UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 2002
Commission file number 0-20165
STERIS Corporation
(Exact name of registrant as specified in its charter)
| Ohio |
34-1482024 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
| 5960 Heisley Road, Mentor, Ohio 44060-1834 |
440-354-2600 | |
| (Address of principal executive offices) |
(Registrant’s telephone number, including area code) |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨.
The number of Common Shares outstanding as of January 31, 2003: 69,522,814
STERIS Corporation
| Page (s) | ||||
| Part I—Financial Information |
||||
| Item 1. |
3-11 | |||
| 12 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13-20 | ||
| Item 3. |
20 | |||
| Item 4. |
21 | |||
| Part II—Other Information |
||||
| Item 1. |
22 | |||
| Item 6. |
22 | |||
| 23 | ||||
| 24 | ||||
| 25 | ||||
2
ITEM 1. FINANCIAL STATEMENTS
STERIS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
| December 31, 2002 |
March 31, 2002 |
|||||||
| (Unaudited) |
||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
10,775 |
|
$ |
12,424 |
| ||
| Accounts receivable (net of allowances of $6,733 and $8,031, respectively) |
|
181,220 |
|
|
196,631 |
| ||
| Inventories |
|
86,496 |
|
|
77,922 |
| ||
| Current portion of deferred income taxes |
|
20,093 |
|
|
20,011 |
| ||
| Prepaid expenses and other assets |
|
10,807 |
|
|
9,656 |
| ||
| Total current assets |
|
309,391 |
|
|
316,644 |
| ||
| Property, plant, and equipment, net |
|
339,684 |
|
|
328,329 |
| ||
| Intangibles, net |
|
193,978 |
|
|
190,822 |
| ||
| Other assets |
|
3,014 |
|
|
5,777 |
| ||
| Total assets |
$ |
846,067 |
|
$ |
841,572 |
| ||
| Liabilities and shareholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Current portion of long-term indebtedness |
$ |
1,802 |
|
$ |
1,663 |
| ||
| Accounts payable |
|
38,202 |
|
|
56,734 |
| ||
| Accrued income taxes |
|
19,587 |
|
|
20,067 |
| ||
| Accrued expenses and other |
|
89,821 |
|
|
91,646 |
| ||
| Total current liabilities |
|
149,412 |
|
|
170,110 |
| ||
| Long-term indebtedness |
|
85,880 |
|
|
115,228 |
| ||
| Deferred income taxes |
|
19,381 |
|
|
19,381 |
| ||
| Other liabilities |
|
51,959 |
|
|
49,708 |
| ||
| Total liabilities |
|
306,632 |
|
|
354,427 |
| ||
| Shareholders’ equity: |
||||||||
| Serial preferred shares, without par value; 3,000 shares authorized; no shares issued or outstanding |
|
— |
|
|
— |
| ||
| Common Shares, without par value; 300,000 shares authorized; issued and outstanding shares of 69,484 and 69,466, respectively |
|
219,694 |
|
|
223,244 |
| ||
| Retained earnings |
|
330,592 |
|
|
277,867 |
| ||
| Accumulated other comprehensive loss: |
||||||||
| Minimum pension liability |
|
(1,038 |
) |
|
(1,038 |
) | ||
| Cumulative foreign currency translation adjustment |
|
(9,813 |
) |
|
(12,928 |
) | ||
| Total shareholders’ equity |
|
539,435 |
|
|
487,145 |
| ||
| Total liabilities and shareholders’ equity |
$ |
846,067 |
|
$ |
841,572 |
| ||
See notes to consolidated financial statements.
3
STERIS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
| Three Months Ended December 31, |
Nine Months Ended December 31, | |||||||||||
| 2002 |
2001 |
2002 |
2001 | |||||||||
| Net revenues: |
||||||||||||
| Product |
$ |
173,245 |
$ |
153,974 |
$ |
489,564 |
$ |
434,153 | ||||
| Service |
|
71,067 |
|
64,663 |
|
208,831 |
|
187,951 | ||||
| Total net revenues |
|
244,312 |
|
218,637 |
|
698,395 |
|
622,104 | ||||
| Cost of revenues: |
||||||||||||
| Product |
|
97,101 |
|
91,642 |
|
281,652 |
|
257,016 | ||||
| Service |
|
43,268 |
|
38,150 |
|
124,590 |
|
110,356 | ||||
| Total cost of revenues: |
|
140,369 |
|
129,792 |
|
406,242 |
|
367,372 | ||||
| Gross profit |
|
103,943 |
|
88,845 |
|
292,153 |
|
254,732 | ||||
| Operating expenses: |
||||||||||||
| Selling, general, and administrative |
|
63,103 |
|
60,377 |
|
190,808 |
|
188,142 | ||||
| Research and development |
|
6,811 |
|
4,958 |
|
17,540 |
|
16,228 | ||||
|
|
69,914 |
|
65,335 |
|
208,348 |
|
204,370 | |||||
| Income from operations |
|
34,029 |
|
23,510 |
|
83,805 |
|
50,362 | ||||
| Interest expense, net |
|
466 |
|
1,283 |
|
1,420 |
|
6,544 | ||||
| Income before income taxes |
|
33,563 |
|
22,227 |
|
82,385 |
|
43,818 | ||||
| Income tax expense |
|
12,083 |
|
8,224 |
|
29,659 |
|
16,213 | ||||
| Net income |
$ |
21,480 |
$ |
14,003 |
$ |
52,726 |
$ |
27,605 | ||||
| Net income per share—basic |
$ |
0.31 |
$ |
0.20 |
$ |
0.76 |
$ |
0.40 | ||||
| Net income per share—diluted |
$ |
0.30 |
$ |
0.20 |
$ |
0.75 |
$ |
0.39 | ||||
See notes to consolidated financial statements.
4
STERIS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Nine Months Ended December 31, |
||||||||
| 2002 |
2001 |
|||||||
| Operating activities |
||||||||
| Net income |
$ |
52,726 |
|
$ |
27,605 |
| ||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
|
34,554 |
|
|
35,357 |
| ||
| Deferred income taxes |
|
(82 |
) |
|
— |
| ||
| Other items |
|
10,441 |
|
|
6,607 |
| ||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
|
16,352 |
|
|
22,286 |
| ||
| Inventories |
|
(8,574 |
) |
|
(2,807 |
) | ||
| Other current assets |
|
(1,086 |
) |
|
1,237 |
| ||
| Accounts payable, accruals, and other, net |
|
(22,740 |
) |
|
1,170 |
| ||
| Net cash provided by operating activities |
|
81,591 |
|
|
91,455 |
| ||
| Investing activities |
||||||||
| Purchases of property, plant, equipment, and patents |
|
(45,218 |
) |
|
(40,467 |
|||