By Mary Vanac
MENTOR, Ohio — Steris Corp. (NYSE:STE) reported higher operating profits and a modest increase in revenue for its fiscal third quarter over the year-ago quarter.
But the infection protection, decontamination and life science technologies maker said its prospects for future profits are unclear because it has been unable to resolve problems the Food & Drug Administration has with its System 1 sterilizer. On Dec. 3, the FDA warned that the chemical sterilizer for medical instruments no longer had the administration’s approval as safe and effective because Steris had significantly changed the device since its 1988 launch.
Today, the FDA updated its safety alert, suggesting that hospitals and other healthcare facilities replace their System 1s with alternatives within 18 months. In December, the administration said this transition should occur within six months; however, it now realizes the short transition period “may represent significant difficulties for some healthcare facilities, which could, in turn, adversely affect patient care.”
Steris said its net income rose 44 percent to $41 million, or 69 cents per diluted share, during the quarter ended Dec. 31, from $28.6 million, or 48 cents per diluted share, a year ago. The year-ago quarter included $12.3 million in pretax restructuring costs.
Operating income — without those restructuring costs — rose 18 percent to $59.4 million in the just-ended quarter, from $50.2 million, according to a press release. Revenues rose 3 percent to $327.8 million, from $319.5 million a year ago.
“Our performance has continued to improve throughout the fiscal year as demand for our healthcare capital equipment has improved and order levels seem to be stabilizing,” president and CEO Walt Rosebrough said in prepared remarks. “While we are pleased with our performance this quarter, we have so far been unable to resolve our System 1 510(k) issue with the FDA. As a result, although our operating performance excluding System 1 continues to be strong, given the forecast uncertainty with System 1, we are not providing guidance for the full fiscal year 2010 at this time.
“We have been in nearly daily communication with the FDA to develop a plan to assist healthcare facilities with their transition to acceptable alternatives. As soon as we have a definitive plan, we will provide as much clarity as possible to both our customers and shareholders.”
For the nine months ended Dec. 31, net income rose 19 percent to $98.6 million, or $1.66 per diluted share, from $82.9 million, or $1.39 per diluted share, in the same period a year ago. Revenues fell 3 percent to $925.6 million from $954.2 million in that time.
Steris shares were up more than 12 percent to $29.33 in midday trading.
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