Welcome to the Steris fiscal 2008 fourth quarter conference call. (Operator Instructions). I'd now like to introduce today's host, Mr. Aidan Gormley. Sir you may begin.

Thank you, Sarah. Good morning, everyone. It's my pleasure to welcome you to our fourth quarter and yearend conference call. Thanks for taking the time to join us this morning. Just for your reference, the announcement went out this morning via PR Newswire. And if you did not get a copy, you can get it at steris-ir.com. Joining me this morning are Walt Rosebrough, our President and Chief Executive Officer; and Mike Tokich, Senior Vice President and Chief Financial Officer. Just a few words of caution before we get started. I wanted to remind you that today's webcast contains time sensitive information accurate only as of today, May 7, 2008. Any redistribution, retransmission or rebroadcast of this call without the express written consent of Steris is strictly prohibited. I'd also like to remind you that our discussion may contain forward looking statements relating to the company, its performance or its industry, and those are intended to qualify for protection under the Private Securities Litigation Reform Act of 1995. No assurance can be given as to any future financial results. Actual results could differ materially from those in the forward-looking statements. The company does not undertake to update or revise these forward-looking statements even if events make it clear that any projected results, expressed or implied, in this or other company statements will not be realized. Investors are further cautioned not to place undue reliance on any forward-looking statement. These statements involve risks and uncertainties, many of which are beyond the company's control. Additional information concerning factors that could cause actual results to differ materially is contained in today's earnings announcement. During the call we will reference certain non-GAAP measures. These non-GAAP measures can include things such as free cash flow, backlog, debt-to-capital, day sales outstanding, all of which you can find in our most recent 10-K filing along with the reconciliation to the corresponding GAAP number. So with that introduction, I would like to hand the call over to Walt who will comment on the quarter and the year. Walt?

Thanks, Aidan, and good morning, everyone. I want to thank all of you who are with us today. I will very briefly reflect on the quarter and then comment on the year, then Mike Tokich will discuss the financials with you in more depth. I will return after that to discuss our outlook for fiscal 2009 and our general areas of focus going forward. First of all, I am very pleased that we were able to deliver 26% earnings growth in the quarter over a very strong 2007 Q4 despite the inflationary pressures and weaker dollar. Our demand continues to be solid overall. But perhaps most important, we were able to generate strong shipments out of our new Monterrey facility. Although we expected them to improve, even we were pleasantly surprised that they were able to deliver a 40% increase in shipments compared to the third quarter. This is just tremendous performance and it gives us great confidence that operations at the facility had now stabilized and we can put the ramp-up behind us. A lot of hard work went into that work and I thank our folks in Monterrey for their efforts and for their dedication. With that transition now complete we can meet customer demand on a sustained basis and will reap the full benefits we expected from the move going forward. Now let me reflect on the year. Fiscal 2008 was in many ways a transition year for the company. It was transitional not only in terms of leadership changes with me joining, Tim Chapman assigned to head our Healthcare segment, John Voyzey to lead Life Science, and Mike Tokich stepping up as CFO, but also in the actions that were taken to drive sustainable future results. As we've discussed, a major undertaking of the year was…

Thank you, Walt. Good morning, everyone. It's my pleasure to be with you this morning to discuss our financial performance for the final quarter of fiscal 2008. We had a very strong quarter to close out fiscal 2008, but before I get into the details, there are two moving parts in our numbers for the quarter. So for clarity, let me remind you that included in the fourth quarter of fiscal 2008 are pre-tax restructuring charges totaling $16.5 million. $15.8 million relates to our previously announced expense reduction program and consists of cost associated with severance and related benefits, rationalization of certain product lines and the closure of sales offices. The remaining $700,000 relates to our transfer of manufacturing operations from Erie to Mexico. Of the $16.5 million in restructuring charges, $12.4 million is recorded as restructuring expense and $4.1 million is recorded in cost of goods sold. Also, included in net income in the fourth quarter of fiscal 2007 is restructuring expenses of $1.1 million relating to our Erie to Mexico manufacturing transfer. Now let me walk you through the income statement. Fourth quarter revenue increased 7%, reflecting growth in all three business segments. Organic growth for the quarter was 5% with 3% from volume and 2% from pricing. Foreign currency translation contributed 2%. Gross margin in the quarter, excluding restructuring, was 41.4% and equal to the prior year. Although we have been successful in implementing price increases and are benefiting from labor savings resulting from our transfer of manufacturing operations from Erie to Mexico, we are still incurring cost increases relating to raw materials and freight, plus an unfavorable impact from foreign currency exchange rates. Raw material cost increased $5 million in the quarter versus last year. As a percentage of revenue, operating expenses excluding restructuring were 25.8%…

Thanks, Michael. We enter fiscal 2009 in a better position than we began 2008. A number of management changes were behind us, we've begun the process of reducing operating expenses, Monterrey is fully operational, overall demand remains positive in our markets and our new product pipeline is beginning to bear fruits. Although we have much more work to do on operating expenses, we are well down the path in North America and we will follow a similar path in our international operations during 2009. As a result, despite the fact that we anticipate raw material prices to continue to rise and the dollar to remain at historically weak levels, we are bullish that our cost reductions, which are in excess of $50 million when fully implemented including Monterrey, will allow us to invest in our sales channels to put more feet on the street, invest in product development to support our customers future needs, absorb the broad base decline in the dollar, and at the same time, affords a significant earnings improvements in 2009. We are anticipating total revenue growth to be similar to fiscal 2008 in the 4% to 6% range. Healthcare and Isomedix will grow in the mid single digits, while Life Science is expected to grow in the low single digits, as we expect it to be another challenging year for our major pharmaceutical customers. And we hope these demand forecast prove to be conservative. As you know, we enter the year with a strong backlog and order pattern, but we also understand that the politics of US healthcare could impact the demand late this calendar year or early next. And our major pharma customers are under significant pressure. We would rather plan conservatively and have potentially upside if things are better. With these revenue forecast in…

Thanks very much, Walt, thank you, Mike. We are ready to begin the Q&A session Sarah so, if you wouldn't mind just give the instruction once again and we can get started.

(Operator Instructions). Our first question is from the Joshua Zable with Natixis. Your line is open.

Hey guys, thank you very much for taking my questions and congrats on a great quarter here and a great outlook.

Thanks a lot, Josh.

Thanks Josh.

I have a couple of quick question here, so let me get right to them. First, Walter I know you focused this past quarter on making sure the Monterrey stuff was going well, execution was happening. Can you just kind of tell us, I know you obviously talked about how far long you are, but just from here on until sort of everything is finished as far as execution goes what risks are out there? I mean there is always risk, but may be just kind of give us sort of how confident you feel about this transition being completed having gone there and sort of now kind of fixed things up.

Talking specifically about Mexico?

Yeah.

I am highly confident. Again, there is always risk in any operation but they are running as an operation should run, and in fact if anything we look forward to more improvements out of them.

Great, okay, and just running down a line here, just in terms of the outlook just to be clear, obviously some headwinds in terms of materials and life science spending, I imagine, I know you addressed that and you also kind of mention potential for hospital spending slowing. Can you just give us a little bit more color as far as your revenue guidance, what you are sort of factoring in, are you seeing any sort of slowdown today and sort of are you factoring it more in the later part of the year, is it sort of a general factor of your total overall guidance?

Sure. Two statements I guess. The first is on the Life science side, we have been discussing the fact that the pharma customers are pushing out projects overtime and have been out for probably six or eight months for better. And so that is a matter of fact and has influenced their order rates and again you see, they had a huge fourth quarter. But that was largely shipping product that had been ordered year-over-year 18 months earlier kind of stuff. That probably over too much time with, certainly there had been order previously. We also saw a good return in the non-pharma piece of that business, so that went well. We haven't seen cancellation of orders, so what we seen today is just some timing issues we believe. But we do expect their timing to continue. And so I would say that ratable throughout the year more than any prime back in. On the healthcare side, we've continue to see strong order rates you see that in our backlog. And so in terms of that question, we are being cautious I think in particularly in the back half of the year; back of half our year, which is the end of this calendar year and first of next calendar due to the elections, and we have lot of balls in the fire the election going right now, nobody really knows what's going to happen and nobody really knows what actions will really be taken post the elections. So we are being a bit cautious based on that. Uncertainty is the enemy of the capital spending and hospitals not really certainty. So I don't see it as a long-term issue, but we might get caught for a quarter or two or just little uncertainty out there and peoples slow down a bit. We had not seen yet today on our order rate.

Okay, great. And then, just quickly on products obviously, Walter, I know you haven't been there too long. Can you just talk about any new products that are out there right now? If there are anything meaningful, sort of multipart question, and then sort of give us a update on the vapor based sterilization. And then sort of also along those lines with the new sort of corporate and other lines referring to defense industrial and early stage businesses obviously vapor based, I assume is in there. Is there anything, sort of new that we should be aware of that’s particularly exciting that might be in that bucket?

I'm going to take three part question. First I'll talk about the products. I mentioned really the significant ones in the course of my conservation, but we really have seen some nice response to I call it the major product that are out there LED light which we have already seen significant orders on, and we think we are going to continue to see significant orders on from all the patterns we have seen. The new V-Pro which is one of our new Hydrogen peroxide sterilizers we've had that basic technology in Life Sciences for a while, we've been marketing it to a lesser extent in Europe because of regulatory issues. We do not yet have final clearance for the SCBI which is the biological indicator that goes with that product. So we cannot fully launch the product of the US yet, we are hopeful that we would be imminent and we are very high on that product line, it's an excellent product and our customers has given us very favorable response. The new Vision Washer is the nice product and it kind of does attract. In fact it's more efficient for the user because the timeframes it is more efficient for both the user and environment because its uses much less electricity and it also uses lower and better concentrations of soaps such that it's efficient for the environment. So we think that's going to be a very nice product for us going forward.

Great.

Those are kind of big ones that have been launched and are out there today. I should to the classics indicators, excuse me I miss that one my mind the classics indicators are also getting very favorable response from our customers. And I would tell you at the AORN which is the operating room show, that has both operating people and then the perioperative environment or the central supply where the sterilizers and washers are used. They had a line of people all they along around the classics indicator, so our people are feeling very good about that. Now turning to Vapor, here I think you are specifically talking about hydrogen peroxide. Again, V-PRO line, it's doing well in early launch. We had some regulatory backup here in US, we have to be completed before we can really, before our customers can begin using it. So that will slow it down until we get that regulatory launch, but we are very comfortable with that one. The other area, I think you might be talking, Josh, about the rooms sterilization that sterilization, the VaproSure, same basic technology, only for a full room as opposed to a sterilization space. That continues as we talked before, I think it will continue to be a slow concepts sale kind of a product. So it's relatively limited in market today, and I think it will be very slow going forward. And we and our customers are trying to figure out the best ways to put that in place. So I think there will be a slow ramp up. I still think there is a good potential for it in the longer run.

And is there anything else new in that sort of early stage product line then?

Well, there is nothing else we release or announced Josh, so there's nothing I can talk about. I will talk specifically to your question about D&I though. I think Mike discussed the accounting change there, and we just had really for two reasons. The first is our shareholder have been asking us for more visibility to our earnings, so we are trying to provide that. And second reason is it's important to be clear what those business, defense and industrial are and are not. They are very embryonic businesses. So they're not generating significant revenue and nor significant cost for that matter, but that the two area that we've talked, both the defense area and the industrial Tetra Pak area are the two areas that we are pursuing. But what we have done is reduced our focus or, I should say, focused on those things that are the most likely alternatives. I think we would spread kind of things in those areas looking for things to apply our technologies in those areas and we have a very good potential relationship with Tetra Pak going on. And so we're just focusing on that on industrial side. And let's get that one going and then we'll worry about doing something else later. And the same on the government side, we're focusing on just those areas where we've already done technologies and we know the government's interested and we're interested in what they're doing and we're focusing that research in only those areas where -- because we do contract research there, which is the bulk of revenue. That research is only on areas that we are interested in for furthering their and our joint interest as opposed to going more broadly. So, we clearly have worked to focus those embryonic businesses into something where we can produce in next two, three years. And I think it will be the next two or three years not next two or three months. And then once we get those going, then we'll worry about other things. I think we were a little too broad.

Great. And then just one final one, probably for Mike here, on the share repurchase, obviously you guys have been aggressive out there, which is great. We have a significant amount of cash left that's allocated towards this. Can you just talk to us -- there are different philosophies out there, some companies kind of get the buyback and then they just sort of just go with it and pretty much spend it. Other people are sort of using more strategically in terms of just kind of picking and choosing their spots, having spent a significant amount of money obviously with the stock down in last quarter, obviously providing an opportunity but not with the stock up. Can you give us little bit color on how you guys think about that?

Yeah. I think it's the later. We are more strategic in our repurchases. And you have seen that we were opportunistic in the quarter with the stock price being a little bit lower. So as we look forward, we're going to continue to repurchase. And again it all depends on where the stock price is? How we are from a cash flow standpoint moving forward? But we're going to be more strategic and if we get the opportunity, once again to be opportunistic, we will step up and look to do that.

Great. Well, thanks very much. Congrats, guys. I know it's your first sort of official outlook here. So good luck and also I know Julie is out there listening so congrats on the kiddies over there. Thanks, guys.

See you Josh.

Thanks very much. Next question, please?

Daniel Owczarski with Avondale Partners, your line is open.

Yes. Thanks. Good morning and congratulations.

Good morning, Dan.

Thank you, Daniel. I owe you guys a call. I apologize.

I wanted to start with Monterrey. I mean can you talk about what seemed to go right? I mean what was the magic bullet in the quarter and why such a dramatic improvement in the productivity?

Well, it's not so much -- it's what went right and what had historically gone wrong in combination. We just got a bit of the track in the third quarter. And we had some excess turnover, and every operation or anything like this, there is an inflection point. It's well, the kind of the time when things have to all come together and when they don't. And we kind of the end of the third quarter was kind of our inflection point. As you may recall, that we built a lot of inventory out of Erie early in the year in anticipation of Monterrey ramping up. So lot of our shipments of those products were really out vary either in terms of complete units or in terms of subcomponents, the fabricated components. And the third quarter is really when we had to turn the corner on not just assembly, which we had already done but on fabrication. We have run into some fabrication difficulties and again we had some -- a brief period of human resource difficulty and we kind of get through both of those at the same time. Again, having said that, even we were surprised at what a great job those guys did at coming back. We expected them as we said at the end of the third quarter, we expect them to able to produce at our annualize run rate. They more produced at our historic high run rates of Q4. So they did a heck of a job. And one of the things, everything kind of came together, the team together, we got the machines running and it's all working. So it's just one of those things, very difficult to forecast at the inflection point.

Okay. And then as a follow-up to that you mentioned the turnover. I mean is that stabilized? Is there still a room for improvement and what can you do as far as work of retention down there?

Well, there is always room for improvement in turnover. That's a general belief of mine, no matter what. They do have a higher turnover rate then is a typical. But that area has a higher turnover rate than the typical U.S. rate. We're running at about the typical rates and we want and hope to improve that. And we're doing work to make that happen.

Anything specific retention wise that you can do?

Yeah. But I think I'd rather not have that conversation at this point.

And then, you mentioned also in your final comments about investment in sales and marketing. Can you give us anymore insight there, what's your planning?

Sure. I mean, first of all, product launches aren't free. So there is a -- you do the product development and people think about that, but product launches cost money. And in fact, our sales meeting this last, I guess two weeks ago now, we had all of our sales people together and they literally had four days of training. We had enough new products out there that it was train, train, train, train. It wasn't a (inaudible) meeting, it was train, train meeting and that cost money. The second and as we do more product, we would expect to see more of that. Second, we have expanded the number of sales people in our North American operation and just in terms of numbers of feet on street and we've focused them -- split, if you will, between the capital size and consumable side. So we're expecting improvements in our sales force out of both those moves.

And then just last question, maybe, Mike, could you give us an idea where the CapEx dollars are going to go this coming year. It sounded like some capacity expansion is there, I'm assuming some amount of routine replacement or any idea where those dollars are going?

Yeah. We're anticipating approximately $65 million to be spent. Majority of that is going to be within our Isomedix facility as they have normal replacement of Cobalt and they have continuation of an expansion of one of their facilities. And then we are going to have, as we have a new products coming on board, we have tooling that has to go into our manufacturing facilities. And then just normal maintenance that will occur, building maintenance or machinery maintenance that will occur on an ongoing basis.

Okay. Thank you.

Thank you.

Next question, please.

Mitra Ramgopal with Sidoti, your line is open.

Yes, hi. Good morning, guys. Just a few questions. I noticed you did mention that production output increased 40% sequentially and you ended the year at record backlog. Any issues in terms of production constraints?

No. Not at all. The backlog is up because orders are up, which of course is a good thing. But in terms of customer lead times we're bringing those down actually. So, you should expect to see that continuing to come down over the following quarter, just as we described. If anything were ahead what we thought we would in terms of meeting customer demand right now.

Okay. And on the life sciences business, I know you entered the quarter with record backlog and you mentioned it declined 5% heading into the new year, any concerns there or--?

I just want to clarify to make sure, we had record backlog earlier in the year. We've reduced that backlog. And now it's down about 5% versus the previous year. So, it's not a record at the end of this year. And I don't know if we misspoke or you may have or…

Right. In the quarter, yeah.

I may have misunderstood you. But in any event, at the end of the year and end of the fourth quarter, we were about 5% down compared to previous year. In terms of concern, naturally we would like our backlog to be even or up a little bit versus a previous year. We are seeing basically what we've describes, some slowness in timing in the order patterns of the pharma guys and continuing good order on the other side of Life Science. And that's why we forecast a lower growth rate in the previous year.

Okay. And again, you thrown up tremendous free cash flow and you've been using it to buyback stock. Any thoughts or anything on the acquisition front that could be -- cash could be used towards?

Sure. We will continue to look at opportunities that are adjacent to our current primary products and markets. And to the extent that there is something that fits into that, we would consider. Having said that, our primary work, I think is to do a great job in those core markets. And so we will keep cash in reserves. And we still we have a significant cash reserve between cash and debt for opportunistic purchases that make sense. But we also think we have room to buy back stock.

Okay. And on price increases, again, I think about you've been able to implement increases to help offset raw material cost et cetera. Do you feel that you still have that ability do it in fiscal '09?

In general, we do raise prices to work to offset those material cost increases. We have two issues with that. First is, we are often bidding out in the future. So you have to bid the anticipation of cost increases. So what hurts us is unanticipated material cost increases. That's number one. And of course, what helps us is unanticipated cost decrease. So that's one issue. And the second issue is, in general, we have not included things like surcharges or whatever on our products. The hospitals want those as a bid, if you will. Here's a price and we're in a competitive pricing mode at the time. So, as all of us are incurring cost decreases, we are able to pass on price increases, but not if all of us aren't. And the second issue is in general in this industry, where one gets improvement on price relative to cost, in general that's when you develop new products. And so typically the path to price cost differential is new products, not straight price increases.

Okay. Thanks. And finally, again, with regard to the guidance you issued, are you assuming any uptick in hospital construction or spending given, as you said, the uncertain political outlook?

Again, we are anticipating 4% to 6% growth for the year in that in total, and obviously, hospitals were in that range, but a little higher because of the lower growth in Life Science. But kind of the long and short out of it is, we're not looking for any major increase or expansion in building nor are we looking for any major decline in building expansion. I think at this point that's reasonable. Again it really boils down to -- my experiences boogeyman on capital spending for hospitals is not so much what's real, it's uncertainty. Once the people who are in charge of hospitals understand what their new deal is, they are very good at working to improve their positions and get in good shape. So, its typically an uncertainty question for two months or three months or six months or year, and we just don't know what's going to happen in the political environment, so we're being little cautious there.

Okay. Thanks again, guys.

Thank you. Next question please.

(Operator Instructions). Greg Halter with the Great Lakes Review, your line is open.

Good morning.

Good morning, Greg.

I believe in the past you've spoken about an expansion for the Isomedix business in Minneapolis. I am just wondering if you could comment on how that is progressing, as well as any others you may be working on as well?

I don't happen to recall if we discuss that particular one. In general our expansions are going well. We do have a significant expansion going this year. We've not spoken publicly about that location. We have a number of smaller expansions going on, and it's just a typical part of our process. But all things are going well and they continue to fill kind of all their vessels. They're doing a nice job. Easiest way to say it is we work hard not to expand without knowing what customers are going to bringing into those facilities. So we tend to try to tie up a few long-term contracts within an expansion and then we have to fill the balance of the vessels. That's their tradition and they've continued down that path.

Okay. Given all the concern over E. coli and food products and so forth, any new initiatives or impetus in that particular area for the Isomedix facilities?

That really -- although there's all kinds of concern out there, that has really not materialized in any significant way, so far. So the answer to that at this point is no.

Okay. And you had mentioned I believe that raw material cost were about $5 million higher than at this time last year. Is that the type of increase you expect on year-over-year basis going forward or will it be even more severe than that?

On a year-over-year basis, it will be more severe than that. It will be two to three times that.

For how many quarters?

For the full year.

Okay.

We would spread that two to three times over the full year impact.

Okay.

I think all of us are kind of in a situation where there's a lot of moving parts in material cost right now. Oil is bouncing around. Steel has clearly been bouncing hard lately. Stainless steel which is one of the big components we had problems last year is actually softened a little bit. Nickel is not as tough as it -- this time going forward is not as tough as it was. We're watching a lot of variables at the same time.

Okay.

It's along with, I think everybody in the business right now.

So those new products really are key in terms of the price increases if you will?

Product is always important.

Any new information on the DOJ investigation?

There is nothing new to report.

Okay. And two last house keeping ones questions. Do you have any short-term debt on the balance sheet?

Yes, we have $700,000 of short-term debt and that's been consistent for last two years at least.

All right. And finally what was the total for the consumable service recurring revenues as an entire company for the quarter and the year I guess?

You're talking about number or percentages?

Numbers or percentages either way?

Total recurring was approximately 7% for the year.

7 or 70?

7.

Okay.

70 would be tremendous, 7 is where we're at. I think capital business is recurring too. We all have different view on that.

Yeah, the number we used on recurring revenues for fiscal '07 was $688 million which includes the consumables, the service and whatever else you may have in there?

Yeah, well the total recurring for fiscal '08 was 737 Greg.

Okay. Great, thank you.

Mike Hughes with Delaware Investments, your line is open.

Good morning, couple of questions. Just a point of further clarification on the order backlog, you touched on this earlier. But up 54% year-over-year, last quarter you were benefited in a big way by the issues in Mexico. Are you saying that that backlog at this point doesn't include kind of some delays in shipping because Mexico is kind of at the level production it needs to be at or is that still up 54% of still being benefited from the issue that you had last quarter too?

No, I mean clearly we were behind relative to our normal shipping pattern last quarter. We are working out of that. But we're not completely out of that. But I guess what I'm saying is we are not losing ground in Mexico any longer, in fact we're gaining ground. We have strong orders across our business and across our plan. So although that increase in backlog is not Mexico, again we just had very strong capital orders in the hospital side the last six months. So good piece of backlog is not related to Mexico.

Okay. And then the earnings guidance 150 to 165 there was a lot of variability, more so than even at operating leverage involved with that the 4% to 6% revenue range. So what would it take to hit the high end and conversely built a low end?

I would say at the high end if the dollar strengthens instead of weakens which has a lot of play on both our FX and our material cost. If we capture all of the costs, we have a range that we're working in some of the cost reduction we're doing. We know we'll get them it's just a matter of when we get them. So it's the rapidity with which we capture those cost and than where the revenues come out particularly in the back half of the year. That's I guess would my big three and the low end it's the reverse scenario.

Okay. And the 150 to 165 does that include any non-recurring cost related to restructuring that you can't back out?

No there are no restructuring costs included in that $50 to $65.

Okay, great. Thank you very much

Thanks, Mike. Next question please.

I show no other questions at this time. I'll turn the call back for any closing remark.

Okay. Well thanks very much everyone. That concludes our fiscal 2008 fourth quarter call. I just wanted to remind you that a replay will be available from noon eastern time today until 5:00 eastern on May 21, 2008. You can tune into our website or call 1-800-756-3940 in the United States and Canada or 1-402-998-0796 internationally. Thanks very much for joining us and have a great day.

Thank you for participating. You may now disconnect.