Julie Winter – Director, Investor Relations Walter M. Rosebrough – President and Chief Executive Officer Michael J. Tokich – Senior Vice President and Chief Financial Officer.

Matthew Ian Mishan – KeyBanc Capital Markets David L. Turkaly – JMP Securities LLC Lawrence S. Keusch – Raymond James & Associates, Inc. Erin Wilson – Bank of America Merrill Lynch Jason A. Rodgers – Great Lakes Review Mitra Ramgopal – Sidoti & Company, LLC.

Welcome to the STERIS' Fiscal 2015 Second Quarter Conference Call. All lines will remain in listen-only until the question-and-answer session. At that time, instructions will be given should you wish to participate. At the request of STERIS, today's call will be recorded for instant replay.

I would now like to introduce today's host, Julie Winter, Director of Investor Relations, thank you. You may begin..

Thank you, Jane, and good morning, everyone. It's my pleasure to welcome you to STERIS' fiscal 2015 second quarter conference call. Thank you for taking the time to join us this morning. As usual, participating in the call are Walt Rosebrough, our President and CEO; and Mike Tokich, our Senior Vice President and CFO.

Now just a few words of caution before we begin; this webcast contains time-sensitive information that is accurate only as of today. Any redistribution, retransmission, or rebroadcast of this call without the expressed written consent of STERIS is strictly prohibited.

I would also like to remind you that this discussion may contain forward-looking statements relating to the Company, its performance or its industry that 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’s statements will not be realized.

Investors are further cautioned not to place undue reliance on any forward-looking statements. 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 release.

As a reminder, during the call we may refer to non-GAAP measures including adjusted earnings, free cash flow, backlog, debt-to-capital and day sales outstanding, all of which are defined and reconciled as appropriate to reported results in today's press release or our most recent 10-K filings, both of which can be found on our website at steris-ir.com.

One last reminder before we get started because of our pending offer for synergies STERIS’ found by the UK takeover code which places instructions on what maybe said by STERIS in the presentation. In particular, only information and opinions which are already in the public domains maybe discussed.

With those cautions, I will hand the call over to Mike..

Thank you, Julie, and good morning, everyone. It is my pleasure to be with you this morning to review our second quarter financial results. Following my remarks, Walt will provide his commentary on our first half performance and discuss our outlook for the full fiscal year.

As usual, our comments this morning will focus on adjusted results, please see the reconciliation table contained within our press release for additional details.

We are pleased to report a strong second quarter with total revenue growth of 21%, driven by 6% increase in organic volume a 14% increase from the IMS and Eschmann acquisitions and 1% positive pricing impact.

Foreign currency was neutral to revenue during the quarter, gross margin as a percent of revenue for the quarter increased 160 basis points to 14.1% gross margin was positively impacted by favorable product mix pricing, productivity and foreign currency somewhat offset by higher material costs and inflation.

The EBIT margin expanded 60 basis points to 14.9% of revenue, the improvement in the EBIT margin was driven higher organic volumes improved gross margins and slightly lower R&D expenses, somewhat offset by higher incentive compensation expenses as compared with the prior year.

In total, the second quarter, year-over-year impact of the higher incentive compensation expenses was just over $5 million which has allocated to each of the three segments as we normally do.

The impact on segment operating margins in the quarter is somewhat muted, by positive items within the healthcare segment, but it is not offset within the Isomedix or Life Sciences segment.

The effective tax rate of the quarter was 36.7% compared with 35.2% last year, during the quarter we had unfavorable discreet items, impact our effective tax rate. We continue to anticipate a full-year effective tax rate of approximately 35% which does include the assumed renewal of tax extenders.

If the tax extenders are not approved, it could negatively impact our adjusted earnings per diluted share outlook for the full fiscal year by approximately $0.03. Even with a higher tax rate net income increased 24% to $40.6 million or $0.68 per diluted share compared with $32.6 million or $0.55 per diluted share last year.

Moving on to our segment results Healthcare had a very good quarter growing 27% in total of which 8% was organic. Healthcare service revenue grew 64% driven by acquisitions and 10% organic growth.

Consumable revenue increased 13% all of which was organic; lastly capital equipment revenue grew 9% of which 4% was organic with growth coming from both our infection prevention and surgical businesses.

Healthcare backlog at the end of the quarter was $117 million a reduction of about 12%, despite our current level of backlog in Healthcare our outlook is bolstered by a strong pipeline for capital equipment. In addition we have been successful in reducing our manufacturing lead times, which allows us to fulfill orders on a timelier basis.

Healthcare operating margins increased 200 basis points to 12.9% of revenue, the increase in operating income year-over-year was driven by volume, product mix, pricing and productivity offset by higher material costs. Life Sciences revenue grew 1% in the second quarter.

We did experienced continued strength in our consumable franchise with revenue growth of 14%. Service revenue grew 4%, while capital equipment revenue declined 15% during the quarter. We continue to anticipate that it will be a challenging year for capital equipment sales within Life Sciences.

Our full-year outlook for Life Sciences capital equipment revenue in a mid single-digit decline due to reduction of orders by both pharma and research customers. Backlog in Life Sciences end of the quarter at $46 million, and is in line with historic levels.

Life Science’s second quarter operating margin of 22.4% of revenue is down slightly from the prior year, mainly driven by higher incentive compensation costs. Isomedix had another solid quarter with 9% revenue growth driven by increased demand from our core medical device customers.

Isomedix operating margin was 28% of revenue a decrease of 160 basis points as compared to the prior year caused by higher quality and regulatory expenses and an increase in incentive compensation cost. In terms of the balance sheet, we ended the quarter with a $147.4 million of cash and $620 million of long-term debt.

Our DSO is at 60-days, a one-day improvement as compared to the prior year. Our free cash flow for the first half of the fiscal year was $69.2 million an increase of $36.2 million compared with the prior year driven by working capital improvements and lower capital expenditures.

Capital spending was $13.2 million in the quarter, while depreciation and amortization was $27.4 million. With that I will now turn the call back over to Walt for his remarks. Walt..

Thank you, Michael and good morning everyone. Since Mike has reviewed our quarterly results I will spend some time discussing our first half performance before turning to our full-year outlook. Our commentary on the first half is not all that different from the story for the second quarter.

I would say that overall we are hearing more optimism from our healthcare customers on procedure volumes and hospital spending in recent months, which is benefiting our results in both Healthcare and in Isomedix. For the first half, we had revenue growth of 17% driven by Healthcare and Isomedix with Life Science about flat year-over-year.

Within Healthcare, in addition to the acquisitions, we delivered mid single-digit organic revenue growth with increases in capital equipment, consumables and service.

In the consumables franchise, we had growth across the board and particularly in our instrument cleaning chemistries such as Prolystica and our research sold product for high level disinfection in GI department.

In addition we had nice gains in consumables relating to our growing installed base of our V-PRO brand hydrogen peroxide sterilizers and our in US Endoscopy GI products.

From a Healthcare capital equipment perspective, we had mixed performance in the first half with double digit growth in infection prevention capital and flat performance in the surgical franchise. On the infection prevention side we again saw a good performance from our core products categories, steam sterilizers, washers and V-PRO.

In fact, we have a new addition to our V-PRO family of products that we are excited about. We are pleased to have recently received FDA clearance to market V-PRO 60, the smallest of our line of hydrogen peroxide sterilizers.

This product utilizes the same proprietary consumable as the rest of the V-PRO line, but has a smaller footprint and lower price point. We are just launching the product and remain optimistic about the continued success of this entire product family and the related recurring revenue stream.

As you know, capital equipment shipments tend to vary from time-to-time and we are experiencing that in our surgical business. We are a bit behind our expectations for the first half of the year, but we are expecting a strong second half for that business, both sequentially and year-over-year.

Our Healthcare service business is benefiting from the acquisition of IMS of course, but even beyond that our standard service business had shown high single-digit organic growth in the first half.

Our integration plans with IMS continue to go very well and we are seeing signs of revenue and cost synergies coming through somewhat faster than we anticipated. We've recently adopted the IMS name for the five acquired businesses combined into our specialty service business unit.

As a result, we have taken a $5.6 million non cash charge for reduction in valuation of the spectrum trade name in our GAAP earnings for the second quarter. This one-time non cash charge has been adjusted out of our earnings.

In Life Sciences, we've had a similar story for some time now with a challenging environmental for capital equipment and continued revenue growth in consumables and in service.

As Mike mentioned, we anticipate that the demand for Life Science capital equipment will remain challenging for the balance of the year, but we do expect a stronger capital second half compared with both last year and our first half. We believe that our performance today is a function of decreased overall demand versus competitive factors.

Isomedix has had a solid first half growing revenue 8% as we continue to fill recently expanded capacity particularly in the northeast. Our capital expenditure plans for the full-year reflect continued investments to expand Isomedix capacity in order to meet increased demand from our core medical device customers.

These projects are moving along as planned. We’ve made nice progress expanding our EBIT margin to the first half of the year and particularly in the second quarter, which as allowed us to exceed our expectations for earnings so for this year.

As a result, we are revising our outlook for earnings for the full fiscal year to the upper end of our previously provided range. We now anticipate adjusted earnings per diluted share for the full-year in the range of $2.86 to $2.91. We are maintaining our revenue expectations of 15% to 17% growth for the full fiscal year.

Although our Life Science capital revenue is not what we anticipated to the first half of the year and will likely fall somewhat sort of our original expectations for revenue. To be clear our total company outlook for the full fiscal year excludes any impact from the expected acquisitions of Synergy Health.

Before I open the call to Q&A, I want to take another moment to touch on our recently announced proposed acquisitions of Synergy Health. We are excited about the combination of these businesses and we are working on our Form S-4/Proxy filings which we expect to submit the SEC shortly.

While we are still early in conversations we have received positive input from shareholders on both sides of the deal as well as from our customers who are pleased to see two good companies coming together.

This is a long-term strategic deal that we’ve been considering and working on for sometime and it’s driven by our desire to create value by expanding our service offers in the U.S. and through accelerated international growth which happens to have some tax advantages.

I reiterate that we continue to expect to achieve both the annual pretax cost savings of $30 million or more and to reduce our effective tax rate to approximately 25% of our earnings for the combined businesses. With that, I will turn the call back to Julie to open for Q&A..

Thank you Wal and Mike for your comments. We are now ready to begin the Q&A session. Jane would you please give the instructions and we will began..

Thank you. (Operator Instructions) Our first question is from Matthew Mishan with KeyBanc. You may ask you question..

Great, thank you for taking my questions..

Good morning, Matt..

You guys are having double-digit growth in healthcare consumables I’m just curious how we should think about growth rate going forward for that growth?.

Matt, as we’ve talked about before we have the consumable business. Most of our consumables are a function of procedure volumes in hospitals for hospitals and ambulatory surgery centers and procedural care units. And so the underlying growth rate is a function of the growth rate of those procedural volumes and we have been seeing that picking up.

And then the second piece of the conversion is around either new products or product extensions that we’re bring to that market and clearly we’re seeing that particularly in the US Endoscopy space, what we’ve long-said that we expect double-digit growth in that arena and again in the V-PRO consumable space where we have seen double-digit growths in that arena.

So we’re still looking to see kind of that marketplace for procedure growth in the mid single-digits maybe a little stronger these days seems to have picked up some. And then additional for the new products we bring into the marketplace..

So just a follow-up on that procedural volumes are improving into your back half and you continue to win some new products low double-digit is somewhat sustainable maybe for the next year or two?.

Matt, don’t give product volume forecast that we certainly are not doing forecast next year or two. I think our total forecast in that mid single-digits growth is I think the best place to start and if we see a significant pickup we may see a pickup from that. But I think we’re not changing our long-term view at this point..

All right and on IMS, I believe you had guidance out there, when you made the acquisition for 10% margins through the course of the year. And it sounded if the cost synergies and maybe some of the revenue growth is coming in a little bit faster.

Could you update your expectation and what you think the margins for IMS would be this year?.

Yes, again I don’t think were going to get in detail on the product line but you are correct, the original guidance we gave plus we would be improving those margins over the course of the year and we are ahead of our forecast at this point in time.

It’s not huge numbers but its very good sign that we will be at a minimum meeting our original forecast..

Okay, and then Synergy mentioned in that release that move in forward with another supplier of cobalt.

Could you add a little bit of color on that, does anything changed on the minority in front?.

First of all Dr. Steve did his normal good job in his conference call and discuss things and I’m just going to leave comments about their business with his comments which are public of course and he did comment that they are pursuing other sources of cobalt.

We have not had any significant change in our relationship or orders mainly on at this point in time..

All right. Thank you very much..

You bet..

Our next question comes from Dave Turkaly with JMP Securities. Your line is open..

Great, can you hear me?.

Certainly, Dave, good morning..

Good morning.

Related to a question here 1% positive price impact in the quarter, so your Healthcare business, so I was wondering is that across-the-board price related or is there anything you could kind of single out there for that positive price?.

I would say generally speaking in this business we look over the long-term, getting inflation minus one is kind of the norm and we got inflation minus one which is kind of the norm and so there is nothing that I would point out one spot versus another..

Okay, and then I guess quickly to the Life Science side, I guess you mentioned demand is sort of the fact that’s impacting the most, what could change that, do you need a new product cycle there or what would change a year from now that would maybe make that mix go back to positive?.

Yes, first of all on Life Science, the mix is very positive right now, because consumables continue to grow and that’s a very attractive business in Life Science, but on the capital side your question is absolutely correct. And as you know the pharmaceutical industry has consolidated and continues to consolidate.

When they do that even though they may run more product, they don’t necessarily need more equipment to run that more product. And so I think that’s largely speaking what’s been going on now for several years in the Life Science system. So I think as the pharmaceutical guys finish that convergence if you will, you will see more demand.

We are also seeing as is not surprising, we are seeing our service business staying strong because the long you keep old capital the more service it requires. So there is a little bit of a trade-off there between how much service you do and how much capital you buy.

And I would clearly seeing that trade, but we do have some products underdevelopment in that space and as we release those we do expect to see increase demand, but I wouldn’t characterize it as anything out of the ordinary if you will, that because it’s more of a market issue.

And we have seen on the research side which is the other place where we saw capital in the Life Science business. On the research side we did some – I'll call it some signs of life and we are seeing some signs of life, but its not become any significant pattern and so that market has been down significantly for four, five years now..

Okay. Thanks a lot..

Our next question comes from Larry Keush with Raymond James. You may ask your question..

Thanks. Good morning everyone.

Just a quick question, I think if we look at the first half reported numbers and the implied numbers for the second half given the guidance it would appear that Isomedix would decelerate in growth from current levels and conversely Life Science would have to increase from current levels to sort of make the overall guidance.

So is the best way to think about that is perhaps flip-flopping around where we should think about Isomedix seeing some acceleration and Life Science continue to see some challenges here..

Yes Larry, this is Mike. I would say in Life Sciences we've already talked about the challenges that we've had and we've been down I think 17% in total for capital equipment.

We do not anticipate being down 17% for the full year, we are anticipating that to be mid single-digit decline for the full year, so we are going to get some rebounding on the capital equipment within Life Sciences.

So that is one area that again we will see a little bit of reversal and then Isomedix obviously Isomedix is doing very well, they are grown 8% for the year and most of the time the back half of the year is a little bit of a bigger struggle for them just from a comparability standpoint, but obviously we still believe that there is mid single-digit growth in that business..

Okay, perfect. And then Walt, I guess I just wanted to ask you and come back on two questions regarding the synergy acquisition. I guess the first one is could you talk a little bit about the outsourcing opportunities in the U.S.

hospitals segment for sterilization and I guess what makes you think this is obviously native today, but what makes you think that it’s a model of outsourcing these services can get bigger in the U.S. and then I have a follow-up..

You know Larry, I would say a couple of things, as you know we do some outsourcing work already in our IMS business and we are clearly and we've been passing that business along if you will, because often when hospitals are looking to outsourcing, they look to STERIS and we are one of their if not biggest suppliers in that space.

Now I am talking about outsourcing of CSDs not outsourcing in general, but when you are looking at central sterile departments. We are one of the biggest players in this space and often one of the biggest suppliers in the space we do a lot of work with them already to help them design their centers when they’re putting them together.

And so we’re in a consultant to the mode with them as it is. And they have often asked us to consider taking on some outsourcing. And we basically have been passing that business to IMS for the last five, six, seven maybe longer years and so IMS is in that business.

Synergy in my view adds the I’ll call it the final step in the outsourcing that is doing the outsourcing offsite as opposed to the type of consulting we do. And then they do a broad as well. So to me it’s a product extension as well as growth in the outsourcing opportunity.

I do think that we are hearing more and more from hospital customers that this is something they are interest in. And something that they would be considering doing and as they group up regionally it also adds some impetus to that thinking. And as we’ve talked before it’s not clear that I mean I don’t believe 100% hospitals will outsource their CSDs.

But it doesn’t take very many to be a pretty significant business and that’s what we view the future being..

Okay terrific. And then just as an extension to that maybe just help us think about and broad brush strokes to extend that you can the economics for a hospital with having the central sterilization in-house versus outsource..

You know that varies widely and again – when getting into the detailed economics I think we probably shouldn’t be going there at this point in time, but when you look at in general what the facilities are looking for when they are considering outsourcing its either one or two things typically.

Either they are looking for an improvement in the quality of that process in which case it is not in common for them to spend more to outsource because they are dissatisfied with the level of quality from their process.

And so they are either looking for consulting help or management help or even complete outsourcing help to improve the quality of that service or they are looking for a reduction in the cost in that service. Obviously the Nirvana is when both can be done but my experience is it’s commonly one of the others more the driver.

And so that – what their needs are really determine kind of the economic situation with the individual facilities..

Okay, and then lastly I think Mike in the first quarter call, you provided the acquisition impact on EBIT margins and unless I missed it could you provide that for this quarter?.

We did last quarter Larry, you’re right. This is Julie. Last quarter, it was a bit of drain, this quarter was actually neutral..

Okay, great. Thanks very much..

Thank you..

Our next question comes from Erin Wilson with Bank of America. Your line is open..

Great. Thanks for taking for my questions. The healthcare capital equipment strength that was encouraging where there any large one-time orders that drove it or was it relatively broad based.

Are you seeing that trend continue in the current quarter? And how would you characterize purchasing behavior of your customers, is it higher end equipment compared to more standard equipment, any sort of color that would be helpful. Thanks..

Sure. Good morning Erin. A couple of comments I guess you have kind of track back to the first part of this calendar year which is our Q4. And we clearly saw and we have talked about this. We clearly saw on the first couple of months of that calendar year hesitancy to release capital equipment.

So most hospitals in our experience were forecasting that they would spend telling their people they would spend putting in their budget that they would spend about the same or maybe point or two more than they did the previous year.

But many, many of them had that spending on hold to see how the whole they see anything was going to workout in first several months of the year. Probably we started seeing mid February-ish timeframe then releasing those capital spending holds. And really since then, I would say it’s been for a lack of better terms business as usual.

And we have been saying that pretty much for two or three years now. It’s not some big spike in capital spending at least from our perspective nor is it a dearth of capital spending.

We did have a little bit of pause in that January first half of February timeframe in terms of people placing orders, they also – they were going to if their bosses let them. But they were on hold. And pretty much that released over the last several months. And so the business has been I would characterize it as solid.

I haven’t yet seen data on this from broad-based data. But we do see a lot of customers in our visitation programs and in other things we do with customers.

And I would say generally the last couple of months, people have been in our view more optimistic about their volumes, whether they are full or not, both outpatient and inpatient but particularly their residual volumes. And that tracks well with what we’re see in Isomedix, right.

We are seeing volumes in Isomedix which is medical devices which means somebody is doing something. And then – and it also tracks with what our consumables are showing. So it seems to us that volumes are up, there is always a lag time between volumes up and capital spending, but they do tend to be correlated over the long period.

So we are a bit more optimistic I that our original feelings refracted I don’t think we see this as a surge in capital equipment, but we’ve had cautious optimism and we continue to maintain that. I don’t think there is any huge mix variation, hospital customers are not moving upscale or moving downscale in any broad way that I see.

So I think that’s pretty much normal..

Okay. Great, thanks. And can you speak to the reprocessing market your potential to expand into this market and what sort of opportunity or changes you are seeing in that space, could this be a meaningful opportunity for you in the U.S.

and abroad?.

Erin, I need to be clear on what you mean by reprocessing, because there are – I’ll characterize it is two broad based kinds of reprocessing.

The first is devices that are clear to be single-use devices that been our reprocessed – that a I would call it surge or single-use device reprocessor does to turn that device into potentially a multiple use device.

So you do whatever work is required, they go and get a 510(k) in order to do that, so it’s a regulated business and they do that reprocessing. I suspect you are talking about the synergy business where they have taken, they’ve outsourced the work for SterilMed a division of J&J. And to the extent J&J sees that as a good opportunity which they seem to.

And it is clear that synergy is doing that work for them on a contract basis and they see there is an opportunity and they’ve been clear that they do, they see that it’s a growth opportunity and we would concur.

But in terms of us being in being the single-use reprocessor the entity that goes out and gets the 510(k)’s and works with the FDA and works with the OEMs.

We think the guys doing that who are typically OEMs now, most of the people in that are historic OEMs and we think they are well suited to do that and we don’t see any reason to head there in that space, but if we can do work for them either some physical work and/or some cleaning and disinfecting and sterilization, it’s obviously something that fits our strength, so that’s how we characterize the I'll call it SUDs market or single-use disposable reprocessing market.

The counter to day is the surgical – what we do in IMS now which is the surgical equipment device if you will surgical instrument and scope reprocessing where you are taking your device, its suppose to be a multiple use device, its was clear to be a multi – it is a multiuse device.

And we are doing what needs to be done to keep it in good shape and that is something we are very interest in, we think we have very good capabilities with the combination of the five businesses we've purchased, we think we have very good technical skill and so we do see that as a real opportunity for growth for us in that arena, certainly in the U.S.

in the longer term probably overseas..

Okay, great.

Thanks so much and should we still expect a filing in the next couple of weeks as it relates to the Synergy Health acquisition?.

All this technical detail its hard to know the exact time, but we are still thinking days and weeks, not weeks and months..

Okay. Great, thanks so much..

You bet, Ann..

(Operator Instructions) our next question comes from Jason Rodgers with Great Lake Review. Your line is open..

Good morning..

Good morning Jason..

Looking at the company now, it will have a larger percentage of revenue derived overseas with the Synergy acquisition.

So I was wondering if you could talk a little bit about what you are seeing as far as the level of spending for the hospitals overseas as well as potential synergies from the combined company STERIS and as far as the synergies you are seeing overseas, you mentioned some domestically, but just looking for overseas revenue Synergy potential as well..

Sure. I'll break that into two questions if you will and we are clearly – Synergy Health as appose to synergies, Synergy Health is clearly much more non-U.S.

based and that was one of the real advantages we saw in the combination is it increases our footprint outside the U.S., we've talked many times we've grown our OUS business organically faster than our U.S. business, just what happens the acquisitions we made tended to be more U.S.

so we are pleased, we've been looking for things OUS on the acquisition front and had been working on those for some time and we are pleased to be able to be able to do that with Synergy.

So we clearly see that as one of the significant advantages is having a broader OUS footprint and particularly in the AST business or what we would call Isomedix business.

In their AST business they have work to get into the faster growing markets as well, not just in Europe, they are very strong in Europe, but they’ve moved into the for lack of better term emerging markets and we see that as a really opportunity. So full stop that was one of the significant reasons for the deal.

Secondarily, we do expect to see many of those markets in the emerging markets if you will grow faster than the U.S., or European business. And as a result, we see that as an opportunity, we also see opportunities where they have strength with customers to help us do a better job selling things outside the U.S.

or they have good strength with customers and we would expect to help them in the U.S. where we have good strength of customers. So the cross revenue synergy, well I think is what you are describing there is something we think will happen.

Those are almost always longer term affairs that doesn’t usually happen time zero and so that’s why I talk about this as a strategic long-term acquisition because of the revenue synergies almost always take longer to accrue and particularly when you are talking about cross national revenue synergies as opposed to in the same general geography.

So we do expect that to take longer. The other – the cost synergies we’ve been clear and that is filed and in short we’ve committed that we expect that to be $30 million or more and we continue to expect that..

And just some commentary on the level of hospital spending in those markets overseas?.

Yes, we’ve seen I guess it’s interesting, our business is actually been stronger in Europe this year than in the previous years and I think that’s a little counter trend. I think we’ve see more weakness there. We’ve been stronger than the market I think in Europe in the last few months or at least relative to our previous year.

I do think particularly in the Eastern Europe we’ve seen some softening across the board Life Science and Healthcare. So that’s kind of the broadest way to say and I would not – I would – it seems to us that the European markets are backing off a little bit vis-à-vis the U.S. market in terms of market demand.

The other piece of that is when you put the Japanese – the Japan, the Asian markets and the Latin America markets we’ve seen a slip and we’ve talked about that in the first quarter.

Our Latin American markets have softened a bit relative to our history and our Asian markets have grown a bit, so they pretty much offset each other in total growing, but the Asian markets offsetting the Latin America.

And then as most people know the –we put our, when we talk about Europe, we talk EMEA which includes the Middle East markets and the Middle East markets are strong..

And then looking at Europe, do most hospitals outsource their sterilization needs or is there a still a large opportunity within the hospitals?.

It is mixed and it depends on the country, the UK is really where this phenomena got legs. There’s been outsourcing in the U.S., there’s been outsourcing in different parts of Europe, but where really got legs in grew was in the UK and synergy is really one of the driving forces, one of the reasons that occurred in my opinion.

And so there is opportunity, but generally speaking I think we’ve seen more activity in the southern countries in Europe then we have in the other Northern countries in Europe as a general statement. But if you look at in terms of the amount that’s placed that’s definitely the case, so but there is potential upside in that over the longer-term..

Thank you..

You bet..

Our final question comes from Mitra Ramgopal with Sidoti. Your line is open..

Yes, hi good morning. Just a couple of questions, coming back to the IMS acquisition, it looks like from a revenue standpoint it’s running well ahead of where the business was when you bought it. I was just wondering if it’s really the strength of the underlying business or are you already able to start levering that the top line..

Yes..

Okay..

IMS had a nice business and they were planning to grow double-digits and I think they would have grown those kinds of numbers on their own.

And we have clearly seen an ability to as I commented earlier the cost synergies are coming at least as quickly as we expected and really probably more quickly than we expected and we are seeing signs of revenue synergies that are more favorable than we expected..

Okay, thanks and also just in terms of use of cash I know you’ve always generated tremendous free cash flow in the past and have allocated it in terms of share buybacks increasing the dividend et cetera.

But given the recent acquisitions and increased leverage on the balance sheet is the use now going to be towards maybe reducing debt asset acquisitions or you still looking to occasionally repurchase shares and also increased the dividend..

Yes, again we’ve been I think consistent for 6.5 or 7-years on our allocation of cash and that allocation is in rank order we don’t expect to cut our dividends, and we generally expect to grow them. Secondly, we’ll invest in the organic growth of the businesses we already have.

Thirdly, we’ll look for acquisition opportunity in adjacent markets, and fourthly look at doing share buybacks if the first three opportunities don’t use the full cash that we have on hand and need to have for future of the first three.

The one thing we did change when we announced this acquisition is because our leverage ratio is running up will be we think around 2.8, 2.9 leverage ratio. We do see reduction of that leverage as a lever that’s a head of share buybacks in general.

So we would expect to be deleveraging before we did any buybacks, but I would still put the first three in the appropriate order. And you have to look that in the long-term, on long-term basis..

Absolutely. Thanks again for taking the questions..

You bet..

I show no other questions at this time. I will turn the call back for any closing remarks..

This concludes the second quarter conference call. Thanks everybody for joining us and your interest in STERIS..

Thank you for participating. You may now disconnect..