<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _______________ TO _______________
COMMISSION FILE NUMBER 0-20165
STERIS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
OHIO 34-1482024
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
5960 HEISLEY ROAD 216-354-2600
MENTOR, OHIO 44060 (REGISTRANT'S TELEPHONE NUMBER
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE)
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
COMMON SHARES, WITHOUT PAR VALUE
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 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K in any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, computed by reference to the average of the bid and ask price of
such stock as of May 30, 1997: $1,215,222,199
The number of Common Shares outstanding as of May 30, 1997: 33,948,158
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1997 Annual Meeting -- Part III
================================================================================
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PART I
ITEM 1. BUSINESS
DESCRIPTION OF BUSINESS
STERIS Corporation (the "Company" or "STERIS") develops, manufactures,
markets, and services infection prevention, contamination control, and surgical
support systems, products, and technologies for healthcare, scientific,
research, and industrial Customers throughout the world. STERIS is focused on
helping Customers address today's trends in the healthcare and scientific
industries. The healthcare industry is changing rapidly due to the explosive
growth of minimally invasive surgical and diagnostic procedures; heightened
public and professional awareness and concern for the increasing number of
transmittable and antibiotic-resistant infectious diseases; the shifting of
patient care from acute care hospital settings to alternative care facilities;
and the overall need to reduce the cost of healthcare delivery. These trends
have expanded the demand for rapid, safe, and efficient infection prevention
systems for critical tasks such as the sterile processing of devices and the
handling, decontamination, destruction, and disposal of potentially infectious
biohazardous waste. In the scientific industry, the market is expanding as
pharmaceutical, biotech, and other FDA-regulated manufacturers are under
increasing pressure to adhere to stricter guidelines for the validation and
control of their antimicrobial processes, as well as the trend towards global
standardization of protocols.
In May 1996, STERIS acquired Amsco International, Inc., a prestigious U.S.
market leader in equipment and services. As a result, STERIS became a major
provider of infection prevention, contamination control, and surgical support
capital equipment and related services, consumables, and accessories to the
healthcare and scientific markets worldwide. This acquisition was a part of
STERIS's consistent strategy to better serve its Customers, and gave STERIS a
wider variety of technologies, greater manufacturing capacity, and a broader
line of products and services. In addition, the acquisition extended STERIS's
access to international and non-healthcare markets, including the biomedical
research, biotechnology, and pharmaceutical sectors.
STERIS expanded its consumable offerings in late 1996 with the acquisitions
of Calgon Vestal Laboratories, Inc. ("Calgon Vestal") and Surgicot, Inc. Calgon
Vestal is a U.S. market leader in the development and manufacture of products
used for instrument cleaning and decontamination, high risk and routine skin
care products, and hard surface disinfectants. Surgicot is a leading developer
and supplier of consumable sterility assurance products.
The Company has approximately 4,000 Associates (employees) worldwide,
including 1,200 direct sales, service, and field support personnel. Customer
Support facilities are located in major global market centers with manufacturing
operations in the United States, Canada, Germany, and Finland.
PRINCIPAL PRODUCTS AND SERVICES
Through a consistent strategic plan, a focused research and development
effort, and several business acquisitions, STERIS has emerged as a market leader
in low temperature sterilization, high temperature sterilization, washing and
decontamination systems, surgical tables, surgical lights, and consumables. The
Company has expanded from its original narrow product line to become a
multi-faceted global organization that serves healthcare, scientific, research,
and industrial markets. Revenues by principal market are as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
----------------------------------
1997 1996* 1995*
-------- -------- --------
<S> <C> <C> <C>
Infection Prevention............................... $320,664 $290,019 $286,065
Surgical Support................................... 128,502 112,400 116,529
Scientific and Industrial.......................... 101,442 101,124 112,348
Management Services................................ 37,244 31,069 30,810
-------- -------- --------
Total.............................................. $587,852 $534,612 $545,752
======== ======== ========
</TABLE>
- ---------------
* Includes the combined results of STERIS and Amsco on a pooling-of-interests
basis.
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INFECTION PREVENTION. Infection Prevention products are used by Customers
to significantly reduce or eliminate microbial contamination of surfaces with
which human contact might occur. The Company provides complete infection
prevention material processing systems, including products used for cleaning,
decontaminating, disinfecting, sterilizing, drying, and aerating medical
instruments, devices, chemicals, and packaging. STERIS infection prevention
systems support cost containment, productivity increases, and risk reduction in
a wide variety of healthcare, scientific, industrial, and research settings
through process standardization, automatic monitoring and documentation,
processing site flexibility, and reduction in processing time.
The principal product line within the STERIS(R) brand is STERIS SYSTEM
1(R), a complete system for just-in-time sterile processing at or near the site
of patient care. SYSTEM 1 enables healthcare professionals to easily and
economically sterilize immersible surgical and diagnostic devices between
patient procedures in less than thirty minutes. The use of SYSTEM 1 also
eliminates time consuming transportation to and from central processing sites.
Customers are able to use delicate, expensive, heat sensitive devices and
instrument sets many times per day without compromising sterilization standards.
STERIS SYSTEM 1 consists of a tabletop microprocessor-controlled unit, a
patented, proprietary single-use sterilant, and multiple adapter trays and
containers. Installation requirements are tap water, electricity, and a drain.
STERIS sterilant, STERIS 20(TM), combines a powerful chemical biocidal agent
with a proprietary anti-corrosion formulation to provide low temperature
destruction of microorganisms. STERIS's process significantly reduces processing
time and safety concerns associated with conventional low temperature
sterilization and disinfection systems. SYSTEM 1 has particular appeal in the
increasingly decentralized delivery of therapeutic patient services where
capitated costs and standardized outcomes are emphasized. Since commercially
introducing SYSTEM 1 in November 1988, the Company has sold well over 10,000
SYSTEM 1 units to thousands of healthcare facilities, including hospitals,
medical centers, ambulatory facilities, and physician offices in major markets
throughout the world.
The fundamental technology of the STERIS brand is the rapid, safe, low
temperature chemical destruction of microorganisms on inanimate surfaces.
STERIS's strategy is to employ this technology in commercial applications with a
focus on sterile processing, biohazardous waste processing, and other surface
safety applications in the healthcare industry. The technology also has
potential applications in a wide variety of other settings where cleanliness or
low temperature destruction of microorganisms is important.
Recognized for years as the industry standard in large and medium scale,
high quality hardware systems, the AMSCO(R) brand represents a leading choice in
infection prevention. AMSCO brand infection prevention products include thermal
and low temperature gaseous sterilization systems, cleaning and decontamination
systems, accessories, and related consumables that are used to prevent the
spread of infectious diseases and microbial contamination.
The Company's thermal sterilization systems use saturated steam to
sterilize items through a combination of heat, moisture, and pressure. Thermal
sterilizers are offered in a number of sizes based on Customer throughput
requirements and are designed for use in centralized or decentralized processing
environments. The product line includes a versatile microprocessor-based control
system which is designed to monitor each phase of the sterilization cycle and
provide the Customer a permanent record of important cycle information,
including type and parameters of sterilization cycle, temperature, pressure,
vacuum, and total cycle time. The Company's sterilizer chambers are made of
highly durable nickel-clad carbon steel or 316L stainless steel.
In addition to thermal sterilization systems, the Company manufactures low
temperature ethylene oxide (EO) gas sterilizers which provide Customers the
capability to sterilize heat sensitive medical devices in a safe, controlled
processing environment. Each sterilization system includes an advanced
microprocessor-based control system which monitors cycle parameters and provides
the Customer a permanent record of each sterilization cycle. The Company's
leading ethylene oxide gas sterilization system, the AMSCO(R) 3017 100% EO
Sterilizer/Aerator, utilizes a proprietary, single-use sterilant cartridge and
includes a built-in exhaust system.
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STERIS manufactures and distributes infection prevention consumables that
are used to prevent the spread of infectious diseases and to monitor
sterilization and decontamination processes. CALGON VESTAL(TM) brand products
offer quality choices for infection prevention and contamination control in the
following categories: Instrument Cleaning and Decontamination Systems; High Risk
and Routine Skin Care Products; Hard Surface Disinfectants; and Surgical Scrubs.
The SURGICOT(R) brand includes over 300 sterility assurance and sterility
maintenance products for the worldwide healthcare market, including:
Sterilization, Protective and Decontamination Packaging; Biological Monitoring
Systems; Barrier Wraps; Integrator/Indicator Monitoring Systems; and Record
Keeping Systems.
SURGICAL SUPPORT. The Company's Surgical Support product line includes
general and specialty surgical tables, surgical and examination lights,
operating room (OR) storage cabinets, fluid waste management systems, warming
cabinets, scrub sinks, and other complementary products and accessories for
hospital and non-hospital ORs. Surgical tables, lights, and stainless steel OR
products are used in both hospital and non-hospital settings. The Company's
versatile surgical table product line includes automated and manual general
surgical tables and an orthopedic specialty table. A wide variety of general and
specialty surgical procedures are accommodated through the use of attachable
accessories. The Company produces and sells its own line of accessories, as well
as accessories manufactured by outside sources.
The Company's illumination systems are designed for a wide variety of
locations where therapeutic procedures are performed, including the emergency
room, general surgery suite, OB/GYN suite, and ambulatory surgery suite. These
lighting products combine optical performance with positioning flexibility that
accommodate the surface and cavity illumination needs of virtually all types of
surgical procedures. The Company's surgical lighting products range from major
surgical lights to minor examination lights.
The Company's surgical support product line includes SafeCycle(R) 40, a
self-contained, high volume fluid waste management system designed for the
collection, containment, transport, and safe disposal of potentially infectious
fluid waste generated during surgical and diagnostic procedures. The system
eliminates the need for up to thirteen three-liter suction canisters while
significantly reducing the possibility of human exposure to biologically
contaminated fluids.
SCIENTIFIC AND INDUSTRIAL. Scientific and Industrial contamination
prevention and control products and services are used in the pharmaceutical,
biotechnology, medical device, research, and industrial markets worldwide. These
products and services assist Customers in assuring sterility and other microbial
reduction processes while meeting regulatory and validation requirements. The
Company provides complete contamination prevention systems including AMSCO brand
high temperature and low temperature sterilizers, FINN-AQUA brand high purity
water systems and lyophilizers (freeze drying systems), CALGON VESTAL high level
disinfection and surface decontamination systems, and SURGICOT monitoring
products.
High temperature sterilizers used by Scientific and Industrial Customers
range from standard table top and mid-sized units to large room-sized custom
installed units. The Company's line of low temperature infection control
equipment ranges from high level disinfectants to vaporized hydrogen peroxide
(VHP(R)) sterilizers. All of the Company's cGMP (current Good Manufacturing
Practices) products are designed in accordance with the latest U.S. Pharmacopeia
XXIII and European Pharmacopoeia 3rd Edition requirements. Demand for such
equipment is fueled by the level of scientific research and production.
MANAGEMENT SERVICES. The Company provides after-sale field service for a
wide variety of clinical and scientific equipment. The Company's service
technicians focus on the management and servicing of sophisticated clinical
equipment, including surgical, laboratory, and diagnostic imaging equipment sold
by third-party manufacturers.
The Company's third-party service organization also provides full-service
Clinical Engineering Services ("CES") programs to hospitals. The CES program
provides on-site clinical engineers and consolidated equipment maintenance
activities under the program manager for each account. The objective of the CES
program is to improve service performance and equipment up-time within the
hospital, while affording the hospital an opportunity to control its maintenance
budget, as well as to comply with existing regulations.
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MANUFACTURING
The Company manufactures, assembles, and packages products in Mentor, Ohio;
Erie, Pennsylvania; Montgomery, Alabama; Research Triangle Park, North Carolina;
St. Louis, Missouri; Cologne, Germany; Helsinki, Finland; and Quebec City,
Canada. Each of the production facilities focuses on particular processes and
products. Generally, STERIS(R) brand products are produced in Mentor, Ohio;
CALGON VESTAL(TM) brand in St. Louis, Missouri; SURGICOT(R) brand in Research
Triangle Park, North Carolina; and AMSCO(R) brand in the remaining locations.
All of the Company's equipment production facilities throughout the world are
ISO 9001 certified.
Raw materials, sub-assemblies, and other components essential to the
Company's business are readily available within the lead times specified by
vendors. The supply of such raw materials has posed no significant problem in
the operation of the Company's business. All raw materials are available from
multiple sources, both domestic and foreign.
The Company's foreign operations are subject to the usual risks that may
affect such operations. These include, among other things, customary exchange
controls and currency restrictions, currency fluctuations, changes in local
economic conditions, exposure to possible expropriation or other government
actions, unsettled political conditions, and foreign government-sponsored
boycotts of the Company's products or services for noncommercial reasons. Most
of the identifiable assets associated with the Company's foreign operations are
located in countries where the Company believes such risks to be minimal. For
certain financial information regarding the Company's foreign operations, see
Note M -- Business Segment Information to the accompanying financial statements
on page 31 of this Form 10-K.
THE MARKETS AND METHODS OF DISTRIBUTION
STERIS has, as of March 31, 1997, 263 direct sales representatives and 35
regional sales managers in North America. The sales representatives reside in
metropolitan market areas throughout the U.S. and Canada. STERIS also has, as of
March 31, 1997, 880 field service representatives, who provide on-site repair
and maintenance service in Customer facilities in the U.S. and Canada. Sales and
service activities are supported by a staff of regionally based clinical
specialists, system planners, corporate account managers, and an in-house
service and field support department.
Customer training is one of the most important aspects of the STERIS
marketing plan. In addition to training at Customer locations, STERIS provides a
two-day course for Customer operators at the Company's Training and Education
Center in Mentor, Ohio. The program enables the Customer representative to
understand fully the fundamentals of The STERIS PROCESS(TM) and the theory and
operation of STERIS SYSTEM 1(R). The Operator Training Program is approved by
the Ohio Nurses Association to offer contact hours for continuing education to
eligible course participants. The Ohio Nurses Association has been authorized by
the American Nurses Credentialing Center's Commission on Accreditation to
approve continuing education programs that meet standards established by the
Commission. The program was implemented in July 1991, and, as of March 31, 1997,
approximately 9,200 Customer representatives, primarily nurses and department
managers, have received training at STERIS. The Company provides a separate
training program for biomedical engineers employed by the Company's Customers on
a fee basis. As of March 31, 1997, approximately 900 biomedical engineers have
received training at STERIS.
The Company has adopted a strategy focused on employing direct sales,
service, and support personnel in developed international markets while
contracting with distributors in other selected markets. STERIS currently has
subsidiaries and support personnel in Belgium, Brazil, Canada, China, Costa
Rica, Finland, France, Germany, Hong Kong, Italy, Japan, Korea, Mexico,
Singapore, Spain, and the United Kingdom. STERIS has distribution agreements
with medical supply distributors in Australia, and various countries in Asia,
Europe, and the Middle East.
The Company believes that one of its strengths is its broad Customer base
with no single Customer accounting for more than two percent of sales during the
fiscal year ended March 31, 1997.
5
<PAGE> 6
COMPETITION
A number of methodologies and commercial products are available for general
sterilization purposes. Getinge/Castle, Advanced Sterilization Products
(division of Johnson & Johnson), and the Medical-Surgical Products Division of
3M Corporation are well-known U.S. companies offering products for general
sterilization and disinfection. Skytron (division of KMW Group, Inc.),
Getinge/Castle, and Midmark are competitors in providing general surgical
tables. Berchtold Corporation, ALM Surgical Equipment, Inc., Heraeus Surgical,
Inc., and Skytron are competitors in the major surgery OR light market.
Competitors in sterility assurance products include Kimberly-Clark Corporation,
3M Healthcare, and Allegiance Healthcare Corporation. EcoLabs/Huntington and 3M
Corporation are competitors in environmental decontamination products.
Competitors in instrument decontamination products include Getinge/Castle,
EcoLabs/Huntington, and Allegiance Healthcare Corporation. The Company's high
risk and routine skin care products compete against the products of
EcoLabs/Huntington, Provon (division of Gojo), and SaniFresh (division of
Kimberly-Clark). Allegiance Healthcare Corporation, Becton Dickinson,
EcoLabs/Huntington, and Purdue Frederick are competitors in providing surgical
scrubs. Competitors in the OEM service business are local and in-hospital
service groups. Competitors in the third-party service business are General
Electric Medical, Cohr, ServiceMaster, and in-hospital service groups. The
primary competitor for the Company's Scientific and Industrial sterilization
systems is Getinge/Castle. The balance of the Scientific and Industrial product
lines compete against small regionally-based manufacturers.
Competition in the product markets served by the Company is based upon
product design and quality, product innovation, and product serviceability that
results in the greatest overall value to the Customer. In addition, there is
significant price competition among various instrument preparation processes.
Several smaller, early-stage companies are believed to be working with a
variety of other technologies and sterilizing agents, including microwave,
ozone, plasma, chlorine dioxide, peracids, and formaldehyde. In addition, a
number of companies have developed disposable medical instruments and other
devices designed to address the risk of contamination.
STERIS anticipates that it may face increased competition in the future as
new sterile processing, contamination control, and surgical support products
enter the market. There can be no assurance that new products developed by the
Company's competitors will not be more commercially successful than those
currently developed by STERIS or that may be developed by STERIS. In addition,
some of STERIS's existing or potential competitors have greater financial,
technical, and human resources than the Company. Accordingly, the Company's
competitors may succeed in developing and commercializing products more rapidly
than the Company.
GOVERNMENT REGULATION
Many of the Company's products and manufacturing processes are subject to
regulation by the United States Food and Drug Administration ("FDA"), the United
States Environmental Protection Agency (the "EPA"), and other governmental
authorities. Similar regulatory agencies exist in other countries with a wide
variety of regulatory review processes and procedures. The Company's products
are also subject to review or certification by various non-governmental
certification authorities, including Underwriter's Laboratories, Canadian
Standards Association, ASME, and TUV/VDE (Europe). Domestic and foreign
government regulatory and certification authorities may delay or prevent product
introductions, require additional studies or tests prior to product
introduction, require product modifications or recalls, or mandate cessation of
production and marketing of existing products. The cost of compliance with
applicable regulations represents a considerable expense, and significant
changes in such regulations or their interpretation could have a material
adverse impact.
In the United States, the FDA regulates the introduction, manufacturing,
labeling, and recordkeeping procedures for medical devices, including the
majority of products manufactured by the Company. The process of obtaining
marketing clearance from the FDA for new products, new applications for existing
products, and changes to existing products can be time-consuming and expensive.
In addition, whether separate marketing clearance is required under applicable
regulations for any particular product is often a
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matter of judgment. There is no assurance that marketing clearances will be
granted, that the FDA will agree or continue to agree with all judgments made
from time to time by the Company with respect to whether or not marketing
clearance is required for any particular new or existing product, or that the
FDA review will not involve delays that would adversely affect the Company's
ability to commercialize additional products or applications for existing
products. Similar approvals by comparable agencies are required in most
countries. Foreign regulatory requirements may vary widely from country to
country. The time required to obtain market clearance from a foreign country may
be longer or shorter than that required by the FDA or other agencies, and
clearance or approval or other product requirements may differ.
Even if regulatory clearances to market a product are obtained from the FDA
or comparable foreign agencies, these clearances may entail limitations on the
indicated uses of the product. Product clearances granted by the FDA or
comparable foreign agencies can also be withdrawn due to failure to comply with
regulatory standards or the occurrence of unforeseen problems following initial
approval. The FDA could also limit or prevent the manufacture or distribution of
the Company's products and has the power to require the recall of such products.
FDA regulations depend heavily on administrative interpretation and there can be
no assurance that future interpretations made by the FDA or other regulatory
bodies, with possible retroactive effect, will not adversely affect the Company.
Further, additional government regulation may be established that could prevent,
delay, or result in the rejection of regulatory clearance of the Company's
products. The effect of government regulation that may arise from future
legislation or administrative action cannot be predicted.
The FDA, various state agencies, and foreign regulatory agencies also have
the right to inspect the Company's facilities from time to time to determine
whether the Company is in compliance with various regulations relating to good
manufacturing practices ("GMP Regulations"), validation, testing, quality
control, and product labeling. In complying with GMP Regulations, manufacturers
must continue to expend time, money, and effort in the areas of production and
quality control in order to ensure full technical compliance.
Failure to comply with any applicable regulatory requirements could result
in sanctions being imposed on the Company, including warning letters,
injunctions, civil money penalties, failure of the FDA or comparable foreign
agencies to grant premarket clearance or premarket approval of medical devices,
product recalls, operating restrictions, and, in extreme cases, criminal
sanctions.
In addition, the Company is and may be subject to regulation under state,
federal, and foreign law regarding occupational safety, environmental
protection, and hazardous and toxic substance control, and to other present and
possible future local, state, federal, and foreign regulation.
The Company believes that it is currently in conformity in all material
respects with all applicable regulatory requirements. The Company is committed
to maintaining compliance with all applicable FDA, EPA, and other governmental
laws, regulations and nongovernmental certification authorities.
EMPLOYEES
As of March 31, 1997, the Company employed approximately 4,000 Associates
(employees). Management considers its relations with its Associates to be good.
INTELLECTUAL PROPERTY AND RESEARCH AND DEVELOPMENT
The Company protects its technology and products by, among other means,
filing U.S. and foreign patent applications that it considers important to its
business. There can be no assurance, however, that any patent will provide
adequate protection for the technology or product it covers. In addition, the
process of obtaining and protecting patents can be long and expensive. The
Company also relies upon trade secrets, technical know-how, and continuing
technological innovation to develop and maintain its competitive position.
Research activities are important to the Company's business. The costs of
the Company's research activities relating to the discovery and development of
new products and the improvement of existing products
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amounted to $22.0 million, $17.9 million, and $17.3 million in fiscal years
1997, 1996, and 1995, respectively. These costs are charged directly to income
in the year in which incurred.
As of March 31, 1997, the Company held 182 U.S. patents and 264 foreign
patents with expiration dates ranging from 1997 to the year 2015. In addition,
the Company, as of March 31, 1997, had 32 U.S. patents and 163 foreign patents
pending.
The Company also considers its various trademarks to be valuable in the
marketing of its products. The Company has a total of 532 trademark
registrations in the United States and in various foreign countries in which the
Company does business.
ITEM 2. PROPERTIES
At March 31, 1997, the Company operated nine manufacturing and engineering
facilities comprising approximately 1.4 million square feet. Substantially all
such facilities are owned. Six of these sites are located in the United States,
with the others located in Canada, Finland and Germany. Management believes that
its facilities are adequate for operations and are maintained in good condition.
At March 31, 1997, the Company leased or owned sales, service and support
offices in 15 countries. The Company is confident that, if needed, it will be
able to acquire additional facilities at commercially reasonable rates.
ITEM 3. LEGAL PROCEEDINGS
In connection with the May 1996 Amsco Merger, a complaint purporting to be
a class action on behalf of Amsco's stockholders was filed on December 22, 1995
in the Chancery Court of the State of Delaware, New Castle County, seeking to
enjoin the Merger, money damages, and other relief. The complaint, which named
Amsco and all but one of its directors and STERIS as defendants, alleged, among
other things, that Amsco's board had breached its fiduciary duties in approving
the Merger and, in particular, the consideration to be paid to Amsco's
stockholders in the Merger and that STERIS's board had aided and abetted the
Amsco board in its alleged breach of fiduciary duties. On May 20, 1997, the
complaint, which STERIS had always believed was without merit, was dismissed
without prejudice.
For a discussion of other legal proceedings, see Note L -- Contingencies to
the accompanying consolidated financial statements on page 30 of this Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the Company's 1997 fiscal year.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the executive
officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------------- --- -------------------------------------
<S> <C> <C>
Bill R. Sanford...................... 53 Chairman of the Board of Directors,
President, and Chief Executive
Officer
J. Lloyd Breedlove................... 49 Senior Vice President
Michael A. Keresman, III............. 39 Senior Vice President and Chief
Financial Officer
David C. Dvorak...................... 33 Vice President, General Counsel and
Secretary
Paul A. Zamecnik..................... 37 Vice President
Pamela S. Sedmak..................... 36 Vice President
</TABLE>
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The following is a brief account of the business experience during the past
five years of each such executive officer:
BILL R. SANFORD serves as Chairman of the Board of Directors,
President, and Chief Executive Officer. He joined the Company April 1,
1987.
J. LLOYD BREEDLOVE serves as a Senior Vice President of the Company
and Group President of the Company's Customer Support Group. He joined the
Company as Executive Vice President in August 1991.
MICHAEL A. KERESMAN, III serves as a Senior Vice President and Chief
Financial Officer. He joined the Company in January 1988 as Director of
Finance and has held positions as Vice President of Finance, Vice President
of Finance and Administration, Vice President of Finance and Operations,
Secretary, and Vice President of Business Development.
DAVID C. DVORAK serves as Vice President, General Counsel, and
Secretary. He joined the Company in June 1996. Prior to joining the
Company, Mr. Dvorak served as an attorney with Thompson Hine & Flory LLP
from 1994 to 1996, and with Jones, Day, Reavis & Pogue from 1991 to 1994.
PAUL A. ZAMECNIK serves as Vice President with responsibility for
Regulatory Affairs and Quality Systems and as Group President of the
Capital Systems Group. He joined the Company in July 1992 as Director of
Marketing and was appointed Vice President with responsibility for
Regulatory Affairs and Quality Systems in November 1993. He became Group
President of the Capital Systems Group in January 1997.
PAMELA S. SEDMAK serves as Vice President and as Group President of
the Consumables Systems Group. She joined the Company in October 1996 as
Vice President with responsibility for Strategic Planning. She became Group
President of the Consumables Systems Group in January 1997. Prior to
joining the Company, Ms. Sedmak had been with General Electric Company for
twelve years, most recently as a General Manager of Marketing with GE
Medical Systems.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
MARKET INFORMATION AND DIVIDENDS
The Company's Common Shares are traded on the NASDAQ National Market System
under the symbol "STRL." The following table sets forth, for the periods
indicated, the high and low sales prices for the Company's Common Shares as
quoted by NASDAQ. These prices do not include retail markups, markdowns or
commissions.
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------
MARCH 31 DECEMBER 31 SEPTEMBER 30 JUNE 30
-------- ----------- ------------ -------
<S> <C> <C> <C> <C>
FISCAL 1997
High................................. $43.38 $ 44.00 $36.00 $ 35.88
Low.................................. 22.63 33.00 25.00 29.56
FISCAL 1996
High................................. $36.50 $ 45.00 $43.00 $ 28.50
Low.................................. 28.88 28.75 22.88 18.25
</TABLE>
The Company has not paid any dividends on its Common Shares since its
inception and does not anticipate paying any such dividends in the foreseeable
future. The Company has entered into a credit agreement which includes
operational conditions and financial ratio covenants that, in certain
circumstances, could limit the Company's ability to pay dividends. The Company
currently intends to retain all of its earnings
9
<PAGE> 10
for the operation and expansion of its businesses. At May 30, 1997, there were
approximately 1,955 holders of record of the Company's Common Shares.
ITEM 6. SELECTED FINANCIAL DATA
On May 13, 1996, STERIS merged with Amsco International, Inc. ("Amsco") in
a tax-free, stock-for-stock transaction (the "Amsco Merger"). The data set forth
below should be read in conjunction with the financial statements and related
notes included herein. The Amsco Merger has been accounted by the pooling-
of-interests method. Accordingly, the data set forth below include the combined
operations of STERIS and Amsco for all periods presented.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONAL DATA:
Net revenue........................... $587,852 $534,612 $545,752 $535,718 $541,241
Gross profit.......................... 231,845 202,701 204,824 208,595 211,327
Non-recurring expenses................ 90,831 26,996 4,950
Income (loss) from operations......... (6,487) 69,731 38,645 59,438 76,930
Income (loss) from continuing
operations......................... (30,606) 40,790 15,736 32,715 43,257
Loss from discontinued operation...... (51,658) (14,353) (6,664)
Loss on the extinguishment of debt.... (1,655)
Cumulative effect of change in
accounting for income taxes........ 1,220
--------- -------- --------- -------- --------
Net income (loss)..................... $(30,606) $ 40,790 $(37,577) $ 19,582 $ 36,593
========= ======== ========= ======== ========
Income (loss) per Common Share
From continuing operations......... $ (0.91) $ 1.17 $ 0.47 $ 0.99 $ 1.41
From discontinued operation........ (1.54) (0.44) (0.22)
From extinguishment of debt........ (0.05)
From change in method of accounting
for income taxes................. 0.04
--------- -------- --------- -------- --------
Net income (loss).................. $ (0.91) $ 1.17 $ (1.12) $ 0.59 $ 1.19
========= ======== ========= ======== ========
Shares used in computing net income
(loss) per share................... 33,678 34,857 33,536 32,977 30,732
BALANCE SHEET DATA:
Working Capital....................... $141,354 $231,996 $177,470 $202,928 $209,874
Total assets.......................... 539,455 592,697 535,454 567,312 540,082
Long-term debt........................ 35,879 102,631 103,585 152,910 166,173
Total liabilities..................... 244,739 288,638 297,645 305,226 302,292
Total shareholders' equity............ $294,716 $304,059 $237,809 $262,086 $237,790
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BASIS OF DISCUSSION
On May 13, 1996, STERIS merged with Amsco International, Inc. ("Amsco") in
a tax-free, stock-for-stock transaction (the "Amsco Merger"). The Amsco Merger
has been accounted by the pooling-of-interests method. Accordingly, the
accompanying consolidated financial statements give retroactive effect to the
10
<PAGE> 11
transaction and include the combined operations of STERIS and Amsco for all
periods presented. In addition, the historical financial information of Amsco
(previously reported on fiscal years ending December 31) has been recast to
conform to STERIS's annual reporting period ending March 31.
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
Net revenues increased by 10.0% to $587.9 million in fiscal 1997 from
$534.6 million in fiscal 1996. Infection Prevention revenues increased by 10.6%
to $320.7 million in fiscal 1997 from $290.0 million in fiscal 1996. Surgical
Support revenues increased by 14.3% to $128.5 million in fiscal 1997 from $112.4
million in fiscal 1996. Scientific and Industrial revenues increased by 0.3% to
$101.4 million in fiscal 1997 from $101.1 million in fiscal 1996. Management
Services revenues increased by 19.9% to $37.2 million in fiscal 1997 from $31.1
million in fiscal 1996. The increases were due principally to changes in volume.
The cost of products and services sold increased by 7.3% to $356.0 million
in fiscal 1997 from $331.9 million in fiscal 1996. The cost of products and
services sold as a percentage of net revenues was 60.6% in fiscal 1997 compared
to 62.1% in fiscal 1996. The decrease in the cost of products and services sold
as a percentage of net revenues in fiscal 1997 resulted principally from cost
savings from the effects of restructuring, the implementation of cost control
measures, increases in volume, and changes in the mix of products sold.
Selling, general, and administrative expenses increased in fiscal 1997 by
9.1% to $125.5 million from $115.0 million in fiscal 1996.
Research and development expenses increased by 22.5% to $22.0 million in
fiscal 1997 from $17.9 million in fiscal 1996. Research and development expenses
as a percentage of net revenues were 3.7% in fiscal 1997 compared to 3.4% in
fiscal 1996. The increases were due to additional product and application
development expenditures.
Non-recurring charges of $81.3 million net of tax ($90.8 million pre-tax),
or $2.44 per share, were recorded in the 1997 fiscal first quarter for costs
connected to the Amsco Merger. The charges include transaction costs of $15.0
million and restructuring charges of $66.3 million net of tax. The transaction
costs are for legal, accounting, investment banking, and related expenses. The
restructuring charges are for (i) elimination of redundant facilities and other
assets ($27.0 million), (ii) satisfaction of Amsco executive employment
agreements and other employee severance ($19.3 million), (iii) write-off of
goodwill related to Amsco's Finn-Aqua business ($27.3 million), and (iv) other
merger-related items. Cash payments for fiscal 1997 related principally to
transaction costs, executive employment agreements, and associate severance.
Interest expense decreased by 52.9% to $2.9 million in fiscal 1997 from
$6.2 million in fiscal 1996. The decrease was due primarily to the July 1996
redemption of approximately $100 million of Amsco 4.5%/6.5% Convertible
Subordinated Notes.
Interest income and other decreased by 29.2% to $4.5 million in fiscal 1997
from $6.4 million in fiscal 1996. The decrease in interest income was due
primarily to lower cash, cash equivalents, and marketable security balances,
with the lower balances resulting from the cash redemption of the aforementioned
Amsco Convertible Subordinated Notes.
Excluding the effect of non-recurring items, income increased by 24.3% to
$50.7 million ($1.43 per share) in fiscal 1997 from $40.8 million ($1.17 per
share) in fiscal 1996.
The effective income tax rate for fiscal year 1997 differed from statutory
rates principally because certain non-recurring items that increased the net
loss are non-deductible for tax purposes. Non-deductible items include the
write-off of goodwill related to Amsco's Finn-Aqua business and provisions for
certain executive severance costs. Also, additional tax valuation allowances
were provided to reflect the effects of merger activities.
As a result of the foregoing factors, the net loss for fiscal 1997 was
$30.6 million, compared to net income of $40.8 million for fiscal 1996.
11
<PAGE> 12
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
Net revenues decreased by 2.0% to $534.6 million in fiscal 1996 from $545.8
million in fiscal 1995. Infection Prevention revenues increased by 1.4% to
$290.0 million in fiscal 1996 from $286.1 million in fiscal 1995. Surgical
Support revenues decreased by 3.5% to $112.4 million in fiscal 1996 from $116.5
million in fiscal 1995. Scientific and Industrial revenues decreased by 10.0% to
$101.1 million in fiscal 1996 from $112.3 million in fiscal 1995. Management
Services revenues increased by 0.8% to $31.1 million in fiscal 1996 from $30.8
million in fiscal 1995.
The cost of products and services sold decreased by 2.6% to $331.9 million
in fiscal 1996 from $340.9 million in fiscal 1995. The cost of products and
services sold as a percentage of net revenues was 62.1% in fiscal 1996 compared
to 62.5% in fiscal 1995.
Selling, general, and administrative expenses decreased by 5.6% to $115.0
million in fiscal 1996 from $121.8 million in fiscal 1995.
Research and development expenses increased by 3.5% to $17.9 million in
fiscal 1996 from $17.3 million in fiscal 1995. Research and development expenses
as a percentage of net revenues were 3.4% in fiscal 1996 compared to 3.2% in
fiscal 1995. The increases were due to additional product and application
development expenditures.
Interest expense decreased by 35.7% to $6.2 million in fiscal 1996 from
$9.6 million in fiscal 1995. The decrease was due primarily to the
extinguishment of certain debt in December 1994.
Interest income and other increased by 214.7% to $6.4 million in fiscal
1996 from $2.0 million in fiscal 1995. The increase in interest income was due
primarily to an overall increase in funds available for investment during the
year.
As a result of the foregoing factors, income from continuing operations was
$40.8 million in fiscal 1996, compared to $15.7 million in fiscal 1995.
DISCONTINUED OPERATION
On June 23, 1994, the former Amsco Board of Directors approved a plan to
divest or wind-down the business of its subsidiary American Sterile Recoveries,
Inc. (ASRI). Amsco's decision was based on the difficulties encountered in
achieving ASRI's growth objectives in the health care environment existing at
that time. In connection with this action, Amsco recorded a one-time after-tax
charge of $60 million (net of taxes of $32.3 million). The charge reflected
estimated asset write-offs and wind-down costs associated with discontinuing the
ASRI business.
In connection with this divestment plan, ASRI consummated the sale of
substantially all of its assets effective July 31, 1994. Proceeds from the
disposal consisted of a combination of cash and a note totaling $14.9 million.
As a result of the sale and its subsequent impact on the resolution of certain
contingencies related to the transaction, during the third quarter of fiscal
1995, Amsco recorded a favorable after-tax adjustment of $10.9 million (net of
taxes of $5.9 million) to the previously recorded estimated charge on the
disposal of the ASRI business.
For the first quarter of fiscal 1995, ASRI had net revenues of $5.6 million
and after-tax losses from operations of $2.6 million (net of taxes of $1.4
million). Total accruals for ASRI at March 31, 1996 were $3.1 million, which
consisted primarily of wind-down costs. Substantially all the remaining accruals
were satisfied in fiscal 1997 and the previously recorded accruals were
sufficient. The results of operations for ASRI through the disposition date have
been reflected in the accompanying consolidated financial statements as a
discontinued operation.
12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had $23.6 million in cash, cash equivalents,
and marketable securities, compared to $150.0 million of the same at March 31,
1996. The decrease was primarily a result of the pay down of debt and
acquisitions of businesses.
At March 31, 1997, the Company had accounts receivable of $164.2 million,
compared to $129.3 million at March 31, 1996. The increase was attributable to
increased revenues in the fourth quarter fiscal 1997 compared to the fourth
quarter fiscal 1996.
At March 31, 1997, the Company had inventory of $78.8 million, compared to
$73.7 million at March 31, 1996. The increase was primarily attributable to
inventories of businesses acquired in the second and third fiscal quarters that
were accounted for using the purchase method of accounting.
Property, plant, and equipment increased by 11.4% to $177.2 million as of
March 31, 1997, compared to $159.1 million at March 31, 1996. The increase was
due primarily to the increases resulting from acquired businesses that were
accounted for using the purchase method of accounting, the investment in
information systems, plant and equipment for an additional packaging plant for
the production of sterilant and decontaminant, and facility renovations,
partially offset by the write-down of assets resulting from the Amsco Merger.
Intangibles increased by 14.1% to $186.4 million as of March 31, 1997,
compared to $163.4 million at March 31, 1996. The change resulted primarily
because of an increase related to goodwill and intangibles of acquired
companies, offset by the write-down of goodwill related to the Finn-Aqua
business resulting from the Amsco Merger.
Total deferred income taxes increased by 19.1% to $39.8 million as of March
31, 1997, compared to $33.4 million at March 31, 1996. The increase was due
primarily to the recognition of costs resulting from the Amsco acquisition and
Merger.
Current liabilities increased by 16.9% to $158.7 million as of March 31,
1997, compared to $135.7 million at March 31, 1996. The increase in current
liabilities was primarily a result of the liabilities of acquired businesses
that were accounted for using the purchase method of accounting.
Other liabilities were $50.2 million as of March 31, 1997, compared to
$50.3 million of the same at March 31, 1996.
Concurrent with the consummation of the Amsco Merger, STERIS entered into a
two and one-half year $125 million unsecured revolving Credit Facility. The
Credit Facility is available to facilitate the integration of the operations of
STERIS or to be used for general corporate purposes. Loans under the Credit
Facility bear interest, at STERIS's option, at either KeyBank National
Association's prime rate or LIBOR rates plus 0.25 percent to 0.35 percent, which
amounted to 5.8 percent at March 31, 1997. The Credit Facility contains
customary covenants which include maintenance of certain financial ratios. As of
March 31, 1997, retained earnings were not restricted under the Company's Credit
facility. Outstanding borrowings under the Credit Facility were $35 million at
March 31, 1997. All borrowings under the Credit Facility are scheduled to mature
during fiscal 1999.
In July 1996, STERIS redeemed $99.4 million of Amsco's $100 million
4.5%/6.5% Convertible Subordinated Notes which were convertible into STERIS
Common Shares. This transaction had no material effect on earnings per share.
The Company has no material commitments for capital expenditures. The
Company believes that its cash requirements will increase due to increased sales
requiring more working capital, accelerated research and development, and
potential acquisitions or investments in complementary businesses. However, the
Company believes that its available cash, cash flow from operations, and sources
of credit will be adequate to satisfy its capital needs for the foreseeable
future.
13
<PAGE> 14
The overall effects of inflation on the Company's business during the
periods discussed have not been significant. The Company monitors the prices it
charges for its products and services on an ongoing basis and believes that it
will be able to adjust those prices to take into account future changes in the
rate of inflation.
The overall effects of foreign currency exchange rates on the Company's
business during the periods discussed have not been significant. Movements in
foreign currency exchange rates create a degree of risk to the Company's
operations. These movements affect the U.S. dollar value of sales made in
foreign currencies, and the U.S. dollar value of costs incurred in foreign
currencies. Changing currency exchange rates also affect the company's
competitive position, as exchange rate changes may affect profitability and
business and/or pricing strategies of non-U.S. based competitors.
CONTINGENCIES
For a discussion of contingencies, see Note L to the consolidated financial
statements.
FORWARD-LOOKING STATEMENTS
This discussion contains statements concerning certain trends and other
forward-looking information affecting or relating to the Company and its
industry that are intended to qualify for the protections afforded
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. There are many important factors that could cause actual results to
differ materially from those in the forward-looking statements. Many of these
important factors are outside STERIS's control. Changes in market conditions,
including competitive factors and changes in governmental regulations, could
cause actual results to differ materially from the Company's expectations. No
assurance can be provided as to any future financial results. Other potentially
negative factors that could cause actual results to differ materially from those
in the forward-looking statements include the potential for increased pressure
on pricing that leads to erosion in profit margins, and to the possibility of
reduced demand, or reductions in the rate of growth in demand, for the Company's
products.
14
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
STERIS Corporation
We have audited the accompanying consolidated balance sheets of STERIS
Corporation and subsidiaries as of March 31, 1997 and 1996, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended March 31, 1997. Our audits also
included the financial statement schedule listed in the index at Item 14(a)(2).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of STERIS
Corporation and subsidiaries as of March 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Cleveland, Ohio
April 21, 1997
15
<PAGE> 16
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31
----------------------
1997 1996
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 20,576 $140,789
Marketable securities............................................. 2,977 9,193
Accounts receivable (net of allowances of $3,810 and $1,947,
respectively).................................................. 164,163 129,312
Inventories....................................................... 78,762 73,718
Current portion of deferred income taxes.......................... 24,888 7,914
Prepaid expenses and other assets................................. 8,676 6,768
-------- --------
TOTAL CURRENT ASSETS................................................ 300,042 367,694
Property, plant, and equipment...................................... 177,184 159,084
Accumulated depreciation............................................ (74,332) (65,338)
-------- --------
Net property, plant, and equipment................................ 102,852 93,746
Intangibles......................................................... 186,417 163,354
Accumulated amortization............................................ (67,032) (59,498)
-------- --------
Net intangibles................................................... 119,385 103,856
Deferred income taxes............................................... 14,862 25,452
Other assets........................................................ 2,314 1,949
-------- --------
TOTAL ASSETS........................................................ $ 539,455 $592,697
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term indebtedness......................... $ 12 $ 371
Accounts payable.................................................. 39,323 31,710
Accrued income taxes.............................................. 19,059 13,097
Accrued expenses and other........................................ 100,294 90,520
-------- --------
TOTAL CURRENT LIABILITIES........................................... 158,688 135,698
Long-term indebtedness.............................................. 35,879 102,631
Other liabilities................................................... 50,172 50,309
-------- --------
TOTAL LIABILITIES................................................... 244,739 288,638
Shareholders' equity:
Serial preferred shares, without par value, 3,000 shares authorized;
no shares outstanding
Common Shares, without par value, 100,000 shares authorized; issued
and outstanding shares of 33,984 at March 31, 1997 and 32,986 at
March 31, 1996, excluding 255 and 7 treasury shares,
respectively...................................................... 231,278 209,751
Retained earnings................................................... 69,513 100,119
Cumulative translation adjustment and other......................... (6,075) (5,811)
-------- --------
TOTAL SHAREHOLDERS' EQUITY.......................................... 294,716 304,059
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......................... $ 539,455 $592,697
======== ========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE> 17
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net revenues............................................. $587,852 $534,612 $545,752
Cost of products sold.................................... 356,007 331,911 340,928
---------- ---------- ----------
- - -
GROSS PROFIT............................................. 231,845 202,701 204,824
Cost and expenses:
Selling, general, and administrative................... 125,515 115,029 121,843
Research and development............................... 21,986 17,941 17,340
Non-recurring items.................................... 90,831 26,996
---------- ---------- ----------
- - -
238,332 132,970 166,179
---------- ---------- ----------
- - -
INCOME (LOSS) FROM OPERATIONS............................ (6,487) 69,731 38,645
Interest expense......................................... (2,919) (6,202) (9,641)
Interest income and other................................ 4,544 6,420 2,040
---------- ---------- ----------
- - -
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES.................................................. (4,862) 69,949 31,044
Income taxes............................................. 25,744 29,159 15,308
---------- ---------- ----------
- - -
INCOME (LOSS) FROM CONTINUING OPERATIONS................. (30,606) 40,790 15,736
Loss from discontinued operation, net of income taxes.... (51,658)
Extraordinary loss on extinguishment of debt, net of
income taxes........................................... (1,655)
---------- ---------- ----------
- - -
NET INCOME (LOSS)........................................ $(30,606) $ 40,790 $(37,577)
=========== =========== ===========
EARNINGS (LOSS) PER SHARE
From continuing operations............................... $ (0.91) $ 1.17 $ 0.47
From discontinued operation.............................. (1.54)
From extinguishment of debt.............................. (0.05)
---------- ---------- ----------
- - -
NET INCOME (LOSS)........................................ $ (0.91) $ 1.17 $ (1.12)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED IN
COMPUTING EARNINGS (LOSS) PER SHARE.................... 33,678 34,857 33,536
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 18
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income........................................ $(30,606) $ 40,790 $(37,577)
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization.......................... 16,528 19,694 18,501
Deferred income taxes.................................. (12,173) 7,471 (16,190)
Extraordinary loss on extinguishment of debt, net of
tax................................................. 1,655
Estimated loss on disposal of discontinued operation,
net of tax.......................................... 49,050
Non-recurring items.................................... 55,944
Other items............................................ 1,489 1,550 75
Changes in operating assets and liabilities:
Accounts receivable................................. (33,559) 4,090 (3,631)
Inventories......................................... 5,086 5,802 6,668
Other assets........................................ 2,645 (2,550) 2,432
Accounts payable and accruals....................... (4,121) (9,648) 44,553
Other liabilities................................... 15,053 2,610 3,049
------- ------- ------
NET CASH PROVIDED BY OPERATING ACTIVITIES................ 16,286 69,809 68,585
INVESTING ACTIVITIES
Purchases of property, plant, equipment, and patents..... (20,468) (15,143) (19,537)
Investment in businesses, net of cash acquired........... (82,586) (6,191) (2,926)
Proceeds from notes receivable........................... 8,438
Purchases of marketable securities....................... (6,970) (12,678) (42,132)
Proceeds from sales of marketable securities............. 13,231 16,749 59,543
------- ------- ------
NET CASH USED IN INVESTING ACTIVITIES.................... (88,355) (17,263) (5,052)
FINANCING ACTIVITIES
Payments on long term obligations........................ (106,802) (1,080) (54,516)
Borrowing under line of credit........................... 40,000
Purchase of treasury shares.............................. (11,418)
Proceeds from exercise of stock options.................. 27,807 10,732 6,761
Tax benefits from exercise of stock options.............. 5,138 12,477 1,384
------- ------- ------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES...... (45,275) 22,129 (46,371)
Effect of exchange rate changes on cash and cash
equivalents............................................ (2,869) 2,039 2,041
------- ------- ------
(Decrease) increase in cash and cash equivalents......... (120,213) 76,714 19,203
Cash and cash equivalents at beginning of period......... 140,789 64,075 44,872
------- ------- ------
Cash and cash equivalents at end of period............... $ 20,576 $140,789 $ 64,075
======= ======= ======
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 19
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON SHARES CUMULATIVE
----------------- RETAINED TRANSLATION
NUMBER AMOUNT EARNINGS AND OTHER
------ -------- -------- -----------
<S> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1994............................. 30,824 $174,034 $ 96,906 $(8,854)
Net loss.............................................. (37,577)
Stock options exercised............................... 830 6,761
Tax benefit of stock options exercised................ 1,384
Foreign currency translation adjustment............... 5,155
------ -------- ------- -------
BALANCE AT MARCH 31, 1995............................. 31,654 182,179 59,329 (3,699)
Net income............................................ 40,790
Stock options exercised............................... 1,332 10,732
Tax benefit of stock options exercised................ 12,477
Foreign currency translation adjustment............... 493
Restricted Stock Award and options issued at a
discounted price.................................... 4,363 (4,363)
Amortization of Restricted Stock Award and options
issued at a discounted price........................ 1,758
------ -------- ------- -------
BALANCE AT MARCH 31, 1996............................. 32,986 209,751 100,119 (5,811)
Net loss.............................................. (30,606)
Stock options exercised............................... 1,448 27,807
Tax benefit of stock options exercised................ 5,138
Foreign currency translation adjustment............... (2,869)
Treasury shares purchased............................. (450) (11,418)
Amortization of Restricted Stock Award and options
issued at a discounted price........................ 2,605
------ -------- ------- -------
BALANCE AT MARCH 31, 1997............................. 33,984 $231,278 $ 69,513 $(6,075)
====== ======== ======= =======
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 20
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED MARCH 31, 1997 AND 1996
A. ACCOUNTING POLICIES
STERIS Corporation (the "Company" or "STERIS") develops, manufactures,
markets, and services infection prevention, contamination control, and surgical
support systems, products, and technologies for healthcare, scientific,
research, and industrial Customers throughout the world.
BUSINESS COMBINATION
On May 13, 1996, STERIS merged with Amsco International, Inc. ("Amsco") in
a tax-free, stock-for-stock transaction (the "Amsco Merger"). The Amsco Merger
has been accounted using the pooling-of-interests method. Accordingly, the
accompanying consolidated financial statements give retroactive effect to the
transaction and include the combined operations of STERIS and Amsco for all
periods presented. In addition, the historical financial information of Amsco
(previously reported using fiscal years ending December 31) has been recast to
conform to STERIS's annual reporting period ending March 31.
In accordance with the merger agreement, each outstanding share of Amsco
common stock was converted on a tax-free basis into 0.46 of a Common Share of
STERIS, resulting in the issuance of approximately 15,200,000 STERIS Common
Shares. Summarized operating results of the separate entities for the period
prior to the Amsco Merger follow:
<TABLE>
<CAPTION>
STERIS AMSCO COMBINED
------- -------- --------
<S> <C> <C> <C>
YEAR ENDED MARCH 31, 1996:
Net revenues.............................. $91,192 $443,420 $534,612
Income from operations.................... 20,279 49,452 69,731
Net income................................ 12,794 27,996 40,790
YEAR ENDED MARCH 31, 1995:
Net revenues.............................. $64,272 $481,480 $545,752
Income from operations.................... 13,226 25,419 38,645
Net income (loss)......................... 8,736 (46,313) (37,577)
</TABLE>
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. Intercompany accounts and transactions have
been eliminated upon consolidation. Certain reclassifications have been made to
the Company's prior year financial statements to agree with current year
classifications.
CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Cash and cash
equivalents consist exclusively of interest-bearing savings accounts and U.S.
government securities. Marketable securities represent investments in United
States government agency securities.
20
<PAGE> 21
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Supplemental disclosure of cash flow information follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
------------------------------
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Cash paid during the year for
Interest..................................... $ 6,130 $ 4,922 $9,290
Income taxes................................. $17,286 $12,445 $8,071
</TABLE>
REVENUES
The Company's net revenues include revenues earned on product sales and
related after-sales, third-party service contracts and long-term construction
contracts. The Company recognizes product revenues upon shipment to a location
designated by the Customer. After-sales and third-party service contract
revenues are recognized upon completion of the work. Advance billings for
products or service work are recorded as deferred revenue until earned. Revenue
on long-term construction contracts is recognized on the percentage-
of-completion basis, using the cost-to-cost method.
The Company performs periodic credit evaluations of its Customers'
financial condition and generally does not require collateral on sales. The
Company principally sells to health care institutions with no single Customer
accounting for more than two percent of sales during the year ended March 31,
1997.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions in certain circumstances that affect the amounts reported in the
accompanying consolidated financial statements and notes. Actual results could
differ from these estimates.
FOREIGN CURRENCY TRANSLATION
The accounts of the Company's foreign subsidiaries are recorded in the
currency of the country in which they operate. The Company applies FASB
Statement No. 52 relative to the translation of foreign currency financial
statements into U.S. dollars and the accounting for foreign currency
transactions. Under this statement, all balance sheet accounts except
stockholders' equity are translated at current exchange rates, and revenue and
expense items are translated at rates of exchange prevailing during the year.
Gains and losses resulting from the translation of foreign currency financial
statements are reflected in the cumulative translation adjustment component of
stockholders' equity, which amounted to $6,075 and $3,206 as of March 31, 1997
and 1996, respectively.
B. INVENTORIES
Inventories are stated at the lower of cost or market. Inventories
utilizing the last-in, first-out method represent 54% and 66% of the inventory
at March 31, 1997 and 1996, respectively, with the remainder of the inventory
using the first-in, first-out method (FIFO). Inventory costs include material,
labor and overhead. If
21
<PAGE> 22
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
the FIFO method of inventory costing had been used exclusively, inventories
would have been $10,934 and $10,327 higher than those reported at March 31, 1997
and 1996, respectively. Inventories were as follows:
<TABLE>
<CAPTION>
MARCH 31
-------------------
1997 1996
------- -------
<S> <C> <C>
Raw material............................................. $30,027 $25,411
Work in process.......................................... 15,240 19,922
Finished goods........................................... 33,495 28,385
------- -------
$78,762 $73,718
======= =======
</TABLE>
C. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost, less accumulated
depreciation. The Company provides for depreciation of the net carrying cost
less anticipated salvage value over the estimated remaining useful lives of
property, plant, and equipment, principally by using the straight line method.
Depreciation expense was approximately $8,994, $11,728 and $9,749 for the years
ended March 31, 1997, 1996 and 1995, respectively. Expenditures that increase
the value or productive capacity of assets are capitalized. Property, plant, and
equipment consist of the following:
<TABLE>
<CAPTION>
MARCH 31
--------------------
1997 1996
-------- -------
<S> <C> <C>
ASSET (ASSET LIVES)
Land and land improvements (12 years)................... $ 3,110 $ 1,958
Buildings and leasehold improvements (10-50 yrs)........ 62,558 61,039
Machinery and equipment (3-15 years).................... 111,516 96,087
-------- -------
TOTAL................................................... 177,184 159,084
Less: accumulated depreciation.......................... 74,332 65,338
-------- -------
PROPERTY, PLANT AND EQUIPMENT, NET...................... $102,852 $93,746
======== =======
</TABLE>
Rental expense under all leases was approximately $10,784, $10,708 and
$12,142 for the years ended March 31, 1997, 1996 and 1995, respectively.
Operating leases relate principally to warehouse and office space, service
facilities, vehicles, equipment and communication systems. Future minimum annual
rentals payable under noncancelable leases in fiscal 1998, 1999, 2000, 2001,
2002 and thereafter are $7,874, $5,488, $3,083, $2,515, $2,018, and $1,627,
respectively.
D. INTANGIBLE ASSETS
Costs incurred to obtain product technology rights, including patents, have
been capitalized and are being amortized over their estimated useful lives of
five to seventeen years using the straight-line method. The Company currently
provides for the amortization of intangible assets, including goodwill, over
lives ranging
22
<PAGE> 23
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
from 5-40 years. The write-off of goodwill for Finn-Aqua Oy resulted in a
decrease of goodwill of $27,250. Intangible assets consist of the following:
<TABLE>
<CAPTION>
MARCH 31
---------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS (AMORTIZATION PERIOD)
Goodwill, net of accumulated amortization of $20,700
and $17,550, respectively (35-40 years).............. $105,578 $ 81,527
Patents, trademarks and other intangible assets, net of
accumulated amortization of $46,332 and $41,948,
respectively (5-17 years)............................ 13,807 22,329
-------- --------
TOTAL.................................................. $119,385 $103,856
======== ========
</TABLE>
In late December 1996, STERIS completed the acquisition of the assets of
the infection control and contamination control businesses of Calgon Vestal
Laboratories from Bristol-Myers Squibb Company. The acquisition expands STERIS's
consumable product lines for surface cleaning and decontamination. The
acquisition was accounted for using the purchase method of accounting and
resulted in an increase in goodwill of $52,979.
During the second quarter of fiscal 1997, STERIS acquired Surgicot, Inc., a
privately held manufacturer and supplier of biological and chemical sterile
process monitors, sterilization wraps and pouches, and other consumable
infection prevention products for the health care and scientific markets. The
acquisition was accounted for using the purchase method of accounting and
resulted in an increase in goodwill of $4,126.
The Company continually evaluates whether events and circumstances have
occurred that indicate the remaining estimated useful life of any intangible may
warrant revision or that the remaining balance of the intangible may not be
recoverable. When factors indicate that the intangibles should be evaluated for
possible impairment, the Company uses an estimate of the related operation's
cash flow from operations over the remaining life to determine recoverability.
E. FINANCIAL INSTRUMENTS
Concurrent with the consummation of the Amsco Merger, STERIS entered into a
two and one-half year $125,000 unsecured revolving Credit Facility. The Credit
Facility is available to facilitate the integration of the operations of STERIS
or to be used for general corporate purposes. Loans under the Credit Facility
bear interest, at STERIS's option, at either KeyBank National Association's
prime rate or LIBOR rates plus 0.25 percent to 0.35 percent, which amounted to
5.8 percent at March 31, 1997. The Credit Facility contains customary covenants
which include maintenance of certain financial ratios. As of March 31, 1997,
retained earnings were not restricted under the Company's Credit Facility.
Outstanding borrowings under the Credit
23
<PAGE> 24
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Facility were $35,000 at March 31, 1997. All borrowings under the Credit
Facility are scheduled to mature during fiscal 1999. Long-term indebtedness was
as follows:
<TABLE>
<CAPTION>
MARCH 31
--------------------
1997 1996
------- --------
<S> <C> <C>
Credit Facility due 9/30/98............................. $35,000 $ 0
4.5%/6.5% Step-Up Convertible Subordinated Debentures
due 2002.............................................. 579 100,000
Other debt.............................................. 312 3,002
------- --------
Total................................................... 35,891 103,002
Less current portion.................................... 12 371
------- --------
Long-term portion....................................... $35,879 $102,631
======= ========
</TABLE>
In July 1996, STERIS redeemed $99,400 of Amsco's $100,000 4.5%/6.5%
Convertible Subordinated Notes which were convertible into STERIS Common Shares.
This transaction had no material effect on earnings per share.
As of March 31, 1997 and 1996, the Company was contingently liable in the
amount of $27,200 and $26,700, respectively, under standby letters of credit and
guarantees. Approximately $11,500 and $13,200 of the totals at March 31, 1997
and 1996, respectively, relate to letters of credit required as security under
the Company's self-insured risk retention policies. The remaining balance in
each year relates to performance bonds on long-term contracts.
The fair value of the Company's financial instruments, including long-term
indebtedness and cash, cash equivalents and marketable securities that amounted
to $23,553 and $149,982 as of March 31, 1997 and 1996, respectively,
approximated their carrying values.
An extraordinary charge on the early extinguishment of debt of $1,655, net
of income taxes, was recorded in fiscal 1995. The extinguishment costs reflected
the December 1994 extinguishment of Amsco's 8.79% Senior Note due July 31, 2004
(the "Senior Note") in the aggregate principal amount of $50,000, and the
termination of the Amsco bank credit agreement, which included a revolving
credit facility in the maximum principal amount of $90,000.
On January 30, 1997 the Company announced that its Board of Directors had
authorized the periodic repurchase of up to three million STERIS Common Shares
in the open market. As of April 1997, the Company had repurchased 550,000 STERIS
Common Shares.
F. ACCRUED EXPENSES AND OTHER
Accrued expenses and other consisted of the following:
<TABLE>
<CAPTION>
MARCH 31
--------------------
1997 1996
-------- -------
<S> <C> <C>
Accrued warranty and product upgrade costs.............. $ 12,390 $11,396
Accrued self insured retention.......................... 11,200 12,508
Other accruals.......................................... 76,704 66,616
-------- -------
TOTAL................................................... $100,294 $90,520
======== =======
</TABLE>
24
<PAGE> 25
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
G. INCOME TAXES
The Company records the effect of income taxes using the liability method.
Income (loss) from continuing operations before income taxes was as follows:
<TABLE>
<CAPTION>
MARCH 31
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
U. S. operations.............................. $ 2,995 $70,628 $38,296
Non-U. S. operations.......................... (7,857) (679) (7,252)
------- ------- -------
$(4,862) $69,949 $31,044
======= ======= =======
</TABLE>
The components of the provision for income taxes for continuing operations
before extraordinary items consisted of the following:
<TABLE>
<CAPTION>
MARCH 31
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current provision:
U.S. federal................................ $29,247 $13,470 $23,345
U.S. state and local........................ 2,471 3,198 5,241
Non-U.S..................................... 1,061 1,069 1,295
------- ------- -------
Total current provision....................... 32,779 17,737 29,881
Deferred credit............................... (12,173) (1,055) (15,957)
Taxes allocated to contributed capital for
stock options exercised..................... 5,138 12,477 1,384
------- ------- -------
Total provision for income taxes.............. $25,744 $29,159 $15,308
======= ======= =======
</TABLE>
The total provision for income taxes for continuing operations before
extraordinary items can be reconciled to the tax computed at the U.S. federal
statutory rate as follows:
<TABLE>
<CAPTION>
MARCH 31
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Tax computed at the U.S. federal statutory tax
rate........................................ $(1,702) $24,482 $10,865
Merger and related costs for which no tax
benefit was provided........................ 22,260 0 0
State taxes, net of federal income tax
benefit..................................... 1,606 2,079 1,788
Amortization of excess cost over net assets
acquired.................................... 831 870 672
Valuation allowance........................... 1,646 513 1,996
Difference in non-U.S. tax rates.............. 500 554 692
All other, net................................ 603 661 (705)
------- ------- -------
Total provision for income taxes.............. $25,744 $29,159 $15,308
======= ======= =======
</TABLE>
25
<PAGE> 26
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The significant components of the deferred tax assets and liabilities
recorded in the accompanying balance sheets at March 31, 1997 and 1996, were as
follows:
<TABLE>
<CAPTION>
MARCH 31
--------------------
1997 1996
------- --------
<S> <C> <C>
DEFERRED TAX ASSETS
Post-retirement benefit accrual....................... $17,397 $ 17,167
Net operating loss carryforwards...................... 7,990 9,974
Accrued expenses and other............................ 29,238 35,819
------- --------
Gross deferred tax assets............................... 54,625 62,960
Valuation allowance..................................... (7,990) (6,344)
------- --------
Total deferred tax assets............................... $46,635 $ 56,616
======= ========
DEFERRED TAX LIABILITIES
Plant & equipment..................................... $ (450) $ (8,612)
Intangibles........................................... (3,519) (4,564)
Inventory............................................. (246) (5,348)
Other................................................. (2,670) (4,726)
------- --------
Total deferred tax (liabilities)........................ $(6,885) $(23,250)
======= ========
</TABLE>
For tax return purposes, certain subsidiaries, both U.S. and non-U.S., had
operating loss carryforwards of $22,820. Carryforwards of $12,276 have no
expiration dates and the balance expires at various dates from 1998 through
2005. The valuation allowance applies to net operating losses carryforwards that
may expire before the Company can utilize them. The net change in the total
valuation allowance for the year ended March 31, 1997 was an increase of $1,646,
primarily due to an increase in non-U.S. net operating losses and the effect of
foreign restructuring.
At March 31, 1997, undistributed earnings of non-U.S. subsidiaries included
in consolidated retained earnings amounted to $24,838. These earnings are
indefinitely reinvested in non-U.S. operations. Accordingly, no provision has
been made for withholding taxes related to such earnings, nor is it practicable
to determine the amount of this liability.
H. PENSION PLANS
The Company has a defined benefit pension plan which covers substantially
all domestic bargaining unit Associates and provides pension benefits of stated
amounts for each year of service of the Associate. The Company also has defined
benefit plans which cover substantially all bargaining and non-bargaining
Associates of the Company's subsidiaries in Finland and Germany, as well as
certain other foreign distribution
26
<PAGE> 27
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
entities. The Company's funding methodologies differ from those used to
recognize pension expense in the accompanying financial statements. Net periodic
pension cost includes the following components:
<TABLE>
<CAPTION>
MARCH 31
-----------------------------------------------------------------
1997 1996 1995
------------------- ------------------- -------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN DOMESTIC FOREIGN
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Service cost: benefits earned during
the period........................... $ 517 $ 168 $ 464 $ 139 $ 565 $ 134
Interest cost on projected benefit
obligation........................... 2,133 94 2,089 95 1,885 93
Actual return on assets................ (2,863) (12) (7,066) (14) (1,093) (17)
Net amortization and deferral.......... 577 0 5,323 0 (701) 0
------- ------- ------- ----- -- ------- ----- --
Net periodic pension cost.............. $ 364 $ 250 $ 810 $ 220 $ 656 $ 210
======= ======= ======= ======= ======= =======
</TABLE>
The following table sets forth the pension plan's funded status and amounts
recognized in the accompanying consolidated balance sheets:
<TABLE>
<CAPTION>
MARCH 31
---------------------------------------------
1997 1996
-------------------- --------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested.................................. $(28,278) $(2,257) $(29,434) $(1,711)
Nonvested............................... (936) 0 (1,147) 0
-------- -------- -------- --------
Projected benefit obligation (equal to
the accumulated benefit obligation)... (29,214) (2,257) (30,581) (1,711)
Plan assets at fair value............... 32,579 0 31,769 189
-------- -------- -------- --------
Plan assets greater (less) than
projected benefit obligation.......... 3,365 (2,257) 1,188 (1,522)
Unamortized initial net asset........... (1,328) 0 (1,375) 0
Unrecognized net gain................... (4,734) 0 (2,376) 0
Unrecognized prior service cost......... 2,439 0 2,635 0
-------- -------- -------- --------
(Accrued) prepaid pension cost.......... $ (258) $(2,257) $ 72 $(1,522)
======== ======== ======== ========
</TABLE>
A weighted average discount rate of 7.75%, 7.25% and 8.5% was used in
determining the actuarial present value of the projected benefit obligation at
March 31, 1997, 1996 and 1995, respectively. The expected long-term rates of
return on assets at the respective measurement dates were 8%, 7.5%, and 7.5% at
March 31, 1997, 1996 and 1995. The initial net asset is being amortized and
recognized as a component of net periodic pension cost on a straight-line basis
over 15 years. Plan assets consist primarily of common stocks, corporate bonds,
U.S. government obligations, temporary investments and private placement
investments.
The Company also administers a defined benefit 401(k) Plan (the "Plan") for
eligible Associates. During fiscal 1997, the Company amended the Plan to allow
for matching contributions as determined by the Board of Directors. For fiscal
1997, matching contributions amounted to $1,117. In addition, the Company
administers the Amsco Employees' Retirement Account (the "AERA"), which is a
qualified employee stock ownership plan. The AERA enabled eligible Associates to
receive an equity participation in the Company. Contributions declared by the
former Amsco Board of Directors, up to a maximum of 25% of eligible Associate
compensation, were made to the AERA. No further contributions will be made to
the AERA. The AERA in turn used the funds to purchase shares of the Company's
stock or make investments in certain other
27
<PAGE> 28
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
securities. Contribution expense for AERA amounted to $1,862, $3,165 and $2,696
in 1997, 1996 and 1995, respectively.
I. POSTRETIREMENT BENEFITS
The Company has defined benefit retirement health care plans for the
majority of domestic bargaining unit Associates. Such Associates are generally
eligible for benefits upon retirement after completion of a specified number of
years of creditable service. The Company does not pre-fund these benefits and
has the right to modify these plans in the future. The components of expense in
fiscal 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
MARCH 31
----------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service costs of benefits earned during the
period......................................... $ 99 $ 749 $1,014
Interest cost on accumulated postretirement
benefit obligation............................. 3,321 3,607 3,359
------ ------ ------
Net postretirement benefit costs................. $3,420 $4,356 $4,373
====== ====== ======
</TABLE>
The accumulated postretirement benefit obligation at March 31, 1997 and
1996, which is reflected in the accompanying consolidated balance sheets, is
comprised of the following components:
<TABLE>
<CAPTION>
MARCH 31
-------------------
1997 1996
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees................................................... $28,043 $28,896
Fully eligible active plan participants.................... 10,396 8,297
Other active plan participants............................. 14,458 16,449
------- -------
Total...................................................... 52,897 53,642
Unrecognized prior service costs........................... 2,290 1,343
Unrecognized net loss...................................... (5,481) (5,937)
------- -------
Accrued postretirement benefit liability................... 49,706 49,048
Less current portion....................................... 2,708 2,400
------- -------
Long-term accrued postretirement benefit liability......... $46,998 $46,648
======= =======
</TABLE>
Future benefit costs were estimated assuming medical costs would increase
on a weighted average basis at approximately a 7.25% annual rate (7.13% in
fiscal 1996 and 9% in fiscal 1995), decreasing to approximately a 5% annual
growth rate ratably over the next four years and then remaining at that rate
(4.5% in fiscal 1996 and 5% in fiscal 1995). A 1% increase in this annual trend
rate would have increased the accumulated postretirement benefit obligation at
March 31, 1997, by $5,260 and increased the 1997 postretirement benefit expense
by $943. The weighted average discount rate used to estimate the accumulated
postretirement benefit obligation was 7.75% for fiscal 1997 and 7.25% for fiscal
1996.
During fiscal 1997, the Company announced changes in various benefit plans
that better conformed benefits available to various Associate groups. One such
change will result in a curtailment of retiree health care benefits for certain
non-bargaining unit active plan participants. The net postretirement benefit
cost for fiscal 1997 reflects the effects of this change. The impact of the
change, which may result in a curtailment gain, was not reasonably estimable as
of March 31, 1997, and accordingly, has not been recognized.
28
<PAGE> 29
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
J. NON-RECURRING TRANSACTIONS
Non-recurring charges of $90,831 ($81,300 net of tax, or $2.44 per share)
were recorded in the 1997 fiscal first quarter for costs related to the Amsco
Merger. The charges include transaction costs of approximately $15,000 and other
non-recurring charges of approximately $75,800 ($66,300 net of tax). The
transaction costs are for legal, accounting, investment banking, and related
expenses. The other non-recurring charges are for (i) elimination of redundant
facilities and other assets ($27,000), (ii) satisfaction of Amsco executive
employment agreements and other Associate severance ($19,300), (iii) write-off
of goodwill related to Amsco's Finn-Aqua business which was impaired as a result
of the planned merger activities ($27,250), and (iv) other merger-related items.
Property write downs of $20,000 were recorded as part of the estimated cost of
eliminating redundant facilities based on fair value estimates. During fiscal
1997, STERIS closed a manufacturing and research facility in Apex, North
Carolina, Amsco's headquarters in Pittsburgh, Pennsylvania, as well as Customer
Service facilities in Dallas, Texas and Atlanta, Georgia. Operations of the
closed facilities were consolidated into existing STERIS facilities. As of March
31, 1997, the carrying value of facilities to be disposed of was approximately
$4,500. Cash payments for fiscal 1997 related principally to transaction costs,
executive employment agreements and Associate severance. Associate severance
costs incurred related to closed facilities. The planned Associate severance was
substantially complete as of March 31, 1997. Such severance included
approximately 150 individuals and cost approximately $6,000.
In fiscal 1995, Amsco implemented certain cost containment measures in
order to continue to streamline and reorganize certain operations commensurate
with the health care market environment that prevailed at that time. These cost
containment measures included severance pay related to work force reductions;
abandoned lease expense; asset write-offs associated with the centralization of
Amsco's corporate headquarters; restructuring of certain international
distribution entities and manufacturing facilities; operations consolidations
associated with a realignment of Amsco's manufacturing facilities; and computer
hardware and software write-offs associated with the removal of certain obsolete
systems. As a result, Amsco recognized costs of $26,996 in fiscal 1995.
K. DISCONTINUED OPERATION
On June 23, 1994, the former Amsco Board of Directors approved a plan to
divest or wind-down the business of its subsidiary American Sterile Recoveries,
Inc. (ASRI). Amsco's decision was based on the difficulties encountered in
achieving ASRI's growth objectives in the health care environment existing at
that time. In connection with this action, Amsco recorded a one-time after-tax
charge of $60,000 (net of taxes of $32,300). The charge reflected estimated
asset write-offs and wind-down costs associated with discontinuing the ASRI
business.
In connection with this divestment plan, ASRI consummated the sale of
substantially all of its assets effective July 31, 1994. Proceeds from the
disposal consisted of a combination of cash and a note totaling $14,900. As a
result of the sale and its subsequent impact on the resolution of certain
contingencies related to the transaction, during the third quarter of fiscal
1995, Amsco recorded a favorable after-tax adjustment of $10,949 (net of taxes
of $5,897) to the previously recorded estimated charge on the disposal of the
ASRI business.
For the first quarter of fiscal 1995, ASRI had net revenues of $5,625 and
after-tax losses from operations of $2,607 (net of taxes of $1,350). Total
accruals for ASRI at March 31, 1996 were $3,050, which consisted primarily of
wind-down costs. Substantially all the remaining accruals were satisfied in
fiscal 1997 and the previously recorded accruals were sufficient. The results of
operations for ASRI through the disposition date have been reflected in the
accompanying consolidated financial statements as a discontinued operation.
29
<PAGE> 30
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
L. CONTINGENCIES
PRODUCT LIABILITY EXPOSURE. In the ordinary course of business, STERIS is
subject to product liability lawsuits related to products it manufactures and
distributes. STERIS presently maintains product liability insurance coverage in
amounts and with deductibles that it believes are prudent and defends itself
vigorously against all such actions. Although there can be no assurance that the
outcome of any particular product liability lawsuit will be favorable to STERIS,
the Company believes that pending product liability lawsuits will not have a
material adverse effect on STERIS's business or financial condition.
ENVIRONMENTAL MATTERS. The Environmental Protection Agency has alleged that
Amsco is a potentially responsible party ("PRP") within the meaning of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(the "Superfund Act") with respect to a Superfund Act site near Erie,
Pennsylvania (the "Site") that allegedly received foundry sands and other
potentially contaminated materials originated by Amsco. Amsco and 8 other PRPs,
all of whom were named in a 1992 unilateral administrative order (the
"Administrative Order") remain as members of a group formed to respond to the
Administrative Order. Although there can be no assurance that the costs will not
be higher, STERIS believes that the ultimate cost to complete the remediation of
the site will be less than $2 million.
FDA REGULATION. As disclosed in the Amsco financial statements that were
included in the STERIS 8-K/A filed with the Securities and Exchange Commission
on June 25, 1996, Amsco was notified by the US Food and Drug Administration
("FDA") on January 20, 1995 that the FDA applied its Application Integrity
Policy ("AIP") to Amsco. Consequently, all Amsco pre-market submissions would
not be reviewed by FDA until Amsco completed certain corrective actions to the
satisfaction of FDA, including audits of certain previously cleared 510(k)
notifications. FDA's AIP has never been applied to STERIS nor has the review of
any STERIS pre-market submission been delayed because of the AIP.
On December 24, 1996, FDA terminated the application of AIP to Amsco, and
agreed to resume scientific review of Amsco pre-market submissions. This
determination was based on the agency's review of corrective action plans, FDA's
inspection of the Amsco subsidiary in Erie, Pennsylvania, and the withdrawal of
certain 510(k) notifications. Additionally, based on audits of past Amsco data,
STERIS agreed to either supplement certain existing pre-market notifications or
file new pre-market notifications.
STERIS believes that it is currently in conformity in all material respects
with all FDA-related regulatory requirements. It is, however, possible that the
FDA would disagree with this belief and seek to apply one or more of the
remedies available to it under applicable law, which could have a material
adverse effect on STERIS. STERIS is committed to maintaining compliance with all
applicable FDA regulations.
LITIGATION. There are other various pending lawsuits and claims arising out
of the conduct of STERIS's business. In the opinion of management, the ultimate
outcome of these lawsuits and claims will not have a material adverse effect on
STERIS's consolidated financial position or results of operations.
30
<PAGE> 31
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
M. BUSINESS SEGMENT INFORMATION
The Company operates in a single business segment. The following is
information about the Company's operations by geographic area:
<TABLE>
<CAPTION>
MARCH 31
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net revenues --
Net revenues (including intergeographic net
revenues of $11,594, $13,755 and $9,750 for the
years 1997, 1996 and 1995,
respectively) -- United States................. $499,273 $490,667 $502,537
Net revenues (including intergeographic net
revenues of $31,940, $37,944 and $34,418 for
the years 1997, 1996 and 1995,
respectively) -- Foreign....................... 132,113 95,644 87,383
Adjustments and eliminations................... (43,534) (51,699) (44,168)
------ ------ ------
Consolidated net revenues........................ $587,852 $534,612 $545,752
====== ====== ======
Income (loss) from operations
United States.................................. $ (1,787) $ 68,553 $ 43,259
Foreign........................................ (4,700) 1,178 (4,614)
------ ------ ------
Consolidated................................ (6,487) 69,731 38,645
Other income (expenses), including interest and
general corporate expenses.................. 1,625 218 (7,601)
------ ------ ------
Income (loss) from continuing operations before
income taxes................................... $ (4,862) $ 69,949 $ 31,044
====== ====== ======
Identifiable assets
United States.................................. $430,227 $344,549 $367,692
Foreign........................................ 85,675 98,166 90,600
Corporate...................................... 23,553 149,982 77,162
------ ------ ------
Consolidated identifiable assets................. $539,455 $592,697 $535,454
====== ====== ======
</TABLE>
Transfers between geographic areas are accounted for at prices which
approximate arms-length market prices. To reconcile geographic information with
consolidated amounts, intergeographic net revenues were eliminated. Income
(loss) from operations is total continuing revenue less costs and expenses
without the effect of interest expense and other nonoperating income.
Identifiable assets are those assets that are identified with the operations in
each geographic area. Corporate assets are principally cash and short-term
marketable securities. Revenues to a single Customer did not aggregate two
percent or more of total revenues. Export revenues were less than 10% of
consolidated net revenues in the years presented and are included in United
States net revenues. Revenues by principal product are as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Infection Prevention............................. $320,664 $290,019 $286,065
Surgical Support................................. 128,502 112,400 116,529
Scientific and Industrial........................ 101,442 101,124 112,348
Management Services.............................. 37,244 31,069 30,810
-------- -------- --------
Total............................................ $587,852 $534,612 $545,752
======== ======== ========
</TABLE>
31
<PAGE> 32
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
N. STOCK OPTIONS
The Company has granted nonqualified stock options to certain Associates to
purchase the Company's Common Shares at the market price on the date of grant.
Stock options granted become exercisable to the extent of one-fourth of the
optioned shares for each full year of employment following the date of grant and
expire 10 years after the date of grant, or earlier if an option holder ceases
to be employed by the Company. The Company applies the provisions of Accounting
Principles Board Opinion No. 25, which provides that no compensation expense is
recognized when the exercise price equals the market price of the stock on the
date of grant.
The computations of earnings (loss) per Common Share and Common Share
equivalents give retroactive effect to the Amsco Merger and are based upon the
weighted average number of Common Shares outstanding and when applicable, the
dilutive effect of Common Share equivalents (consisting solely of stock
options). Incremental Common Share equivalents are calculated for each
measurement using the treasury stock method. Common Share equivalents were
antidilutive for the fiscal year 1997 and accordingly were excluded from the
computation of earnings (loss) per Common Share for such period. Following is a
summary in thousands of Common Shares and Common Share equivalents outstanding
used in the calculations of earnings (loss) per share.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
----------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Weighted average Common Shares outstanding....... 33,678 32,511 31,024
Dilutive effect of stock options -- primary
basis.......................................... 0 2,248 2,389
------ ------ ------
Weighted average Common Shares and equivalents --
primary basis.................................. 33,678 34,759 33,413
Additional dilutive effect of stock
options -- fully diluted basis................. 0 98 123
------ ------ ------
Weighted average Common Shares and equivalents --
fully diluted basis............................ 33,678 34,857 33,536
====== ====== ======
</TABLE>
The Financial Accounting Standards Board (the "FASB") has issued a
Statement that will require the Company to calculate earnings per share using
different methods, beginning in the 1998 fiscal third quarter (early adoption is
prohibited). Applying the new methods to fiscal 1997 operations would not change
reported results.
Effective July 11, 1995, Amsco entered into an employment agreement with
its President and Chief Executive Officer (CEO) that included the granting of
690,000 nonqualified stock options at a discounted exercise price of $26.35. The
fair value of the options was $16.50 per share. 460,000 of the stock options
were performance-based and vested if Amsco's common stock achieved certain
market value criteria. During the second quarter of fiscal 1996, 230,000 of
these performance-based options vested because the average fair market value of
Amsco's common stock exceeded target prices. The remaining performance-based
options vested in fiscal 1997. The employment agreement referred to above also
included an award of 37,939 shares of restricted stock of Amsco. Based on the
terms of the award, this stock became completely vested during fiscal 1997. Upon
granting the stock options and awarding the restricted stock to the Amsco CEO,
Amsco recorded $4,363 of deferred compensation expense, which was amortized over
defined vesting schedules. The unamortized portion of the awards was $2,605 as
of March 31, 1996, and was recorded as a component of the special equity account
entitled "foreign currency translation and other" on the accompanying
consolidated balance sheet. In the event of an accelerated vesting of any
portion of the performance-based options, Amsco was required to record
immediately any unrecognized compensation expense related to such options.
During
32
<PAGE> 33
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
the second quarter of fiscal 1996, Amsco recorded an approximate $1,000 charge
to earnings because of the accelerated vesting of the 230,000 options discussed
above. This charge was reflected as general and administrative expense in the
accompanying consolidated statement of operations. As a result of the Amsco
Merger, vesting accelerated for the remaining stock options and restricted stock
agreements. The related charges were recorded as part of the non-recurring
charge in the accompanying consolidated statement of operations.
Following is a summary of option share information. The average grant price
and fair value shown for fiscal 1996 excludes the options granted at a
discounted exercise price.
<TABLE>
<CAPTION>
BEGINNING OF
YEAR GRANTED EXERCISED CANCELED END OF YEAR
------------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Fiscal 1997
Option Shares........ 3,851,468 725,288 (1,448,695) (166,675) 2,961,386
Average Price........ $16.10 $27.38 $19.32 $28.03 $16.61
Fair Value........... $13.23
Fiscal 1996
Option Shares........ 4,351,644 1,021,644 (1,332,348) (189,472) 3,851,468
Average Price........ $11.98 $19.72 $8.02 $21.96 $16.10
Fair Value........... $9.78
Fiscal 1995
Option Shares........ 4,147,490 1,250,532 (829,677) (216,701) 4,351,644
Price Range.......... $57.61 -- $.46 $21.47 -- $10.00 $23.91 -- $.46 $54.35 -- $15.49 $57.61 -- $.46
</TABLE>
In relation to the exercise of approximately 190,000 options during the
1997 fiscal year, an executive officer of the Company borrowed from the Company
approximately $1,700. The related full recourse note bears interest at 6.4% and
is payable on or before February 28, 2002.
Shares available for future grants were 308,001 at March 31, 1997. At March
31, 1997, the range and weighted average per share exercise prices of options
outstanding and exercisable, and the weighted-average remaining contractual life
(years) for exercisable options, was as follows:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
----------------------- ------------------------------------
WEIGHTED- WEIGHTED-
RANGE OF AVERAGE AVERAGE CONTRACT
EXERCISE OPTION EXERCISE OPTION EXERCISE LIFE
PRICES SHARES PRICE SHARES PRICE (YEARS)
- ---------------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
$0.96 -- $3.50 637,544 $ 1.19 637,544 $ 1.19 2.1
$3.51 -- $8.75 556,026 6.53 503,526 6.41 5.5
$8.76 -- $23.91 743,247 15.53 396,597 15.78 7.0
$23.92 -- $56.79 1,024,569 32.39 355,194 41.83 8.0
--------- ------ --------- ------ ---
2,961,386 $ 16.61 1,892,861 $ 13.26 6.0
========= ====== ========= ====== ===
</TABLE>
At March 31, 1996, options with an average exercise price of $13.94 were
exercisable on 2,405,675 shares; at March 31, 1995, options with an average
exercise price of $10.37 were exercisable on 3,246,275 shares.
Had the compensation cost for the stock options granted in fiscal 1997 and
1996 been determined based on the fair value at the grant date consistent with
the fair value method of FASB Statement No. 123, the Company's net loss and loss
per share would have been increased by $3,060 ($.09 per share) in fiscal 1997
and net earnings and earnings per share would have been reduced by $2,960 ($.09
per share) in fiscal 1996. The effect on fiscal 1997 and 1996 net earnings
(loss) may not be representative of the effect on future years' net
33
<PAGE> 34
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
earnings amounts as the compensation cost of each year's grant is recognized
over the four-year vesting period. Fair value was estimated at the date of grant
using the Black-Scholes option pricing model and the following weighted-average
assumptions for fiscal 1997 and 1996: risk-free interest rate of 6.5%; dividend
yield of 0%; expected volatility of 45%; and an expected option life of 5 years.
O. COMMON SHARE RIGHTS
On October 24, 1996, the Board of Directors declared a dividend consisting
of one Right for each outstanding Common Share. The distribution was paid on
November 7, 1996 (the "Record Date"). Following the Shares Acquisition Date,
each Right entitles the registered holder (other than an Acquiring Person) to
purchase from the Company one Common Share at a price of $120.00 (the "Purchase
Price"), subject to adjustment, or, under conditions described below, to acquire
one Common Share for an exercise price of $1.00 per share (the "Exercise
Price"). The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and KeyBank National
Association, as Rights Agent.
Until such time as a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the Common
Shares then outstanding (the "Shares Acquisition Date"), the Rights will be
evidenced, with respect to any of the Common Share certificates outstanding as
of the Record Date, by such Common Share certificates with a copy of a Summary
of Rights attached thereto.
The Rights Agreement provides that, until the Shares Acquisition Date, the
Rights will be transferred with and only with the Common Shares. The Rights are
not exercisable until the Shares Acquisition Date. The Rights will expire at the
close of business on November 7, 2006, unless redeemed earlier. Until a Right is
exercised, the holder thereof, as such, will have no rights as stockholder of
the Company, including, without limitation, the right to vote or receive
dividends.
Upon the occurrence of a Triggering Event (as defined in the Rights
Agreement), each holder of a Right, other than Rights that were or are
beneficially owned by the Acquiring Person (which will thereafter be void),
shall have the right to receive, upon exercise of the Right and payment of the
Exercise Price, one Common Share of the Company.
At any time prior to the Shares Acquisition Date, the Board of Directors of
the Company may redeem the Rights, at a price of $.01 per Right (the "Redemption
Price"); except that, the Rights may not be redeemed on or after the date of the
commencement by any Person (as defined in the Rights Agreement) of a tender or
exchange offer if, upon consummation thereof, such Person would be an Acquiring
Person unless such redemption is approved by a majority of the Continuing
Directors (as defined in the Rights Agreement) and the Continuing Directors
constitute a majority of the Board of Directors.
The provisions of the Rights Agreement may be amended by the Board of
Directors in order to cure any ambiguity, to correct any defect or inconsistency
or, prior to the Shares Acquisition Date, to make changes deemed to be not
adverse to the interests of the holders of the Rights, except that, the Rights
agreement may not be amended on or after the date of the commencement by any
Person of a tender or exchange offer if, upon consummation thereof, such Person
would be an Acquiring Person unless such amendment is approved by a majority of
the Continuing Directors and the Continuing Directors constitute a majority of
the Board of Directors.
The Rights could have the effect of discouraging a tender offer or exchange
offer for Common Shares or the accumulation of a substantial number of Common
Shares, unless the Board of Directors redeems the Rights.
34
<PAGE> 35
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
P. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------
MARCH 31 DECEMBER 31 SEPTEMBER 30 JUNE 30
-------- ----------- ------------ --------
<S> <C> <C> <C> <C>
FISCAL 1997
Net revenues................................. $170,489 $ 151,005 $138,490 $127,868
Gross profit................................. 71,460 59,774 53,325 47,286
Percentage of revenues....................... 42% 40% 39% 37%
NET INCOME (LOSS)............................ $ 15,916 $ 13,535 $ 11,538 $(71,595)
======== ======== ======== ========
Earnings per share: Net income(loss)......... $ 0.45 $ 0.38 $ 0.33 $ (2.16)
======== ======== ======== ========
FISCAL 1996
Net revenues................................. $117,850 $ 163,623 $132,268 $120,871
Gross profit................................. 45,792 62,300 48,058 46,551
Percentage of revenues....................... 39% 38% 36% 39%
NET INCOME................................... 6,867 17,552 7,199 9,172
======== ======== ======== ========
Earnings per share: Net income............... $ 0.20 $ 0.50 $ 0.21 $ 0.27
======== ======== ======== ========
</TABLE>
As discussed in Note J, certain non-recurring expenses were recognized in
the 1997 first fiscal quarter.
35
<PAGE> 36
STERIS CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- --------------------------------- --------- ------------ ------------ -------------- -------------
ADDITIONS
----------------------------
CHARGES TO
BEGINNING COSTS AND CHARGES TO BALANCE AT
DESCRIPTION OF PERIOD EXPENSES (1) OTHER ACCTS. DEDUCTIONS (2) END OF PERIOD
- --------------------------------- --------- ------------ ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1997
Deducted from asset accounts:
Allowance for doubtful
accounts.................. $ 1,947 $2,557 $0 $694 $ 3,810
====== ====== ==== ==== ======
Year ended March 31, 1996
Deducted from asset accounts:
Allowance for doubtful
accounts.................. $ 1,754 $ 592 $0 $399 $ 1,947
====== ====== ==== ==== ======
Year ended March 31, 1995
Deducted from asset accounts:
Allowance for doubtful
accounts.................. $ 1,699 $ 670 $0 $615 $ 1,754
====== ====== ==== ==== ======
</TABLE>
- ---------------
(1) Charges to costs and expenses during the periods reflect an increase in
allowances to support larger receivable balances.
(2) Uncollectible accounts written off, net of recoveries.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company incorporates herein by reference the information appearing
under the captions "Board of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" of the Company's definitive Proxy Statement to be filed
with the Securities and Exchange Commission on or about June 20, 1997.
Executive officers of the Company serve for a term of one year from the
date of election to the next organizational meeting of the Board of Directors
and until their respective successors are elected and qualified, except in the
case of death, resignation, or removal. Information concerning executive
officers of the Company is contained in Part I of this report under the caption
"Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The Company incorporates herein by reference the information appearing
under the caption "Compensation of Executive Officers" of the Company's
definitive Proxy Statement to be filed with the Securities and Exchange
Commission on or about June 20, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company incorporates herein by reference the information appearing
under the caption "Ownership of Voting Securities" of the Company's definitive
Proxy Statement to be filed with the Securities and Exchange Commission on or
about June 20, 1997.
36
<PAGE> 37
STERIS CORPORATION AND SUBSIDIARIES
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company incorporates herein by reference the information appearing
under the caption "Compensation of Executive Officers" of the Company's
definitive Proxy Statement to be filed with the Securities and Exchange
Commission on or about June 20, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
LIST OF CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULE
(a) (1) The following consolidated financial statements of STERIS
Corporation and subsidiaries are included in Item 8:
Consolidated Balance Sheets -- March 31, 1997 and 1996.
Consolidated Statements of Operations -- Years ended March 31, 1997,
1996 and 1995.
Consolidated Statements of Cash Flows -- Years ended March 31, 1997,
1996 and 1995.
Consolidated Statements of Shareholders' Equity -- Years ended March 31,
1997, 1996 and 1995.
Notes to Consolidated Financial Statements -- March 31, 1997.
(a) (2) The following consolidated financial statement schedule of STERIS
Corporation and subsidiaries is included in Item 8:
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore, have been
omitted.
(a) (3) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ ---------------------------------------------------------------------------------
<C> <S>
3.1 1992 Amended Articles of Incorporation of STERIS Corporation, amended as of May
13, 1996 (filed as Exhibit 4.2 to the Registration Statement on Form S-3 filed
June 21, 1996, and incorporated herein by reference).
3.2 1992 Amended Regulations of STERIS Corporation (filed as Exhibit 3(b).4(b) to
Form 10-Q filed for the quarter ended June 30, 1992, and incorporated herein by
reference).
4.1 Specimen form of Common Stock Certificate (filed as Exhibit 4.1 to Amendment No.
1 to the Registration Statement on Form S-1 filed April 30, 1992, and
incorporated herein by reference).
4.2 Indenture governing the 4 1/2%/6 1/2% Step-Up Convertible Subordinated Debentures
due 2002, including the form of 4 1/2%/6 1/2% Step-Up Convertible Debenture due
2002 (incorporated by reference to Exhibit 2.1 of the Registration Statement on
Form 8-A of Amsco International, Inc., filed on September 10, 1992 and amended on
October 16, 1992).
4.3 First Supplemental Indenture, dated May 13, 1996 among Amsco International, Inc.,
STERIS Corporation and The Bank of New York (filed as Exhibit 4.3 to the Annual
Report on Form 10-K for the fiscal year ended March 31, 1996, and incorporated
herein by reference).
10.1 Amended Non-Qualified Stock Option Plan (filed as Exhibit 10.4 to Amendment No. 1
to the Registration Statement on Form S-1 filed April 23, 1992, and incorporated
herein by reference).
</TABLE>
37
<PAGE> 38
STERIS CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ ---------------------------------------------------------------------------------
<C> <S>
10.2 STERIS Corporation 1994 Equity Compensation Plan (filed as Exhibit 99 to the
Registration Statement on Form S-8 filed April 21, 1995, and incorporated herein
by reference).
10.3 STERIS Corporation 1994 Nonemployee Directors Equity Compensation Plan
10.4 Management Incentive Compensation Plan FY 1997
10.5 Amsco International, Inc. Stock Option Plan (incorporated by reference to Exhibit
4.1 to the Registration Statement of Amsco International, Inc. on Form S-8,
Registration No. 33-79566, filed on June 2, 1994).
10.6 Form of grant of Incentive Stock Option under Amsco International, Inc. Stock
Option Plan.
10.7 Form of grant of Non-Qualified Stock Option under the Amsco International, Inc.
Stock Option Plan.
10.8 Credit Agreement, dated May 13, 1996, among STERIS Corporation, various financial
institutions, and KeyBank National Association, as Agent (filed as Exhibit 10.14
to the Annual Report on Form 10-K for the fiscal year ended March 31, 1996, and
incorporated herein by reference).
10.9 Promissory Note
21.1 Subsidiaries of STERIS Corporation
23.1 Consent of Independent Auditors
24 Powers of Attorney
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
December 19, 1996 -- Item 2. Acquisition or Disposition of Assets. On
December 19, 1996, STERIS, through its newly-formed and wholly-owned subsidiary
Calgon Vestal, Inc, a Delaware corporation (collectively, "STERIS") completed
the acquisition, from E.R. Squibb & Sons, Inc.("Squibb"), a Delaware corporation
and a wholly-owned subsidiary of Bristol-Myers Squibb Company, of the assets of
the infection control and contamination control businesses formerly carried on
by Squibb through its subsidiary, Calgon Vestal Laboratories, Inc, and the
ConvaTec division of Bristol-Myers Squibb. The assets acquired include two
manufacturing facilities in the St. Louis, Missouri area that STERIS intends to
use in the continuing conduct of the acquired business.
Item 5. Other Events. On January 30, 1997, STERIS issued a press release
announcing its earnings for the three month period and nine month period ended
December 31, 1996.
Item 7. Financial Statements, Pro Forma Financial Information, and
Exhibits. With respect to the December 19, 1996 acquisition of assets from
Squibb, STERIS filed the Asset Purchase Agreement by and between E.R. Squibb &
Sons, Inc. and STERIS, dated as of November 26, 1996 and amended as of December
19, 1996.
On January 30, 1997, STERIS issued a press release announcing its earnings
for the three month period and nine month period ended December 31, 1996.
38
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the date indicated.
STERIS Corporation
(Registrant)
/s/ MICHAEL A. KERESMAN, III
--------------------------------------
Michael A. Keresman, III
Chief Financial Officer and
Senior Vice President
(Principal Financial Officer)
June 20, 1997
Pursuant to the requirements of Sections 13 or 15 (d) of the Securities
Exchange Act of 1934, this Report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the date indicated.
BILL R. SANFORD, Chairman of the Board of Directors, President, and Chief
Executive Officer (Principal Executive Officer); RUSSELL L. CARSON, Director;
MICHAEL A. KERESMAN, III, Senior Vice President, and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer); RAYMOND A.
LANCASTER, Director; THOMAS J. MAGULSKI, Director; J.B. RICHEY, Director; JERRY
E. ROBERTSON, Director; FRANK E. SAMUEL, JR., Director; and LOYAL W. WILSON,
Director.
STERIS Corporation
(Registrant)
/s/ MICHAEL A. KERESMAN, III
--------------------------------------
Michael A. Keresman, III
Attorney-in-Fact
June 20, 1997
39
<PAGE> 40
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------------------------------------------------------
<C> <S> <C>
3.1 1992 Amended Articles of Incorporation of STERIS Corporation,
amended as of May 13, 1996 (filed as Exhibit 4.2 to the
Registration Statement on Form S-3 filed June 21, 1996, and
incorporated herein by reference).
3.2 1992 Amended Regulations of STERIS Corporation (filed as Exhibit
3(b).4(b) to Form 10-Q filed for the quarter ended June 30, 1992,
and incorporated herein by reference).
4.1 Specimen form of Common Stock Certificate (filed as Exhibit 4.1 to
Amendment No. 1 to the Registration Statement on Form S-1 filed
April 30, 1992, and incorporated herein by reference).
4.2 Indenture governing the 4 1/2%/6 1/2% Step-Up Convertible
Subordinated Debentures due 2002, including the form of
4 1/2%/6 1/2% Step-Up Convertible Debenture due 2002 (incorporated
by reference to Exhibit 2.1 of the Registration Statement on Form
8-A of Amsco International, Inc., filed on September 10, 1992 and
amended on October 16, 1992).
4.3 First Supplemental Indenture, dated May 13, 1996 among Amsco
International, Inc., STERIS Corporation and The Bank of New York
(filed as Exhibit 4.3 to the Annual Report on Form 10-K for the
fiscal year ended March 31, 1996, and incorporated herein by
reference).
10.1 Amended Non-Qualified Stock Option Plan (filed as Exhibit 10.4 to
Amendment No. 1 to the Registration Statement on Form S-1 filed
April 23, 1992, and incorporated herein by reference).
10.2 STERIS Corporation 1994 Equity Compensation Plan (filed as Exhibit
99 to the Registration Statement on Form S-8 filed April 21, 1995,
and incorporated herein by reference).
10.3 STERIS Corporation 1994 Nonemployee Directors Equity Compensation
Plan
10.4 Management Incentive Compensation Plan FY 1997
10.5 Amsco International, Inc. Stock Option Plan (incorporated by
reference to Exhibit 4.1 to the Registration Statement of Amsco
International, Inc. on Form S-8, Registration No. 33-79566, filed
on June 2, 1994).
10.6 Form of grant of Incentive Stock Option under Amsco International,
Inc. Stock Option Plan.
10.7 Form of grant of Non-Qualified Stock Option under the Amsco
International, Inc. Stock Option Plan.
10.8 Credit Agreement, dated May 13, 1996, among STERIS Corporation,
various financial institutions, and KeyBank National Association,
as Agent (filed as Exhibit 10.14 to the Annual Report on Form 10-K
for the fiscal year ended March 31, 1996, and incorporated herein
by reference).
10.9 Promissory Note
21.1 Subsidiaries of STERIS Corporation
23.1 Consent of Independent Auditors
24 Powers of Attorney
27.1 Financial Data Schedule
</TABLE>
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<PAGE> 1
EXHIBIT 10.3
STERIS CORPORATION
1994 Nonemployee Directors
Equity Compensation Plan
1. Purpose. The STERIS Corporation 1994 Nonemployee Directors Equity
Compensation Plan is intended to promote the interests of STERIS Corporation and
its shareholders by providing for the use of Restricted Shares of the Company to
pay part of the annual retainers paid to nonemployee Directors and by granting
Stock Options to nonemployee Directors in order to further align the interests
of nonemployee Directors more closely with the interests of other shareholders
of the Company, to provide a financial incentive that will help attract and
retain the most qualified nonemployee Directors for the Company, and to
encourage nonemployee Directors to hold proprietary interests in the Company.
Capitalized terms used in this Plan have the meanings ascribed to them in
Section 20, the last section hereof.
2. Administration. The Plan shall be administered by the Committee.
However, the Committee shall have no authority, discretion or power, subject to
the terms of the Plan, (a) to determine whether a particular Director shall be
granted Restricted Shares or Stock Options under the Plan, the type, size, and
terms of Restricted Shares or Stock Options to be granted to any Director, the
time or times at which Restricted Shares and Stock Options shall be exercisable
or at which restrictions, conditions, and contingencies shall lapse, or the
terms and provisions of the Instruments by which Restricted Shares and Stock
Options shall be evidenced, or (b) to alter any other restrictions, conditions,
and contingencies specified in the Plan, except in the sense of administering
the Plan. Subject to the foregoing limitations, the Committee, is authorized to
interpret the Plan, to prescribe, amend, and rescind rules and regulations
relating to the Plan, and to provide for conditions and assurances deemed
necessary or advisable to protect the interests of the Company and make all
other determinations necessary or advisable for the administration of the Plan.
The construction and interpretation by the Committee of any provision of the
Plan or any Instrument delivered pursuant to the Plan and any determination by
the Committee pursuant to any provision of the Plan or any Instrument shall be
final and conclusive. No member or alternate member of the Committee shall be
liable for any such action or determination made in good faith. The Committee
may act only by a majority of its members. Any determination of the Committee
may be made, without a meeting, by a writing or writings signed by all of the
members of the Committee. In addition, the Committee may authorize any one or
more of their number or any officer of the Company to execute and deliver
documents on behalf of the Committee and the Committee may delegate to one or
more employees, agents, or officers of the Company, or to one or more third
party consultants, accountants, lawyers, or other advisors, such ministerial
duties related to the operation of the Plan as it may deem appropriate.
3. Eligibility. No Director who is also employed by the Company shall
participate in the Plan. Each Director who is not employed by the Company shall
qualify as a Participant and shall be eligible to receive Restricted Stock and
grants of Stock Options on the terms and conditions set forth in the Plan. Each
Participant shall, if required by the Company, enter into an agreement or other
Instrument with the Company, the form of such agreement or Instrument to be
determined by the Company and which is consistent with the provisions of the
Plan. In the event of any inconsistency between the provisions of the Plan and
any such Instrument entered into hereunder, the provisions of the Plan shall
govern.
4. Stock Subject to the Plan. The aggregate number of Common Shares of the
Company that may be issued and distributed to Participants in connection with
Restricted Shares and Stock Options granted under the Plan shall be 100,000
Common Shares which may be authorized and unissued Common Shares, treasury
Common Shares, or Common Shares acquired on the open market specifically for
distribution under the Plan, as the Board of Directors may from time to time
determine. The number of Common Shares remaining available for additional grants
of Restricted Stock or Stock Options under the Plan at any particular time shall
be reduced, upon the granting thereafter of any Restricted Stock or Stock Option
under the Plan, by the full
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<PAGE> 2
number of Common Shares of Restricted Stock or by the full number of Common
Shares subject to the Stock Option. If any Restricted Stock is forfeited for any
reason or if any Stock Option for any reason expires or is terminated, in whole
or in part, without the receipt by a Participant of Common Shares, the
Restricted Shares so forfeited or the Common Shares subject to that part of the
Stock Option that has so expired or terminated, as the case may be, shall again
be available for the future grant of Restricted Shares or Stock Options under
the Plan.
5. Restricted Shares as Partial Payment of Annual Retainer.
5.1 Automatic Grant of Restricted Shares. The annual retainer payable to
each nonemployee Director for services during an Annual Term shall be paid (a),
as to the first $7,000 of the annual retainer, by an automatic grant Restricted
Shares (valued as provided in Section 5.2) and (b), as to the remainder of the
annual retainer, in cash. The first automatic grants of Restricted Shares under
the Plan shall be made with respect to the Annual Term commencing with the 1994
Annual Meeting. Subsequent automatic grants of Restricted Shares under the Plan
shall be made with respect to each succeeding Annual Term so long as the Plan
remains in effect.
5.2 Date of Grant, Number of Shares. The automatic grant of Restricted
Shares for any Annual Term shall be made on the last business day of the month
during which the Annual Meeting coinciding with the beginning of that Annual
Term is held. The total number of Restricted Shares so granted shall be
determined by dividing the dollar amount of that portion of the retainer to be
paid in Restricted Shares by the average of the per share closing price of
Common Shares for the period of 10 consecutive trading days, the fifth of which
is the trading day coinciding with the date of the Annual Meeting, and rounding
the quotient so determined down to the next whole number of Restricted Shares.
No fractional shares shall be issued under the Plan. In lieu of issuing a
fractional share to any Participant, the Company shall pay the Participant cash
equal to the value of the fractional share not issued.
5.3 Restrictions: Six Month Minimum Holding Period, Periodic Vesting,
Forfeiture.
(a) A Participant may not sell, transfer, otherwise dispose of, or pledge
or otherwise hypothecate Restricted Shares until (i) at least six months have
passed following the grant of those Restricted Shares and (ii) the Participant's
rights in the Restricted Shares have vested in accordance with Section 5.3(b).
(b) A Participant's rights in Restricted Shares granted with respect to
any Annual Term shall vest in increments as follows, provided the Participant
remains as a Director through the periods indicated: 2/7th of those Restricted
Shares shall vest on the last day of the sixth Full Calendar Month during the
Annual Term and an additional 1/7 of those Restricted Shares shall vest on the
last day of each of the seventh through eleventh Full Calendar Months during the
Annual Term, except that if any Annual Term includes fewer than eleven Full
Calendar Months, any Restricted Shares granted to a Participant who remains as a
Director through the last day of that Annual Term that have not previously
vested on the foregoing schedule shall vest on that last day.
(c) Except as otherwise provided in Section 7, if a Participant ceases to
be a Director before all Restricted Shares granted to the Participant with
respect to any Annual Term have vested, any such Restricted Shares that have not
vested shall be forfeited.
6. Stock Options.
6.1 Automatic Annual Grant. On the last business day of the month during
which any Annual Meeting is held, each Participant shall be granted, as
additional consideration for services to be rendered by the Participant during
the Annual Term commencing with that Annual Meeting, a Stock Option with respect
to 2,500 Common Shares.
6.2 Time of and Conditions on Exercise. A Stock Option granted under the
Plan may be exercised not earlier than six months nor later than ten years after
the date of grant of the Stock Option. Stock Options may be exercised only
during the continuance of a Participant's service as
42
<PAGE> 3
a Director or within three months of termination of such service, except as
provided in Section 7. During a Participant's lifetime, only the Participant (or
in the case of incapacity of a Participant, the Participant's attorney in fact
or legal guardian) may exercise a Stock Option. A Participant may exercise a
Stock Option from time to time, in whole or in part, up to the total number of
Common Shares with respect to which the Stock Option is then exercisable, except
that no fraction of a Common Share may be purchased upon the exercise of any
Stock Option.
6.3 Exercise. A Participant electing to exercise a Stock Option shall
deliver to the Company (a) the Exercise Price payable in accordance with Section
6.4 and (b) written notice of the election that states the number of whole
Common Shares with respect to which the Participant is exercising the Stock
Option.
6.4 Payment For Common Shares. Upon exercise of a Stock Option by a
Participant, the Exercise Price shall be payable by the Participant, at the
election of the Participant, in cash, by delivery by the Participant (with the
written notice of election to exercise) of irrevocable instructions to a broker
registered under the 1934 Act to promptly deliver to the Company the amount of
sale or loan proceeds to pay the Exercise Price, or by such combination of cash
and such instructions as the Participant may elect.
6.5 Nontransferability. Stock Options may not be sold, assigned, pledged,
hypothecated, transferred, or otherwise disposed of during the lifetime of the
Participant, either voluntarily or involuntarily, other than by will or by the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined in Section 414(p)(1)(B) of the Internal Revenue Code of 1986,
as amended, that satisfies the requirements of Section 414(p)(1)(A) of the
Internal Revenue Code of 1986, as amended. A Participant granted a Stock Option
shall have no rights as a shareholder with respect to any shares covered by the
Stock Option until the date the share certificate is issued evidencing ownership
of such shares.
7. Death of a Participant. Upon the death of a Participant while the
Participant is serving as a Director, the Participant's executor or
administrator or the person or persons to whom the Participant's rights under a
Stock Option are transferred by will or the laws of descent and distribution
shall have the right to exercise, from time to time during the period ending one
year after the date of the Participant's death, but not later than the relevant
Expiration Date, any Stock Options that were outstanding on the date of the
Participant's death, if and to the same extent as those Stock Options were
exercisable by the Participant on the date of the Participant's death.
8. Adjustment Upon Changes in Common Shares. In the event of any stock
dividend, stock split, or share combination of the Common Shares or any
reclassification, recapitalization, merger, consolidation, other form of
business combination, liquidation, or dissolution involving the Company or any
spin-off or other distribution to shareholders of the Company (other than normal
cash dividends), (a) the Committee shall make appropriate adjustments to the
maximum number of Common Shares that may be issued under the Plan pursuant to
Section 4, and (b) the Committee shall adjust the number and kind of shares
subject to, the price per share under, and the terms and conditions of each then
outstanding Stock Option to the extent necessary and in such manner that the
benefits of Participants under all then outstanding Stock Options shall be
maintained substantially as before the occurrence of such event. Any adjustment
so made by the Committee shall be conclusive and binding for all purposes of the
Plan as of such date as the Committee may determine.
9. Purchase for Investment. Each Participant acquiring Common Shares
pursuant to a Stock Option may be required by the Company to furnish a
representation that he or she is acquiring the Common Shares so acquired as an
investment and not with a view to distribution thereof if the Company, in its
sole discretion, determines that such representation is required to insure that
a resale or other disposition of the Common Shares would not involve a violation
of the Securities Act of 1933, as amended, or of applicable blue sky laws. Any
investment representation so furnished shall no longer be applicable at any such
time such representation is no longer necessary for such purposes.
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<PAGE> 4
10. Holding Periods. No Participant shall sell or exercise, as the case
may be, any equity security or derivative security, in each case as defined in
the 1934 Act or the rules and regulations promulgated thereunder, acquired
pursuant to Restricted Shares or Stock Options granted under the Plan, before
the earliest date on which the sale or exercise is eligible for the Rule 16b-3
Exemption. If any provision of the Plan (including, without limitation, this
Section 10) must be modified or becomes unnecessary to comply with the
requirements of Rule 16b-3, the Committee may waive such provision and/or amend
the Plan to add to or modify the provisions hereof accordingly.
11. Legal Requirements. No Restricted Shares or Stock Options shall be
granted and the Company shall have no obligation to make any payment under the
Plan, whether in Common Shares, cash, or any combination thereof, except in
compliance with all applicable Federal and state laws and regulations,
including, without limitation, the Internal Revenue Code of 1986, as amended,
and Federal and state securities laws.
12. Duration and Termination of the Plan. The Plan shall become effective
and shall be deemed to have been adopted on the date on which it is approved by
the shareholders of the Company and shall remain in effect thereafter until
terminated by action of the Board of Directors. No termination of the Plan shall
adversely affect the rights of any Participant with respect to any Restricted
Shares or Stock Options granted before the effective date of the termination.
13. Amendments. The Board of Directors, or a duly authorized committee
thereof, may alter or amend the Plan prior to its termination in any manner the
Board of Directors, or such duly authorized committee, may deem to be in the
best interests of the Company and its shareholders, except that (a) the Plan may
not be so altered or amended more frequently than once every six months, and (b)
no amendment may be made without shareholder approval if shareholder approval is
required under Rule 16b-3 to qualify for the Rule 16b-3 Exemption, is required
by any applicable securities law or tax law, or is required by the rules of the
registered national securities association through whose inter-dealer quotation
system the Common Shares are quoted.
14. Plan Noncontractual. Nothing herein contained shall be construed as a
commitment to or agreement with any Participant serving as a Director to
continue such person's service as a Director, and nothing herein contained shall
be construed as a commitment or agreement on the part of the Company to continue
the annual rate of retainer of any such person for any period. All Participants
shall remain subject to termination to the same extent as if the Plan had never
been put into effect.
15. Interest of Participants. Any obligation of the Company under the Plan
to make any payment at any future date merely constitutes the unsecured promise
of the Company to make such payment from its general assets in accordance with
the Plan, and no Participant shall have any interest in, or lien or prior claim
upon, any property of the Company by reason of that obligation.
16. Claims of Other Persons. The provisions of the Plan shall in no event
be construed as giving any person, firm, or corporation any legal or equitable
right against the Company, its officers, employees, agents, or directors, except
any such rights as are specifically provided for in the Plan or are hereafter
created in accordance with the terms and provisions of the Plan.
17. Absence of Liability. No Director, member of the Committee or of any
other committee of the Board of Directors, or any officer or employee of the
Company shall be liable for any act or action under the Plan, whether of
commission or omission, taken by any other member, or by any officer, agent, or
employee, or, except in circumstances involving his bad faith or willful
misconduct, for anything done or omitted to be done by himself or herself.
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<PAGE> 5
18. Severability. The invalidity or unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.
19. Governing Law. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
20. Definitions.
20.1 1934 Act. The term "1934 Act" shall mean the Securities Exchange Act
of 1934, as amended.
20.2 Annual Meeting. The term "Annual Meeting" shall mean an Annual
Meeting of Shareholders of the Company.
20.3 Annual Term. The term "Annual Term" shall mean the period commencing
at the time of election of Directors at one Annual Meeting and continuing until
the time of election of Directors at the immediately succeeding Annual Meeting.
20.4 Committee. The term "Committee" shall mean a committee appointed by
the Board of Directors of the Company to administer the Plan. The Committee
shall be composed of not less than two Directors. The Board of Directors may
also appoint one or more directors as alternate members of the Committee. No
officer or employee of the Company shall be a member or alternate member of the
Committee. The Committee shall at all times be so comprised as to satisfy the
disinterested administration standard contained in Rule 16b-3, if required to
qualify for the Rule 16b-3 Exemption.
20.5 Common Shares. The term "Common Shares" shall mean common shares of
the Company without par value.
20.6 Company. The term "Company" shall mean STERIS Corporation and its
successors, including the surviving or resulting corporation of any merger of
STERIS Corporation with or into, or any consolidation of STERIS Corporation
with, any other corporation or corporations.
20.7 Director. The term "Director" shall mean an individual who has been
duly elected and is serving as a member of the Company's Board of Directors.
20.8 Participant. The term "Participant" shall mean any director of the
Company who is neither an officer nor employee of the Company.
20.9 Exercise Price. The term "Exercise Price" with respect to any Stock
Option shall mean the per share closing price of Common Shares on the date of
the grant of that Stock Option.
20.10 Expiration Date. The term "Expiration Date" with respect to any
Stock Option shall mean the tenth anniversary of the date of grant of the Stock
Option.
20.11 Full Calendar Month. The term "Full Calendar Month" shall mean any
month-long period beginning on the first day and ending on the last day of a
calendar month.
20.12 Instrument. The term "Instrument" shall mean a written instrument
evidencing a grant of Restricted Shares or of a Stock Option in such form and
with such provisions as the Committee may prescribe, including, without
limitation, an agreement to be executed by the Participant and the Company, a
certificate issued by the Company, or a letter executed by the Committee or its
designee. Each Instrument shall provide that acceptance of the Instrument by a
Participant constitutes agreement to the terms of the grant evidenced thereby.
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<PAGE> 6
20.13 Plan. The term "Plan" shall mean this STERIS Corporation 1994
Nonemployee Directors Equity Compensation Plan as from time to time hereafter
amended in accordance with Section 15.
20.14 Restricted Shares. The term "Restricted Shares" shall mean Common
Shares granted to a Participant in accordance with Section 5.
20.15 Rule 16b-3. The term "Rule 16b-3" shall mean Rule 16b-3 or any
successor provision under the 1934 Act.
20.16 Rule 16b-3 Exemption. The term "Rule 16b-3 Exemption" shall mean the
exemption from Section 16(b) of the 1934 Act that is available under Rule 16b-3.
20.17 Stock Option. The term "Stock Option," shall mean a grant entitling
the holder thereof to purchase a specified number of Common Shares at a
specified price during a specified period of time.
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<PAGE> 1
EXHIBIT 10.4
STERIS CORPORATION
Management Incentive Compensation Plan
FY 1997
OBJECTIVE
The objective of the STERIS Corporation Management Incentive Compensation
Plan (MICP) is to encourage greater initiative, resourcefulness, teamwork,
efficiency, and achievement of objectives on the part of key management whose
performance and responsibilities directly affect Company profits.
GENERAL PROVISIONS
The MICP for FY 1997 may be reviewed and revised at the Chief Executive
Officer's discretion within the guidelines established by the Compensation
Committee of the Board of Directors. Any incentive payouts under the terms of
this Plan will be limited by any governmental regulations that are in effect at
the time of such incentive payouts.
The incentive compensation fund available for disbursement to participants
shall be determined by achievement of key parameters of the approved Annual
Business Plan.
Management Incentive Compensation will be calculated after the close of
each quarter and will be cumulative and retroactive. That is, deficiencies in
year-to-date (YTD) performance can be made up by overachievement in subsequent
quarters during the fiscal year.
A portion of the earned Management Incentive Compensation will be paid on
a quarterly basis with another portion held in an escrow account to be paid on
an annual basis. An accrual funding schedule will be developed and maintained by
the Finance Department to reserve adequate funds for the payment of earned
Management Incentive Compensation.
KEY PARAMETERS
MICP compensation will be determined through achievement of a combination
of Annual Business Plan (ABP) objectives and Quarterly Individual Objectives
(IO). ABP parameters are the Net Revenue, Operating Income, and Net Income
objectives. IO parameters are approved quarterly personal objectives that are
brief, specific, measurable, and consistent with overall Company objectives.
47
<PAGE> 2
ELIGIBILITY
The management level classifications of individuals who may be eligible to
participate in the MICP are the following:
Chief Executive Officer
Sr. Vice President
Division President/Unit Head
Vice President
Director
Manager
Supervisor/Professional
Incumbents holding a key management position with one of the above titles
are immediately eligible for participation. New hires for an above titled
position will begin participation in the MICP during the first full fiscal
quarter of employment unless otherwise specified in the employment offer. An
individual promoted to a higher management level during a quarter will have MICP
compensation for that quarter at the management level held by the individual for
the majority of the quarter.
Termination of employment of a participant shall result in his or her
forfeiture of all unpaid incentive earnings.
MICP FY'97 PARTICIPANT BONUS SCHEDULE
The bonus opportunity for each management level upon 100% achievement of
the FY'97 Net Revenue, Operating Income, and Net Income objectives is as
follows:
Management Level Quarterly Funding
Chief Executive Officer 100% of Base Income
Senior Vice President 75% of Base Income
Division President/Unit Head 75% of Base Income
Vice President 50% of Base Income
Director 35% of Base Income
Manager 20% of Base Income
Supervisor/Professional $625
BONUS POOL FUNDING
The funding of the bonus pool will be determined quarterly on a YTD basis.
Any funding will be dependent upon the Company's YTD achievement of net revenue
and operating income in relationship to the Annual Business Plan parameters. The
following weighting factor will apply to the qualification parameters:
Net Revenue 75%
Operating Income 25%
Funding will occur on a sliding scale basis from 80% to 120% of the
Blended Achievement Percentage. The following is a calculation example based
upon YTD achievement of 104% of net revenue and 110% of operating income
parameters of the ABP.
104 x 3 = 312
110 x 1 = 110
----
422 / 4 = 105.5% - Blended Rate
During FY'97, funding will be at a minimum 80% level.
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<PAGE> 3
INDIVIDUAL OBJECTIVES (IO)
Quantifiable management objectives are developed and approved quarterly
for each MICP participant. An individual's performance is evaluated at the end
of each quarter and a percentage Individual Objectives (IO) Achievement
calculated. The Individual Objectives are consistent with the quarterly and
longer term objectives for the Company and the individual business units, profit
centers, corporate services groups, or departments.
BONUS CALCULATION
Individual participant bonuses and bonus payouts will be determined as
defined in this bonus calculation section.
1. The bonus qualifier will be based on the Blended Achievement Percentage of
the Company's Net Revenue and Operating Income objectives.
2. The performance in achieving the Net Revenue and Operating Income bonus
qualification parameters will be determined on a YTD basis with a
weighting of 3X for Net Revenue and 1X for Operating Income.
3. Individual participant payout targets will be taken from the then current
Participant and Target Bonus Schedule.
4. The YTD Blended Achievement Percentage will be applied to the individual
Target Bonus to determine the quarterly MICP eligible bonus amount.
5. If bonus eligibility on a YTD quarterly basis has occurred, the individual
MICP eligible bonus amount is multiplied by the percentage achievement of
the quarterly Individual Objectives that have been approved at the
beginning of each quarter by the participant's direct supervisor and the
senior executive/business head of the individual's business unit.
Bonus calculation example:
Vice President
$80,000 Base Salary
50% Target Bonus
Corp Achievement
104% Net Revenue
110% Op Income
104 x 3 = 312
110 x 1 = 110
---
422 / 4 = 105.5% - Blended Rate
Individual Objectives (IO) Achievement
96%
Quarterly Target Bonus
$80,000 x 50% / 4 = $10,000
Sliding Scale Blended Target
$10,000 x 105.5% = $10,550
Earned Bonus
$10,550 x 96% (IO) = $10,128
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<PAGE> 4
BONUS PAYMENT
Seventy-five percent (75%) of the eligible individual quarterly bonus will
be paid following the end of each quarter. Twenty-five percent (25%) of the
eligible individual quarterly bonus will be held in a bonus escrow account and
will be paid following the end of the fiscal year only if the CORPORATION meets
or exceeds its Net Income objective for the full fiscal year. Should the
Corporation fail to meet or exceed its Net Income objective for the full fiscal
year, all funds in the bonus escrow account will be forfeited.
EFFECTIVE DATE
The STERIS Management Incentive Compensation Plan is effective April 1,
1996, through March 31, 1997.
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EXHIBIT 10.6 Form of grant of Incentive Stock Option under AMSCO
International, Inc. Stock Option Plan.
AMSCO INTERNATIONAL, INC.
INCENTIVE STOCK OPTION AGREEMENT
Date: _________
Employee/Optionee: _________
Number of shares of
Common Stock subject
to this Agreement: _________
Pursuant to the AMSCO International, Inc. Stock Option Plan (the "Plan"),
the Board of Directors of Amsco International, Inc. (the "Company") has granted
to you on this date an option (the "Option") to purchase the number of shares of
the Company's Common Stock, $.01 par value ("Common Stock"), set forth above.
Such number of shares (as such may be adjusted as described in Section 12 below)
is herein referred to as the "Option Shares." This Option shall constitute and
be treated as an "incentive stock option" as defined under Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code") for federal income tax
purposes. The terms and conditions of this Option are set out below.
1. Date of Grant. This Option is granted to you on _________.
2. Termination of Option. Your right to exercise this Option (and to
purchase the Option Shares) shall expire and terminate in all events on the
earlier of (i)_________, or (ii) the date provided in Section 8 below in the
event you cease to be employed on a full-time basis by the Company or any
Subsidiary of the Company (as defined in the Plan).
3. Option Price. The purchase price to be paid upon the exercise of this
Option will be $____ per share, the fair market value of a share of Common Stock
(as determined by the Board of Directors) on _________, the date of grant of
this Option.
4. Vesting Provisions -- Entitlement to Exercise the Option and Purchase
Option Shares. (a) You may not exercise this Option at any time prior to
_________. Commencing on _________ and on each of three succeeding anniversaries
of that date, you shall become entitled to exercise this Option with respect to
25% of the Option Shares. Therefore, you shall become entitled to exercise this
Option with respect to 25% of the Option Shares on each of _________,
_________,_________ and _________.
(b) Notwithstanding the foregoing provisions of Section 4(a)
hereof, upon the occurrence of a "Section 4(b) Event" (as defined below), at any
time prior to _________, then you shall thereupon become entitled to exercise
this Option with respect to all or any portion of the Option Shares which as of
the date of the occurrence of such Section 4(b) Event, you had not yet become
entitled to purchase under the provisions of Section 4(a) hereof. For purposes
of this Agreement, a "Section 4(b) Event" shall mean the earliest to occur of:
(i) a sale of more than 50% of the Company's outstanding Common Stock to an
unrelated, non-affiliated third party purchaser, other than pursuant to an
underwritten public offering of the Company's Common Stock registered under the
Securities Act of 1933; (ii) a sale of substantially all of the assets of the
Company (as determined by the Board of Directors) to an unrelated,
non-affiliated third party purchaser, or (iii) the right of co-sale provided for
in Section 8(a) of the Subscription Agreement dated as of August 7, 1987 among
the Company and other parties named therein becoming effected and, as a result
thereof, the Management Subscribers (as defined therein) becoming entitled to
participate in a sale of Common Stock as provided therein.
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<PAGE> 2
5. Additional Provisions Relating to Exercise.
(a) Once you become entitled to exercise this option (and purchase
Option Shares) as provided in Section 4 hereof, such right will continue until
the date on which this Option expires and terminates pursuant to Section 2
hereof.
(b) The Board of Directors may at any time accelerate the time at
which this Option may be exercised by you with respect to any Option Shares.
6. Exercise of Option: Payment of Option Price:
(a) To exercise the Option, you must deliver a completed copy of
the attached Option Exercise Form to the address indicated on the Form,
specifying the number of Option Shares being purchased as a result of such
exercise, together with payment of the full option price, subject to the
provisions of Section 6(b) below, for the Option Shares being purchased.
(b) In the event that at any time after you become entitled to
exercise this Option and purchase Option Shares as provided in Section 4 hereof,
you determine to exercise this Option and purchase any Option Shares, then the
Company shall assist you in obtaining financing for such purchase from an
unaffiliated third-party lender.
7. Transferability of Option. This Option may not be transferred by you
(other than by will or the laws of descent and distribution) and may be
exercised during your lifetime only by you.
8 Termination of Employment.
(a) In the event that you cease to be employed by the Company or
any Subsidiary on a full-time basis for any reason other than because of your
death or "disability" (within the meaning of Section 22(e) (3) of the Code),
this Option may only be exercised within one month after you cease to be so
employed, and only to the same extent that you were entitled to exercise this
Option on the date you ceased to be so employed and had not previously done so.
(b) In the event that you cease to be employed by the Company or
any Subsidiary of a full-time basis by reason of "disability" (as defined in
paragraph (a) above), this Option may only be exercised within one year after
the date you cease to be so employed, and only to the same extent that you were
entitled to exercise this Option on the date you ceased to be so employed by
reason of such disability and had not previously done so.
(c) In the event that you die while employed on a full-time basis
by the Company or any Subsidiary (or within a period of one month after ceasing
to be employed by the Company or any Subsidiary on a full-time basis for any
reason other than "disability" (as defined in paragraph (a) above) or within a
period of one year after ceasing to be employed by the Company on a full-time
basis by reason of such "disability"), this Option may only be exercised during
such one-year period by the executor or administrator of your estate or by any
person who shall have acquired the Option through bequest or inheritance, but
only to the same extent that you were entitled to exercise this Option
immediately prior to the time of your death and you had not previously done so.
(d) Notwithstanding any provision contained in this Section 8 to
the contrary, in no event may this Option be exercised to any extent by anyone
after _________.
9. Withholding Taxes. If the Company is required to withhold federal,
state or local taxes in respect of any compensation income realized by you as a
result of any "disqualifying disposition" of any Option Shares acquired upon
exercise of the option granted hereunder, you hereby agree to provide the
Company with cash funds equal to the total federal, state and local taxes
required to be so withheld, or make other arrangement satisfactory to the
Company regarding such payment. It is understood that all matters with respect
to the total amount of
52
<PAGE> 3
taxes to be withheld in respect of any such compensation income shall be
determined by the Board of Directors.
10. Representations.
(a) You represent and warrant to the Company that, upon exercise
of the Option, you will be acquiring the Option Shares for your own account for
the purpose of investment and not with a view to or for sale in connection with
any distribution thereof, and you understand that (i) neither the Option nor the
Option Shares have been registered with the Securities Exchange Commission by
reason of their issuance in a transaction exempt from the registration
requirements and (ii) the Option Shares must be held indefinitely by you unless
a subsequent disposition thereof is registered under the Securities Act of 1933
or is exempt from such registration. The stock certificates for any Option
Shares issued to you will bear the following legal legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THE RIGHTS OF THE
HOLDER OF THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
AND LIMITED BY THE TERMS AND CONDITIONS OF A CERTAIN AGREEMENT
DATED _________, BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF
SUCH SHARES. A COPY OF SAID AGREEMENT, TO WHICH REFERENCE IS
HEREBY MADE, IS ON FILE AND MAY BE EXAMINED AT THE OFFICES OF
AMSCO INTERNATIONAL, INC."
(b) You further represent and warrant that you understand the
federal, state and local income tax consequences of the granting of this Option
to you, the exercise of this Option and purchase of Option Shares, and the
subsequent sale or other disposition of any Option Shares.
11. Notice of Sale. You agree to give the Company prompt notice of any
sale or other disposition of any Option Shares that occurs (i) within two years
from the date of the granting of this Option to you, or (ii) within one year
after the transfer of such Shares to you upon the exercise of the Option.
12. Adjustments. If the total outstanding shares of the Common Stock of
the Company shall be increased or decreased or changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation through reorganization, merger or consolidation,
recapitalization, stock split, split-up, combination or exchange of shares or
declaration of any dividends payable in stock, then the Board of Directors shall
appropriately adjust the number of Option Shares (and price per share) subject
to the unexercised portion of this Option (to the nearest possible full share)
subject in all cases to the limitations of Section 425 of the Code.
13. Continuation of Employment. Neither the Plan nor the Option shall
confer upon you any right to continue in the employ of the Company or any
Subsidiary to terminate your employment at any time.
14. Miscellaneous.
(a) This Option Agreement is qualified in its entirety by
reference to the provisions of the Plan applicable to "incentive stock options"
as defined in Section 422A of the Code, which are hereby incorporated herein by
reference.
(b) Any action or determination of the Company or the Board of
Directors provided for or required under the Plan shall be taken or made in the
sole discretion of the Company or the Board of Directors or taken or made in the
sole discretion of the Committee appointed by the Board of Directors to
administer the Plan.
53
<PAGE> 4
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware. If any one or more provisions
of this Agreement shall be found to be illegal or unenforceable in any respect,
the validity and enforceability of the remaining provisions hereof shall not in
any way be affected or impaired thereby.
Please acknowledge receipt of this Option Agreement by signing the
enclosed copy of this Option Agreement in the space provided below and returning
it promptly to the Secretary of the Company.
AMSCO INTERNATIONAL, INC.
By ___________________________
Accepted and Agreed to
as of _________:
- ---------------------------
Employee/Optionee
AMSCO INTERNATIONAL, INC.
STOCK OPTION PLAN
OPTION EXERCISE FORM
I,__________________, a full-time employee of AMSCO International, Inc. or
a Subsidiary thereof (as defined in the AMSCO International, Inc. Stock Option
Plan), do hereby exercise the right to purchase _________ shares of Common
Stock, $.01 par value, of AMSCO International, Inc. pursuant to the Option
granted to me on _________ under the AMSCO International, Inc. Stock Option
Plan.
Date:
--------------- --------------------------------------
Signature
Send a completed copy of this Option Exercise Form to:
Dennis P. Patton, Treasurer
AMSCO International, Inc.
5960 Heisley Road
Mentor, Ohio 44060-1834
54
<PAGE> 1
EXHIBIT 10.7 Form of grant of Non-Qualified Stock Option under the AMSCO
International, Inc. Stock Option Plan.
AMSCO INTERNATIONAL, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
Optionee:
Number of shares of Common Stock subject to this Agreement:
Pursuant to the AMSCO International, Inc. Stock Option Plan (the "Plan"),
the Board of Directors of AMSCO International, Inc. (the "Company") has granted
to you on this date an option (the "Option") to purchase the number of shares of
the Company's Common Stock, $.01 par value ("Common Stock"), set forth above.
Such number of shares (as such may be adjusted as described in Section 11 below)
is herein referred to as the "Option Shares." This Option shall constitute and
be treated as a "non-qualified stock option" as described in the Treasury
Regulation, Section 1.83-7 and will not be treated as an "incentive stock
option" as defined under Section 422A of the Internal Revenue Code of 1986 as
amended (the "Code") for federal income tax purposes. The terms and conditions
of this Option are set out below.
1. Date of Grant. This Option is granted to you on _________.
2. Termination of Option. Your right to exercise this Option (and to
purchase the Option Shares) shall expire and terminate in all events on
_________.
3. Option Price. The purchase price to be paid upon the exercise of this
Option will be $ _________ per share, the fair market value of a share of Common
Stock (as determined by the Board of Directors) on _________ the date of grant
of this Option.
4. Entitlement to Exercise the Option and Purchase Option Shares. You may
exercise this Option at any time until the date on which this Option expires or
terminates pursuant to Section 2 hereof.
5. Exercise of Option: Payment of Option Price. To exercise the Option,
you must deliver a completed copy of the attached Option Exercise Form to the
address indicated on the Form, specifying the number of Option Shares being
purchased as a result of such exercise, together with payment of the full option
price.
6. Transferability of Option. This Option may not be transferred by you
(other than by will or the laws of descent and distribution) and may be
exercised during your lifetime only by you.
7. Withholding Taxes. If the Company is required to withhold federal,
state or local taxes in respect of any compensation income realized by you in
respect of the option granted hereunder or in respect of any Option Shares
acquired upon exercise of the option granted hereunder, you hereby agree to
provide the Company with cash funds equal to the total federal, state and local
taxes required to be so withheld, or make other arrangement satisfactory to the
Company regarding such payment. It is understood that all matters with respect
to the total amount of taxes to be withheld in respect of any such compensation
income shall be determined by the Board of Directors.
55
<PAGE> 2
8. Representations.
----------------
(a) You represent and warrant to the Company that, upon exercise
of the Option, you will be acquiring the Option Shares for your own account for
the purpose of investment and not with a view to or for sale in connection with
any distribution thereof, and you understand that (i) neither the Option nor the
Option Shares have been registered with the Securities Exchange Commission by
reason of their issuance in a transaction exempt from the registration
requirements and (ii) the Option Shares must be held indefinitely by you unless
a subsequent disposition thereof is registered under the Securities Act of 1933
or is exempt from such registration. The stock certificates for any Option
Shares issued to you will bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THE RIGHTS OF THE
HOLDER OF THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
AND LIMITED BY THE TERMS AND CONDITIONS OF A CERTAIN AGREEMENT
DATED _________, BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF
SUCH SHARES. A COPY OF SAID AGREEMENT, TO WHICH REFERENCE IS
HEREBY MADE, IS ON FILE AND MAY BE EXAMINED AT THE OFFICES OF
AMSCO INTERNATIONAL, INC."
(b) You further represent and warrant that you understand the
federal, state and local income tax consequences of the granting of this Option
to you, the exercise of this Option and purchase of Option Shares, and the
subsequent sale or other disposition of any Option Shares.
9. Notice of Sale. You agree to give the Company prompt notice of any sale
or other disposition of any Option Shares that occurs (i) within two years from
the date of the granting of this Option to you, or (ii) within one year after
the transfer of such Shares to you upon the exercise of the Option.
10. Adjustments. If the total outstanding shares of Common Stock of the
Company shall be increased or decreased or changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation through reorganization, merger or consolidation,
recapitalization, stock split, split-up, combination or exchange of shares or
declaration of any dividends payable in stock, then the Board of Directors shall
appropriately adjust the number of Option Shares (and price per share) subject
to the unexercised portion of this Option (to the nearest possible full share).
11. Continuation of Directorship. Neither the Plan nor the Option shall
confer upon you any right to continue as a Director of the Company or any
Subsidiary.
12. Miscellaneous.
(a) This Option Agreement is qualified in its entirety by
reference to the provisions of the Plan applicable to "non-qualified stock
options" as defined in Treasury Regulation, Section 1.83-7, which are hereby
incorporated herein by reference.
(b) Any action or determination of the Company or the Board of
Directors provided for or required under the Plan shall be taken or made in the
sole discretion of the Company or the Board of Directors or taken or made in the
sole discretion of the Committee appointed by the Board of Directors to
administer the Plan.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware. If any one or more provisions
of this Agreement shall be found to be illegal or unenforceable in any respect,
the validity and enforceability of the remaining provision hereof shall not in
any way be affected or impaired thereby.
56
<PAGE> 3
Please acknowledge receipt of this Option Agreement by signing the
enclosed copy of this Option Agreement in the space provided below and returning
it promptly to the Secretary of the Company.
AMSCO INTERNATIONAL, INC.
By
---------------------------
Accepted and Agreed to
as of _________:
- ------------------------------
Optionee
AMSCO INTERNATIONAL, INC.
STOCK OPTION PLAN
OPTION EXERCISE FORM
I, __________________ do hereby exercise the right to purchase _________
shares of Common Stock, $.01 par value, of AMSCO International, Inc. pursuant to
the Option granted to me on _________ under the AMSCO International, Inc. Stock
Option Plan.
Date:
----------------- ------------------------------------------
Signature
Send a completed copy of this Option Exercise Form to:
Dennis P. Patton, Treasurer
AMSCO International, Inc.
5960 Heisley Road
Mentor, Ohio 44060-1834
57
<PAGE> 1
EXHIBIT 10.9
PROMISSORY NOTE
Original Principal Amount Mentor, Ohio
$1,693,297.69 February 28, 1997
FOR VALUE RECEIVED, BILL R. SANFORD ("Maker") promises to pay to the order
of STERIS Corporation ("Holder") the principal amount of One Million Six Hundred
Ninety-Three Thousand Two Hundred Ninety-Seven Dollars and Sixty-Nine Cents
($1,693,297.69) together with interest thereon as hereinafter provided.
1. Principal. The principal amount hereof shall be due and payable in full
on February 28, 2002 (the "Maturity Date").
2. Interest. The principal amount outstanding under this Promissory Note
from time to time shall bear interest from and including the date hereof at the
rate of 6.38% per annum, compounded annually on each anniversary of February 28,
1997, until paid in full. Interest on this Promissory Note shall be computed on
the basis of a 365 day year for the actual number of days elapsed.
3. Payment in Full on Maturity Date. Maker shall pay the full amount then
due under this Promissory Note, both principal and interest (including
compounded interest) in a single payment on the Maturity Date. Payment of the
principal of and interest on this Promissory Note shall be made in lawful money
of the United States of America to Holder at 5960 Heisley Road, Mentor, Ohio
44060 or to such other payee or at such other address as may be designated to
Maker by Holder from time to time.
4. Mandatory Prepayment on Sale of Shares. Maker has used the proceeds of
the loan from STERIS Corporation that is evidenced by this Promissory Note to
fund the exercise of certain options for 186,500 STERIS Corporation Common
Shares (the "Shares"). Upon any sale of any portion of the Shares, Maker
shall promptly pay to Holder such amount, if any, as is necessary so that,
immediately after that payment, the portion of the original principal on this
Promissory Note that has been repaid, and as to which all accrued interest has
been paid, is at least directly proportionate to the portion of the 186,500
Shares that have been sold by Maker through the date of that payment. For
example, if, on a particular date Maker, having not previously sold any
of the Shares and having not previously made any payment on this Promissory
Note, sells 46,625 Shares (1/4 of the original number), Maker shall
promptly pay to Holder at least $423,324.42 of principal (1/4 of the original
principal), together with all accrued interest on that amount of principal. If
the facts were the same as in the example just given except that Maker had
previously repaid $100,000 of principal and accrued interest, Maker would be
required to promptly pay to Holder at least $323,324.42 of principal (1/4 of the
original principal net of the earlier $100,000 payment), together with all
accrued interest on that amount of principal.
5. Waiver of Demand, etc. Maker waives demand, presentment, notice of
dishonor, protest, notice of protest, and diligence in collection and bringing
suit and agrees that Holder may extend the time for payment, accept partial
payment, or take security therefor without discharging or releasing Maker.
6. Governing Law. This Promissory Note has been executed in Mentor, Ohio.
The construction, validity, and enforceability of this Promissory Note shall be
governed by the laws of the State of Ohio applicable to promissory notes made
and to be satisfied entirely within the State of Ohio.
7. Costs of Enforcement. Maker agrees to pay all costs and expenses
(including reasonable attorneys' fees) incurred by Holder in the collection of
this Promissory Note and in the
58
<PAGE> 2
enforcement of the rights under this Promissory Note.
8. Waiver. Maker, to the extent not prohibited by law, waives any right to
have a jury participate in resolving any dispute, whether sounding in contract,
tort or otherwise, between Holder and Maker arising out of, in connection with,
related to, or incidental to the relationship established between Maker and
Holder in connection with this Note, or any other agreement, instrument, or
document executed or delivered in connection therewith or the transactions
related thereto. This waiver shall not in any way affect, waive, limit, amend,
or modify the ability of any Holder hereof to pursue remedies pursuant to any
confession of judgment or cognovit provision contained in this note.
9. Prepayment. Maker may prepay all or any portion of the principal sum
hereof at any time without penalty. All such prepayments shall be applied to the
payment of the principal due hereon, and shall be accompanied by the payment of
accrued interest on the amount of the prepayment to the date thereof.
10. Overdue Payments. Any payment of principal and interest under this
Promissory Note must be received by Holder by 5:00 p.m. E.S.T. on a business day
in order to be credited on such date. If Maker fails to make any payment of
principal, interest, or other amount becoming due pursuant to the provisions of
this Promissory Note within ten business days of the date due and payable, Maker
also shall pay to Holder a late charge equal to five percent of the amount of
such payment. Such ten day period shall not be construed in any way to extend
the due date of any such or subsequent payment.
11. Warrant of Attorney. Maker hereby irrevocably authorizes any
attorney-at-law to appear for Maker in an action on this Promissory Note at any
time after the same becomes due, whether by acceleration or otherwise, in any
court of record in the State of Ohio or elsewhere and to waive the issuing of
service of process against Maker, and to confess judgment in favor of the Holder
against Maker for all amounts that may be due, together with costs of suit, and
thereupon to waive all errors and all rights of appeal and stays of execution in
respect of the judgment rendered. Maker hereby expressly (a) waives any conflict
of interest in an attorney retained by the Holder confessing judgment against
Maker upon this Promissory Note, and (b) consents to any attorney retained by
the Holder receiving a legal fee or other value for legal services rendered for
confessing judgment against Maker upon this Promissory Note. The foregoing
warrant of attorney shall survive any judgment, and if any judgment is vacated
for any reason, the Holder may thereafter use the foregoing warrant of attorney
to obtain an additional judgment or judgments against Maker. A copy of this
Promissory Note, certified by the Holder, may be filed in any proceeding in
place of filing the original as a warrant of attorney.
- --------------------------------------------------------------------------------
"WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE."
- --------------------------------------------------------------------------------
/s/ Bill R. Sanford
-------------------------
Bill R. Sanford
59
<PAGE> 1
EXHIBIT 21.1 SUBSIDIARIES OF STERIS CORPORATION
STERIS has no parent company. As of March 31, 1997, certain of its direct
and indirect subsidiaries were as follows:
Subsidiary Location
STERIS Foreign Sales Corporation US Virgin Islands
Medical & Environmental Designs, Inc. (MED Inc.) Missouri
STERIS GmbH Germany
STERIS S.A. Belgium
STERIS Limited UK
STERIS S.r.l. Italy
Ecomed, Inc. Indiana
STERIS Korea Limited Korea
SURGICOT, Inc. Delaware
Calgon Vestal, Inc. Delaware
AMSCO International, Inc. Delaware
American Sterilizer Company Pennsylvania
AMSCO Foreign Sales Corporation US Virgin Islands
AMSCO International Sales Corporation Delaware
HAS, Inc. Delaware
STERIS Canada Inc. Canada
Hoplab Inc. Canada
AMSCO (Barbados), Inc. Barbados
AMSCO Europe, Inc. Delaware
AMSCO Holdings B.V. Netherlands
AMSCO Finn-Aqua Oy Finland
AMSCO Finn-Aqua GmbH Germany
AMSCO S.A./N.V. Belgium
AMSCO Finn-Aqua, S.A. (Spain) Spain
AMSCO Finn-Aqua S.A. (France) France
AMSCO (U.K.) Ltd. United Kingdom
AMSCO Europe Ltd. (U.K.) United Kingdom
AMSCO Asia Pacific, Inc. Delaware
AMSCO Japan, K.K. Japan
Finn Aqua Japan K.K. Japan
AMSCO Hong Kong Limited Hong Kong
AMSCO Singapore Pte. Ltd. Singapore
American Sterilizer (Thailand) Co. Ltd. Thailand
AMSCO Latin America, Inc. Delaware
AMSCO Brazil Comercios e Servicos Ltda. Brazil
AMSCO de Costa Rica, S.A. Costa Rica
60
<PAGE> 1
EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements and related Prospectuses of our report dated April 21, 1997, with
respect to the consolidated financial statements and schedule of STERIS
Corporation and Subsidiaries included in this Annual Report (Form 10-K) for the
year ended March 31, 1997:
<TABLE>
<CAPTION>
Registration
Number Description Filing Date
- ------------------- ------------------------------------------------------- -------------------
<S> <C> <C>
333-06529 Form S-3 Registration Statement -- STERIS Corporation June 21, 1996
333-01610 Post-effective Amendment to Form S-4 on Form S-8 -- May 14, 1996
STERIS Corporation
33-91444 Form S-8 Registration Statement -- STERIS Corporation April 21, 1995
1994 Equity Compensation Plan
33-91445 Form S-8 Registration Statement -- STERIS Corporation April 21, 1995
1994 Nonemployee Directors Equity Compensation Plan
33-55976 Form S-8 Registration Statement -- STERIS Corporation December 21, 1992
401(k)Plan
33-55258 Form S-8 Registration Statement -- STERIS Corporation December 2, 1992
Amended and Restated Non-Qualified Stock Option Plan
</TABLE>
Ernst & Young LLP
Cleveland, Ohio
June 13, 1997
61
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director, of
STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1997 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, and Roy L. Turnell, and
each of them, as attorney for the undersigned, with full power of substitution
and resubstitution, for and in the name, place, and stead of the undersigned, to
sign and file the Annual Report, and exhibits thereto, and any and all
amendments thereto, with full power and authority to do and perform any and all
acts whatsoever requisite and necessary to be done in the premises, hereby
ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of June 2,
1997.
/s/ Bill R. Sanford
--------------------------------------
Bill R. Sanford,
Chairman of the Board,
President, Chief Executive Officer
62
<PAGE> 2
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director,
of STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1997 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, and Roy L. Turnell, and
each of them, as attorney for the undersigned, with full power of substitution
and resubstitution, for and in the name, place, and stead of the undersigned, to
sign and file the Annual Report, and exhibits thereto, and any and all
amendments thereto, with full power and authority to do and perform any and all
acts whatsoever requisite and necessary to be done in the premises, hereby
ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of May
27, 1997.
/s/ Russell L. Carson
--------------------------------------
Russell L. Carson
Director
63
<PAGE> 3
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director,
of STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1997 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, and Roy L. Turnell, and
each of them, as attorney for the undersigned, with full power of substitution
and resubstitution, for and in the name, place, and stead of the undersigned, to
sign and file the Annual Report, and exhibits thereto, and any and all
amendments thereto, with full power and authority to do and perform any and all
acts whatsoever requisite and necessary to be done in the premises, hereby
ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of May
30, 1997.
/s/ Michael A. Keresman, III
--------------------------------------
Michael A. Keresman, III,
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
64
<PAGE> 4
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director,
of STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1997 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, and Roy L. Turnell, and
each of them, as attorney for the undersigned, with full power of substitution
and resubstitution, for and in the name, place, and stead of the undersigned, to
sign and file the Annual Report, and exhibits thereto, and any and all
amendments thereto, with full power and authority to do and perform any and all
acts whatsoever requisite and necessary to be done in the premises, hereby
ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of May
29, 1997.
/s/ Raymond A. Lancaster
--------------------------------------
Raymond A. Lancaster
Director
65
<PAGE> 5
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director, of
STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1997 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, and Roy L. Turnell, and
each of them, as attorney for the undersigned, with full power of substitution
and resubstitution, for and in the name, place, and stead of the undersigned, to
sign and file the Annual Report, and exhibits thereto, and any and all
amendments thereto, with full power and authority to do and perform any and all
acts whatsoever requisite and necessary to be done in the premises, hereby
ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of May 27,
1997.
/s/ Thomas J. Magulski
--------------------------------------
Thomas J. Magulski
Director
66
<PAGE> 6
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director, of
STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1997 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, and Roy L. Turnell, and
each of them, as attorney for the undersigned, with full power of substitution
and resubstitution, for and in the name, place, and stead of the undersigned, to
sign and file the Annual Report, and exhibits thereto, and any and all
amendments thereto, with full power and authority to do and perform any and all
acts whatsoever requisite and necessary to be done in the premises, hereby
ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of May 26,
1997.
/s/ J. B. Richey
--------------------------------------
J. B. Richey
Director
67
<PAGE> 7
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director,
of STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1997 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, and Roy L. Turnell, and
each of them, as attorney for the undersigned, with full power of substitution
and resubstitution, for and in the name, place, and stead of the undersigned, to
sign and file the Annual Report, and exhibits thereto, and any and all
amendments thereto, with full power and authority to do and perform any and all
acts whatsoever requisite and necessary to be done in the premises, hereby
ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of May
28, 1997.
/s/ Jerry E. Robertson, Ph.D.
--------------------------------------
Jerry E. Robertson, Ph.D.
Director
68
<PAGE> 8
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director,
of STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1997 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, and Roy L. Turnell, and
each of them, as attorney for the undersigned, with full power of substitution
and resubstitution, for and in the name, place, and stead of the undersigned, to
sign and file the Annual Report, and exhibits thereto, and any and all
amendments thereto, with full power and authority to do and perform any and all
acts whatsoever requisite and necessary to be done in the premises, hereby
ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of May
27, 1997.
/s/ Frank E. Samuel, Jr.
--------------------------------------
Frank E. Samuel, Jr.
Director
69
<PAGE> 9
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director,
of STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1997 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, and Roy L. Turnell, and
each of them, as attorney for the undersigned, with full power of substitution
and resubstitution, for and in the name, place, and stead of the undersigned, to
sign and file the Annual Report, and exhibits thereto, and any and all
amendments thereto, with full power and authority to do and perform any and all
acts whatsoever requisite and necessary to be done in the premises, hereby
ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of May
27, 1997.
/s/ Loyal W. Wilson
--------------------------------------
Loyal W. Wilson
Director
70
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
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0
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