<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER 0-20165
STERIS CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 34-1482024
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5960 HEISLEY ROAD, 440-354-2600
MENTOR, OHIO 44060-1834 (Registrant's telephone number,
(Address of principal executive offices) including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ].
The number of Common Shares outstanding as of December 31, 1999: 67,495,079
================================================================================
<PAGE> 2
PART I FINANCIAL INFORMATION
STERIS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS) (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 28,580 $ 23,680
Accounts receivable 224,400 230,346
Inventories 130,225 99,279
Current portion of deferred income taxes 21,910 21,910
Prepaid expenses and other assets 18,127 18,182
--------- ---------
TOTAL CURRENT ASSETS 423,242 393,397
Property, plant, and equipment 422,264 372,386
Accumulated depreciation (134,742) (111,105)
--------- ---------
Net property, plant, and equipment 287,522 261,281
Intangibles 283,336 280,750
Accumulated amortization (77,598) (72,499)
--------- ---------
Net intangibles 205,738 208,251
Other assets 3,444 3,067
--------- ---------
TOTAL ASSETS $ 919,946 $ 865,996
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term indebtedness $ 1,816 $ 2,200
Accounts payable 48,695 47,431
Accrued expenses and other 100,424 107,506
--------- ---------
TOTAL CURRENT LIABILITIES 150,935 157,137
Long-term indebtedness 265,925 221,500
Deferred income taxes 2,810 2,810
Other long-term liabilities 48,997 48,612
--------- ---------
TOTAL LIABILITIES 468,667 430,059
Shareholders' equity:
Serial preferred shares, without par value, 3,000 shares authorized; no
shares outstanding
Common Shares, without par value, 300,000 shares authorized; issued and
outstanding shares of 67,495 at December 31, 1999, and 67,956 at
March 31, 1999, excluding 1,081 and 523 treasury shares, respectively 204,256 222,946
Retained earnings 254,541 219,863
Cumulative translation adjustment (7,518) (6,872)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 451,279 435,937
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 919,946 $ 865,996
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
2
<PAGE> 3
STERIS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31 DECEMBER 31
------------------------- -------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues $ 195,119 $ 205,794 $ 570,534 $ 570,694
Cost of goods and services sold 108,038 109,260 310,840 303,342
--------- --------- --------- ---------
Gross profit 87,081 96,534 259,694 267,352
Costs and expenses:
Selling, informational, and administrative 61,054 49,793 177,339 150,017
Research and development 5,812 6,150 17,735 18,253
--------- --------- --------- ---------
66,866 55,943 195,074 168,270
--------- --------- --------- ---------
Income from operations 20,215 40,591 64,620 99,082
Interest expense (4,086) (3,097) (11,482) (7,816)
Interest income and other 1,507 170 2,755 685
--------- --------- --------- ---------
Income before income taxes 17,636 37,664 55,893 91,951
Income tax expense 6,701 14,689 21,215 35,860
--------- --------- --------- ---------
Net income $ 10,935 $ 22,975 $ 34,678 $ 56,091
========= ========= ========= =========
Net income per share - basic $ 0.16 $ 0.34 $ 0.51 $ 0.82
========= ========= ========= =========
Net income per share - diluted $ 0.16 $ 0.33 $ 0.51 $ 0.79
========= ========= ========= =========
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE> 4
STERIS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31
--------------------------
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 34,678 $ 56,091
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 30,107 22,882
Deferred income taxes 0 (7,358)
Other items (748) (270)
Changes in operating assets and liabilities:
Accounts receivable 6,510 (1,033)
Inventories (30,946) (22,809)
Other assets 4,515 (3,493)
Accounts payable and accruals (6,150) (5,365)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 37,966 38,645
INVESTING ACTIVITIES
Purchases of property, plant, equipment, and patents (49,828) (52,014)
Investment in businesses (6,259) (48,452)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (56,087) (100,466)
FINANCING ACTIVITIES
Payments on long-term obligations (1,659) (1,114)
Borrowing under credit facility 45,000 60,000
Purchase of treasury shares (28,712) (6,746)
Stock option and other equity transactions 8,193 7,003
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 22,822 59,143
Effect of exchange rate changes on cash and cash equivalents 199 519
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,900 (2,159)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 23,680 17,172
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 28,580 $ 15,013
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE> 5
STERIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
PERIODS ENDED DECEMBER 31, 1999 AND 1998
A. - REPORTING ENTITY
STERIS Corporation (the "Company" or "STERIS") develops, manufactures, and
markets infection prevention, contamination prevention, microbial reduction,
and therapy support systems, products, services, and technologies for health
care, scientific, research, food, and industrial Customers throughout the
world. The Company has over 4,700 Associates (employees) worldwide, including
more than 1,900 direct sales, service, field, and Customer support personnel.
Customer Support facilities are located in major global market centers with
production operations in the United States, Australia, Canada, Germany,
Finland, and Sweden. STERIS operates in a single business segment.
B. - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X; they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Accordingly, the reader of these financial statements
should refer to the audited consolidated financial statements of STERIS filed
with the Securities and Exchange Commission as part of STERIS's Form 10-K for
the year ended March 31, 1999.
The accompanying consolidated condensed financial statements have been
prepared in accordance with STERIS's customary accounting practices and have
not been audited. Management believes that the financial information included
herein reflects all adjustments necessary for a fair presentation of interim
results and all such adjustments are of a normal and recurring nature. The
interim results reported are not necessarily indicative of the results to be
expected for the fiscal year ending March 31, 2000.
The balance sheet at March 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. Intercompany accounts and transactions have
been eliminated upon consolidation.
5
<PAGE> 6
STERIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
C. - EARNINGS PER SHARE
Following is a summary, in thousands, of Common Shares and Common Share
equivalents outstanding used in the calculations of earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31 DECEMBER 31
------------------------------------- -------------------------------------
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Weighted average Common
Shares outstanding - basic 67,495 68,174 67,484 68,203
Dilutive effect of stock options 893 2,204 1,156 2,398
--------------- --------------- --------------- ---------------
Weighted average Common
Shares and equivalents - diluted 68,388 70,378 68,640 70,601
=============== =============== =============== ===============
</TABLE>
D. - COMPREHENSIVE INCOME
Comprehensive income amounted to $10,240 and $23,493, net of tax, for the
quarters ended December 31, 1999 and 1998, respectively. Comprehensive income
amounted to $34,032 and $56,610, net of tax, for the nine months ended
December 31, 1999 and 1998, respectively. The entire difference between net
income and comprehensive income for the periods presented results from changes
in the cumulative translation adjustment.
E. - INVENTORIES
Inventories were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 1999
----------------------- ----------------------
<S> <C> <C>
Raw material $41,080 $36,878
Work in process 31,905 19,585
Finished goods 57,240 42,816
----------------------- ----------------------
$130,225 $99,279
======================= ======================
</TABLE>
6
<PAGE> 7
STERIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
F. - FINANCING
On January 26, 1999, STERIS entered into a $400,000 Credit Facility. The
Credit Facility includes an unsecured revolver of $250,000 which expires
January 26, 2002. The remaining $150,000 is an unsecured 364 day facility
originally expiring on January 25, 2000, which has been extended and will
expire on January 23, 2001, subject to being further extended at maturity for
an additional 364 days. The $400,000 Credit Facility may be used for general
corporate purposes and will bear interest at either KeyBank National
Association's prime rate or at LIBOR plus a margin. The Credit Facility
contains customary covenants which include maintenance of certain financial
ratios. At December 31, 1999, the outstanding borrowings under the existing
Credit Facility were $260,000.
The Company has now repurchased 3.7 million Common Shares as a part of its
previously announced open market buy-back program. No Common Shares were
repurchased in the latest quarter.
G. - CONTINGENCIES
There are 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. STERIS believes it
presently maintains a prudent amount of product liability insurance coverage
and associated deductible levels.
On December 15, 1999, STERIS Corporation received a warning letter from the
Food and Drug Administration ("FDA") in connection with the FDA's recent
inspection of STERIS's manufacturing facility in Mentor, Ohio. Since the
inspection and receipt of the warning letter, STERIS has been working
diligently with the FDA to resolve the FDA's concerns and will continue to
cooperate with the FDA to reach a final resolution of all concerns. Although
no assurance can be given as to the timing of any such resolution, management
believes this matter will not have a material adverse effect on STERIS's
financial condition, results of operations, or cash flows.
H. - ACQUISITION
During the fourth quarter fiscal 2000, the Company purchased a minority equity
interest in SterilTek, a provider of sterilization management and outsourcing
services for health care facilities.
7
<PAGE> 8
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors and Shareholders
STERIS Corporation
We have reviewed the accompanying consolidated condensed balance sheet of
STERIS Corporation and subsidiaries as of December 31, 1999, and the related
consolidated condensed statements of income for the three-month and nine-month
periods ended December 31, 1999 and 1998, and the consolidated condensed
statements of cash flows for the nine-month periods ended December 31, 1999
and 1998. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with auditing standards generally accepted in the
United States, which will be performed for the full year with the objective of
expressing an opinion regarding the financial statements taken as a whole.
Accordingly we do not express such an opinion.
Based upon our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated condensed financial statements
referred to above for them to be in conformity with accounting principles
generally accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of STERIS
Corporation and subsidiaries as of March 31, 1999 and the related consolidated
statements of operations, shareholders' equity and cash flows for the year
then ended, not presented herein, and in our report dated April 26, 1999, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
condensed balance sheet as of March 31, 1999, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
is derived.
Ernst & Young LLP
Cleveland, Ohio
January 24, 2000
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
Net revenue decreased by 5.2% to $195.1 million in the third quarter fiscal
2000 from $205.8 million in the third quarter fiscal 1999. The decline in
revenues appeared to be largely attributable to delays in capital equipment
purchases because of concerns over Y2K, the Balanced Budget Act of 1997 which
reduced Medicare reimbursements and caused many hospitals to slow capital
purchases, and the recent and pending global consolidations of companies in
the biopharmaceutical industry. Net revenue decreased to $570.5 million in the
first nine months of fiscal 2000 from $570.7 million in the same period in
fiscal 1999. Health Care Group revenues in the fiscal third quarter decreased
3.5% from the prior year period to $145.2 million, or 74.4% of total Company
revenues. Scientific and Industrial Group revenues were $49.9 million in the
third quarter, a decrease of 9.8% from the prior year period. Health Care
Group revenues in the first nine months of fiscal 2000 increased from the
prior year period to $424.4 million, or 74.4% of total Company revenues.
Scientific and Industrial Group revenues were $146.1 million in the first nine
months of fiscal 2000, a decrease of 0.2% from the prior year period. Revenues
from consumable products, accessories, and services were 58.8% of net revenue
for the quarter.
The costs of products and services sold decreased by 1.1% to $108.0 million in
the third quarter fiscal 2000 from $109.3 million in the third quarter fiscal
1999. The costs of products and services sold increased by 2.5% to $310.8
million for the first nine months of fiscal 2000 from $303.3 million for the
first nine months of fiscal 1999. The cost of products and services sold as a
percentage of net revenue was 55.4% for the third quarter fiscal 2000 compared
to 53.1% for the same period in fiscal 1999. The increase in the cost of
products and services sold as a percentage of net revenue reflects the impact
of lower capital equipment sales for the period upon the absorption of fixed
overhead. The Company has engaged an outside firm to assist with a focused
project aimed at improving the efficiency and profitability of its major
manufacturing operations.
Selling, informational, and administrative expenses increased by 22.7% to
$61.1 million in the third quarter fiscal 2000 from $49.8 million in the third
quarter fiscal 1999. Selling, informational, and administrative expenses
increased by 18.2% to $177.3 million in the first nine months of fiscal 2000
from $150.0 million in the first nine months of fiscal 1999. The increase in
expenses during the quarter reflected higher payroll and marketing costs
primarily incurred to support the expansion and reorientation of the U.S.
Health Care field organization, the addition of a production facility which
was acquired as a result of a business combination, as well as a higher level
of depreciation expense than the prior year. The expenses as a percentage of
net revenue increased to 31.3% in the third quarter fiscal 2000 from 24.2% in
the third quarter fiscal 1999.
Research and development expenses decreased by 6.5% to $5.8 million in the
third quarter fiscal 2000 from $6.2 million in the third quarter fiscal 1999.
Research and development expenses decreased by 3.3% to $17.7 million in the
first nine months fiscal 2000 from $18.3 million in the first nine months
fiscal 1999 as a result of continued consolidation and rationalization of the
research and development activities of acquired businesses.
Interest expense increased by 32.3% to $4.1 million in the third quarter
fiscal 2000 from $3.1 million in the third quarter fiscal 1999. Interest
expense increased by 47.4% to $11.5 million in the first nine months fiscal
2000 from $7.8 million in the first nine months fiscal 1999. The increase was
due to the additional borrowing under the Credit Facility principally for
purchases of property, plant, and equipment, acquisition of businesses, and
repurchase of Common Shares.
9
<PAGE> 10
Net income for the third quarter of fiscal 2000 decreased by 52.6% to $10.9
million ($.16 per share) from $23.0 million ($.33 per share) in the same
period in fiscal 1999. Net income for the first nine months of fiscal 2000
decreased by 38.2% to $34.7 million ($.51 per share) from $56.1 million ($.79
per share) in the same period in fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company had $28.6 million in cash and cash equivalents as of December 31,
1999, compared to $23.7 million of the same at March 31, 1999. The increase
was primarily attributable to cash received from operating activities and
borrowings, offset by purchases of property, plant, and equipment, acquisition
of businesses, and repurchase of Common Shares.
Accounts receivable decreased by 2.6% to $224.4 million as of December 31,
1999, compared to $230.3 million at March 31, 1999. The decrease reflected
seasonal changes in revenues and increased collections.
Inventory increased by 31.1% to $130.2 million as of December 31, 1999,
compared to $99.3 million at March 31, 1999. The increase in inventories
during the period was due to an increase in costs to support product sales and
anticipated future product sales.
Prepaid expenses and other assets decreased by 0.6% to $18.1 million as of
December 31, 1999, compared to $18.2 million at March 31, 1999.
Property, plant, and equipment increased by 13.4% to $422.3 million as of
December 31, 1999, compared to $372.4 million at March 31, 1999. The increase
was due to investments in manufacturing equipment, informational technology
systems, and contract services operations.
Intangibles increased by 0.9% to $283.3 million as of December 31, 1999,
compared to $280.8 million at March 31, 1999.
Current liabilities decreased by 4.0% to $150.9 million as of December 31,
1999, compared to $157.1 million at March 31, 1999. The decrease resulted from
reductions in the current portion of long-term indebtedness and accrued
expenses.
Long-term indebtedness increased by 20.1% to $265.9 million as of December 31,
1999, compared to $221.5 million at March 31, 1999. The increase was due
primarily to fund purchases of property, plant, and equipment, business
acquisitions, and the repurchase of Common Shares.
Other long-term liabilities increased by 0.8% to $49.0 million as of December
31, 1999, compared to $48.6 million at March 31, 1999.
On January 26, 1999, STERIS entered into a $400 million Credit Facility. The
Credit Facility includes an unsecured revolver of $250 million which expires
January 26, 2002. The remaining $150 million is an unsecured 364 day facility
originally expiring on January 25, 2000, which has been extended and will
expire on January 23, 2001, subject to being further extended at maturity for
an additional 364 days. The $400 million Credit Facility may be used for
general corporate purposes and will bear interest at either KeyBank National
Association's prime rate or at LIBOR plus a margin. The Credit Facility
contains customary covenants which include maintenance of certain financial
ratios. At December 31, 1999, the outstanding borrowings under the existing
Credit Facility were $260 million.
10
<PAGE> 11
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.
CONTINGENCIES
-------------
For a discussion of contingencies, see Note G to the consolidated condensed
financial statements.
SEASONALITY
-----------
Historical data indicates that financial results were subject to recurring
seasonal fluctuations. A number of factors have contributed to the seasonal
patterns, including sales promotion and compensation programs, Customer buying
patterns of capital equipment, and international business practices. Sales and
profitability of certain of the acquired and consolidated product lines have
historically been disproportionately weighted toward the latter part of each
quarter and each fiscal year. Various changes in business practices resulting
from the integration of acquired businesses into STERIS may alter the
historical patterns of the previously independent businesses.
YEAR 2000 DATE CONVERSION
-------------------------
An issue affecting many companies is how computer applications process
date-sensitive information. Some older computer programs were written using
two digits rather than four to define the applicable year. As a result, those
computer programs have time-sensitive software that recognize a date using
"00" as the year 1900 rather than the year 2000. Without corrective actions,
this could cause disruptions of operations.
The Company completed all Year 2000 readiness work and has experienced no
significant problems. The Y2K concerns that might have impacted Customer
buying decisions have been addressed above.
Operating expenses include costs incurred in preparing systems and
applications for the year 2000. The Company incurred internal staff costs as
well as outside services and other expenses related to the conversion and
testing of the systems and applications. These costs were immaterial.
EURO
----
On January 1, 1999, eleven of the fifteen member countries of the European
Monetary Union (EMU) began a three-year transition phase during which a common
currency called the Euro was adopted as their legal currency. The Euro began
trading on currency exchanges and is available for non-cash transactions.
During the transition period, parties may pay for goods and services using
either the Euro or the participating country's legacy currency on a "no
compulsion, no prohibition" basis. The conversion rates between the existing
legacy currencies and the Euro were fixed on January 1, 1999. The legacy
currencies will remain legal tender for cash transactions between January 1,
1999, and January 1, 2002, at which time all legacy currencies will be
withdrawn from circulation and the new Euro denominated bills and coins will
be used for cash transactions.
The Company has several operations within the eleven participating countries
that are using the Euro as their local currency. Additionally, the Company's
operations in other European countries and elsewhere in the world will be
conducting business transactions with Customers and suppliers that will be
denominated in the Euro. Euro denominated bank accounts have been established
to accommodate Euro transactions.
The Company has established plans to review strategic and tactical issues
arising from the Euro conversion. Over the past several periods, these plans
have focused on aspects of the Euro conversion that required adjustment or
compliance by January 1, 1999, and for conducting Euro-denominated business.
These aspects included transacting business in the Euro, the competitive
impact on product pricing, and adjustments to billing systems to handle
parallel currencies. The Company has determined that these systems have the
capability to handle Euro transactions and are currently in a position to
transact business in Euros. Continuing analysis and development efforts will
help ensure that the implementation of the Euro meets the timetable and
regulations established by the EMU.
11
<PAGE> 12
Based on current estimates, the Company does not expect the costs incurred to
address the Euro will have a material impact on its financial condition,
results of operations, or cash flows.
FORWARD-LOOKING INFORMATION
---------------------------
This Form 10-Q 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. Forward-looking statements may be identified by the use of
forward-looking terms such as "may," "will," "expects," "anticipates,"
"plans," "estimates," "projects," "targets," "forecasts," or "seeks" or the
negative of such terms or other variations on such terms or comparable
terminology. 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 government
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 (a) the possibility that the continuing integration of acquired
businesses will take longer than anticipated, (b) the potential for increased
pressure on pricing that leads to erosion in profit margins, (c) the
possibility that market demand will not develop for new technologies,
products, and applications or that regulatory actions may affect market
demand, (d) the potential effects of fluctuations in foreign currencies where
the Company does a sizable amount of business, (e) the possibility that the
Company's activities related to changes in its sales force will take longer or
incur greater expense than anticipated and (f) the possibility of reduced
demand, or reductions in the rate of growth in demand, for the Company's
products and services.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
---------------------------------------------------------
A discussion of market risk exposures is included in Part II, Item 7a,
"Quantitative and Qualitative Disclosure about Market Risk," of the Company's
1999 Annual Report and Form 10- K. There were no material changes during the
nine months ended December 31, 1999.
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
------ -----------------
Reference is made to Part I, Item 1., Note G of this Report on Form 10-Q,
which is incorporated herein by reference.
12
<PAGE> 13
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
------ --------------------------------
(a) Exhibits
--------
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
<S> <C>
10.1 First Amendment Agreement, dated January 25, 2000,
among STERIS Corporation, various financial
institutions and KeyBank National Association, as
Agent.
10.2 Assignment and Acceptance Agreement, dated January 24, 2000,
between The Bank of New York ("Assignor") and KeyBank National
Association ("Assignee").
10.3 Tranche B Note, dated January 24, 2000, between
STERIS Corporation and KeyBank National
Association.
15.1 Letter Re: Unaudited Interim Financial Information
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
-------------------
None
SIGNATURE
Pursuant to the requirements 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.
STERIS Corporation
(Registrant)
/s/ Les C. Vinney
-----------------
Les C. Vinney
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
February 11, 2000
13
<PAGE> 1
EXHIBIT 10.1
FIRST AMENDMENT AGREEMENT
This First Amendment Agreement is made as of the 25th day of January,
2000, among STERIS CORPORATION, an Ohio corporation, ("Borrower"), the banking
institutions listed on SCHEDULE 1 to the Credit Agreement, as hereinafter
defined ("Banks"), and KEYBANK NATIONAL ASSOCIATION, as administrative agent
for the Banks ("Agent").
WHEREAS, Borrower, Agent and the Banks are parties to a Credit
Agreement dated as of January 26, 1999, as the same may from time to time be
amended, restated or otherwise modified, which provides, among other things,
for loans aggregating Four Hundred Million Dollars ($400,000,000), all upon
certain terms and conditions ("Credit Agreement");
WHEREAS, Borrower, Agent and the Banks desire to amend the Credit
Agreement to modify certain provisions thereof; and
WHEREAS, each term used herein shall be defined in accordance with the
Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein and for other valuable considerations, Borrower, Agent and
the Banks agree as follows:
1. Article I of the Credit Agreement is hereby amended to delete the
definitions of "Advantage", "Commitment Percentage" and "Commitment Period"
therefrom and to insert in place thereof the following:
"Advantage" shall mean any payment (whether made voluntarily
or involuntarily, by offset of any deposit or other indebtedness or
otherwise) received by any Bank in respect of the Debt, if such payment
results in that Bank having less than its Pro Rata Share of the
Applicable Debt then outstanding, than was the case immediately before
such payment.
"Commitment Percentage" shall mean Applicable Commitment
Percentage.
"Commitment Period" shall mean the period from the Closing
Date to (a) January 26, 2002, with respect to the Tranche A Commitment,
and (b) January 25, 2000, as extended as of January 25, 2000, for an
additional three hundred sixty-four (364) day period ending January 22,
2001, with respect to the Tranche B Commitment; or such earlier date on
which the Commitment shall have been terminated pursuant to Article
VIII hereof.
2. Article I of the Credit Agreement is hereby amended to add the
following new definitions thereto:
"Applicable Commitment Percentage" shall mean, for each Bank,
(a) with respect to the Tranche A Commitment, the percentage set forth
opposite such Bank's name under
1
<PAGE> 2
the column headed "Tranche A Commitment Percentage" as described in
SCHEDULE 1 hereto, and (b) with respect to the Tranche B Commitment,
the percentage set forth opposite such Bank's name under the column
headed "Tranche B Commitment Percentage" as described in SCHEDULE 1
hereto.
"Applicable Debt" shall mean (a) with respect to the Tranche A
Commitment, collectively, (i) all Indebtedness incurred by Borrower to
Agent or the Banks pursuant to this Agreement (other than pursuant to
the Tranche B Commitment) and includes the principal of and interest on
all Notes (other than the Tranche B Notes), (ii) each extension,
renewal or refinancing thereof in whole or in part, and (iii) the
facility fee, other fees, and any prepayment fees payable under this
Agreement (other than the facility fees and prepayment fees payable in
connection with the Tranche B Commitment); and (b) with respect to the
Tranche B Commitment, collectively, (i) all Indebtedness incurred by
Borrower to Agent or the Banks pursuant to the Tranche B Commitment and
includes the principal of and interest on the Tranche B Notes, (ii)
each extension, renewal or refinancing thereof in whole or in part, and
(iii) the facility fee, other fees, and any prepayment fees payable in
connection with the Tranche B Commitment.
"Equalization Event" shall mean the earlier of (a) the
occurrence of an Event of Default specified in Section 7.10 hereof, or
(b) the acceleration of the Debt pursuant to Section 8.1 or 8.2 hereof.
"Payment Conditions" shall mean the following: (a) any
regularly scheduled payment of interest on, or facility fee with
respect to, the Tranche A Loans shall be applied by Agent and the Banks
to the Tranche A Loans and the Tranche A Commitment, respectively; (b)
any regularly scheduled payment of interest on, or facility fee with
respect to, the Tranche B Loans shall be applied by Agent and the Banks
to the Tranche B Loans and the Tranche B Commitment, respectively; (c)
any payment of principal prior to an Equalization Event (or any other
payment prior to an Equalization Event for which there is no apparent
schedule of payment, as determined by Agent) shall be applied to the
principal of the Tranche B Loans, or if there are no Tranche B Loans
outstanding, then to the Tranche A Loans outstanding; and (d) after an
Equalization Event, all payments shall be applied by Agent and the
Banks first to the payment of any fees or other expenses owing to Agent
(acting in its capacity as agent under this Agreement) and then, pro
rata, to each Bank, based upon the aggregate amount of principal
outstanding on the Notes of such Bank (other than the Swing Line Note)
on the date that such Equalization Event occurred over the aggregate
amount of principal then outstanding on all Notes of all of the Banks
(other than the Swing Line Note) on the date that such Equalization
Event occurred.
"Pro Rata Basis" or "pro rata basis" shall mean distribution
to the Banks by Agent in accordance with the Applicable Commitment
Percentages.
"Pro Rata Share" or "pro rata share" shall mean, with respect
to the Applicable Debt, such Bank's share in accordance with such
Bank's Applicable Commitment Percentage.
2
<PAGE> 3
"Ratable Account" or "ratable account" shall mean each Bank's
share of the Applicable Debt in accordance with such Bank's Applicable
Commitment Percentage.
"Ratable Share" or "ratable share" shall mean each Bank's
share of the Applicable Debt in accordance with such Bank's Applicable
Commitment Percentage.
"Ratably" or "ratably" shall mean, other than in Section 9.9
hereof, in accordance with each Bank's Ratable Share.
3. Article I of the Credit Agreement is hereby amended to add the
following new sentence at the end thereof:
Whenever payments are made to Agent, "for the benefit of the
Banks", "for the benefit of the Banks" shall mean for the benefit of
the Banks on a Pro Rata Basis.
4. Section 2.1 of the Credit Agreement is hereby amended to delete the
second and third paragraphs therefrom and to insert in place thereof the
following:
Each Bank, for itself and not one for any other, agrees to
participate in Loans made hereunder during the applicable Commitment
Period on such basis that (a) immediately after the completion of any
borrowing by Borrower hereunder, the aggregate principal amount then
outstanding on the Notes (other than the Swing Line Note) issued to
such Bank shall not be in excess of the Maximum Amount for such Bank,
(b) such aggregate principal amount outstanding on the Tranche A Note
issued to such Bank shall represent that percentage of the aggregate
principal amount then outstanding on all Tranche A Notes (including the
Tranche A Note held by such Bank) which is such Bank's Applicable
Commitment Percentage; and (c) such aggregate principal amount
outstanding on the Tranche B Note issued to such Bank shall represent
that percentage of the aggregate principal amount then outstanding on
all Tranche B Notes (including the Tranche B Note held by such Bank)
which is such Bank's Applicable Commitment Percentage.
Each borrowing (other than the Swing Loans) from the Banks
hereunder shall be made pro rata according to the Banks' respective
Applicable Commitment Percentages. The Loans may be made as Tranche A
Loans, Tranche B Loans and Swing Loans as follows:
5. The Credit Agreement is hereby amended to delete Section 2.3
therefrom in its entirety and to insert in place thereof the following:
SECTION 2.3. PAYMENT ON NOTES, ETC. Unless otherwise provided,
all payments of principal, interest and facility and other fees shall
be made to Agent in immediately available funds for the account of the
Banks on a Pro Rata Basis (except as to payments made exclusively for
the benefit of Agent pursuant to the Agent Fee Letter). Agent, on the
same Business Day, shall distribute to each Bank its Ratable Share of
the amount of principal, interest, and facility and other fees received
by it for the account of
3
<PAGE> 4
such Bank. Each payment under this Agreement shall be applied by Agent
and the Banks in accordance with the Payment Conditions. Each Bank
shall record (a) any principal, interest or other payment, and (b) the
principal amount of the Prime Rate Loans and the LIBOR Loans and all
prepayments thereof and the applicable dates with respect thereto, by
such method as such Bank may generally employ; provided, however, that
failure to make any such entry shall in no way detract from Borrower's
obligations under each such Note. The aggregate unpaid amount of Loans
set forth on the records of Agent shall be rebuttably presumptive
evidence of the principal and interest owing and unpaid on each Note.
Whenever any payment to be made hereunder, including, without
limitation, any payment to be made on any Note, shall be stated to be
due on a day that is not a Business Day, such payment shall be made on
the next succeeding Business Day and such extension of time shall in
each case be included in the computation of the interest payable on
such Note; provided, however, that, with respect to any LIBOR Loan, if
the next succeeding Business Day falls in the succeeding calendar
month, such payment shall be made on the preceding Business Day and the
relevant Interest Period shall be adjusted accordingly.
6. The Credit Agreement is hereby amended to delete Section 2.4(a)
therefrom and to insert in place thereof the following:
(a) Borrower shall have the right at any time or from time to
time to prepay, on a Pro Rata Basis for all of the Banks (other than
the Swing Line Note), all or any part of the principal amount of the
Notes then outstanding as designated by Borrower, plus interest accrued
on the amount so prepaid to the date of such prepayment, subject,
however, to the Payment Conditions. Borrower shall give Agent notice of
prepayment of any Prime Rate Loan by not later than 11:00 A.M.
(Cleveland, Ohio time) on the Business Day such prepayment is to be
made and written notice of the prepayment of any LIBOR Loan not later
than 1:00 P.M.(Cleveland, Ohio time) three (3) Business Days before the
Business Day on which such prepayment is to be made.
7. The Credit Agreement is hereby amended to delete Section 8.4
therefrom in its entirety and to insert in place thereof the following:
SECTION 8.4. EQUALIZATION PROVISION. Each Bank agrees with the
other Banks that if it, at any time, shall obtain any Advantage over
the other Banks or any thereof in respect of the Debt (except as to
Swing Loans as set forth in subpart 2 of Section 2.1A hereof or subpart
2 of Section 2.1B hereof and except under Article III hereof), it shall
purchase from the other Banks, for cash and at par, such additional
participation in the Applicable Debt as shall be necessary to nullify
the Advantage. If any such Advantage resulting in the purchase of an
additional participation as aforesaid shall be recovered in whole or in
part from the Bank receiving the Advantage, each such purchase shall be
rescinded, and the purchase price restored (but without interest unless
the Bank receiving the Advantage is required to pay interest on the
Advantage to the Person recovering the Advantage from such Bank)
ratably to the extent of the recovery. Each Bank further agrees with
the other Banks that if it at any time shall receive any payment for or
on behalf of Borrower on any indebtedness owing by Borrower to that
4
<PAGE> 5
Bank by reason of offset of any deposit or other indebtedness, it will
apply such payment first to any and all Debt owing by Borrower to that
Bank (including, without limitation, any participation purchased or to
be purchased pursuant to this Section or any other Section of this
Agreement), subject to the Payment Conditions. Borrower agrees that any
Bank so purchasing a participation from the other Banks or any thereof
pursuant to this Section may exercise all its rights of payment
(including the right of set-off) with respect to such participation as
fully as if such Bank was a direct creditor of Borrower in the amount
of such participation.
8. The Credit Agreement is hereby amended to delete SCHEDULE 1 thereof
in its entirety and to insert in place thereof a new SCHEDULE 1, in the form
of SCHEDULE 1 attached hereto.
9. Concurrently with the execution of this First Amendment Agreement,
Borrower shall:
(a) pay to Agent an amendment fee, which shall be applied on a Pro Rata
Basis, to each Bank with a Tranche B Commitment, in an amount equal to ten
(10) basis points times the amount of each such Bank's Tranche B Commitment;
(b) cause each Guarantor of Payment to consent and agree to and
acknowledge the terms of this First Amendment Agreement; and
(c) pay all legal fees and expenses of Agent in connection with this
First Amendment Agreement.
10. Borrower hereby represents and warrants to Agent and the Banks that
(a) Borrower has the legal power and authority to execute and deliver this
First Amendment Agreement, (b) the officers executing this First Amendment
Agreement have been duly authorized to execute and deliver the same and bind
Borrower with respect to the provisions hereof, (c) the execution and delivery
hereof by Borrower and the performance and observance by Borrower of the
provisions hereof do not violate or conflict with the organizational
agreements of Borrower or any law applicable to Borrower or result in a breach
of any provision of or constitute a default under any other agreement,
instrument or document binding upon or enforceable against Borrower, (d) no
Unmatured Event of Default or Event of Default exists under the Credit
Agreement, nor will any occur immediately after the execution and delivery of
this First Amendment Agreement or by the performance or observance of any
provision hereof, (e) Borrower is not aware of any claim or offset against, or
defense or counterclaim to, any of Borrower's obligations or liabilities under
the Credit Agreement or any Related Writing, and (f) this First Amendment
Agreement constitutes a valid and binding obligation of Borrower in every
respect, enforceable in accordance with its terms.
11. Each reference that is made in the Credit Agreement or any other
writing to the Credit Agreement shall hereafter be construed as a reference to
the Credit Agreement as amended hereby. Except as herein otherwise
specifically provided, all provisions of the Credit Agreement shall remain in
full force and effect and be unaffected hereby. This First Amendment Agreement
is a Related Writing as defined in the Credit Agreement.
5
<PAGE> 6
12. Borrower and each Guarantor of Payment, by signing below, hereby
waives and releases Agent and each of the Banks and the respective directors,
officers, employees, attorneys, affiliates and subsidiaries of each of the
foregoing from any and all claims, offsets, defenses and counterclaims of
which Borrower or such Guarantor of Payment is aware, such waiver and release
being with full knowledge and understanding of the circumstances and effect
thereof and after having consulted legal counsel with respect thereto.
13. This First Amendment Agreement may be executed in any number of
counterparts, by different parties hereto in separate counterparts and by
facsimile signature, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
14. The rights and obligations of all parties hereto shall be governed
by the laws of the State of Ohio, without regard to principles of conflicts of
laws.
[Remainder of page intentionally left blank.]
6
<PAGE> 7
15. JURY TRIAL WAIVER. BORROWER, AGENT AND EACH OF THE BANKS WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENTS AND THE BANKS, OR ANY
THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT
IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY AGENT'S OR ANY BANK'S ABILITY
TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT
PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
AMONG BORROWER, AGENTS AND THE BANKS, OR ANY THEREOF.
STERIS CORPORATION
By: /s/Bill R. Sanford
-----------------------------------------
Bill R. Sanford, Chairman of the
Board, President, and Chief
Executive Officer
and: /s/Les C. Vinney
-----------------------------------------
Les C. Vinney, Senior Vice President
Finance and Operations, and Chief
Financial Officer
KEYBANK NATIONAL ASSOCIATION,
as a Bank and as Agent
By: /s/ J.T. Taylor
-----------------------------------------
J.T. Taylor, Vice President
NATIONAL CITY BANK
By /s/ Robert S. Coleman
-----------------------------------------
Robert S. Coleman, Vice President
BANK ONE, NA,
By: /s/ Babette Casey Coerdt
------------------------------------------
Title: Managing Director
---------------------------------------
7
<PAGE> 8
PNC BANK, NATIONAL ASSOCIATION,
By: /s/ Bryon Pike
---------------------------------
Title: Vice President
---------------------------------
ABN AMRO BANK N.V.,
PITTSBURGH BRANCH,
By: /s/ Roy D. Hasbrook
---------------------------------
Title: Group Vice President and Director
---------------------------------
and: /s/ Gregory D. Amoroso
---------------------------------
Title: Senior Vice President
---------------------------------
THE BANK OF NEW YORK
By: /s/ Jonathan Rollins
---------------------------------
Title: Vice President
---------------------------------
HARRIS TRUST AND SAVINGS BANK
By: /s/ Jeffrey C. Nicholson
---------------------------------
Title: Managing Director
---------------------------------
8
<PAGE> 9
SCHEDULE 1
<TABLE>
<CAPTION>
TRANCHE A TRANCHE A TRANCHE B TRANCHE B
COMMITMENT COMMITMENT COMMITMENT COMMITMENT
BANKING INSTITUTIONS AMOUNT PERCENTAGE AMOUNT PERCENTAGE MAXIMUM AMOUNT
-------------------- ------ ---------- ------ ---------- --------------
<S> <C> <C> <C> <C> <C>
KeyBank National $50,000,000 20.00% $43,125,000 28.75% $93,125,000
Association
National City Bank $46,875,000 18.75% $28,125,000 18.75% $75,000,000
Bank One, NA $46,875,000 18.75% $28,125,000 18.75% $75,000,000
ABN AMRO Bank N.V., $31,250,000 12.50% $18,750,000 12.50% $50,000,000
Pittsburgh Branch
PNC Bank, National $31,250,000 12.50% $18,750,000 12.50% $50,000,000
Association
The Bank of New York $21,875,000 8.75% $0 0% $21,875,000
Harris Trust and Savings $21,875,000 8.75% $13,125,000 8.75% $35,000,000
Bank
$250,000,000 100.00% $150,000,000 100.00% $400,000,000
Total Commitment Amount $400,000,000
</TABLE>
9
<PAGE> 10
GUARANTOR ACKNOWLEDGMENT
------------------------
The undersigned consents and agrees to and acknowledges the terms of
the foregoing First Amendment Agreement. The undersigned further agrees that
the obligations of the undersigned pursuant to the Guaranty of Payment
executed by the undersigned shall remain in full force and effect and be
unaffected hereby.
MEDICAL & ENVIRONMENTAL DESIGNS,
INC.
ECOMED, INC.
AMERICAN STERILIZER COMPANY
STERIS INTERNATIONAL SALES
CORPORATION
STERIS EUROPE, INC.
STERIS ASIA PACIFIC, INC.
STERIS LATIN AMERICA, INC.
STERIS INC.
STERIS USA DISTRIBUTION
CORPORATION
HTD HOLDING CORP.
HAUSTED, INC.
ISOMEDIX INC.
ISOMEDIX OPERATIONS INC.
ISOMEDIX (PUERTO RICO), INC.
By: /s/ Bill R. Sanford
-----------------------------------------
Bill R. Sanford, President of each
of the foregoing Companies
HSTD LLC
By: HTD Holding Corp., its member
By: /s/ Bill R. Sanford
--------------------------------------
Bill R. Sanford, President
10
<PAGE> 1
EXHIBIT 10.2
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This Assignment and Acceptance Agreement (this "Assignment Agreement")
between THE BANK OF NEW YORK ("Assignor") and KEYBANK NATIONAL ASSOCIATION
("Assignee") is dated as of January 24, 2000. The parties hereto agree as
follows:
1. PRELIMINARY STATEMENT. Assignor is a party to a Credit Agreement,
dated as of January 26, 1999 (which, as the same may from time to time be
amended, restated or otherwise modified is herein called the "Credit
Agreement"), among STERIS CORPORATION, an Ohio corporation ("Borrower"), the
banking institutions named on SCHEDULE 1 thereto (collectively, "Banks" and,
individually, "Bank"), and KEYBANK NATIONAL ASSOCIATION, as agent for the
Banks ("Agent"). Capitalized terms used herein and not otherwise defined
herein that are defined in the Credit Agreement shall have the meanings
ascribed to them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. Assignor hereby sells and assigns to
Assignee, and Assignee hereby purchases and assumes from Assignor, an interest
in and to Assignor's rights and obligations under the Credit Agreement,
effective as of the Assignment Effective Date (as hereinafter defined), equal
to the percentage interest specified on ANNEX 1 hereto (hereinafter,
"Assignee's Percentage") of Assignor's right, title and interest in and to (a)
the Tranche B Commitment of Assignor as set forth on ANNEX 1 (hereinafter,
"Assigned Amount"), (b) Assignee's interest in the Tranche B Loans made by
Assignor and the Banks that are outstanding on the Assignment Effective Date,
and (c) the Tranche B Note delivered to Assignor pursuant to the Credit
Agreement (collectively, the Assigned Interest"). After giving effect to such
sale and assignment and on and after the Assignment Effective Date, Assignee
shall be deemed to have a "Commitment Percentage" with respect to the Tranche
B Commitment under the Credit Agreement equal to the Commitment Percentage set
forth in subparts I.C on ANNEX 1 hereto.
3. ASSIGNMENT EFFECTIVE DATE. The Assignment Effective Date (the
"Assignment Effective Date") shall be January 25, 2000 and shall by subject to
receipt by Agent of this Assignment Agreement, including ANNEX 1 hereto,
properly executed by Assignor and Assignee and accepted and consented to by
Agent and, if necessary pursuant to the provisions of Section 10.10(A)(i) of
the Credit Agreement, by Borrower. In connection with this Assignment,
Borrower shall execute and deliver to Assignee a new Tranche B Note which
reflects Assignee's Commitment Percentage with respect to the Tranche B
Commitment after giving effect to this Assignment.
4. PAYMENT OBLIGATIONS. In consideration for the sale and assignment of
the Assigned Interest, Assignee shall pay to Assignor, on the Assignment
Effective Date, an amount in Dollars equal to Assignee's Percentage of the
principal amount then outstanding on the Tranche B Commitment. Any interest,
fees and other payments accrued prior to the Assignment Effective Date with
respect to the Assigned Amount shall be for the account of Assignor. Any
interest, fees and other payments accrued on and after the Assignment
Effective Date with respect to the Assigned Amount shall be for the account of
Assignee. Each of
1
<PAGE> 2
Assignor and Assignee agrees that it will hold in trust for the other party
any interest, fees or other amounts that it may receive to which the other
party is entitled pursuant to the preceding sentence and to pay to the other
party any such amounts that such party may receive promptly upon receipt
thereof.
5. CREDIT DETERMINATION; LIMITATIONS ON ASSIGNOR'S LIABILITY. Assignee
represents and warrants to Assignor, Borrower, Agent and the other Banks (a)
that it is capable of making and has made and shall continue to make its own
credit determinations and analysis based upon such information as Assignee
deemed sufficient to enter into the transaction contemplated hereby and not
based on any statements or representations by Assignor, (b) Assignee confirms
that it meets the requirements to be an assignee as set forth in Section 10.10
of the Credit Agreement; (c) Assignee confirms that it is able to fund
Assignee's portion of the Tranche B Loans as required by the Credit Agreement;
(d) Assignee agrees that it will perform in accordance with their terms all of
the obligations which by the terms of the Credit Agreement and the Related
Writings are required to be performed by it as a Bank thereunder; and (e)
Assignee represents that it has reviewed each of the Loan Documents. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to Assignor and that Assignor makes no representation or
warranty of any kind to Assignee and shall not be responsible for (i) the due
execution, legality, validity, enforceability, genuineness, sufficiency or
collectability of the Credit Agreement or any Related Writings, (ii) any
representation, warranty or statement made in or in connection with the Credit
Agreement or any of the Related Writings, (iii) the financial condition or
creditworthiness of Borrower or any Guarantor of Payment, (iv) the performance
of or compliance with any of the terms or provisions of the Credit Agreement
or any of the Related Writings, (v) inspecting any of the property, books or
records of Borrower, or (vi) the validity, enforceability, perfection,
priority, condition, value or sufficiency of any collateral securing or
purporting to secure the Loans. Neither Assignor nor any of its officers,
directors, employees, agents or attorneys shall be liable for any mistake,
error of judgment, or action taken or omitted to be taken in connection with
the Loans, the Credit Agreement or the Related Writings, except for its or
their own bad faith or willful misconduct. Assignee appoints Agent to take
such action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to Agent by the terms thereof.
6. INDEMNITY. Assignee agrees to indemnify and hold Assignor harmless
against any and all losses, cost and expenses (including, without limitation,
attorneys' fees) and liabilities incurred by Assignor in connection with or
arising in any manner from Assignee's performance or non-performance with
respect to the Assigned Interest.
7. SUBSEQUENT ASSIGNMENTS. After the Assignment Effective Date,
Assignee shall have the right pursuant to Section 10.10 of the Credit
Agreement to further assign the Assigned Interest, provided that (a) any such
subsequent assignment does not violate any of the terms and conditions of the
Credit Agreement, any of the Related Writings, or any law, rule, regulation,
order, writ, judgment, injunction or decree and that any consent required
under the terms of the Credit Agreement or any of the Related Writings has
been obtained, (b) the assignee under such assignment from Assignee shall
agree to assume all of Assignee's obligations hereunder in a manner
satisfactory to Assignor and (c) Assignee is not thereby released from any of
its obligations to Assignor hereunder.
2
<PAGE> 3
8. REDUCTIONS OF AGGREGATE AMOUNT OF COMMITMENTS. If any reduction in
the Tranche B Commitment occurs between the date of this Assignment Agreement
and the Assignment Effective Date, the percentage of the Tranche B Commitment
assigned to Assignee shall remain the percentage specified in Section 1 hereof
and the dollar amount of the Commitment of Assignee shall be recalculated based
upon the reduced Tranche B Commitment.
9. ACCEPTANCE OF AGENT; NOTICE BY ASSIGNOR. This Assignment Agreement
is conditioned upon the acceptance and consent of Agent and, if necessary
pursuant to Section 10.10A of the Credit Agreement, upon the acceptance and
consent of Borrower; provided, that the execution of this Assignment Agreement
by Agent and, if necessary, by Borrower is evidence of such acceptance and
consent.
10. ENTIRE AGREEMENT. This Assignment Agreement embodies the entire
agreement and understanding between the parties hereto and supersedes all prior
agreements and understandings between the parties hereto relating to the subject
matter hereof.
11. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Ohio.
12. COUNTERPARTS. This Assignment Agreement may be executed in any
number of counterparts, by different parties hereto in separate counterparts and
by facsimile signature, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
13. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth under each party's name on the signature pages hereof.
[Remainder of page intentionally left blank.]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above
written.
<TABLE>
<S> <C>
ASSIGNOR:
Address: 10990 Wilshire Blvd. Suite 1125 THE BANK OF NEW YORK
Los Angeles, CA 90024
Attn: Jonathan Rollins By: /s/ Jonathan Rollins
Phone: (310) 996-8658 --------------------
Fax: (310) 996-8667 Title: Vice President
ASSIGNEE:
Address: 127 Public Square KEYBANK NATIONAL ASSOCIATION,
Cleveland, Ohio 44114 as a Bank
Attn: Large Corporate Banking
By: /s/ J.T. Taylor
---------------------------
J.T. Taylor, Vice President
</TABLE>
Accepted and Consented to this 24th day
of January, 2000:
KEYBANK NATIONAL ASSOCIATION,
as Agent
By: /s/ J.T. Taylor
--------------------------------------
J.T. Taylor, Vice President
Accepted and Consented to this 24th day
of January, 2000:
STERIS CORPORATION
By: /s/ Bill R. Sanford
--------------------------------------
Bill R. Sanford, Chairman of the
Board, President, and Chief
Executive Officer
and: /s/Les C. Vinney
--------------------------------------
Les C. Vinney, Senior Vice President
Finance and Operations, and Chief
Financial Officer
4
<PAGE> 5
ANNEX 1
TO
ASSIGNMENT AND ACCEPTANCE AGREEMENT
On and after January 25, 2000 (the "Assignment Effective Date"), the
respective Tranche B Commitments of Assignee and Assignor, shall be as
follows:
<TABLE>
<S> <C>
I. ASSIGNEE'S TRANCHE B COMMITMENT
A. Amount of Assignee's Percentage of the Tranche
B Commitment Being Assigned ("Assignee's
Percentage") 100%
B. Assigned Amount of Tranche B Commitment $13,125,000
C. Assignee's Commitment Percentage
with respect to the Tranche B Commitment
under the Credit Agreement after giving effect
to this Assignment 28.75%
II.ASSIGNOR'S TRANCHE B COMMITMENT
A. Assignor's Commitment Percentage
with respect to the Tranche B Commitment
under the Credit Agreement 0%
B. Assignor's Tranche B Commitment
under the Credit Agreement $0
</TABLE>
5
<PAGE> 1
EXHIBIT 10.3
TRANCHE B NOTE
$43,125,000 Cleveland, Ohio
As of January 24, 2000
FOR VALUE RECEIVED, the undersigned, STERIS CORPORATION, an Ohio
corporation ("Borrower"), promises to pay on the last day of the Commitment
Period, as defined in the Credit Agreement (as hereinafter defined), to the
order of KEYBANK NATIONAL ASSOCIATION ("Bank") at the Main Office of KEYBANK
NATIONAL ASSOCIATION, as Agent, 127 Public Square, Cleveland, Ohio 44114-1306
the principal sum of
FORTY-THREE MILLION ONE HUNDRED TWENTY-FIVE
THOUSAND AND 00/100................................................ DOLLARS
or the aggregate unpaid principal amount of all Tranche B Loans made by Bank
to Borrower pursuant to Section 2.1B of the Credit Agreement, whichever is
less, in lawful money of the United States of America. As used herein,"Credit
Agreement" means the Credit Agreement dated as of January 26, 1999, among
Borrower, the banks named therein and KeyBank National Association, as Agent,
as amended and as the same may from time to time be further amended, restated
or otherwise modified. Capitalized terms used herein shall have the meanings
ascribed to them in the Credit Agreement.
Borrower also promises to pay interest on the unpaid principal amount
of each Tranche B Loan from time to time outstanding, from the date of such
Tranche B Loan until the payment in full thereof, at the rates per annum which
shall be determined in accordance with the provisions of Section 2.1B of the
Credit Agreement. Such interest shall be payable on each date provided for in
such Section 2.1B; provided, however, that interest on any principal portion
which is not paid when due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Prime Rate Loans and LIBOR Loans, and payments of principal of any thereof,
shall be shown on the records of Bank by such method as Bank may generally
employ; provided, however, that failure to make any such entry shall in no way
detract from Borrower's obligations under this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit Agreement, the principal
hereof and the unpaid interest thereon shall bear interest, until paid, at a
rate per annum equal to the Default Rate. All payments of principal of and
interest on this Note shall be made in immediately available funds.
This Note is one of the Tranche B Notes referred to in the Credit
Agreement. Reference is made to the Credit Agreement for a description of the
right of the undersigned to anticipate payments hereof, the right of the
holder hereof to declare this Note due prior to its stated maturity, and other
terms and conditions upon which this Note is issued.
1
<PAGE> 2
Except as expressly provided in the Credit Agreement, Borrower
expressly waives presentment, demand, protest and notice of any kind.
JURY TRIAL WAIVER. BORROWER, AGENT AND EACH OF THE BANKS WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE BANKS, OR ANY
THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS NOTE OR ANY OTHER
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
STERIS CORPORATION
By: /s/ Bill R. Sanford
----------------------------------------
Bill R. Sanford, Chairman of the
Board, President, and Chief
Executive Officer
and: /s/ Les C. Vinney
----------------------------------------
Les C. Vinney, Senior Vice President
Finance and Operations, and Chief
Financial Officer
2
<PAGE> 1
EXHIBIT 15.1
LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION
We are aware of the incorporation by reference in the Registration Statements
and related Prospectuses of our report dated January 24, 2000, relating to the
unaudited consolidated condensed interim financial statements of STERIS
Corporation and Subsidiaries that are included in its Form 10-Q for the
quarter ended December 31, 1999:
<TABLE>
<CAPTION>
Registration
Number Description Filing Date
- ------------------- ----------------------------------------------------------------------- ---------------------------
<S> <C> <C>
333-65155 Form S-8 Registration Statement -- STERIS October 1, 1998
Corporation Long Term Incentive Stock Plan
333-55839 Form S-8 Registration Statement -- Nonqualified Stock June 2, 1998
Option Agreement between STERIS Corporation and
John Masefield and the Nonqualified Stock Option
Agreement between STERIS Corporation and Thomas
J. DeAngelo
333-32005 Form S-8 Registration Statement -- STERIS July 24, 1997
Corporation 1997 Stock Option Plan
333-06529 Form S-3 Registration Statement -- STERIS June 21, 1996
Corporation
333-01610 Post-effective Amendment to Form S-4 on Form S-8 -- May 16, 1996
STERIS Corporation
33-91444 Form S-8 Registration Statement -- STERIS April 24, 1995
Corporation 1994 Equity Compensation Plan
33-91442 Form S-8 Registration Statement -- STERIS April 24, 1995
Corporation 1994 Nonemployee Directors Equity
Compensation Plan
33-55976 Form S-8 Registration Statement -- STERIS December 21, 1992
Corporation 401(k)Plan
33-55258 Form S-8 Registration Statement -- STERIS December 4, 1992
Corporation Amended and Restated Non-Qualified
Stock Option Plan
</TABLE>
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a
part of the registration statement prepared or certified by accountants within
the meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young LLP
Cleveland, Ohio
February 11, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 28,580
<SECURITIES> 0
<RECEIVABLES> 224,400
<ALLOWANCES> 0
<INVENTORY> 130,225
<CURRENT-ASSETS> 423,242
<PP&E> 422,264
<DEPRECIATION> (134,742)
<TOTAL-ASSETS> 919,946
<CURRENT-LIABILITIES> 150,935
<BONDS> 0
0
0
<COMMON> 204,256
<OTHER-SE> 247,023
<TOTAL-LIABILITY-AND-EQUITY> 919,946
<SALES> 570,534
<TOTAL-REVENUES> 570,534
<CGS> 310,840
<TOTAL-COSTS> 310,840
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,482
<INCOME-PRETAX> 55,893
<INCOME-TAX> 21,215
<INCOME-CONTINUING> 34,678
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,678
<EPS-BASIC> 0.51
<EPS-DILUTED> 0.51
</TABLE>
