<PAGE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2000
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 Identification No.)
incorporation or organization)
5960 Heisley Road 440-354-2600
Mentor, Ohio 44060-1834 (Registrant's telephone number
(Address of principal executive including area code)
offices)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of Exchange on Which Registered
------------------- ------------------------------------
<S> <C>
Common Shares, without par value New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
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 [_]
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 or 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 asked prices
of such stock as of May 31, 2000: $608,840,606.92
The number of Common Shares outstanding as of May 31, 2000: 67,527,075
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2000 Annual Meeting -- Part III
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS
Description of Business
STERIS Corporation, an Ohio corporation organized in 1987 (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. STERIS is focused on
helping Customers address today's trends in the health care and scientific
industries. The health care industry is changing rapidly due to the 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 alternate sites; and the overall need to
reduce the cost of health care 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,
medical device, food, and other United States Food and Drug Administration
("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.
The Company has 4,810 Associates (employees) worldwide, including 2,255
direct sales, service, field, and Customer Support personnel. Customer Support
and Training facilities are located in major global market centers with
production and manufacturing operations in the United States, Australia,
Canada, Germany, Finland, and Sweden.
The Company operates in a single business segment. See the accompanying
consolidated financial statements on page 15 of this Form 10-K for financial
information regarding the Company.
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
related consumables. The Company has expanded from its original narrow product
line to become a multi-faceted global organization that serves health care,
scientific, research, food, and industrial markets. Revenues by principal
market are as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended March 31
--------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Health Care...................................... $557,686 $597,146 $547,809
Scientific and Industrial........................ 202,940 200,465 171,847
-------- -------- --------
Total............................................ $760,626 $797,611 $719,656
======== ======== ========
</TABLE>
Health Care. Health Care systems, products, and services 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 and specialty chemical
products, including those used for cleaning, decontaminating, disinfecting,
sterilizing, drying, and aerating medical and surgical instruments, devices,
and hard surfaces. Specialty chemical products are generally employed in the
material processing systems or used for high risk and routine skin care, hard
surface disinfection, and surgical preparation. STERIS infection prevention
systems support cost containment, productivity increases, and risk reduction
in a wide variety of health care settings through process standardization,
automatic monitoring and documentation, processing site flexibility, and
reduction in processing time.
1
<PAGE>
One of the Company's well known product lines 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 health care professionals to safely, 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.
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
20(TM), the sterilant component of SYSTEM 1, combines a powerful chemical
biocidal agent with a proprietary anti-corrosion formulation to provide low
temperature destruction of microorganisms. The STERIS 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 produced
over 20,000 SYSTEM 1 units for thousands of health care facilities, including
hospitals, medical centers, ambulatory facilities, and physician offices in
major markets throughout the world. We estimate that our Customers have now
safely processed approximately 250 million surgical and diagnostic devices in
STERIS SYSTEM 1.
The products and services of STERIS are sold under a variety of brand and
product names. As acquired businesses have been integrated and consolidated,
the STERIS name is increasingly visible on the product and service offerings.
The fundamental technology of the original STERIS brand is the rapid, safe
destruction of microorganisms on 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
health care industry. The technology also has applications in a wide variety
of other settings where cleanliness and destruction of microorganisms is
important.
Recognized for years as the industry standard in large and medium scale,
high quality hardware systems and related service, STERIS is the leading
provider of infection prevention and surgical support. STERIS 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 reduce 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 3017(TM)
100% EO Sterilizer/Aerator, utilizes a proprietary, single-use sterilant
cartridge and includes a built-in exhaust system.
STERIS develops, manufactures, and distributes infection prevention
consumables and supplies that are used to prevent the spread of infectious
diseases and to monitor sterilization and decontamination processes. STERIS
consumable products offer quality choices for infection and contamination
prevention for: Instrument Cleaning and Decontamination Systems; High Risk and
Routine Skin Care Products; Hard Surface Disinfectants;
2
<PAGE>
and Surgical Scrubs. STERIS quality assurance products to monitor
sterilization processes include over 300 sterility assurance and sterility
maintenance products for the worldwide health care market, including:
Protective and Decontamination Packaging; Biological Monitoring Systems;
Barrier Wraps; Integrator/Indicator Monitoring Systems; and Record Keeping
Systems.
The Company's Health Care product line also 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 other
health care facilities. The Company's versatile surgical table product line
includes powered and manual general surgical tables as well as an orthopedic
specialty table. A wide variety of general and specialty surgical procedures
are accommodated through the use of attachable accessories which increase the
versatility of the tables. The Company produces and sells its own line of
accessories, as well as accessories manufactured by outside sources.
The Company's illumination and space management systems are designed for a
wide variety of locations where diagnostic and therapeutic procedures are
performed, including the emergency room, general surgery suite, OB/GYN suite,
ICU/CCU suite, and ambulatory surgery suite. The 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 SurgiVision(TM) Surgical Lighting and Video System combines high
quality illumination with a technically advanced video system to provide
innovative and cost-effective systems for both acute care and non-acute care
Customers. The Company's products range from major surgical lights to minor
examination lights, and include the Orbiter(R) line of ceiling management
products for the OR and critical care markets.
During fiscal 2000, STERIS formed an alliance with SterilTek, Inc., a
provider of sterilization management and outsourcing services for health care
facilities. STERIS has purchased a minority equity interest in SterilTek, and
STERIS has become the exclusive supplier of infection prevention systems,
consumables, and services to SterilTek. SterilTek develops comprehensive
solutions to meet the instrument reprocessing needs of hospitals and health
care facilities located throughout North America, and is positioned to
capitalize on the current hospital trend of outsourcing non-revenue generating
operations such as central sterile processing.
Scientific and Industrial. STERIS Scientific Division is a global provider
of contamination prevention and control, systems, products, and services for
the pharmaceutical, biotechnology, medical device, critical research, food,
laboratory research, and industrial markets. These products and services
assist Customers in following the stringent sterility assurance and microbial
reduction processes that are demanded by the FDA, as well as worldwide
regulatory and compliance agencies.
STERIS Scientific offers a complete range of systems and products with
several of the most trusted brand names in the scientific industry: Finn
Aqua(R) and Amsco(R) sterilizers, Reliance(R) and Basil(R) washers, VHP(R)
(Vapor Hydrogen Peroxide) biodecontamination systems, Finn Aqua high-purity
water systems, Lyovac(R) freeze dryers, as well as an extensive line of
consumable products for contamination prevention and sterility assurance.
Additionally, STERIS offers added services such as facility planning,
engineering support, process and cleaner evaluation, education, and
preventative maintenance and repair services.
STERIS Isomedix Services Division provides contract sterilization and
microbial reduction services to manufacturers of pre-packaged health care and
consumer products. As a result of external mergers -- beginning with STERIS's
1998 acquisition of Isomedix Inc., a leading North American provider of
contract sterilization and microbial reduction services -- and internal
expansion, STERIS now has a network of 16 contract sterilization facilities
which utilize gamma irradiation, ethylene oxide, and electron beam processing
technologies. STERIS Isomedix Services works closely with Customers to provide
high-quality processing and optimum logistical support to minimize the time it
takes to get a product from the factory to its final destination.
STERIS's Food Safety Division helps Customers meet the growing consumer and
regulatory demands for improved food safety. The Division's broad offering to
the food industry encompasses systems, products, services, and technologies
for monitoring, reducing, and/or preventing potential food contamination at
all stages of the food production process. Specifically, STERIS offers a full
line of cleaners, sanitizers, disinfectants and
3
<PAGE>
hand care products; environmental control systems and facility design
services; analytical and process validation services; and irradiation
pasteurization services. The increased emphasis on food safety, supported by
the United States government's multiple food safety initiatives, presents new
business opportunities for STERIS.
Manufacturing
The Company manufactures, assembles, and packages products in Erie,
Pennsylvania; Medina, Ohio; Mentor, Ohio; Montgomery, Alabama; St. Louis,
Missouri; Cologne, Germany; Helsinki, Finland; Quebec City, Canada; Stockholm,
Sweden; and Sydney, Australia. Each of the production facilities focuses on
particular processes and products. All of the Company's equipment production
facilities throughout the world are ISO 9001 certified. These factories and
production facilities supply products to both Health Care and Scientific and
Industrial Customers.
Raw materials, sub-assemblies, and other components essential to the
Company's business are readily available within the lead times specified to
vendors. The supply of such raw materials has posed no significant problem in
the operation of the Company's business. All major raw materials are available
from multiple sources, both domestic and foreign.
Foreign Operations
The Company's foreign operations are subject to the usual risks that may
affect such operations. These include, among other things, exchange controls
and currency restrictions, currency fluctuations, changes in local economic
conditions, 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 international
operations, see Note K -- Business Segment Information to the accompanying
consolidated financial statements on page 28 of this Form 10-K.
Markets and Methods of Distribution
STERIS has, as of March 31, 2000, over 1,000 direct field sales and service
representatives in North America. The representatives reside in metropolitan
market areas throughout the United States and Canada. Sales and service
activities are supported by a staff of regionally based clinical specialists,
systems planners, corporate account managers, and an in-house Customer service
and field support department.
Customer training is an important aspect of the STERIS business. In addition
to training at Customer locations, STERIS provides a variety of courses for
Customers at the Company's training and education centers. The programs enable
Customer representatives to understand the science, technology, and operation
of STERIS products. Many of the Operator Training Programs are approved by
professional certifying organizations to offer contact hours for continuing
education to eligible course participants. The first program was implemented
in July 1991, and, as of March 31, 2000, approximately 17,000 Customer
representatives, primarily nurses, department managers, and biomedical
engineers, have received training at STERIS training and education centers.
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
sales offices in Belgium, Canada, Costa Rica, Finland, France, Germany, Hong
Kong, Italy, Japan, Korea, Mexico, the Netherlands, Puerto Rico, Singapore,
Spain, Sweden, and the United Kingdom. STERIS has distribution agreements with
medical supply distributors in Australia, and various countries in North and
South America, 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 revenues
during the fiscal year ended March 31, 2000. Customers who are part of a
buying group generally make independent purchasing decisions and are invoiced
directly by the Company.
4
<PAGE>
Competition
A number of methodologies and commercial products are available for general
sterilization purposes. Getinge/Castle, Advanced Sterilization Products
(Johnson & Johnson), and 3M Corporation are well-known United States companies
offering products for general sterilization and disinfection. Skytron
(division of KMW Group, Inc.), Getinge/Castle, Maquet, and Midmark are
competitors in providing general surgical tables. Berchtold Corporation, ALM
Surgical Equipment, Inc., Heraeus Surgical, Inc., Hill-Rom, and Skytron are
competitors in major surgery OR light products. Competitors in sterility
assurance products include Kimberly-Clark Corporation, 3M Health Care, and
Allegiance (Cardinal Health). Competitors in environmental and instrument
decontamination products include Getinge/Castle, Ecolab Inc., and Allegiance.
The Company's high risk and routine skin care products compete against the
products of Ecolab, Provon (Gojo), and SaniFresh (Kimberly-Clark). Allegiance,
Becton Dickinson, Ecolab, and Purdue Frederick are competitors in providing
surgical scrubs. Competitors in the OEM service business are local and in-
hospital service groups. In contract sterilization, the Company primarily
competes with Griffith Micro Science and SteriGenics International, Inc.
(business units of Ion Beam Applications), and companies that sterilize
products in-house. The primary competitor for the Company's Scientific and
Industrial sterilization systems is Getinge/Castle.
In the surgical support market, the FDA has reclassified certain products
from a Device II (which require a 510(k) application) to a Device I
classification which lessens the requirements for new products. The lower
regulatory barriers could accelerate new product introductions for the Company
as well as improve the ability of foreign competitors to introduce products
into the United States market and as a result, increase competition.
Competition in the product markets served by the Company is based upon
product design and quality, product innovation, price, 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 and services.
Several smaller, early-stage companies are believed to be working with a
variety of 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 infection prevention, sterile processing, contamination control, and
surgical support products and services enter the market. There can be no
assurance that new products or services 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 FDA, the United States Environmental Protection Agency
("EPA"), the United States Nuclear Regulatory Commission ("NRC"), and other
governmental authorities. Similar regulatory agencies exist in other countries
with a wide variety of regulatory review processes and procedures. Many
products offered for sale in Europe must meet CE Mark requirements, and must
be manufactured in accordance with ISO 9001 and EN 46001 certification
requirements. The Company's products are also subject to review or
certification by various non-governmental certification authorities, including
Underwriter's Laboratories, Canadian Standards Association, British Standards
Institute, and TUV/VDE (Europe). Compliance with the regulations and
certification requirements of 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, 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.
5
<PAGE>
In the United States, the FDA regulates the introduction, manufacturing,
labeling, and record keeping requirements for medical devices and drugs. The
FDA regulates the majority of products manufactured by the Company, through
marketing clearance, pre-market approvals, new drug approvals, or compliance
with established monographs. 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 matter of interpretation and 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 authority 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,
among other things, whether the Company is in compliance with various subparts
relating to the Quality System Regulation ("QSR"). In complying with QSR,
manufacturers must continue to expend time, money, and effort in the areas of
production and quality control in order to ensure full regulatory 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 pre-market clearance or pre-market approval of medical
devices, product recalls, operating restrictions, and, in extreme cases,
criminal sanctions.
In December 1999, STERIS received a warning letter from the FDA in
connection with the FDA's inspection of STERIS's manufacturing facility in
Mentor, Ohio. Since the inspection and receipt of the warning letter, STERIS
has been working diligently to resolve the FDA's concerns. STERIS submitted a
timely formal response to the warning letter and has continued to communicate
with the FDA both in writing and orally with respect to this matter. The
Company will continue to cooperate with the FDA to reach a final resolution of
all concerns. Although no assurance can be given regarding further actions by
the FDA or the timing of any such final resolution, management believes this
matter will not have a material adverse effect on STERIS's financial
condition, results of operations, or cash flow.
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 gamma
irradiation and ethylene oxide sterilization activities of the Company produce
virtually no harmful solid, liquid, or gaseous effluents or pollutants.
The Company believes that it is currently in conformity in all material
respects with applicable regulatory requirements. The Company has received
licenses and permits it believes necessary to conduct its current
6
<PAGE>
manufacturing and contract sterilization business and believes that it will be
able to obtain any permits necessary for the future conduct of its
manufacturing and contract sterilization business. The Company is committed to
maintaining compliance with applicable FDA, EPA, and other governmental laws,
regulations and nongovernmental certification authorities.
Employees
As of March 31, 2000, the Company employed 4,810 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 United States 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, system, product, service,
or process 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 amounted to $24.2
million, $24.8 million, and $23.9 million in fiscal years 2000, 1999, and
1998, respectively. These costs are charged directly to income in the year in
which incurred.
As of March 31, 2000, the Company held 213 United States patents and 321
foreign patents with expiration dates ranging from 2000 to the year 2018. In
addition, the Company, as of March 31, 2000, had 53 United States patents and
138 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 747 trademark
registrations in the United States and in various foreign countries in which
the Company does business.
ITEM 2. PROPERTIES
At March 31, 2000, the Company operated 26 manufacturing, distribution, and
engineering facilities comprising approximately 2.5 million square feet.
Substantially all such facilities are owned. Twenty of these sites are located
in the United States, with the others located in Australia, Canada, Finland,
Germany, and Sweden. Management believes that its facilities are adequate for
operations and are maintained in good condition. At March 31, 2000, the
Company leased or owned sales, service, and support offices in 18 countries.
The Company is confident that, if needed, it will be able to acquire
additional facilities at commercially reasonable rates.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to Note J -- Contingencies to the accompanying
consolidated financial statements on page 27 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 2000 fiscal year.
7
<PAGE>
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......... 56 Chairman of the Board of Directors and Chief Executive Officer
Les C. Vinney........... 51 President, Chief Operating Officer, and Director
Laurie Brlas............ 42 Senior Vice President and Chief Financial Officer
David C. Dvorak......... 36 Senior Vice President, General Counsel, and Secretary
Gerard J. Reis.......... 48 Senior Vice President, Associate and Business Relations
Joseph C. McDonald...... 46 Corporate Vice President and Group President, Scientific and Industrial
William A. O'Riordan.... 41 Corporate Vice President and Group President, Health Care
</TABLE>
The following is a brief account of the business experience during the past
five years of each such executive officer:
Bill R. Sanford served as Chairman of the Board of Directors, President, and
Chief Executive Officer of the Company from April 1987 until March 2000 when
the Board appointed Les C. Vinney President and Chief Operating Officer of the
Company. Mr. Sanford continues as Chairman of the Board of Directors and Chief
Executive Officer of the Company. Mr. Sanford is also currently a member of
the Board of Directors of KeyCorp, a financial services company.
Les C. Vinney serves as President, Chief Operating Officer, and Director.
Mr. Vinney joined the Company's Board of Directors in March 2000 at the same
time as he was appointed as the Company's President and Chief Operating
Officer, a new position. Mr. Vinney became Senior Vice President and Chief
Financial Officer of STERIS in August 1999. He became Senior Vice President
Finance and Operations, while continuing as Chief Financial Officer, in
October 1999. Immediately prior to Mr. Vinney's employment with STERIS, he
most recently served as Senior Vice President and Chief Financial Officer at
The BF Goodrich Company, a Fortune 500 manufacturer of advanced aerospace
systems, performance materials, and engineered industrial products. During his
eight year career with BF Goodrich he held a variety of senior operating and
financial management positions, including Vice President and Treasurer,
President and CEO of the former Tremco subsidiary, and Senior Vice President,
Finance and Administration of BF Goodrich Specialty Chemicals.
Laurie Brlas serves as a Senior Vice President and Chief Financial Officer.
She joined the Company in April 2000. Prior to joining STERIS, Ms. Brlas was
employed by OfficeMax, Inc., a Fortune 500 retailer, from September 1995
through April 2000, serving most recently as Senior Vice President and
Corporate Controller. She was employed by Corning Clinical Labs, the
laboratory testing division of Corning, Inc., from June 1994 through September
1995 serving most recently as Divisional Controller.
David C. Dvorak serves as Senior 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 the law firm of Thompson Hine & Flory
LLP from June 1994 to June 1996.
Gerard J. Reis serves as Senior Vice President, Associate and Business
Relations. He joined the Company in July 1994 as Vice President,
Administration. Mr. Reis has held positions as Vice President, Business and
Professional Relations and Vice President, Associate and Business Relations.
He became Senior Vice President in October 1999.
Joseph C. McDonald serves as Corporate Vice President and Group President of
the Scientific and Industrial Group. He joined the Company in May 1989 as
Scientific Zone Manager, and has held positions as Vice President of
Marketing, General Manager of European Health Care and Scientific
Distribution, and President of the Company's Scientific Division. He became
Group President in April 2000.
William A. O'Riordan serves as Corporate Vice President and Group President
of the Health Care Group. He joined the Company in June 1991 as Division Vice
President -- Customer Support, and has held positions as Vice President --
Operations, Group Vice President -- Customer Support, and Corporate Vice
President -- Global Operations. He became Group President in April 1999.
8
<PAGE>
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 New York Stock Exchange under
the symbol "STE." The following table sets forth, for the periods indicated,
the high and low sales prices for the Company's Common Shares.
<TABLE>
<CAPTION>
Quarters Ended
----------------------------------------
June
March 31 December 31 September 30 30
-------- ----------- ------------ ------
<S> <C> <C> <C> <C>
Fiscal 2000
High............................... $12.13 $15.00 $20.13 $28.44
Low................................ 9.13 9.44 11.50 15.13
Fiscal 1999
High............................... $35.06 $29.00 $35.94 $33.50
Low................................ 25.00 18.50 22.59 25.44
</TABLE>
The Company has not paid any cash 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 for the operation and
expansion of its businesses. At June 9, 2000, there were approximately 2,085
shareholders of record of the Company's Common Shares.
9
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended March 31
-----------------------------------------------
2000(1)(2) 1999(1) 1998(1) 1997(3) 1996(3)
---------- -------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operational Data:
Net revenues.................. $760,626 $797,611 $719,656 $587,852 $534,612
Gross profit.................. 315,425 368,591 324,558 231,845 202,701
Non-recurring expenses........ 90,831
Income (loss) from
operations................... 29,706 136,379 112,614 (6,487) 69,731
Net income (loss)............. 10,485 84,854 65,496 (30,606) 40,790
Net income (loss) per Common
Share -- basic............... $ 0.16 $ 1.24 $ 0.96 $ (0.45) $ 0.63
Shares used in computing net
income (loss) per share --
basic....................... 67,489 68,200 67,898 67,356 65,022
Net income (loss) per Common
Share -- diluted............. $ 0.15 $ 1.20 $ 0.93 $ (0.45) $ 0.59
Shares used in computing net
income (loss) per share --
diluted..................... 68,567 70,592 70,224 67,356 69,714
Balance Sheet Data:
Working Capital............... $233,217 $236,260 $174,678 $143,734 $231,996
Total assets.................. 903,574 865,996 728,069 539,455 592,697
Long-term debt................ 268,700 221,500 152,879 35,879 102,631
Total liabilities............. 482,480 430,059 369,117 244,739 288,638
Total shareholders' equity.... 421,094 435,937 358,952 294,716 304,059
</TABLE>
(1) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(2) Earnings for fiscal 2000 include a pre-tax special charge of $39,722,
primarily related to plans for manufacturing consolidations, productivity
improvements and associated workforce reductions. Of the $39,722 charge,
$24,808 was charged to cost of sales and $14,914 was charged to selling,
informational, and administration expenses in the consolidated statement
of operations.
(3) Fiscal 1996 includes the combined results of the STERIS merger with Amsco
International, Inc. in a tax free, stock-for-stock transaction. The Amsco
merger has been accounted for using the pooling-of-interests method.
Fiscal 1997 Non-recurring expenses relate to the Amsco merger.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Fiscal Year 2000 Compared to Fiscal Year 1999
Net revenues decreased by 4.6% to $760.6 million in fiscal 2000 from $797.6
million in fiscal 1999. Health Care Group revenues decreased by 6.6% to $557.7
million in fiscal 2000 from $597.1 million in fiscal 1999. Scientific and
Industrial Group revenues increased 1.2% to $202.9 million in fiscal 2000 from
$200.5 million in fiscal 1999. North America revenues for fiscal 2000 were
$659.8 million, or 86.7% of total revenues, with $100.8 million, or 13.3%,
from International markets. North America revenues for fiscal 1999 were $701.1
million, or 87.9% of total revenues, with $96.5 million, or 12.1%, from
International markets. Revenues from consumables and services contributed
$443.5 million, or 58.3%, of total revenues for fiscal 2000 compared to $429.3
million, or 53.8% in the prior year. The decrease in net revenues was due
principally to softness in United States hospital spending, particularly for
capital equipment, and delays in scientific and pharmaceutical projects.
Non-recurring charges of $39.7 million ($24.6 million net of tax, or $.36
per share) were recorded in the fiscal 2000 fourth quarter after the Company
completed a review of certain manufacturing and support functions. This charge
primarily related to plans for manufacturing consolidations, productivity
improvements, and associated workforce reductions. The charge to cost of sales
includes $19.3 million for inventory write-downs and disposals relating to the
restructuring of the Company's remanufactured equipment business as well as
improvements to production flows and facility restructurings to align with
revised strategic plans. The charge to
10
<PAGE>
cost of sales also includes $5.5 million for closing the Company's sterility
assurance production operations in North Carolina, which will be consolidated
into a dedicated facility in Mentor, Ohio. Costs to close the facility include
write-downs in inventory, lease termination costs, severance, property
abandonment, and other miscellaneous costs. The Company expects to be
completed with the consolidation by July 31, 2000. The charge to selling,
informational, and administrative expenses includes $10.4 million related to
plans for implementing specific improvements to manufacturing and
administrative support functions, primarily related to severance costs. The
remaining $4.5 million of charges relates to accounts receivable management
initiatives including implementation of a new program to enhance the
collection of receivables and the write-off of certain aged smaller balance
accounts.
The cost of products and services sold increased by 3.8% to $445.2 million
in fiscal 2000, including the effect of the fourth quarter charge, from $429.0
million in fiscal 1999. Excluding the charge, the cost of products and
services sold decreased by 2.0% to $420.4 million. The cost of products and
services sold as a percentage of net revenues was 55.3% in fiscal 2000
excluding the fourth quarter charge, compared to 53.8% in fiscal 1999. The
increase in the cost of products and services sold as a percentage of net
revenue for fiscal 2000 resulted primarily from decreased overhead absorption
from lower volumes.
Selling, informational, and administrative expenses increased in fiscal 2000
by 26.1% to $261.6 million, including the effect of the fourth quarter charge,
from $207.4 million in fiscal 1999. Excluding the charge, selling,
informational, and administrative expenses increased in fiscal 2000 by 18.9%
to $246.6 million. The increase in expenses was primarily attributable to the
higher payroll and marketing costs incurred to support the reorientation and
expansion of the field organization. The expenses as a percentage of net
revenue excluding the charge increased to 32.4% in fiscal 2000 from 26.0% in
fiscal 1999.
Research and development expenses decreased by 2.7% to $24.2 million in
fiscal 2000 from $24.8 million in fiscal 1999. Research and development
expenses as a percentage of net revenues were 3.2% in fiscal 2000 compared to
3.1% in fiscal 1999.
Interest expense increased by 50.6% to $16.2 million in fiscal 2000 from
$10.7 million in fiscal 1999. The increase was due to additional borrowing,
principally for funding the Company's share repurchase plan and the purchase
of acquired businesses, as well as the effects of higher interest rates.
Income tax expense was 38.0% of pretax income in fiscal 2000, including a
$2.0 million accrual reduction. In fiscal 1999, the income tax rate was 38.0%
before a reduction in the income tax accruals of approximately $6.0 million,
which reduced the effective rate to 33.3%. These accrual reductions were due
to benefits from the Company's global tax strategies and active tax management
programs and the overall effect of the fourth quarter charge in fiscal 2000.
Net income for fiscal 2000 decreased by 87.6% to $10.5 million ($.15 per
diluted share), including the effect of the fourth quarter charge, from $84.9
million ($1.20 per diluted share) in fiscal 1999. Excluding the fourth quarter
charge, net income decreased by 58.6% to $35.1 million ($.51 per diluted
share).
Fiscal Year 1999 Compared to Fiscal Year 1998
Net revenues increased by 10.8% to $797.6 million in fiscal 1999 from $719.7
million in fiscal 1998. Health Care Group revenues increased by 9.0% to $597.1
million in fiscal 1999 from $547.8 million in fiscal 1998. Scientific and
Industrial Group revenues increased 16.7% to $200.5 million in fiscal 1999
from $171.8 million in fiscal 1998. North America revenues for fiscal 1999
were $701.1 million, or 87.9% of total revenues, with $96.5 million, or 12.1%,
from International markets. North America revenues for fiscal 1998 were $633.3
million, or 88.0% of total revenues, with $86.4 million, 12.0% from
International markets. Revenues from consumables and services contributed
$429.3 million, or 53.8%, of total revenues for fiscal 1999 compared to $359.6
million, or 50.0% in the prior year. The increase in net revenues was due
principally to higher sales of capital equipment, consumable products, and
services.
11
<PAGE>
The cost of products and services sold increased by 8.6% to $429.0 million
in fiscal 1999 from $395.1 million in fiscal 1998. The cost of products and
services sold as a percentage of net revenues was 53.8% in fiscal 1999
compared to 54.9% in fiscal 1998. The decrease in the cost of products and
services sold as a percentage of net revenue for fiscal 1999 resulted
principally from improved overhead absorption from volume increases, favorable
changes in the mix of products sold, and the benefits from the restructuring
of the acquired and merged businesses.
Selling, informational, and administrative expenses increased in fiscal 1999
by 10.3% to $207.4 million from $188.0 million in fiscal 1998. The increase in
expenses was attributable to the continued investments in customer support
systems, information technology systems, and to support the increased level of
business. The expenses as a percentage of net revenue decreased to 26.0% in
fiscal 1999 from 26.1% in fiscal 1998.
Research and development expenses increased by 3.9% to $24.8 million in
fiscal 1999 from $23.9 million in fiscal 1998. Research and development
expenses as a percentage of net revenues were 3.1% in fiscal 1999 compared to
3.3% in fiscal 1998.
Interest expense increased by 72.1% to $10.7 million in fiscal 1999 from
$6.2 million in the fiscal 1998. The increase was due to the additional
borrowing, principally for the purchase of acquired companies and funding the
Company's share repurchase plan.
Income tax expense decreased to 33.3% of pretax income in fiscal 1999 from
39.0% of pretax income in fiscal 1998. The decrease was due to events which
enabled STERIS to capitalize on its previously implemented tax planning
strategies and the effective integration of its previously acquired
businesses. A significant component of the decrease was a $6.0 million
reduction in the income tax accruals. Excluding this reduction, the effective
income tax rate decreased to 38.0% of pretax income in fiscal 1999 from 39.0%
of pretax income in fiscal 1998.
Net income for fiscal 1999 increased by 29.6% to $84.9 million ($1.20 per
diluted share) from $65.5 million ($.93 per diluted share) in fiscal 1998.
Liquidity and Capital Resources
At March 31, 2000, the Company had $35.5 million in cash and cash
equivalents, compared to $23.7 million of cash and cash equivalents at March
31, 1999. The increase was a result of net cash provided by operating and
financing activities, offset by net cash used in investing activities.
At March 31, 2000, the Company had accounts receivable of $206.3 million,
compared to $230.3 million at March 31, 1999. The decrease was primarily
attributed to decreased revenues in the fourth quarter fiscal 2000 compared to
the fourth quarter fiscal 1999.
At March 31, 2000, the Company had inventory of $107.7 million, compared to
$99.3 million at March 31, 1999. The increase was primarily attributed to
decreased revenues in the fourth quarter fiscal 2000 compared to the fourth
quarter fiscal 1999.
Property, plant, and equipment increased by 19.1% to $443.6 million as of
March 31, 2000, compared to $372.4 million at March 31, 1999. The increase was
due primarily to the increases resulting from the investment in information
systems, plant and equipment, facility renovations, and acquired businesses
that were accounted for using the purchase method of accounting.
Intangibles increased by 0.7% to $282.6 million as of March 31, 2000,
compared to $280.8 million at March 31, 1999. Goodwill and other intangible
assets represented 22.6% and 24.1% of total assets at March 31, 2000 and 1999,
respectively.
Net deferred income tax assets decreased by 21.2% to $15.0 million as of
March 31, 2000, compared to $19.1 million at March 31, 1999. The decrease was
due primarily to the recognition of amounts for tax purposes during fiscal
2000 that were previously recognized for financial reporting purposes.
12
<PAGE>
Current liabilities decreased by 0.8% to $155.9 million as of March 31,
2000, compared to $157.1 million at March 31, 1999.
Other liabilities were $49.0 million as of March 31, 2000, compared to $48.6
million of the same at March 31, 1999.
On June 19, 2000, STERIS entered into a $325 million Revolving Credit
Facility (the "Revolving Credit Facility"), which replaced the prior credit
facility (see Note E to the consolidated financial statements). The Revolving
Credit Facility matures June 29, 2003 and provides financial covenants and
borrowing alternatives which are more appropriate for the Company's strategic
objectives. The Revolving Credit Facility may be used to refinance existing
indebtedness, as well as for general corporate purposes. The Revolving Credit
Facility will bear interest at LIBOR plus 1.25% to 2.25% or KeyBank National
Association's prime rate. The Revolving Credit Facility contains customary
covenants which include maintenance of certain financial ratios such as a
fixed charge covenant and consolidated leverage ratios. The Revolving Credit
Facility also places restrictions on the Company's ability to pay dividends.
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.
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 United States dollar value of sales
made in foreign currencies, and the United States 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-United States
based competitors.
Contingencies
For a discussion of contingencies, see Note J to the consolidated 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 generally weighted toward the latter part of 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.
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. The Euro trades 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
13
<PAGE>
January 1, 1999. The legacy currencies will remain legal tender for cash
transactions until 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 utilizing the Euro. Additionally, the Company's operations in other
countries 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 and implemented certain plans to review
strategic and tactical areas arising from the Euro conversion. Initial efforts
were 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 is 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. 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 or results of operations.
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. 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 of profit margins, (c) the possibility that market
demand will not develop for new technologies, products, and applications, (d)
the possibility that compliance with the regulations and certification
requirements of domestic and foreign authorities may delay or prevent new
product introductions or affect the production and marketing of existing
products, (e) the potential effects of fluctuations in foreign currencies
where the Company does a sizable amount of business, (f) the possibility that
the Company's activities related to changes in its sales force will take
longer or incur greater expense than anticipated, and (g) the possibility of
reduced demand, or reductions in the rate of growth in demand, for the
Company's products.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Consistent with the prior year, the Company is exposed to market risk
through various financial instruments, including fixed rate and floating rate
debt instruments. Based on March 31, 2000 debt levels, a 1% change in interest
rates would impact interest expense by approximately $2.2 million annually.
Additionally, the Company operates internationally and as a result is exposed
to foreign currency fluctuations. Specifically, the exposure includes
intercompany loans, and third party sales or payments. The Company does not
consider the market risk associated with its international operations to be
material. The Company does not use derivative financial instruments for
hedging or speculative purposes.
14
<PAGE>
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, 2000 and 1999, and the related
consolidated statements of income, shareholders' equity and cash flows for
each of the three years in the period ended March 31, 2000. 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 auditing standards generally
accepted in the United States. 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 at March 31, 2000 and 1999, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended March 31, 2000, in conformity with accounting principles
generally accepted in the United States. 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.
/s/ Ernst & Young LLP
Cleveland, Ohio
April 20, 2000,
except for Note E, as to which the date is
June 19, 2000
15
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31
--------------------
2000 1999
--------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents............................... $ 35,476 $ 23,680
Accounts receivable (net of allowances of $6,047 and
$6,000, respectively).................................. 206,344 230,346
Inventories............................................. 107,728 99,279
Deferred income taxes................................... 23,923 21,910
Prepaid expenses and other assets....................... 15,648 18,182
--------- ---------
Total current assets..................................... 389,119 393,397
Property, plant, and equipment........................... 443,608 372,386
Accumulated depreciation................................. (138,603) (111,105)
--------- ---------
Net property, plant, and equipment...................... 305,005 261,281
Intangibles.............................................. 282,639 280,750
Accumulated amortization................................. (78,300) (72,499)
--------- ---------
Net intangibles......................................... 204,339 208,251
Other assets............................................. 5,111 3,067
--------- ---------
Total assets............................................. $ 903,574 $ 865,996
========= =========
Liabilities and shareholders' equity
Current liabilities:
Current portion of long-term indebtedness............... $ 1,816 $ 2,200
Accounts payable........................................ 51,374 47,431
Accrued expenses and other.............................. 102,712 107,506
--------- ---------
Total current liabilities................................ 155,902 157,137
Long-term indebtedness................................... 268,700 221,500
Deferred income taxes.................................... 8,880 2,810
Other liabilities........................................ 48,998 48,612
--------- ---------
Total liabilities........................................ 482,480 430,059
Shareholders' equity:
Serial preferred shares, without par value, 3,000 shares
authorized; no shares issued or outstanding............
Common Shares, without par value, 300,000 shares
authorized; issued and outstanding shares of 67,517 at
March 31, 2000 and 67,956 at March 31, 1999, excluding
1,052 and 523 treasury shares, respectively............ 198,253 222,946
Retained earnings........................................ 230,348 219,863
Cumulative translation adjustment........................ (7,507) (6,872)
--------- ---------
Total shareholders' equity............................... 421,094 435,937
--------- ---------
Total liabilities and shareholders' equity............... $ 903,574 $ 865,996
========= =========
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended March 31
----------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Net revenues...................................... $760,626 $797,611 $719,656
Cost of products sold............................. 445,201 429,020 395,098
-------- -------- --------
Gross profit...................................... 315,425 368,591 324,558
Cost and expenses:
Selling, informational, and administrative....... 261,550 207,375 188,030
Research and development......................... 24,169 24,837 23,914
-------- -------- --------
285,719 232,212 211,944
-------- -------- --------
Income from operations............................ 29,706 136,379 112,614
Interest expense.................................. (16,166) (10,736) (6,239)
Interest income and other......................... 3,372 1,553 980
-------- -------- --------
Income before income taxes........................ 16,912 127,196 107,355
Income taxes...................................... 6,427 42,342 41,859
-------- -------- --------
Net income........................................ $ 10,485 $ 84,854 $ 65,496
======== ======== ========
Net income per share -- basic..................... $ 0.16 $ 1.24 $ 0.96
======== ======== ========
Net income per share -- diluted................... $ 0.15 $ 1.20 $ 0.93
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended March 31
------------------------------
2000 1999 1998
-------- --------- ---------
<S> <C> <C> <C>
Operating activities
Net income.................................... $ 10,485 $ 84,854 $ 65,496
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................ 39,672 33,279 24,202
Deferred income taxes........................ 4,057 14,000 7,446
Other items.................................. 1,115 (1,252) (5,577)
Changes in operating assets and liabilities:
Accounts receivable......................... 24,566 (22,654) (31,945)
Inventories................................. (8,449) (12,998) (11,311)
Other assets................................ 6,994 (5,229) 368
Accounts payable and accruals............... (7,333) (25,541) (36,686)
-------- --------- ---------
Net cash provided by operating activities..... 71,107 64,459 11,993
Investing activities
Purchases of property, plant, equipment, and
patents...................................... (77,131) (77,286) (39,181)
Proceeds from sales of assets................. 43,084
Investment in businesses, net of cash
acquired..................................... (8,134) (41,457) (126,505)
Proceeds from sales of marketable securities.. 2,977
-------- --------- ---------
Net cash used in investing activities......... (85,265) (118,743) (119,625)
Financing activities
Payments on long-term obligations............. (8,884) (206,339) (4,512)
Borrowings under line of credit............... 55,000 275,000 110,000
Purchase of treasury shares................... (28,712) (17,697) (10,051)
Stock option and other equity transactions.... 8,340 10,166 9,250
-------- --------- ---------
Net cash provided by financing activities..... 25,744 61,130 104,687
Effect of exchange rate changes on cash and
cash equivalents............................. 210 (338) (459)
-------- --------- ---------
Increase (decrease) in cash and cash
equivalents.................................. 11,796 6,508 (3,404)
Cash and cash equivalents at beginning of
period....................................... 23,680 17,172 20,576
-------- --------- ---------
Cash and cash equivalents at end of period.... $ 35,476 $ 23,680 $ 17,172
======== ========= =========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Common Shares Total
---------------- Retained Cumulative Shareholders
Number Amount Earnings Translation Equity
------ -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at April 1, 1997.. 67,969 $231,278 $ 69,513 $(6,075) $294,716
Net income................ 65,496 65,496
Foreign currency
translation adjustment
(including taxes of
$247).................... (459) (459)
--------
Comprehensive income...... 65,037
Stock options exercised... 652 6,584 6,584
Tax benefit of stock
options exercised........ 2,666 2,666
Treasury shares
purchased................ (600) (10,051) (10,051)
------ -------- -------- ------- --------
Balance at March 31,
1998..................... 68,021 230,477 135,009 (6,534) 358,952
Net income................ 84,854 84,854
Foreign currency
translation adjustment
(including taxes of
$207).................... (338) (338)
--------
Comprehensive income...... 84,516
Stock options exercised... 631 5,489 5,489
Other equity
transactions............. 4 109 109
Tax benefit of stock
options exercised........ 4,568 4,568
Treasury shares
purchased................ (700) (17,697) (17,697)
------ -------- -------- ------- --------
Balance at March 31,
1999..................... 67,956 222,946 219,863 (6,872) 435,937
Net income................ 10,485 10,485
Foreign currency
translation adjustment
(including taxes of
$393).................... (635) (635)
--------
Comprehensive income...... 9,850
Stock options exercised... 1,010 4,253 4,253
Tax benefit of stock
options exercised........ 4,232 4,232
Treasury shares
purchased................ (1,540) (28,712) (28,712)
Other equity
transactions............. 91 (4,466) (4,466)
------ -------- -------- ------- --------
Balance at March 31,
2000..................... 67,517 $198,253 $230,348 $(7,507) $421,094
====== ======== ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Years Ended March 31, 2000 and 1999
A. Accounting Policies
STERIS Corporation (the "Company" or "STERIS") develops, manufactures, and
markets infection prevention, contamination prevention, microbial reduction,
and surgical support systems, products, services, and technologies for health
care, scientific, research, food, and industrial Customers throughout the
world.
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.
The Company continually evaluates whether events and circumstances have
occurred that indicate the remaining estimated useful life of any long-lived
or intangible asset may warrant revision or that the remaining balance of the
asset may not be recoverable. When factors indicate that the long-lived assets
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; the measurement of the impairment would be based on
a market valuation.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.
The accounts of the Company's foreign subsidiaries are recorded in the
currency of the country in which they operate. All balance sheet accounts
except shareholders' 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, which amounted to $7,507 and $6,872 as of March
31, 2000 and 1999, respectively, represent other comprehensive income and are
reflected in the cumulative translation adjustment component of shareholders'
equity.
Business Combinations
During the second quarter fiscal 2000, the Company completed two
acquisitions to extend the capabilities of STERIS's Scientific and Industrial
Group in areas targeted as future growth markets. The assets of Quality
Sterilization Services, a contract sterilization business located near
Minneapolis, Minnesota, were acquired to expand STERIS's network of contract
sterilization and microbial reduction services in North America. The
acquisition resulted in an increase in goodwill of $6,408. FoodLabs, Inc.,
based in Manhattan, Kansas, was also acquired. FoodLabs is a provider of
analytical, product development, and consulting services to the food and
agricultural industries, with a particular focus on food safety. These
acquisitions were accounted for as purchase transactions and did not have a
material effect on the operations of the Company.
During the third quarter fiscal 1999, the Company acquired Detach AB. Detach
AB, located in Sweden, possesses proprietary technology and produces
innovative systems for the Company's scientific and industrial marketplace.
These acquisitions were accounted for as purchase transactions and did not
have a material effect on the operations of the Company. In late September
1998, the Company completed the acquisition of Hausted Inc. for cash. Hausted
is a leading provider of mobile systems for surgical and diagnostic patient
positioning and transport. The acquisition resulted in an increase in goodwill
of $41,977.
20
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In September 1997, STERIS purchased the common shares of Isomedix Inc. in
exchange for cash of $134,102. Isomedix is a leading provider of contract
sterilization and microbial reduction services, with gamma irradiation,
ethylene oxide, and electron-beam processing facilities across North America.
The acquisition was accounted for using the purchase method of accounting and
resulted in an increase in goodwill of $53,376.
In July 1997, STERIS acquired the assets of Joslyn Sterilizer Corporation, a
designer and manufacturer of high quality, high performance sterile processing
systems based upon widely accepted steam and gas sterilization methodologies.
The acquisition was accounted for using the purchase method of accounting and
resulted in an increase in goodwill of $7,367.
Cash Equivalents and Supplemental Cash Flow Information
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 consisted primarily of interest-bearing savings accounts and
United States government securities.
Supplemental disclosure of cash flow information follows:
<TABLE>
<CAPTION>
Years Ended March 31
-----------------------
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Cash paid during the year for:
Interest........................................... $17,280 $ 8,942 $ 5,885
Income taxes....................................... $ 9,114 $20,042 $27,193
</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 under the cost-to-
cost type of percentage-of-completion method, resulting in revenue being
recorded as costs are incurred.
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, scientific, and industrial institutions and
companies with no single Customer accounting for more than two percent of
revenues during the year ended March 31, 2000.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101.
"Revenue Recognition", which explains how the SEC staff believes existing
revenue recognition rules should be applied. It is anticipated that the SEC
will issue SAB No. 101 interpretive guidance by the end of the second calendar
quarter of 2000. The Company is currently studying the provisions of SAB No.
101 and plans to utilize this interpretive guidance to determine if any change
is required to ensure compliance with this SAB.
B. Inventories
Inventories are stated at cost, which does not exceed market. The Company
uses the last-in, first-out (LIFO) and first-in, first-out (FIFO) cost
methods. Inventories utilizing LIFO represent approximately 59% and 57% of the
inventory at March 31, 2000 and 1999, respectively. Inventory costs include
material, labor, and overhead. If
21
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
the FIFO method of inventory costing had been used exclusively, inventories
would have been $10,552 and $11,025 higher than those reported at March 31,
2000 and 1999, respectively. Inventories were as follows:
<TABLE>
<CAPTION>
March 31
----------------
2000 1999
-------- -------
<S> <C> <C>
Raw material................................................ $ 29,346 $36,878
Work in process............................................. 24,743 19,585
Finished goods.............................................. 53,639 42,816
-------- -------
Total Inventories........................................... $107,728 $99,279
======== =======
</TABLE>
C. Property, Plant, and Equipment
Property, plant, and equipment are stated at cost, less accumulated
depreciation. Property, plant, and equipment costs include capitalized labor,
overhead, and interest costs. As a result of a capital improvements campaign
to add significant manufacturing assets at several locations, labor and
overhead capitalized in fiscal 2000 totaled $7,490 and $4,850 in fiscal 1999.
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 of radioisotope is determined by use of the annual decay factor
inherent in the material, which is similar to the sum-of-the-years-digits
method. Depreciation expense was $32,865, $27,367, and $18,929 for the years
ended March 31, 2000, 1999, and 1998, respectively. Expenditures that increase
the value or productive capacity of assets, including information systems, are
capitalized. Capitalized internal costs associated with information systems
implementation amounted to $2,446 in fiscal 2000 and $1,263 in fiscal 1999.
Property, plant, and equipment consisted of the following:
<TABLE>
<CAPTION>
March 31
-----------------
2000 1999
-------- --------
<S> <C> <C>
Asset (asset lives)
Land and land improvements (12 years)..................... $ 21,422 $ 18,300
Buildings and leasehold improvements (7-50 years)......... 126,572 115,678
Machinery and equipment (3-15 years)...................... 239,786 195,191
Radioisotope (20 years)................................... 55,828 43,217
-------- --------
Total..................................................... 443,608 372,386
Less: accumulated depreciation............................ 138,603 111,105
-------- --------
Property, plant, and equipment, net....................... $305,005 $261,281
======== ========
</TABLE>
Rental expense for leases was approximately $11,052, $10,617, and $10,383
for the years ended March 31, 2000, 1999, and 1998, 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 2001, 2002, 2003, 2004, and 2005
and thereafter are $10,410, $8,981, $6,927, $4,425, $2,959, and $11,584,
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
22
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Company currently provides for the amortization of intangible assets,
including goodwill, over lives ranging from 17-40 years. Intangible assets
consisted of the following:
<TABLE>
<CAPTION>
March 31
-----------------
2000 1999
-------- --------
<S> <C> <C>
Assets (amortization period)
Goodwill, net of accumulated amortization of $29,866 and
$24,420, respectively (35-40 years)...................... $193,066 $196,831
Patents, trademarks, and other intangible assets, net of
accumulated amortization of $48,434 and $48,079,
respectively (17 years).................................. 11,273 11,420
-------- --------
Total..................................................... $204,339 $208,251
======== ========
</TABLE>
E. Financial Instruments
Long-term indebtedness was as follows:
<TABLE>
<CAPTION>
March 31
-----------------
2000 1999
-------- --------
<S> <C> <C>
Credit Facility............................................ $263,000 $215,000
Other debt................................................. 7,516 8,700
-------- --------
Total...................................................... 270,516 223,700
Less current portion....................................... 1,816 2,200
-------- --------
Long-term portion.......................................... $268,700 $221,500
======== ========
</TABLE>
As of March 31, 2000, STERIS maintained an unsecured credit facility of
$250,000 maturing on January 26, 2002. The Company also maintained a $150,000
unsecured 364 day facility maturing on January 25, 2001. The $400,000 could be
used for general corporate purposes and bore interest at either LIBOR plus
.325 to .700 percent, which amounted to 6.7 and 5.4 percent at March 31, 2000
and 1999, respectively, or KeyBank National Association's prime rate.
On June 19, 2000, STERIS entered into a $325,000 Revolving Credit Facility
(the "Revolving Credit Facility"), which replaced the prior credit facility.
The Revolving Credit Facility matures June 29, 2003 and provides financial
covenants and borrowing alternatives which are more appropriate for the
Company's strategic objectives. The Revolving Credit Facility may be used to
refinance existing indebtedness, as well as for general corporate purposes.
The Revolving Credit Facility will bear interest at LIBOR plus 1.25 to 2.25
percent or KeyBank National Association's prime rate. The Revolving Credit
Facility contains customary covenants which include maintenance of certain
financial ratios such as a fixed charge covenant and consolidated leverage
ratios. The Revolving Credit Facility also places restrictions on the
Company's ability to pay dividends. As of March 31, 2000, no dividend
distributions could be made under these provisions.
Other debt consisted mainly of industrial development revenue bonds which
bear interest at a variable rate based on the bank/marketing agent's demand
note index. These bond agreements contain various covenants relating to
minimum capitalization, net worth, and working capital. At March 31, 2000,
outstanding obligations under the industrial development revenue bonds were
$6,400, with a weighted average interest rate of 3.2 percent.
Amounts payable for borrowings in fiscal 2001, 2002, 2003, 2004, and 2005
and thereafter are $1,816, $700, $700, $263,700, and $2,900, respectively.
23
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
As of March 31, 2000 and 1999, the Company was contingently liable in the
amount of $20,770 and $21,066, respectively, under standby letters of credit
and guarantees. Approximately $12,300 of the totals at March 31, 2000 and 1999
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 recorded value of the Company's financial instruments, which includes
cash, cash equivalents and the revolving credit facility, approximates fair
value. Financial instruments which potentially subject the Company to
concentration of credit risk, consists principally of cash investments. The
Company invests its excess cash in high-quality securities placed with major
banks and financial institutions. The Company has established guidelines
relative to diversification and maturities to maintain safety and liquidity.
F. Accrued Expenses and Other
Accrued expenses and other consisted of the following:
<TABLE>
<CAPTION>
March 31
-----------------
2000 1999
-------- --------
<S> <C> <C>
Associate compensation................................... $ 33,903 $ 15,374
Self insured retention................................... 6,504 8,000
Taxes.................................................... 27,481 42,879
Warranty................................................. 4,460 5,490
Other.................................................... 30,364 35,763
-------- --------
Total.................................................... $102,712 $107,506
======== ========
</TABLE>
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>
Years Ended March 31
-------------------------
2000 1999 1998
------- -------- --------
<S> <C> <C> <C>
United States operations.......................... $13,916 $112,889 $110,755
Non-United States operations...................... 2,996 14,307 (3,400)
------- -------- --------
$16,912 $127,196 $107,355
======= ======== ========
</TABLE>
The components of the provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
Years Ended March 31
------------------------
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Current provision:
United States federal............................. $(2,020) $23,899 $27,211
United States state and local..................... 2,493 3,218 4,465
Non-United States................................. 1,898 3,176 2,742
------- ------- -------
Total current provision............................ 2,371 30,293 34,418
Deferred expense................................... 4,056 12,049 7,441
------- ------- -------
Total provision for income taxes................... $ 6,427 $42,342 $41,859
======= ======= =======
</TABLE>
24
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The total provision for income taxes can be reconciled to the tax computed
at the United States federal statutory rate as follows:
<TABLE>
<CAPTION>
Years Ended March 31
------------------------
2000 1999 1998
------ ------- -------
<S> <C> <C> <C>
Tax computed at the United States federal
statutory tax rate.............................. $5,919 $44,518 $37,574
Reduction of income tax accruals................. (2,081) (6,000)
State and local taxes, net of federal income tax
benefit......................................... 1,024 2,092 2,902
Amortization of excess cost over net assets
acquired........................................ 1,041 629 530
Difference in non-United States tax rates........ 526 1,046 532
All other, net................................... (2) 57 321
------ ------- -------
Total provision for income taxes................. $6,427 $42,342 $41,859
====== ======= =======
</TABLE>
The significant components of the deferred tax assets and liabilities
recorded in the accompanying balance sheets at March 31, 2000 and 1999, were
as follows:
<TABLE>
<CAPTION>
March 31
------------------
2000 1999
-------- --------
<S> <C> <C>
Deferred Tax Assets
Post-retirement benefit accrual........................ $ 16,869 $ 16,768
Net operating loss carryforwards....................... 940 1,929
Inventory.............................................. 1,566 1,559
Accrued expenses and other............................. 23,035 21,247
-------- --------
Gross deferred tax assets............................... 42,410 41,503
Valuation allowance..................................... (940) (1,929)
-------- --------
Total deferred tax assets............................... $ 41,470 $ 39,574
======== ========
Deferred Tax Liabilities
Plant and equipment.................................... $(21,905) $(16,669)
Intangibles............................................ (4,500) (3,236)
Other.................................................. (22) (569)
-------- --------
Total deferred tax (liabilities)........................ $(26,427) $(20,474)
======== ========
</TABLE>
For tax return purposes, certain subsidiaries, both United States and non-
United States, had operating loss carryforwards of $940 which expire at
various dates from 2001 through 2011. The valuation allowance applies to net
operating loss carryforwards that may expire before the Company can utilize
them. The net change in deferred tax assets related to carryforwards and the
valuation allowance for the year ended March 31, 2000 was a decrease of $989,
primarily due to the decrease in foreign operating loss carryforwards.
At March 31, 2000, undistributed earnings of non-United States subsidiaries
included in consolidated retained earnings amounted to $35,518. These earnings
are indefinitely reinvested in non-United States 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.
25
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
H. Benefit Plans
The following table sets forth the funded status and amounts recognized in
the accompanying consolidated balance sheets for the Company's defined benefit
plans:
<TABLE>
<CAPTION>
Other Post-
Pension Retirement
Benefits Benefits
---------------- ------------------
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Benefit obligation
Balance at beginning of measurement
period.............................. $42,622 $41,638 $ 53,585 $ 47,704
Service cost......................... 968 1,081 487 399
Interest cost........................ 2,708 2,768 3,476 3,187
Actuarial (gains) loss............... (1,438) 202 3,869 5,689
Benefits paid........................ (2,384) (2,616) (3,971) (3,394)
Plan curtailments (gain)............. 0 (451) 0 0
Settlements.......................... (780) 0 0 0
Balance at end of measurement
period.............................. 41,696 42,622 57,446 53,585
Fair value of plan assets
Balance at beginning of measurement
period.............................. 45,286 43,966 0 0
Actual return on plan assets......... 4,512 4,044 0 0
Employer contribution................ 0 103 3,971 3,394
Benefits paid........................ (2,341) (2,575) (3,971) (3,394)
Settlement........................... (780) 0 0 0
------- ------- -------- --------
Balance at end of measurement
period.............................. 46,677 45,538 0 0
------- ------- -------- --------
Funded status........................ 4,981 2,916 (57,446) (53,585)
Unamortized transition amount........ (1,067) (1,180) 0 0
Unamortized prior service cost....... 2,761 3,052 (556) (752)
Unamortized (gain) loss.............. (8,036) (6,814) 9,100 5,725
------- ------- -------- --------
(Accrued) benefit cost............... $(1,361) $(2,026) $(48,902) $(48,612)
======= ======= ======== ========
</TABLE>
Net periodic cost of the Company's defined benefit plans includes the
following components:
<TABLE>
<CAPTION>
Other Post-
Retirement
Pension Benefits Benefits
------------------------- ---------------------
2000 1999 1998 2000 1999 1998
------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Service cost.............. $ 968 $ 1,081 $ 989 $ 487 $ 399 $ 399
Interest cost............. 2,708 2,768 2,701 3,476 3,187 3,529
Expected return on plan
assets................... (3,478) (3,423) (2,963) 0 0 0
Effect of settlement...... (131) 0 0 0 0 0
Net amortization and
deferral................. (731) (576) 351 297 (233) 0
------- ------- ------- ------ ------ ------
Net periodic (benefit)
cost..................... $ (664) $ (150) $ 1,078 $4,260 $3,353 $3,928
======= ======= ======= ====== ====== ======
</TABLE>
A weighted average discount rate of 7.0%, 6.75%, and 7.0% was used in
determining the actuarial present value of the projected benefit obligations
at March 31, 2000, 1999, and 1998, respectively. The expected long-term rates
of return on assets at the respective measurement dates were 8.0% at March 31,
2000, 1999, and 1998. Unrecognized gains and losses and the initial net
pension asset are amortized over a fifteen-year period.
Future benefit costs for other post-retirement benefit plans were estimated
assuming medical costs would increase at approximately a 9.0% annual rate
(6.5% in fiscal 1999 and 1998), decreasing to approximately a 5%
26
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
annual growth rate ratably over an eight-year period and then remaining at
that rate. A 1% change in the annual trend rate would have changed the
accumulated postretirement benefit obligation at March 31, 2000, by $5,400 and
changed the fiscal 2000 postretirement benefit expense by $428.
The Company's contributions to defined contribution plans were $3,818,
$3,231, and $2,936 for fiscal 2000, 1999, and 1998, respectively.
I. Non-recurring Transactions
Fiscal 2000 Charge
The Company completed a review of certain manufacturing and support
functions during the fourth quarter of fiscal 2000. The review of
manufacturing operations included an outside consultant's study and evaluation
of manufacturing practices at several manufacturing plants. As a result of the
review and study performed and the related plan to initiate improvements in
these and other functions, a special charge of $39,722 ($24,628 net of tax, or
$0.36 per share) was recorded in the fourth quarter. This charge primarily
related to plans for manufacturing consolidations, productivity improvements
in both manufacturing and support functions, restructuring of the
remanufactured equipment business, and associated workforce reductions. The
implementation of these actions will result in a reduction of approximately
200 Associates (employees) in the manufacturing and support functions
beginning in early fiscal 2001. Of the $39,722 charge, $24,808 was charged to
cost of sales and $14,914 was charged to selling, informational, and
administrative expenses in the consolidated statement of income.
The charge to cost of sales includes $19,349 for inventory write-downs and
disposals relating to the restructuring of the Company's remanufactured
equipment business as well as improvements to production flows and facility
restructurings to align with revised strategic plans. The charge to cost of
sales also includes $5,459 for closing the Company's sterility assurance
production operations in North Carolina, which will be consolidated into a
dedicated facility in Mentor, Ohio. Costs to close the facility include write-
downs in inventory, lease termination costs, severance, property abandonment
and other miscellaneous costs. The Company expects to complete the
consolidation by July 31, 2000.
The charge to selling, informational and administrative expenses includes
$10,373 related to plans for implementing specific improvements to
manufacturing and administrative support functions, primarily related to
severance costs. The remaining $4,540 of charges relates to accounts
receivable management initiatives including implementation of a new program to
enhance the collection of receivables and the write-off of certain aged
smaller balance accounts.
Fiscal 1998 Sale of Assets
During the second quarter of fiscal 1998, STERIS completed the sale of the
assets of its Management Services Division to General Electric Medical
Systems, a business of General Electric Company. The transaction did not
result in a material income statement effect. The transaction included
tangible and intangible assets relating to the business, and costs included
impairment of redundant assets and transaction related costs.
J. 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 presently
maintains product liability insurance coverage in amounts and with deductibles
that it believes are prudent.
27
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In December 1999, STERIS received a warning letter from the FDA in
connection with the FDA's inspection of STERIS's manufacturing facility in
Mentor, Ohio. Since the inspection and receipt of the warning letter, STERIS
has been working diligently to resolve the FDA's concerns. STERIS submitted a
timely formal response to the warning letter and has continued to communicate
with the FDA both in writing and orally with respect to this matter. The
Company will continue to cooperate with the FDA to reach a final resolution of
all concerns. Although no assurance can be given regarding further actions by
the FDA or the timing of any such final resolution, management believes this
matter will not have a material adverse effect on STERIS's financial
condition, results of operations, or cash flow.
K. 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>
Years Ended March 31
--------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Net revenues
United States................................... $633,295 $649,990 $582,644
Non-United States............................... 127,331 147,621 137,012
-------- -------- --------
Consolidated net revenues........................ $760,626 $797,611 $719,656
======== ======== ========
Long-lived assets
United States................................... $289,091 $245,447 $192,538
Non-United States............................... 21,025 18,901 15,773
-------- -------- --------
Consolidated long-lived assets................... $310,116 $264,348 $208,311
======== ======== ========
</TABLE>
Long-lived assets are those assets that are identified with the operations
in each geographic area. Revenues are based on the location of these
operations and their Customers. Revenues to a single Customer did not
aggregate 2 percent or more of total revenues. Revenues by principal market
are as follows:
<TABLE>
<CAPTION>
Years Ended March 31
--------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Health Care...................................... $557,686 $597,146 $547,809
Scientific and Industrial........................ 202,940 200,465 171,847
-------- -------- --------
Total............................................ $760,626 $797,611 $719,656
======== ======== ========
</TABLE>
L. Common Shares
Basic earnings per share is based on average Common Shares outstanding.
Diluted earnings per share includes the dilutive effect of stock options.
Incremental Common Share equivalents are calculated for each measurement using
the treasury stock method. The following is a summary of Common Shares and
Common Share equivalents outstanding used in the calculations of earnings per
share:
<TABLE>
<CAPTION>
Years Ended March 31
--------------------
(in thousands)
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Weighted average Common Shares outstanding -- basic... 67,489 68,200 67,898
Dilutive effect of stock options...................... 1,078 2,392 2,326
------ ------ ------
Weighted average Common Shares and equivalents --
diluted............................................. 68,567 70,592 70,224
====== ====== ======
</TABLE>
28
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
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 accounts for stock based
compensation under the provisions of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" and accordingly recognizes no
compensation expense when the exercise price equals the market price of the
stock on the date of grant.
Following is a summary of option share information.
<TABLE>
<CAPTION>
Beginning
of year Granted Exercised Canceled End of year
--------- --------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Fiscal 2000
Option Shares............ 6,573,104 1,494,920 (1,010,273) (443,403) 6,614,348
Average Price............ $13.07 $11.49 $4.21 $25.15 $13.25
Fair Value............... $6.17
Fiscal 1999
Option Shares............ 6,228,596 1,162,604 (630,937) (187,159) 6,573,104
Average Price............ $9.52 $30.40 $8.70 $16.96 $13.07
Fair Value............... $14.24
Fiscal 1998
Option Shares............ 5,922,772 1,196,404 (652,242) (238,338) 6,228,596
Average Price............ $8.31 $19.06 $10.10 $25.47 $9.52
Fair Value............... $9.14
</TABLE>
An executive officer of the Company has an outstanding balance on a loan
originally made during fiscal year 1997 in connection with the exercise of
373,000 options by the executive officer. As of March 31, 2000 and 1999, the
outstanding balance was $2,644 and $2,501, respectively. The loan is evidenced
by a full recourse promissory note which bears interest at the rate of 5.7%
per annum, and is repayable in a lump sum on or before February 28, 2002. The
executive officer subsequently entered into an employment agreement with the
Company which provides, among other things, that if the executive officer
observes all obligations thereunder through February 28, 2002, the loan and
all accrued interest thereon will be forgiven by the Company. In addition, the
employment agreement provides the executive officer with the right to put up
to 600,000 of the Company's common shares to the Company at any time between
July 21, 2001 and February 28, 2002 at a purchase price of $15.00 per share in
cash. Compensation expense of $2,850 was recognized based on market value as
of March 31, 2000.
Shares available for future grants were 3,762,146 at March 31, 2000. At
March 31, 2000, the range and weighted average per share exercise prices of
options outstanding and exercisable, and the weighted average remaining
contractual life (years), was as follows:
<TABLE>
<CAPTION>
Outstanding Exercisable
--------------------------- ------------------
Weighted Weighted
Average Contract Average
Option Exercise Life Option Exercise
Range of Exercise Prices Shares Price (Years) Shares Price
------------------------ --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$ 0.48 - $ 5.49............. 1,668,015 $ 2.80 2.4 1,668,015 $ 2.80
$ 5.50 - $10.99............. 1,640,638 9.46 8.5 408,634 8.78
$11.00 - $17.99............. 1,359,578 13.56 6.5 997,078 13.57
$18.00 - $30.66............. 1,946,117 25.18 7.6 905,116 23.61
--------- ------ --- --------- ------
6,614,348 $13.25 6.3 3,978,843 $10.85
========= ====== === ========= ======
</TABLE>
29
<PAGE>
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
At March 31, 1999, options with an average exercise price of $7.46 were
exercisable on 4,107,099 shares; at March 31, 1998, options with an average
exercise price of $5.90 were exercisable on 3,761,000 shares.
Had the compensation cost for the stock options granted in fiscal 2000,
1999, and 1998 been determined based on the value at the grant date consistent
with the Financial Accounting Standards Board's fair value method, the
Company's net earnings and earnings per share would have been reduced by
$4,629 ($.07 per share) in fiscal 2000, $5,104 ($.07 per share) in fiscal
1999, and $3,197 ($.05 per share) in fiscal 1998. Fair value was estimated at
the date of grant using the Black-Scholes option pricing model and the
following weighted-average assumptions for fiscal 2000, 1999, and 1998: risk-
free interest rate of 6.1%; dividend yield of 0%; expected volatility of 45%;
and an expected option life of 5 years.
On January 30, 1997, the Company announced that its Board of Directors had
authorized the periodic repurchase of up to six million STERIS Common Shares
in the open market. As of March 31, 2000, the Company had repurchased
3,740,100 STERIS Common Shares.
Under a Shareholder Rights Agreement, one Common Share purchase Right is
attached to each outstanding Common Share. Each Right is exercisable only if a
person or group acquires 15% or more of the outstanding Common Shares. If the
Rights become exercisable, each Right will entitle the holder (other than the
acquiring person or group) to acquire one Common Share for an exercise price
of $.50 per share. The Rights will expire on November 7, 2006, unless redeemed
earlier at one half cent per Right.
M. Quarterly Data (Unaudited)
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------------------
March 31 December 31 September 30 June 30
-------- ----------- ------------ --------
<S> <C> <C> <C> <C>
Fiscal 2000
Net revenues..................... $190,092 $195,119 $198,602 $176,813
Gross profit..................... 55,731 87,081 90,601 82,012
Percentage of revenues........... 29% 45% 46% 46%
Net income (loss)................ $(24,193) $ 10,935 $ 14,408 $ 9,335
======== ======== ======== ========
Net income (loss) per share --
basic.......................... $ (0.36) $ 0.16 $ 0.21 $ 0.14
======== ======== ======== ========
Net income (loss) per share --
diluted........................ $ (0.36) $ 0.16 $ 0.21 $ 0.14
======== ======== ======== ========
Fiscal 1999
Net revenues..................... $226,917 $205,794 $191,125 $173,775
Gross profit..................... 101,239 96,534 89,504 81,314
Percentage of revenues........... 45% 47% 47% 47%
Net income....................... $ 28,763 $ 22,975 $ 18,771 $ 14,345
======== ======== ======== ========
Net income per share -- basic.... $ 0.42 $ 0.34 $ 0.27 $ 0.21
======== ======== ======== ========
Net income per share -- diluted.. $ 0.41 $ 0.33 $ 0.27 $ 0.20
======== ======== ======== ========
</TABLE>
Refer to Note I regarding a fourth-quarter fiscal 2000 charge.
Refer to Note G regarding a reduction of income tax accruals.
30
<PAGE>
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 Costs Charges Balance at
Beginning and to Other Deductions End of
Description of Period Expenses Accounts (1) Period
----------- --------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 2000
Deducted from asset
accounts:
Allowance for doubtful
accounts.................. $6,000 $3,034 $ 0 $2,987 $6,047
====== ====== ==== ====== ======
Year ended March 31, 1999
Deducted from asset
accounts:
Allowance for doubtful
accounts.................. $6,780 $ 379 $500 $1,659 $6,000
====== ====== ==== ====== ======
Year ended March 31, 1998
Deducted from asset
accounts:
Allowance for doubtful
accounts.................. $3,810 $3,561 $ 0 $ 591 $6,780
====== ====== ==== ====== ======
</TABLE>
--------
(1) 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 22, 2000.
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 22, 2000.
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 22, 2000.
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 22, 2000.
31
<PAGE>
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, 2000 and 1999.
Consolidated Statements of Income -- Years ended March 31, 2000, 1999,
and 1998.
Consolidated Statements of Cash Flows -- Years ended March 31, 2000,
1999, and 1998.
Consolidated Statements of Shareholders' Equity -- Years ended March
31, 2000, 1999, and 1998.
Notes to Consolidated Financial Statements -- Years Ended March 31,
2000 and 1999.
(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, as
amended on May 14, 1996, November 6, 1996, and August 6, 1998.
3.2 1992 Amended Regulations of STERIS Corporation (filed as Exhibit 3.2
to Form 10-K filed for the fiscal year ended March 31, 1998, and
incorporated herein by reference).
4.1 Specimen Form of Common Stock Certificate.
4.2 Amended and Restated Rights Agreement, dated as of January 21, 1999,
between STERIS Corporation and National City Bank, as successor Rights
Agent (filed as Exhibit 4.2 to the Registration Statement on Form 8-A
filed April 16, 1999, 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
(filed as Exhibit 10.3 to Form 10-K filed for the fiscal year ended
March 31, 1997, and incorporated herein by reference).*
10.4 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).*
10.5 Form of grant of Incentive Stock Option under Amsco International,
Inc. Stock Option Plan (filed as Exhibit 10.6 to Form 10-K filed for
the fiscal year ended March 31, 1997, and incorporated herein by
reference).*
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.6 Form of grant of Non-Qualified Stock Option under the Amsco
International, Inc. Stock Option Plan (filed as Exhibit 10.7 to Form
10-K filed for the fiscal year ended March 31, 1997, and incorporated
herein by reference).*
10.7 STERIS Corporation 1997 Stock Option Plan (filed as Exhibit 10.14 to
Form 10-K filed for the fiscal year ended March 31, 1998, and
incorporated herein by reference).*
10.8 STERIS Corporation 1998 Long-Term Incentive Stock Plan (filed as
Exhibit 10.8 to Form 10-K for the fiscal year ended March 31, 1999,
and incorporated herein by reference).*
10.9 Credit Agreement, dated January 26, 1999, among STERIS Corporation,
various financial institutions and KeyBank National Association, as
Agent (filed as Exhibit 10.1 to Form 10-Q filed for the quarter ended
December 31, 1998, and incorporated herein by reference).
10.10 First Amendment Agreement, dated January 25, 2000, among STERIS
Corporation, various financial institutions and KeyBank National
Association, as Agent (filed as Exhibit 10.1 to Form 10-Q filed for
the quarter ended December 31, 1999, and incorporated herein by
reference).
10.11 Assignment and Acceptance Agreement, dated January 24, 2000, between
The Bank of New York, as Assignor, and KeyBank National Association,
as Assignee (filed as Exhibit 10.2 to Form 10-Q filed for the quarter
ended December 31, 1999, and incorporated herein by reference).
10.12 Tranche B Note, dated January 24, 2000, between STERIS Corporation and
KeyBank National Association (filed as Exhibit 10.3 to Form 10-Q filed
for the quarter ended December 31, 1999, and incorporated herein by
reference).
10.13 Management Incentive Compensation Plan FY 2000.*
10.14 Management Incentive Compensation Plan (first effective in fiscal year
2001).*
10.15 Senior Executive Management Incentive Compensation Plan (filed as
Exhibit 10.11 to Form 10-K for the fiscal year ended March 31, 1999,
and incorporated herein by reference).*
10.16 Promissory Note (filed as Exhibit 10.12 to Form 10-K filed for the
fiscal year ended March 31, 1998, and incorporated herein by
reference).
10.17 Change of Control Agreement between STERIS Corporation and Mr. Sanford
(filed as Exhibit 10.1 to Form 10-Q filed for the quarter ended June
30, 1999, and incorporated herein by reference).*
10.18 Change of Control Agreement between STERIS Corporation and Mr.
Vinney.*
10.19 Form of Change of Control Agreement between STERIS Corporation and the
executive officers of STERIS Corporation other than Messrs. Sanford
and Vinney (filed as Exhibit 10.2 to Form 10-Q filed for the quarter
ended June 30, 1999, and incorporated herein by reference).*
10.20 Employment Agreement between STERIS Corporation and Mr. Sanford.*
10.21 Employment Agreement between STERIS Corporation and Mr. Vinney.*
10.22 Letter Agreement between STERIS Corporation and Mr. Keresman.*
10.23 Letter Agreement between STERIS Corporation and Mr. Magulski.*
10.24 Credit Agreement, dated June 19, 2000, among STERIS Corporation,
various financial institutions and KeyBank National Association, as
Agent.
21.1 Subsidiaries of STERIS Corporation.
23.1 Consent of Independent Auditors.
24.1 Power of Attorney.
27.1 Financial Data Schedules.
</TABLE>
--------
* A management contract or compensatory plan or arrangement required to be
filed as an exhibit hereto.
33
<PAGE>
STERIS or its subsidiaries are parties to several indentures relating to
long-term debt instruments, which, individually or in the aggregate, do not
exceed 10% of the total assets of STERIS and its subsidiaries on a
consolidated basis. STERIS will furnish a copy of any such indenture to the
Securities and Exchange Commission upon request.
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed by STERIS during the fourth
quarter of fiscal 2000.
(c) Exhibits
The response to this portion of item 14 is submitted as a separate section
of this report.
(d) Financial Statement schedules
The response to this portion of item 14 is submitted as a separate section
of this report.
34
<PAGE>
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/ Laurie Brlas
_____________________________________
Laurie Brlas
Senior Vice President and
Chief Financial Officer
June 22, 2000
Pursuant to the requirements 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 and Chief Executive
Officer; LES C. VINNEY, President, Chief Operating Officer, and Director;
LAURIE BRLAS, Senior Vice President and Chief Financial Officer; RAYMOND A.
LANCASTER, Director; J.B. RICHEY, Director; JERRY E. ROBERTSON, Director;
FRANK E. SAMUEL, JR., Director; and LOYAL W. WILSON, Director.
STERIS Corporation
(Registrant)
/s/ David C. Dvorak
_____________________________________
David C. Dvorak
Attorney-in-Fact
June 22, 2000
35
