1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 11-K Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934 For the Twelve-Month Period Ended December 31, 1998 Commission File No. 0-20165 A. Full title of the plan and the address of the plan if different from that of the issuer named below: STERIS Corporation 401(k) Plan and Trust B. Name of issuer of securities held pursuant to the plan and the address of its principal executive office: STERIS Corporation 5960 Heisley Road Mentor, Ohio 44060
2 Audited Financial Statements and Supplemental Schedules STERIS CORPORATION 401(k) PLAN AND TRUST December 31, 1998 and 1997 Plan Sponsor STERIS CORPORATION 5960 Heisley Road Mentor, Ohio 44060 Plan Administrator STERIS CORPORATION 5960 Heisley Road Mentor, Ohio 44060
3 STERIS Corporation 401(k) Plan and Trust Audited Financial Statements and Supplemental Schedules December 31, 1998 and 1997 CONTENTS REQUIRED INFORMATION Report of Independent Auditors............................................. 1 FINANCIAL STATEMENTS PROVIDED Statements of Net Assets Available for Benefits, with Fund Information as of December 31, 1998 and 1997........................... 2 Statement of Changes in Net Assets Available for Benefits, with Fund Information for the year ended December 31, 1998............. 4 Notes to Financial Statements--December 31, 1998 and 1997.................. 5 SUPPLEMENTAL SCHEDULES Line 27(a)--Schedule of Assets Held for Investment Purposes................ 10 Line 27(d)--Schedule of Reportable Transactions............................ 11 EXHIBITS Exhibit 23--Consent of Independent Auditors................................ 12
4 Report of Independent Auditors Board of Directors STERIS Corporation Mentor, Ohio We have audited the accompanying financial statements of STERIS Corporation 401(k) Plan and Trust (the "Plan") as of December 31, 1998 and 1997, and for the year ended December 31, 1998, as listed in the table of contents. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 1998 and 1997, and the changes in its net assets available for benefits for the year ended December 31, 1998, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of December 31, 1998, and reportable transactions for the year then ended, are presented for purpose of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's management. The Fund Information in the statements of net assets available for benefits and the statement of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The supplemental schedules and Fund Information have been subjected to auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated, in all material respects in relation to the financial statements taken as a whole. June 23, 1999 1
5 STERIS Corporation 401(k) Plan and Trust Statement of Net Assets Available for Benefits, with Fund Information December 31, 1998 Victory Victory Victory Investment Stock Balanced Quality EB Magic Index Fund Fund Bond Fund Fund ------------------------------------------------------------------ ASSETS Investments, at contract value $ 4,357,220 Investments, at fair value: STERIS Corporation common shares Mutual funds $ 49,467,063 $ 43,263,854 $ 3,170,901 Common/collective trusts 7,941,067 Participant loans receivable Other investments ------------------------------------------------------------------ Total investments 49,467,063 43,263,854 3,170,901 12,298,287 Receivables: Employer contributions 293,554 141,040 28,850 110,653 Accrued income 28,995 Other 27,139 ------------------------------------------------------------------ Total receivables 320,693 141,040 28,850 139,648 ------------------------------------------------------------------ Total assets 49,787,756 43,404,894 3,199,751 12,437,935 LIABILITIES Accrued purchase of investments 21,996 20,419 18,466 ------------------------------------------------------------------ NET ASSETS AVAILABLE FOR BENEFITS $ 49,787,756 $ 43,382,898 $ 3,179,332 $ 12,419,469 ================================================================== STERIS Stock Participant Fund Loans Total ------------------------------------------------ ASSETS Investments, at contract value $ 4,357,220 Investments, at fair value: STERIS Corporation common shares $ 40,551,792 40,551,792 Mutual funds 95,901,818 Common/collective trusts 7,941,067 Participant loans receivable $ 3,460,489 3,460,489 Other investments 32,027 32,027 ------------------------------------------------ Total investments 40,583,819 3,460,489 152,244,413 Receivables: Employer contributions 174,297 748,394 Accrued income 450 227 29,672 Other 81,647 108,786 ------------------------------------------------ Total receivables 256,394 227 886,852 ------------------------------------------------ Total assets 40,840,213 3,460,716 153,131,265 LIABILITIES Accrued purchase of investments 60,881 ------------------------------------------------ NET ASSETS AVAILABLE FOR BENEFITS $ 40,840,213 $ 3,460,716 $ 153,070,384 ================================================ See notes to financial statements. 2
6 STERIS Corporation 401(k) Plan and Trust Statement of Net Assets Available for Benefits, with Fund Information December 31, 1997 Victory Victory Victory Investment STERIS Stock Balanced Quality EB Magic Stock Participant Index Fund Fund Bond Fund Fund Fund Loans Total ----------------------------------------------------------------------------------------------- ASSETS Investments at contract value $ 4,005,365 $ 4,005,365 Investments at fair value: STERIS Corporation common shares $ 8,507,199 8,507,199 Mutual funds $ 30,567,888 $ 11,791,413 $ 875,750 43,235,051 Common/collective trusts 4,260,448 4,260,448 Participant loans receivable $ 1,787,987 1,787,987 Other investments 5,246 5,246 ----------------------------------------------------------------------------------------------- Total investments 30,567,888 11,791,413 875,750 8,265,813 8,512,445 1,787,987 61,801,296 Receivables: Employer contributions 266,355 114,551 26,069 123,834 149,141 679,950 Participant contributions 116,912 48,290 10,158 47,941 56,358 279,659 Accrued income 4 2 38,377 338 38,721 Other 10,202 10,202 ----------------------------------------------------------------------------------------------- Total receivables 383,271 162,843 36,227 220,354 205,837 1,008,532 ----------------------------------------------------------------------------------------------- Total assets 30,951,159 11,954,256 911,977 8,486,167 8,718,282 1,787,987 62,809,828 LIABILITIES Accrued purchase of investments 154,271 88,979 10,736 253,986 NET TRANSFERS PENDING (37,360) (40,689) (578) 58,143 (2,033) 22,517 0 ----------------------------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR BENEFITS $ 30,834,248 $ 11,905,966 $ 901,819 $ 8,428,024 $ 8,720,315 $ 1,765,470 $ 62,555,842 =============================================================================================== See notes to financial statements. 3
7 STERIS Corporation 401(k) Plan and Trust Statement of Changes in Net Assets Available for Benefits, with Fund Information For the Year Ended December 31, 1998 Victory Victory Victory Investment STERIS Stock Balanced Quality EB Magic Stock Participant Index Fund Fund Bond Fund Fund Fund Loans Total ---------------------------------------------------------------------------------------------- ADDITIONS Investment income: Net appreciation in fair value of investments $ 4,421,152 $ 2,002,431 $ 31,652 $ 325,711 $ 8,031,908 $ 14,812,854 Interest and dividends 4,848,006 3,348,803 107,827 331,255 21,716 $ 198,718 8,856,325 Other receipts 314,743 314,743 --------------------------------------------------------------------------------------------- 9,269,158 5,351,234 139,479 656,966 8,053,624 513,461 23,983,922 Contributions: Participants 3,805,384 1,641,108 374,065 1,282,025 1,961,785 9,064,367 Employer 1,212,391 545,297 121,292 456,862 678,218 3,014,060 --------------------------------------------------------------------------------------------- 5,017,775 2,186,405 495,357 1,738,887 2,640,003 12,078,427 --------------------------------------------------------------------------------------------- Total additions 14,286,933 7,537,639 634,836 2,395,853 10,693,627 513,461 36,062,349 DEDUCTIONS Benefits paid to participants (3,122,252) (4,300,439) (148,452) (1,573,821) (3,789,555) (208,434) (13,142,953) Administrative expenses (34,634) (7,364) (208) (411) (81,397) (124,014) --------------------------------------------------------------------------------------------- Total deductions (3,156,886) (4,307,803) (148,660) (1,574,232) (3,870,952) (208,434) (13,266,967) --------------------------------------------------------------------------------------------- Net increase prior to transfers 11,130,047 3,229,836 486,176 821,621 6,822,675 305,027 22,795,382 Transfers from ERA Plan 32,508,318 32,080,317 64,588,635 Transfers from Isomedix 401(k) Plan 1,957,407 311,112 65,308 367,698 429,000 3,130,525 Transfers from (to) other funds 5,866,054 (4,572,334) 1,726,029 2,802,126 (7,212,094) 1,390,219 --------------------------------------------------------------------------------------------- Net increase 18,953,508 31,476,932 2,277,513 3,991,445 32,119,898 1,695,246 90,514,542 Net assets available for benefits at beginning of year 30,834,248 11,905,966 901,819 8,428,024 8,720,315 1,765,470 62,555,842 --------------------------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 49,787,756 $ 43,382,898 $ 3,179,332 $ 12,419,469 $ 40,840,213 $ 3,460,716 $ 153,070,384 ============================================================================================== See notes to financial statements. 4
8 STERIS Corporation 401(k) Plan and Trust Notes to Financial Statements December 31, 1998 and 1997 A. DESCRIPTION OF THE PLAN The following brief description of the STERIS Corporation 401(k) Plan and Trust (the "Plan") is provided for general information purposes only. Participants should refer to the Plan document for complete information regarding the Plan's definitions, benefits, eligibility, and other matters. GENERAL The Plan, which became effective April 1, 1992, is a contributory plan available to all domestic employees of STERIS Corporation (the "Company" or "STERIS") who have completed three months of service and have attained the age of 18 (21 prior to June 30, 1996). Employee participation in the Plan is voluntary and enrollment in the Plan is permitted on the first day of each January, April, July, and October (an "Entry Date"). The Plan is subject to certain provisions of the Employee Retirement Income Security Act of 1974 ("ERISA") and the Internal Revenue Code. Effective January 1, 1998, the Isomedix Inc. Employee Savings and Protection Plan (the "Isomedix Plan") and the AMSCO Employees' Retirement Account (the "ERA Plan") were merged into the Plan. Also on January 1, 1998, or shortly thereafter, the equity of all participants and beneficiaries in the Isomedix Plan and the ERA Plan as of the date of the merger were transferred to the Plan. CONTRIBUTIONS A participant is permitted to contribute not less than 1 percent and not more than 10 percent of his/her compensation received during a calendar year. All contributions made by a participant must be "before-tax" deferred compensation contributions. 5
9 STERIS Corporation 401(k) Plan and Trust Notes to Financial Statements--Continued A. DESCRIPTION OF THE PLAN--CONTINUED The Company may make matching discretionary contributions to a participant's account. The level of matching contributions is determined quarterly by the Company. Employer contributions are allocated to each participant's account in accordance with the investment election choices made by the participant. For the year ended December 31, 1998, the Company made a 50% matching contribution in cash on employee contributions on the first 6% of eligible participant compensation. Participants are fully vested in Company matching contributions at such time as the contribution is made. PARTICIPANT ACCOUNTS Each participant may direct their contributions to be invested in 5 percent increments in any combination of the following investment options: EB Magic Fund, Victory Stock Index Fund, Victory Balanced Fund, Victory Investment Quality Bond Fund or STERIS Corporation common stock. The allocation of a participant's contributions to these investment funds is selected by the participant and may be changed at any time. A participant may elect to have a portion or all of the balance of his prior contributions (in increments of 5 percent) transferred from any fund in which it is invested to any other fund. Separate accounts are maintained for each participant showing each type of contribution and the interest of each participant in the various funds. The fund provides participants the opportunity to apply for a loan up to 50% of that participants balance, not to exceed $50,000. At December 31, 1998 and 1997, no amounts had been allocated to participants who have withdrawn from the Plan. VESTING AND PAYMENT OF BENEFITS Participant contributions, with all earnings and appreciation thereon, are fully vested at all times. A participant whose employment terminates due to death or retirement (including retirement on account of total and permanent disability) or for reasons other than death or retirement will be eligible for a distribution equal to the full amount of the separate accounts attributable to their participant contributions. 6
10 STERIS Corporation 401(k) Plan and Trust Notes to Financial Statements--Continued A. DESCRIPTION OF THE PLAN--CONTINUED The Company, by action of its Board of Directors and without approval of its shareholders, has the right to amend, suspend, or terminate the Plan in its entirety. If the Plan is terminated, all amounts credited to a participant's account will be paid to such participant as directed by the Company. PLAN EXPENSES Costs incident to the purchase and sale of securities, such as brokerage commissions and stock transfer taxes, are paid by the respective funds. All other general and administrative expenses incurred in the administration of the Plan are charged against the respective funds, unless the employer elects to pay such amounts. The employer has elected to pay audit fees only. B. SIGNIFICANT ACCOUNTING POLICIES Investments in the EB Magic Fund are stated at fair value as determined by the trustee based on the underlying investments held in the fund. Also, included in the EB Magic Fund at December 31, 1998 are two fully benefit responsive guaranteed investment contracts. These contracts are carried at contract value which approximates fair value. The average yield and crediting interest rate for the year ended December 31, 1998 was 8.15%. Interest rates are fixed. All contracts mature in 1999. All other investments are stated at fair value as measured by quoted prices in active markets. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform with current year reporting. C. TRANSACTIONS WITH PARTIES-IN-INTEREST Party-in-interest transactions include the investment in the special funds of the trustee and the payment of administrative expenses. The Plan purchased shares of common stock of the Company for $6,082,916 and sold shares of common stock of the Company for $12,994,790 during the year ended December 31, 1998. 7
11 STERIS Corporation 401(k) Plan and Trust Notes to Financial Statements--Continued D. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated November 23, 1992, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the "Code") and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Sponsor has indicated that it will take the necessary steps, if any, to maintain the Plan's qualified status. E. INVESTMENTS The Plan's investments are held by a bank administered trust fund and are presented in the following table: Cost Fair Value ------------------------------ December 31, 1998: Collective Investment Trusts of KeyBank National Association: *Employee Benefits Money Market Fund $ 32,027 $ 32,027 *EB Magic Fund 7,585,348 **7,941,067 Mutual Funds: *Victory Stock Index Fund 40,094,467 **49,467,063 *Victory Balanced Fund 40,699,295 **43,263,854 *Victory Investment Quality Bond Fund 3,130,764 **3,170,901 *STERIS Corporation common stock 32,651,084 **40,551,792 Guaranteed investment contracts 4,357,220 **4,357,220 Participant loans **3,460,489 ------------------------------ $ 128,550,205 $ 152,244,413 ============================== December 31, 1997: Collective Investment Trusts of KeyBank National Association: *Employee Benefits Money Market Fund $ 5,246 $ 5,246 *EB Magic Fund 4,103,332 **4,260,448 Mutual Funds: *Victory Stock Index Fund 24,642,217 **30,567,888 *Victory Balanced Fund 10,658,814 **11,791,413 *Victory Investment Quality Bond Fund 859,272 875,750 *STERIS Corporation common stock 5,086,037 **8,507,199 Guaranteed investment contracts 4,005,365 **4,005,365 Participant loans **1,787,987 ------------------------------ $ 49,360,283 $ 61,801,296 ============================== * Party-in-interest ** Investment representing five percent or more of the Plan's net assets available for benefits at December 31, 1998 and 1997, respectively. 8
12 STERIS Corporation 401(k) Plan and Trust Notes to Financial Statements--Continued F. YEAR 2000 ISSUE (UNAUDITED) STERIS Corporation has developed a plan to modify its internal information technology to be ready for the year 2000 and has begun converting critical data processing systems. The project also includes determining whether third party service providers have reasonable plans in place to become year 2000 compliant. STERIS Corporation currently expects the project to be substantially complete by mid-year 1999. STERIS Corporation does not expect this project to have a significant effect on plan operations. 9
13 STERIS Corporation 401(k) Plan and Trust Line 27(a)--Schedule of Assets Held for Investment Purposes Employee Identification Number--34-1482024 Plan Number--001 December 31, 1998 Cost Fair Value -------------------------------- Collective Investment Trusts of KeyBank National Association: *Employee Benefits Money Market Fund $ 32,027 $ 32,027 *EB Magic Fund 7,585,348 7,941,067 Mutual Funds of KeyBank National Association: *Victory Stock Index Fund 40,094,467 49,467,063 *Victory Balanced Fund 40,699,295 43,263,854 *Victory Investment Quality Bond Fund 3,130,764 3,170,901 *STERIS Corporation common stock 32,651,084 40,551,792 Guaranteed investment contracts 4,357,220 4,357,220 Participant loans (interest rates ranging from 8.75% to 10.75%) 3,460,489 ------------------------------- $ 128,550,205 $ 152,244,413 =============================== * Party-in-interest 10
14 STERIS Corporation 401(k) Plan and Trust Line 27(d)--Schedule of Reportable Transactions Employee Identification Number--34-1482024 Plan Number--001 For the Year Ended December 31, 1998 Current Value of Asset on Net Number of Purchase Selling Cost of Transaction Gain or Transactions Description of Asset Price Price Asset Date (Loss) - ------------------------------------------------------------------------------------------------------------------------- CATEGORY (I) INDIVIDUAL TRANSACTION IN EXCESS OF 5% OR PLAN ASSETS 1 *Victory Stock Index $ 3,896,323 $ 3,896,323 $ 3,896,323 CATEGORY (III) SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS 122 *EB Magic fund $ 6,381,991 $ 6,381,991 $ 6,381,991 100 $ 3,027,083 2,899,980 3,027,083 $ 127,103 180 *EB Money Market Fund 11,659,313 11,659,313 11,659,313 178 11,632,532 11,632,532 11,632,532 142 *STERIS Corporation Common 6,082,916 6,082,916 6,082,916 128 Stock 12,994,790 9,701,685 12,994,790 3,293,105 147 *Victory Investment 2,787,358 2,787,358 2,787,358 55 Quality Bond Fund 523,859 515,868 523,859 7,991 158 *Victory Stock Index 19,770,854 19,770,854 19,770,854 87 Fund 5,292,832 4,315,909 5,292,832 976,923 105 *Victory Balance 6,566,617 6,566,617 6,566,617 138 Fund 9,604,925 9,052,181 9,604,925 552,744 32 Participant Loans 2,392,595 2,392,595 2,392,595 128 806,360 806,360 806,360 There were no category (ii) or (iv) reportable transactions during the year ended December 31, 1998. *Party-in-interest 11
15 SIGNATURES THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Plan has duly caused this annual report to be signed on their behalf by the undersigned hereunto duly authorized. STERIS Corporation 401(k) Plan and Trust Dated: June 28, 1999 By: /s/ Laura L. Weien ----------------------------- Laura L. Weien Treasurer
1 Exhibit 23 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-55976) pertaining to the STERIS Corporation 401(k) Plan and Trust of our report dated June 23, 1999, with respect to the financial statements and schedules of the STERIS Corporation 401(k) Plan and Trust included in this Annual Report (Form 11-K) for the year ended December 31, 1998. /s/ Ernst & Young LLP June 23, 1999 Cleveland, Ohio