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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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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, 1998
COMMISSION FILE NUMBER 0-20165
STERIS CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 34-1482024
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5960 HEISLEY ROAD, 440-354-2600
MENTOR, OHIO 44060-1834 (Registrant's telephone number
(Address of principal executive offices) including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
COMMON SHARES, WITHOUT PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K in any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, computed by reference to the average of the bid and ask price of
such stock as of April 30, 1998: $1,984,025,891
The number of Common Shares outstanding as of April 30, 1998: 34,012,272
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1998 Annual Meeting -- Part III
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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 surgical support systems,
products, services, and technologies for healthcare, scientific, research, food,
and industrial Customers throughout the world. STERIS is focused on helping
Customers address today's trends in the healthcare and scientific industries.
The healthcare industry is changing rapidly due to the 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 healthcare delivery. These trends have expanded the demand for
rapid, safe, and efficient infection prevention systems for critical tasks such
as the sterile processing of devices and the handling, decontamination,
destruction, and disposal of potentially infectious biohazardous waste. In the
scientific industry, the market is expanding as pharmaceutical, biotech, medical
device, food, and other FDA-regulated manufacturers are under increasing
pressure to adhere to stricter guidelines for the validation and control of
their antimicrobial processes, as well as the trend towards global
standardization of protocols.
STERIS expanded its operations during fiscal 1998 with the acquisitions of
Isomedix Inc. ("Isomedix") and the assets of Joslyn Sterilizer Corporation
("Joslyn"). Isomedix is a leading North American provider of contract
sterilization and microbial reduction services for manufacturers and producers
of medical and non-medical products. Joslyn is a designer and manufacturer of
high quality, high performance sterile processing systems based upon widely
accepted steam and gas sterilization methodologies. Additionally, Joslyn is the
only U.S. manufacturer of Biological Indicator Evaluation Resistometer (BIER)
vessels used in the development and validation of sterilization methodologies
and process assurance indicators.
STERIS established a food safety business initiative to help Customers meet
the growing consumer demands for improved food safety. The irradiation services
of our Isomedix subsidiary recently gained media attention with the December
1997 approval by the FDA of the irradiation ("cold pasteurization") of red meat.
The increased emphasis on food safety, supported by the U.S. government's new
Food Safety Initiative, presents new business opportunities for STERIS because
of our extensive portfolio of antimicrobial technologies, systems, products, and
services.
The Company has approximately 4,500 Associates (employees) worldwide,
including 1,700 direct sales, service, and field support personnel. Customer
Support facilities are located in major global market centers with manufacturing
operations in the United States, Canada, Germany, and Finland.
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 consumables. The
Company has expanded from its original narrow product line to become a
multi-faceted global organization that
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serves healthcare, scientific, research, food, and industrial markets. Revenues
by principal market are as follows (in thousands):
YEARS ENDED MARCH 31
--------------------------------
1998 1997 1996*
-------- -------- --------
Infection Prevention....................................... $389,649 $320,664 $290,019
Surgical Support........................................... 158,160 128,502 112,400
Scientific and Industrial.................................. 123,106 101,442 101,124
Management Services........................................ 48,741 37,244 31,069
-------- -------- --------
Total...................................................... $719,656 $587,852 $534,612
======== ======== ========
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* Includes the combined results of STERIS and Amsco on a pooling-of-interests
basis.
Infection Prevention. Infection Prevention products are used by Customers
to significantly reduce or eliminate microbial contamination of surfaces with
which human contact might occur. The Company provides complete infection
prevention material processing systems 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 healthcare, scientific, industrial, and research settings through
process standardization, automatic monitoring and documentation, processing site
flexibility, and reduction in processing time.
A major product line is STERIS SYSTEM 1(R), a complete system for
just-in-time sterile processing at or near the site of patient care. SYSTEM 1
enables healthcare professionals to 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.
STERIS SYSTEM 1 consists of a tabletop microprocessor-controlled unit, a
patented, proprietary, single-use sterilant, and multiple adapter trays and
containers. Installation requirements are tap water, electricity, and a drain.
STERIS 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 15,000 SYSTEM 1 units for thousands of healthcare facilities, including
hospitals, medical centers, ambulatory facilities, and physician offices in
major markets throughout the world.
A fourth quarter highlight was the sale of over 1,000 STERIS SYSTEM 1
Sterile Processing Systems, the first time that quarterly sales exceeded the
1,000 unit volume level. Sales of STERIS 20 Sterilant Concentrate, the
proprietary consumable component of STERIS SYSTEM 1, continued to grow faster
than overall sales. We estimate that our Customers have now safely processed
more than 130 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
healthcare industry. The
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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, the Amsco(R) brand represents a leading choice in
infection prevention. Amsco brand 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.
A new line of sterilizers was internationally introduced to the market in
fiscal 1998. STERIS System 2S(TM) is a self-generating steam sterilizer that is
particularly well suited for the alternate healthcare and research laboratory
markets. The needs for the costly installation of steam lines and the purchase
of a separate steam generator are eliminated.
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 that are used to prevent the spread of infectious diseases and to
monitor sterilization and decontamination processes. FDA approval was received
this year for Prima-Kare(TM), a 0.75% CHG antimicrobial hand wash. STERIS
consumable products offer quality choices for infection prevention and
contamination control in the following categories: Instrument Cleaning and
Decontamination Systems; High Risk and Routine Skin Care Products; Hard Surface
Disinfectants; and Surgical Scrubs. STERIS quality assurance products used to
monitor sterilization processes include over 300 sterility assurance and
sterility maintenance products for the worldwide healthcare market, including:
Protective and Decontamination Packaging; Biological Monitoring Systems; Barrier
Wraps; Integrator/Indicator Monitoring Systems; and Record Keeping Systems.
Surgical Support. The Company's Surgical Support product line includes
general and specialty surgical tables, surgical and examination lights,
operating room (OR) storage cabinets, fluid waste management systems, warming
cabinets, scrub sinks, and other complementary products and accessories for
hospital and non-hospital ORs. The Company's versatile surgical table product
line includes powered and manual general surgical tables and an orthopedic
specialty table. A wide variety of general and specialty surgical procedures are
accommodated through the use of attachable accessories 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 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, and ambulatory surgery
suite. These lighting products combine optical performance with positioning
flexibility that accommodate the surface and cavity illumination needs of
virtually all types of surgical procedures. The Company's surgical lighting
products range from major surgical lights to minor examination lights. New to
the STERIS product line in fiscal 1998 is the Orbiter(R) line of ceiling
management products for the operating room and critical care markets.
The Company's surgical support product line includes SafeCycle(R) 40, a
self-contained, high volume fluid waste management system designed for the
collection, containment, transport, and safe disposal of potentially
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infectious fluid waste generated during surgical and diagnostic procedures. The
system eliminates the need for up to thirteen three-liter suction canisters
while significantly reducing the possibility of human exposure to biologically
contaminated fluids.
Scientific and Industrial. Scientific and Industrial contamination
prevention and control products and services are used in the pharmaceutical,
biotechnology, medical device, research, and industrial markets worldwide. These
products and services assist Customers in assuring sterility and other microbial
reduction processes according to worldwide regulatory and validation
requirements. The Company provides complete contamination prevention systems
including steam sterilization, electron-beam, gamma radiation, vaporized
hydrogen peroxide, and EO systems; high purity water systems and lyophilizers
(freeze drying systems); high level disinfection and surface decontamination
systems; and monitoring products.
High temperature sterilizers used by Scientific and Industrial Customers
range from standard table top and mid-sized units to large room-sized custom
installed units. The Company's line of low temperature infection control
equipment ranges from high level disinfectants to vaporized hydrogen peroxide
(VHP(R)) sterilizers. All of the Company's GMP (Good Manufacturing Practices)
products are designed in accordance with the latest U.S. Pharmacopeia XXIII and
European Pharmacopoeia 3rd Edition requirements. Demand for such equipment is
fueled by the level of scientific research and production, particularly in the
pharmaceutical and medical device industries.
Management Services. STERIS's Management Services group provides contract
sterilization and microbial reduction services to manufacturers of pre-packaged
products, including healthcare and consumer products. STERIS has a network of
eleven gamma facilities and five ethlyene oxide facilities (four of which are
combined gamma/ethylene oxide) in the United States and Canada. A new
electron-beam facility in Illinois began operations in fiscal 1999.
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. Prior to the sale, the Company provided
after-sale field service for a wide variety of clinical and scientific
equipment. STERIS is retaining its traditional service business related to
servicing the Company's products, including its service agreements with selected
original equipment manufacturers (OEMs).
MANUFACTURING
The Company manufactures, assembles, and packages products in Mentor, Ohio;
Erie, Pennsylvania; Montgomery, Alabama; Research Triangle Park, North Carolina;
St. Louis, Missouri; Cologne, Germany; Helsinki, Finland; and Quebec City,
Canada. Each of the production facilities focuses on particular processes and
products. Generally, infection prevention and scientific products are produced
in Mentor, Ohio; Erie, Pennsylvania; Quebec City, Canada; Cologne, Germany; and
Helsinki, Finland. Surgical support products are produced in Montgomery,
Alabama; specialty chemical products are produced in St. Louis, Missouri; and
quality assurance products are produced in Research Triangle Park, North
Carolina and Mentor, Ohio. All of the Company's equipment production facilities
throughout the world are ISO 9001 certified.
Raw materials, sub-assemblies, and other components essential to the
Company's business are readily available within the lead times specified 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
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certain financial information regarding the Company's international operations,
see Note L-Business Segment Information to the accompanying consolidated
financial statements on page 29 of this Form 10-K.
MARKETS AND METHODS OF DISTRIBUTION
STERIS has, as of March 31, 1998, over 950 direct field sales and service
representatives in North America. The representatives reside in metropolitan
market areas throughout the U.S. 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 one of the most important aspects 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 center.
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, 1998, approximately
14,000 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
subsidiaries or support personnel in Belgium, Canada, China, Costa Rica,
Finland, France, Germany, Hong Kong, Italy, Japan, Korea, Mexico, Singapore,
Spain, and the United Kingdom. STERIS has distribution agreements with medical
supply distributors in Australia, and various countries in Asia, Europe, and the
Middle East.
The Company believes that one of its strengths is its broad Customer base
with no single Customer accounting for more than two percent of sales during the
fiscal year ended March 31, 1998. Customers that are part of a buying group
generally make individual purchasing decisions and are invoiced directly by the
Company.
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 U.S. companies offering products
for general sterilization and disinfection. Skytron (division of KMW Group,
Inc.), Getinge/Castle, and Midmark are competitors in providing general surgical
tables. Berchtold Corporation, ALM Surgical Equipment, Inc., Heraeus Surgical,
Inc., and Skytron are competitors in the major surgery OR light market.
Competitors in sterility assurance products include Kimberly-Clark Corporation,
3M Healthcare, and Allegiance. Competitors in environmental and instrument
decontamination products include Getinge/Castle, EcoLabs/Huntington, and
Allegiance Healthcare Corporation. The Company's high risk and routine skin care
products compete against the products of EcoLabs/Huntington, Provon (Gojo), and
SaniFresh (Kimberly-Clark). Allegiance, Becton Dickinson, EcoLabs/Huntington,
and Purdue Frederick are competitors in providing surgical scrubs. Competitors
in the OEM service business are local and in-hospital service groups. In
contract sterilization, the Company primarily competes with Griffith
Biosciences, SteriGenics International, Inc., 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 United States Food and Drug
Administration ("FDA") has reclassified certain products from a Device II (which
require a 510K 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 U.S. 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, 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.
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Several smaller, early-stage companies are believed to be working with a
variety of other technologies and sterilizing agents, including microwave,
ozone, plasma, chlorine dioxide, peracids, and formaldehyde. In addition, a
number of companies have developed disposable medical instruments and other
devices designed to address the risk of contamination.
STERIS anticipates that it may face increased competition in the future as
new sterile processing, contamination control, and surgical support products 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 United States Food and Drug Administration ("FDA"), the United
States Environmental Protection Agency ("EPA"), the United States Nuclear
Regulatory Commission, and other governmental authorities. Similar regulatory
agencies exist in other countries with a wide variety of regulatory review
processes and procedures. The Company's products are also subject to review or
certification by various non-governmental certification authorities, including
Underwriter's Laboratories, Canadian Standards Association, ASME, and TUV/VDE
(Europe). Domestic and foreign government regulatory and certification
authorities may delay or prevent product introductions, require additional
studies or tests prior to product introduction, require product modifications or
recalls, or mandate cessation of production and marketing of existing products.
The cost of compliance with applicable regulations represents a considerable
expense, and significant changes in such regulations or their interpretation
could have a material adverse impact.
In the United States, the FDA regulates the introduction, manufacturing,
labeling, and record keeping procedures for medical devices and drugs, including
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 judgment. There is no assurance that
marketing clearances will be granted, that the FDA will agree or continue to
agree with all judgments made from time to time by the Company with respect to
whether or not marketing clearance is required for any particular new or
existing product, or that the FDA review will not involve delays that would
adversely affect the Company's ability to commercialize additional products or
applications for existing products. Similar approvals by comparable agencies are
required in most countries. Foreign regulatory requirements may vary widely from
country to country. The time required to obtain market clearance from a foreign
country may be longer or shorter than that required by the FDA or other
agencies, and clearance or approval or other product requirements may differ.
Even if regulatory clearances to market a product are obtained from the FDA
or comparable foreign agencies, these clearances may entail limitations on the
indicated uses of the product. Product clearances granted by the FDA or
comparable foreign agencies can also be withdrawn due to failure to comply with
regulatory standards or the occurrence of unforeseen problems following initial
approval. The FDA could also limit or prevent the manufacture or distribution of
the Company's products and has the power to require the recall of such products.
FDA regulations depend heavily on administrative interpretation and there can be
no assurance that future interpretations made by the FDA or other regulatory
bodies, with possible retroactive effect, will not adversely affect the Company.
Further, additional government regulation may be established that could prevent,
delay, or result in the rejection of regulatory clearance of the Company's
products. The effect of government regulation that may arise from future
legislation or administrative action cannot be predicted.
The FDA, various state agencies, and foreign regulatory agencies also have
the right to inspect the Company's facilities from time to time to determine
whether the Company is in compliance with various
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regulations relating to good manufacturing practices ("GMP Regulations"),
validation, testing, quality control, and product labeling. In complying with
GMP Regulations, manufacturers must continue to expend time, money, and effort
in the areas of production and quality control in order to ensure full technical
compliance.
Failure to comply with any applicable regulatory requirements could result
in sanctions being imposed on the Company, including warning letters,
injunctions, civil money penalties, failure of the FDA or comparable foreign
agencies to grant pre-market clearance or pre-market approval of medical
devices, product recalls, operating restrictions, and, in extreme cases,
criminal sanctions.
In addition, the Company is and may be subject to regulation under state,
federal, and foreign law regarding occupational safety, environmental
protection, and hazardous and toxic substance control, and to other present and
possible future local, state, federal, and foreign regulation. The gamma
radiation 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 all applicable regulatory requirements. The Company has received
all licenses and permits it believes necessary to conduct its current
sterilization business and believes that it will be able to obtain any permits
necessary for the future conduct of its sterilization business. The Company is
committed to maintaining compliance with all applicable FDA, EPA, and other
governmental laws, regulations and nongovernmental certification authorities.
EMPLOYEES
As of March 31, 1998, the Company employed approximately 4,500 Associates
(employees). Management considers its relations with its Associates to be good.
INTELLECTUAL PROPERTY AND RESEARCH AND DEVELOPMENT
The Company protects its technology and products by, among other means,
filing U.S. and foreign patent applications that it considers important to its
business. There can be no assurance, however, that any patent will provide
adequate protection for the technology or product it covers. In addition, the
process of obtaining and protecting patents can be long and expensive. The
Company also relies upon trade secrets, technical know-how, and continuing
technological innovation to develop and maintain its competitive position.
Research activities are important to the Company's business. The costs of
the Company's research activities relating to the discovery and development of
new products and the improvement of existing products amounted to $23.9 million,
$22.0 million, and $17.9 million in fiscal years 1998, 1997, and 1996,
respectively. These costs are charged directly to income in the year in which
incurred.
As of March 31, 1998, the Company held 198 U.S. patents and 321 foreign
patents with expiration dates ranging from 1998 to the year 2016. In addition,
the Company, as of March 31, 1998, had 96 U.S. patents and 211 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 739 trademark
registrations in the United States and in various foreign countries in which the
Company does business.
ITEM 2. PROPERTIES
At March 31, 1998, the Company operated 20 manufacturing, distribution, and
engineering facilities comprising approximately 2.0 million square feet.
Substantially all such facilities are owned. Sixteen of these sites are located
in the United States, with the others located in Canada, Finland, and Germany.
Management believes that its facilities are adequate for operations and are
maintained in good condition. At March 31, 1998, the Company leased or owned
sales, service and support offices in 14 countries. The Company is confident
that, if needed, it will be able to acquire additional facilities at
commercially reasonable rates.
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ITEM 3. LEGAL PROCEEDINGS
Reference is made to Note K-Contingencies to the accompanying consolidated
financial statements on page 29 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 1998 fiscal year.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the executive
officers of the Company.
NAME AGE POSITION
---- --- --------
Bill R. Sanford........................... 54 Chairman of the Board of Directors,
President, and Chief Executive Officer
J. Lloyd Breedlove........................ 50 Senior Vice President
Michael A. Keresman, III.................. 40 Senior Vice President and Chief Financial
Officer
David C. Dvorak........................... 34 Vice President, General Counsel, and
Secretary
Paul A. Zamecnik.......................... 38 Vice President
The following is a brief account of the business experience during the past
five years of each such executive officer:
BILL R. SANFORD serves as Chairman of the Board of Directors, President,
and Chief Executive Officer. He joined the Company April 1, 1987.
J. LLOYD BREEDLOVE serves as a Senior Vice President of the Company and
Group President of the Company's Customer Support Group. He joined the Company
as Executive Vice President in August 1991.
MICHAEL A. KERESMAN, III serves as a Senior Vice President and Chief
Financial Officer. He joined the Company in January 1988 as Director of Finance
and has held positions as Vice President of Finance, Vice President of Finance
and Administration, Vice President of Finance and Operations, Secretary, and
Vice President of Business Development.
DAVID C. DVORAK serves as Vice President, General Counsel, and Secretary.
He joined the Company in June 1996. Prior to joining the Company, Mr. Dvorak
served as an attorney with Thompson Hine & Flory LLP from 1994 to 1996, and with
Jones, Day, Reavis & Pogue from 1991 to 1994.
PAUL A. ZAMECNIK serves as Corporate Vice President and Group President of
the Product Systems Group. He joined the Company in July 1992 as Director of
Marketing and was appointed Vice President with responsibility for Regulatory
Affairs and Quality Systems in November 1993. He became Group President in
January 1997.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
MARKET INFORMATION AND DIVIDENDS
The Company's Common Shares are traded on the NASDAQ Stock Market under the
symbol "STRL." The following table sets forth, for the periods indicated, the
high and low sales prices for the Company's Common Shares as quoted by NASDAQ.
These prices do not include retail markups, markdowns, or commissions.
QUARTERS ENDED
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MARCH 31 DECEMBER 31 SEPTEMBER 30 JUNE 30
-------- ----------- ------------ -------
FISCAL 1998
High......................................... $61.00 $ 50.25 $ 44.13 $39.00
Low.......................................... 45.31 32.25 34.38 23.50
FISCAL 1997
High......................................... $43.38 $ 44.00 $ 36.00 $35.88
Low.......................................... 22.63 33.00 25.00 29.56
The Company has not paid any dividends on its Common Shares since its
inception and does not anticipate paying any such dividends in the foreseeable
future. The Company has entered into a credit agreement which includes
operational conditions and financial ratio covenants that, in certain
circumstances, could limit the Company's ability to pay dividends. The Company
currently intends to retain all of its earnings for the operation and expansion
of its businesses. At April 30, 1998, there were approximately 1,781 holders of
record of the Company's Common Shares.
ITEM 6. SELECTED FINANCIAL DATA
YEARS ENDED MARCH 31
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1998(1) 1997(1) 1996(2) 1995(2) 1994(2)
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONAL DATA:
Net revenue......................... $719,656 $587,852 $534,612 $545,752 $535,718
Gross profit........................ 324,558 231,845 202,701 204,824 208,595
Non-recurring expenses.............. 90,831 26,996 4,950
Income (loss) from operations....... 112,614 (6,487) 69,731 38,645 59,438
Income (loss) from continuing
operations........................ 65,496 (30,606) 40,790 15,736 32,715
Loss from discontinued operation.... (51,658) (14,353)
Loss on the extinguishment of
debt.............................. (1,655)
Cumulative effect of change in
accounting for income taxes....... 1,220
-------- -------- -------- -------- --------
Net income (loss)................... $ 65,496 $(30,606) $ 40,790 $(37,577) $ 19,582
======== ======== ======== ======== ========
Income (loss) per Common Share
-basic
From continuing operations..... $ 1.93 $ (0.91) $ 1.25 $ 0.51 $ 1.07
From discontinued operation.... (1.67) (0.47)
From extinguishment of debt.... (0.05)
From change in method of
accounting for income
taxes........................ 0.04
-------- -------- -------- -------- --------
Net income (loss).............. $ 1.93 $ (0.91) $ 1.25 $ (1.21) $ 0.64
======== ======== ======== ======== ========
10
11
YEARS ENDED MARCH 31
--------------------------------------------------------
1998(1) 1997(1) 1996(2) 1995(2) 1994(2)
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Shares used in computing net income
(loss) per share--basic........... 33,949 33,678 32,511 31,024 30,592
Income (loss) per Common Share
-diluted
From continuing operations..... $ 1.87 $ (0.91) $ 1.17 $ 0.47 $ 0.99
From discontinued operation.... (1.54) (0.44)
From extinguishment of debt.... (0.05)
From change in method of
accounting for income
taxes........................ 0.04
-------- -------- -------- -------- --------
Net income (loss).............. $ 1.87 $ (0.91) $ 1.17 $ (1.12) $ 0.59
======== ======== ======== ======== ========
Shares used in computing net income
(loss) per share-- diluted........ 35,112 33,678 34,857 33,536 32,977
BALANCE SHEET DATA:
Working Capital..................... $174,678 $143,734 $231,996 $177,470 $202,928
Total assets........................ 732,325 539,455 592,697 535,454 567,312
Long-term debt...................... 152,879 35,879 102,631 103,585 152,910
Total liabilities................... 373,373 244,739 288,638 297,645 305,226
Total shareholders' equity.......... 358,952 294,716 304,059 237,809 262,086
- ---------------
(1) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Fiscal Year 1998 Compared to Fiscal Year 1997."
(2) Includes the combined results of STERIS and Amsco on a pooling-of-interests
basis.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
Net revenues increased by 22.4% to $719.7 million in fiscal 1998 from
$587.9 million in fiscal 1997. Infection Prevention revenues increased by 21.5%
to $389.6 million in fiscal 1998 from $320.7 million in fiscal 1997. Surgical
Support revenues increased by 23.1% to $158.2 million in fiscal 1998 from $128.5
million in fiscal 1997. Scientific and Industrial revenues increased by 21.4% to
$123.1 million in fiscal 1998 from $101.4 million in fiscal 1997. Management
Services revenues increased by 30.9% to $48.7 million in fiscal 1998 from $37.2
million in fiscal 1997. The increases were due principally to higher sales of
capital equipment and consumable products as well as higher Management Services
revenues through the acquisition of Isomedix. (See Note-A--Accounting
Policies--Business Combinations to the accompanying consolidated financial
statements on page 20 of this Form 10-K.) In addition to higher sales of
previously existing products, a portion of the increase in sales of consumable
products was a result of the full year effect of the December 1996 acquisition
of the assets of the infection prevention and contamination prevention
businesses of Calgon Vestal Laboratories, and the fiscal second quarter 1997
acquisition of Surgicot, Inc., a manufacturer and supplier of biological and
chemical sterile process monitors, sterilization wraps and pouches, and other
quality assurance products. Revenues related to the Infection Prevention,
Surgical Support, and Scientific and Industrial classifications each include
revenues from capital equipment, consumable products, and services.
The cost of products and services sold increased by 11.0% to $395.1 million
in fiscal 1998 from $356.0 million in fiscal 1997. The cost of products and
services sold as a percentage of net revenues was 54.9% in fiscal 1998 compared
to 60.6% in fiscal 1997. The decrease in the cost of products and services sold
as a percentage of net revenues in fiscal 1998 resulted principally from
improved overhead absorption from plant consolidation and volume increases,
vertical integration, favorable changes in the mix of products sold, and the
benefits from the restructuring of the acquired and merged businesses.
11
12
Selling, informational, and administrative expenses increased in fiscal
1998 by 49.8% to $188.0 million from $125.5 million in fiscal 1997. The increase
was primarily attributable to investments in Customer Support, direct sales
efforts in key global markets, business development and management information
systems as well as the inclusion of selling, informational, and administrative
expenses of acquired companies.
Research and development expenses increased by 8.8% to $23.9 million in
fiscal 1998 from $22.0 million in fiscal 1997. Research and development expenses
as a percentage of net revenues were 3.3% in fiscal 1998 compared to 3.7% in
fiscal 1997.
Non-recurring charges of $81.3 million net of tax ($90.8 million pre-tax),
or $2.44 per share, were recorded in the 1997 fiscal first quarter for costs
connected to the Amsco Merger. The charges include transaction costs of $15.0
million and restructuring charges of $66.3 million net of tax.
Interest expense increased by 113.7% to $6.2 million in fiscal 1998 from
$2.9 million in fiscal 1997. The increase was due to the additional borrowing
under the Credit Facility for the purchase of Isomedix common shares.
Interest income and other decreased by 78.4% to $1.0 million in fiscal 1998
from $4.5 million in fiscal 1997. The decrease in interest income was due
primarily to lower cash, cash equivalents, and marketable security balances,
with the lower balances resulting from the July 1996 redemption of approximately
$100 million of Amsco 4.5%/6.5% Convertible Subordinated Notes.
Excluding the effect of non-recurring items, income increased by 29.2% to
$65.5 million ($1.87 per diluted share) in fiscal 1998 from $50.7 million ($1.43
per share) in fiscal 1997.
The effective income tax rate for fiscal year 1997 differed from statutory
rates principally because certain non-recurring items that increased the net
loss are non-deductible for tax purposes. Non-deductible items include the
write-off of goodwill related to Amsco's Finn-Aqua business and provisions for
certain executive severance costs. Also, additional tax valuation allowances
were provided to reflect the effects of merger activities.
As a result of the foregoing factors, net income for fiscal 1998 was $65.5
million compared to a net loss for fiscal 1997 of $30.6 million.
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
Fiscal year 1996 was restated to include the combined results of STERIS and
Amsco on a pooling-of-interests basis.
Net revenues increased by 10.0% to $587.9 million in fiscal 1997 from
$534.6 million in fiscal 1996. Infection Prevention revenues increased by 10.6%
to $320.7 million in fiscal 1997 from $290.0 million in fiscal 1996. Surgical
Support revenues increased by 14.3% to $128.5 million in fiscal 1997 from $112.4
million in fiscal 1996. Scientific and Industrial revenues increased by 0.3% to
$101.4 million in fiscal 1997 from $101.1 million in fiscal 1996. Management
Services revenues increased by 19.9% to $37.2 million in fiscal 1997 from $31.1
million in fiscal 1996. The increases were due principally to changes in volume.
The cost of products and services sold increased by 7.3% to $356.0 million
in fiscal 1997 from $331.9 million in fiscal 1996. The cost of products and
services sold as a percentage of net revenues was 60.6% in fiscal 1997 compared
to 62.1% in fiscal 1996. The decrease in the cost of products and services sold
as a percentage of net revenues in fiscal 1997 resulted principally from cost
savings from the effects of restructuring, the implementation of cost control
measures, increases in volume, and changes in the mix of products sold.
Selling, informational, and administrative expenses increased in fiscal
1997 by 9.1% to $125.5 million from $115.0 million in fiscal 1996.
Research and development expenses increased by 22.5% to $22.0 million in
fiscal 1997 from $17.9 million in fiscal 1996. Research and development expenses
as a percentage of net revenues were 3.7% in fiscal 1997 compared to 3.4% in
fiscal 1996. The increases were due to additional product and application
development expenditures.
Non-recurring charges of $81.3 million net of tax ($90.8 million pre-tax),
or $2.44 per share, were recorded in the 1997 fiscal first quarter for costs
connected to the Amsco Merger. The charges include transaction costs of $15.0
million and restructuring charges of $66.3 million net of tax. The transaction
costs are for legal, accounting, investment banking, and related expenses. The
restructuring charges are for (i) elimination of
12
13
redundant facilities and other assets ($27.0 million), (ii) satisfaction of
Amsco executive employment agreements and other employee severance ($19.3
million), (iii) write-off of goodwill related to Amsco's Finn-Aqua business
($27.3 million), and (iv) other merger-related items. Cash payments for fiscal
1997 related principally to transaction costs, executive employment agreements,
and Associate severance.
Interest expense decreased by 52.9% to $2.9 million in fiscal 1997 from
$6.2 million in fiscal 1996. The decrease was due primarily to the July 1996
redemption of approximately $100 million of Amsco 4.5%/6.5% Convertible
Subordinated Notes.
Interest income and other decreased by 29.2% to $4.5 million in fiscal 1997
from $6.4 million in fiscal 1996. The decrease in interest income was due
primarily to lower cash, cash equivalents, and marketable security balances,
with the lower balances resulting from the cash redemption of the aforementioned
Amsco Convertible Subordinated Notes.
Excluding the effect of non-recurring items, income increased by 24.3% to
$50.7 million ($1.43 per share) in fiscal 1997 from $40.8 million ($1.17 per
share) in fiscal 1996.
The effective income tax rate for fiscal year 1997 differed from statutory
rates principally because certain non-recurring items that increased the net
loss are non-deductible for tax purposes. Non-deductible items include the
write-off of goodwill related to Amsco's Finn-Aqua business and provisions for
certain executive severance costs. Also, additional tax valuation allowances
were provided to reflect the effects of merger activities.
As a result of the foregoing factors, the net loss for fiscal 1997 was
$30.6 million, compared to net income of $40.8 million for fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had $17.2 million in cash, and cash
equivalents, compared to $23.6 million of cash, cash equivalents, and marketable
securities at March 31, 1997. The decrease was primarily a result of the cash
paid for the acquisitions of Isomedix and Joslyn and the purchases of property,
plant, and equipment offset by cash received through borrowings under the Credit
Facility and the sale of assets.
At March 31, 1998, the Company had accounts receivable of $204.0 million,
compared to $164.2 million at March 31, 1997. The increase was primarily
attributable to increased revenues in the fourth quarter fiscal 1998 compared to
the fourth quarter fiscal 1997.
At March 31, 1998, the Company had inventory of $91.0 million, compared to
$78.8 million at March 31, 1997. The increase was necessary to support the
increase in product sales.
Property, plant, and equipment increased by 63.5% to $289.7 million as of
March 31, 1998, compared to $177.2 million at March 31, 1997. The increase was
due primarily to the increases resulting from acquired businesses that were
accounted for using the purchase method of accounting, the investment in
information systems, plant and equipment, and facility renovations, partially
offset by the sale of certain assets.
Intangibles increased by 29.0% to $240.5 million as of March 31, 1998,
compared to $186.4 million at March 31, 1997. The change resulted primarily
because of an increase related to goodwill and intangibles of acquired
companies.
Net deferred tax assets decreased by 26.2% to $29.3 million as of March 31,
1998, compared to $39.8 million at March 31, 1997. The decrease was due
primarily to the effect of the acquisitions of companies during the year.
Current liabilities increased by 8.5% to $169.7 million as of March 31,
1998, compared to $156.3 million at March 31, 1997.
Other liabilities were $50.8 million as of March 31, 1998, compared to
$52.6 million of the same at March 31, 1997.
During the first fiscal quarter 1998, STERIS increased the amount available
for borrowing under its unsecured revolving Credit Facility from $125 million to
$215 million. The amended Credit Facility expires September 30, 2001 and may be
used for general corporate purposes. Loans under the Credit Facility will bear
interest, at STERIS's option, at either KeyBank National Association's prime
rate or LIBOR rates plus 0.25 percent to 0.35 percent, which amounted to 6.0
percent and 5.8 percent at March 31, 1998 and 1997, respectively.
13
14
The Credit Facility contains customary covenants which include maintenance of
certain financial ratios. As of March 31, 1998, $131 million was available for
dividend distributions under these provisions. Outstanding borrowings under the
Credit Facility were $145 million and $35 million at March 31, 1998 and 1997,
respectively.
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 U.S. dollar value of sales made in
foreign currencies, and the U.S. dollar value of costs incurred in foreign
currencies. Changing currency exchange rates also affect the company's
competitive position, as exchange rate changes may affect profitability and
business and/or pricing strategies of non-U.S. based competitors.
CONTINGENCIES
For a discussion of contingencies, see Note K to the consolidated financial
statements.
IMPACT OF THE YEAR 2000
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. Without corrective actions, this could
cause a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company has a program to address concerns regarding the impact of the
year 2000. Operating expenses include costs incurred in preparing systems and
applications for the year 2000. The Company expects to incur internal staff
costs as well as consulting and other expenses related to the conversion and
testing of the systems and applications. These costs, which are expensed as
incurred, have been immaterial to date. These costs and the occurrence of the
year 2000 are not expected to have a material impact on the Company's earnings
in the future.
FORWARD-LOOKING STATEMENTS
This discussion contains statements concerning certain trends and other
forward-looking information affecting or relating to the Company and its
industry that are intended to qualify for the protections afforded
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. There are many important factors that could cause actual results to
differ materially from those in the forward-looking statements. Many of these
important factors are outside STERIS's control. Changes in market conditions,
including competitive factors and changes in 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 potential effects of
fluctuations in foreign currencies, and (e) the possibility of reduced demand,
or reductions in the rate of growth in demand, for the Company's products.
14
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
STERIS Corporation
We have audited the accompanying consolidated balance sheets of STERIS
Corporation and subsidiaries as of March 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended March 31, 1998. Our audits also
included the financial statement schedule listed in the index at Item 14(a)(2).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of STERIS
Corporation and subsidiaries as of March 31, 1998 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1998, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
Ernst & Young LLP
Cleveland, Ohio
April 20, 1998
15
16
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31
--------------------
1998 1997
-------- --------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 17,172 $ 20,576
Marketable securities..................................... 2,977
Accounts receivable (net of allowances of $6,780 and
$3,810, respectively).................................. 203,992 164,163
Inventories............................................... 90,998 78,762
Current portion of deferred income taxes.................. 23,609 24,888
Prepaid expenses and other assets......................... 8,561 8,676
-------- --------
TOTAL CURRENT ASSETS........................................ 344,332 300,042
Property, plant, and equipment.............................. 289,658 177,184
Accumulated depreciation.................................... (84,366) (74,332)
-------- --------
Net property, plant, and equipment........................ 205,292 102,852
Intangibles................................................. 240,488 186,417
Accumulated amortization.................................... (66,516) (67,032)
-------- --------
Net intangibles........................................... 173,972 119,385
Deferred income taxes....................................... 5,710 14,862
Other assets................................................ 3,019 2,314
-------- --------
TOTAL ASSETS................................................ $732,325 $539,455
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term indebtedness................. $ 2,200 $ 12
Accounts payable.......................................... 37,213 39,323
Accrued expenses and other................................ 130,241 116,973
-------- --------
TOTAL CURRENT LIABILITIES................................... 169,654 156,308
Long-term indebtedness...................................... 152,879 35,879
Other liabilities........................................... 50,840 52,552
-------- --------
TOTAL LIABILITIES........................................... 373,373 244,739
Shareholders' equity:
Serial preferred shares, without par value, 3,000 shares
authorized; no shares outstanding
Common Shares, without par value, 100,000 shares authorized;
issued and outstanding shares of 34,010 at March 31, 1998
and 33,984 at March 31, 1997, excluding 229 and 255
treasury shares, respectively............................. 230,477 231,278
Retained earnings........................................... 135,009 69,513
Cumulative translation adjustment........................... (6,534) (6,075)
-------- --------
TOTAL SHAREHOLDERS' EQUITY.................................. 358,952 294,716
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $732,325 $539,455
======== ========
See notes to consolidated financial statements.
16
17
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED MARCH 31
--------------------------------
1998 1997 1996
-------- -------- --------
Net revenues............................................... $719,656 $587,852 $534,612
Cost of products sold...................................... 395,098 356,007 331,911
-------- -------- --------
GROSS PROFIT............................................... 324,558 231,845 202,701
Cost and expenses:
Selling, informational, and administrative............... 188,030 125,515 115,029
Research and development................................. 23,914 21,986 17,941
Non-recurring items...................................... 90,831
-------- -------- --------
211,944 238,332 132,970
-------- -------- --------
INCOME (LOSS) FROM OPERATIONS.............................. 112,614 (6,487) 69,731
Interest expense........................................... (6,239) (2,919) (6,202)
Interest income and other.................................. 980 4,544 6,420
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES.......................... 107,355 (4,862) 69,949
Income taxes............................................... 41,859 25,744 29,159
-------- -------- --------
NET INCOME (LOSS).......................................... $ 65,496 $(30,606) $ 40,790
======== ======== ========
NET INCOME (LOSS) PER SHARE -- BASIC....................... $ 1.93 $ (0.91) $ 1.25
======== ======== ========
NET INCOME (LOSS) PER SHARE -- DILUTED..................... $ 1.87 $ (0.91) $ 1.17
======== ======== ========
See notes to consolidated financial statements.
17
18
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED MARCH 31
-----------------------------------
1998 1997 1996
--------- --------- ---------
OPERATING ACTIVITIES
Net income (loss)........................................ $ 65,496 $ (30,606) $ 40,790
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 24,202 18,681 19,694
Deferred income taxes.................................. 7,446 (12,173) 7,471
Non-recurring items.................................... 55,944
Other items............................................ (5,577) (664) 1,550
Changes in operating assets and liabilities:
Accounts receivable................................. (31,945) (33,559) 4,090
Inventories......................................... (11,311) 5,086 5,802
Other assets........................................ 368 2,645 (2,550)
Accounts payable and accruals....................... (30,127) (4,121) (9,648)
Other liabilities................................... (6,559) 15,053 2,610
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES................ 11,993 16,286 69,809
INVESTING ACTIVITIES
Purchases of property, plant, equipment, and patents..... (39,181) (20,468) (15,143)
Sales of assets.......................................... 43,084
Investment in businesses, net of cash acquired........... (126,505) (82,586) (6,191)
Proceeds from notes receivable........................... 8,438
Purchases of marketable securities....................... (6,970) (12,678)
Proceeds from sales of marketable securities............. 2,977 13,231 16,749
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES.................... (119,625) (88,355) (17,263)
FINANCING ACTIVITIES
Payments on long term obligations........................ (4,512) (106,802) (1,080)
Borrowing under line of credit........................... 110,000 40,000
Purchase of treasury shares.............................. (10,051) (11,418)
Proceeds from exercise of stock options.................. 6,584 27,807 10,732
Tax benefits from exercise of stock options.............. 2,666 5,138 12,477
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES...... 104,687 (45,275) 22,129
Effect of exchange rate changes on cash and cash
equivalents............................................ (459) (2,869) 2,039
--------- --------- ---------
(Decrease) increase in cash and cash equivalents......... (3,404) (120,213) 76,714
Cash and cash equivalents at beginning of period......... 20,576 140,789 64,075
--------- --------- ---------
Cash and cash equivalents at end of period............... $ 17,172 $ 20,576 $ 140,789
========= ========= =========
See notes to consolidated financial statements.
18
19
STERIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
COMMON SHARES CUMULATIVE TOTAL
------------------ RETAINED TRANSLATION SHAREHOLDERS
NUMBER AMOUNT EARNINGS AND OTHER EQUITY
------ -------- -------- ----------- ------------
BALANCE AT MARCH 31, 1995........... 31,654 $182,179 $ 59,329 $(3,699) $237,809
Net income.......................... 40,790 40,790
Foreign currency translation
adjustment (including taxes of
$265)............................. 493 493
--------
Comprehensive income................ 41,283
Stock options exercised............. 1,332 10,732 10,732
Tax benefit of stock options
exercised......................... 12,477 12,477
Restricted Stock Award and options
issued at a discounted price...... 4,363 (4,363) 0
Amortization of Restricted Stock
Award and options issued at a
discounted price.................. 1,758 1,758
------ -------- -------- ------- --------
BALANCE AT MARCH 31, 1996........... 32,986 209,751 100,119 (5,811) 304,059
Net loss............................ (30,606) (30,606)
Foreign currency translation
adjustment (including taxes of
$1,545)........................... (2,869) (2,869)
--------
Comprehensive loss.................. (33,475)
Stock options exercised............. 1,448 27,807 27,807
Tax benefit of stock options
exercised......................... 5,138 5,138
Treasury shares purchased........... (450) (11,418) (11,418)
Amortization of Restricted Stock
Award and options issued at a
discounted price.................. 2,605 2,605
------ -------- -------- ------- --------
BALANCE AT MARCH 31, 1997........... 33,984 231,278 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............. 326 6,584 6,584
Tax benefit of stock options
exercised......................... 2,666 2,666
Treasury shares purchased........... (300) (10,051) (10,051)
------ -------- -------- ------- --------
BALANCE AT MARCH 31, 1998........... 34,010 $230,477 $135,009 $(6,534) $358,952
====== ======== ======== ======= ========
See notes to consolidated financial statements
19
20
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED MARCH 31, 1998 AND 1997
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 healthcare,
scientific, research, food, and industrial Customers throughout the world.
BUSINESS COMBINATIONS
On May 13, 1996, STERIS merged with Amsco International, Inc. ("Amsco") in
a tax-free, stock-for-stock transaction (the "Amsco Merger"). The Amsco Merger
has been accounted using the pooling-of-interests method. Accordingly, the
accompanying consolidated financial statements give retroactive effect to the
transaction and include the combined operations of STERIS and Amsco for all
periods presented. In addition, the historical financial information of Amsco
(previously reported using fiscal years ending December 31) has been recast to
conform to STERIS's annual reporting period ending March 31.
In accordance with the merger agreement, each outstanding share of Amsco
common stock was converted on a tax-free basis into 0.46 of a Common Share of
STERIS, resulting in the issuance of approximately 15,200,000 STERIS Common
Shares. Summarized operating results of the separate entities for the period
prior to the Amsco Merger follow:
STERIS AMSCO COMBINED
------- -------- --------
YEAR ENDED MARCH 31, 1996:
Net revenues...................................... $91,192 $443,420 $534,612
Income from operations............................ 20,279 49,452 69,731
Net income........................................ 12,794 27,996 40,790
On September 17, 1997, pursuant to an offer to purchase the publicly traded
common stock of Isomedix Inc., the Company acquired all of the shares of common
stock 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 has been accounted for as a purchase transaction.
The following is a preliminary allocation of the purchase price:
Current assets.............................................. $ 21,633
Property, plant, and equipment.............................. 94,546
Excess purchase price over net assets acquired.............. 56,978
Other assets................................................ 3,284
Current liabilities......................................... (31,519)
Long-term debt.............................................. (7,900)
Deferred income taxes....................................... (2,920)
--------
Total cost of acquisition................................... $134,102
========
The following unaudited pro forma results of operations assume the
acquisition occurred on April 1, 1996. These pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
the results of operations which actually would have resulted had the acquisition
occurred on the date indicated, or which may result in the future.
20
21
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED MARCH 31
--------------------
1998 1997
-------- --------
Net revenues................................................ $740,926 $633,085
======== ========
Income (loss) from continuing operations.................... $ 65,393 $(30,873)
Income (loss) from discontinued operations.................. 200 (2,394)
-------- --------
Net income (loss)........................................... $ 65,593 $(33,267)
======== ========
Income (loss) from continuing operations per
share -- diluted.......................................... $ 1.86 $ (0.92)
======== ========
Net income (loss) per share -- diluted...................... $ 1.87 $ (0.99)
======== ========
In July 1997, STERIS acquired 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 as a purchase transaction and did not have a material effect
on the operations of the Company.
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. Intercompany accounts and transactions have
been eliminated upon consolidation. Certain reclassifications have been made to
the Company's prior year financial statements to agree with current year
classifications.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Cash and cash
equivalents consist exclusively of interest-bearing savings accounts and U.S.
government securities.
Supplemental disclosure of cash flow information follows:
YEARS ENDED MARCH 31
-----------------------------
1998 1997 1996
------- ------- -------
Cash paid during the year for:
Interest............................................ $ 5,885 $ 6,130 $ 4,922
Income taxes........................................ $27,193 $17,286 $12,445
REVENUES
The Company's net revenues include revenues earned on product sales and
related after-sales, third-party service contracts and long-term construction
contracts. The Company recognizes product revenues upon shipment to a location
designated by the Customer. After-sales and third-party service contract
revenues are recognized upon completion of the work. Advance billings for
products or service work are recorded as deferred revenue until earned. Revenue
on long-term construction contracts is recognized on the
percentage-of-completion basis, using the cost-to-cost method. Accrued revenue
for contracts accounted for on the percentage-of-completion basis accounted for
less than one percent of fiscal 1998 net revenues.
The Company performs periodic credit evaluations of its Customers'
financial condition and generally does not require collateral on sales. The
Company principally sells to health care institutions with no single Customer
accounting for more than two percent of sales during the year ended March 31,
1998.
21
22
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions in certain circumstances that affect the amounts reported in the
accompanying consolidated financial statements and notes. Actual results could
differ from these estimates.
FOREIGN CURRENCY TRANSLATION
The accounts of the Company's foreign subsidiaries are recorded in the
currency of the country in which they operate. All balance sheet accounts except
stockholders' equity are translated at current exchange rates, and revenue and
expense items are translated at rates of exchange prevailing during the year.
Gains and losses resulting from the translation of foreign currency financial
statements, which amounted to $6,534 and $6,075 as of March 31, 1998 and 1997,
respectively, represent other comprehensive income and are reflected in the
cumulative translation adjustment component of stockholders' equity.
B. INVENTORIES
Inventories are stated at cost, which did not exceed market. The Company
uses the last-in, first-out (LIFO) and first-in, first-out (FIFO) cost methods.
Inventories utilizing LIFO represent 54% of the inventory at March 31, 1998 and
1997. Inventory costs include material, labor and overhead. If the FIFO method
of inventory costing had been used exclusively, inventories would have been
$9,087 and $10,934 higher than those reported at March 31, 1998 and 1997,
respectively. Inventories were as follows:
MARCH 31
------------------
1998 1997
------- -------
Raw material................................................ $33,007 $30,027
Work in process............................................. 17,666 15,240
Finished goods.............................................. 40,325 33,495
------- -------
$90,998 $78,762
======= =======
C. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost, less accumulated
depreciation. The Company provides for depreciation of the net carrying cost
less anticipated salvage value over the estimated remaining useful lives of
property, plant, and equipment, principally by using the straight-line method.
Depreciation 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 approximately $18,929, $11,147 and $11,728 for
the years ended
22
23
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
March 31, 1998, 1997 and 1996, respectively. Expenditures that increase the
value or productive capacity of assets are capitalized. Property, plant, and
equipment consist of the following:
MARCH 31
--------------------
1998 1997
-------- --------
ASSET (ASSET LIVES)
Land and land improvements (12 years)....................... $ 12,512 $ 3,110
Buildings and leasehold improvements (7-50 yrs)............. 91,426 62,558
Machinery and equipment (3-15 years)........................ 149,473 111,516
Radioisotope (20 years)..................................... 36,247 0
-------- --------
TOTAL....................................................... 289,658 177,184
Less: accumulated depreciation.............................. 84,366 74,332
-------- --------
PROPERTY, PLANT, AND EQUIPMENT, NET......................... $205,292 $102,852
======== ========
Rental expense under all leases was approximately $11,727, $10,784 and
$10,708 for the years ended March 31, 1998, 1997 and 1996, 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 1999, 2000, 2001, 2002,
2003, and thereafter are $9,527, $8,130, $6,812, $4,211, $1,314, and $1,001,
respectively.
D. INTANGIBLE ASSETS
Costs incurred to obtain product technology rights, including patents, have
been capitalized and are being amortized over their estimated useful lives of
five to seventeen years using the straight-line method. The Company currently
provides for the amortization of intangible assets, including goodwill, over
lives ranging from 5-40 years. Intangible assets consist of the following:
MARCH 31
--------------------
1998 1997
ASSETS (AMORTIZATION PERIOD) -------- --------
Goodwill, net of accumulated amortization of $19,542 and
$20,700, respectively (35-40 years)....................... $163,752 $105,578
Patents, trademarks and other intangible assets, net of
accumulated amortization of $46,974 and $46,332,
respectively (5-17 years)................................. 10,220 13,807
-------- --------
TOTAL....................................................... $173,972 $119,385
======== ========
In September 1997, STERIS purchased the common shares of Isomedix Inc., 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 $56,978.
In July 1997, STERIS acquired the assets of Joslyn Sterilizer Corporation,
a privately held 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 $6,760.
In late December 1996, STERIS completed the acquisition of the assets of
the infection prevention and contamination prevention businesses of Calgon
Vestal Laboratories from Bristol-Myers Squibb Company. The acquisition expands
STERIS's consumable product lines for surface cleaning and decontamination. The
23
24
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
acquisition was accounted for using the purchase method of accounting and
resulted in an increase in goodwill of $52,979.
During the second quarter of fiscal 1997, STERIS acquired Surgicot, Inc., a
privately held manufacturer and supplier of biological and chemical sterile
process monitors, sterilization wraps and pouches, and other consumable
infection prevention products for the health care and scientific markets. The
acquisition was accounted for using the purchase method of accounting and
resulted in an increase in goodwill of $4,126.
The Company continually evaluates whether events and circumstances have
occurred that indicate the remaining estimated useful life of any intangible may
warrant revision or that the remaining balance of the intangible may not be
recoverable. When factors indicate that the intangibles should be evaluated for
possible impairment, the Company uses an estimate of the related operation's
cash flow from operations over the remaining life to determine recoverability.
E. FINANCIAL INSTRUMENTS
Long-term indebtedness was as follows:
MARCH 31
-------------------
1998 1997
-------- -------
Credit Facility............................................. $145,000 $35,000
Other debt.................................................. 10,079 891
-------- -------
Total....................................................... 155,079 35,891
Less current portion........................................ 2,200 12
-------- -------
Long-term portion........................................... $152,879 $35,879
======== =======
During the first fiscal quarter 1998, STERIS increased the amount available
for borrowing under its unsecured revolving Credit Facility from $125,000 to
$215,000. The amended Credit Facility expires September 30, 2001 and may be used
for general corporate purposes. Loans under the Credit Facility will bear
interest, at STERIS's option, at either KeyBank National Association's prime
rate or LIBOR rates plus 0.25 percent to 0.35 percent, which amounted to 6.0
percent and 5.8 percent at March 31, 1998 and 1997, respectively. The Credit
Facility contains customary covenants which include maintenance of certain
financial ratios. As of March 31, 1998, $131,000 was available for dividend
distributions under these provisions. Outstanding borrowings under the Credit
Facility were $145,000 and $35,000 at March 31, 1998 and 1997, respectively.
Additional obligations consist 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, 1998,
outstanding obligations under the industrial development revenue bonds were
$7,800, with a weighted average interest rate of 4.6 percent. Amounts payable
for long-term debt in fiscal 1999, 2000, 2001, 2002, 2003, and thereafter are
$2,200, $900, $700, $145,700, $1,279, and $4,300, respectively.
During the first fiscal quarter 1999, STERIS entered into a six month
$85,000 line of credit with substantially the same terms and conditions as the
Credit Facility. The line of credit expires September 30, 1998 and there were no
outstanding borrowings at March 31, 1998.
As of March 31, 1998 and 1997, the Company was contingently liable in the
amount of $15,980 and $27,200, respectively, under standby letters of credit and
guarantees. Approximately $11,500 of the totals at March 31, 1998 and 1997
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.
24
25
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The fair value of the Company's financial instruments, including long-term
indebtedness and cash, and cash equivalents that amounted to $17,172 and $23,553
as of March 31, 1998 and 1997, respectively, approximated their carrying values.
On January 30, 1997, the Company announced that its Board of Directors had
authorized the periodic repurchase of up to three million STERIS Common Shares
in the open market. As of March 1998, the Company had repurchased 750,000 STERIS
Common Shares.
F. ACCRUED EXPENSES AND OTHER
Accrued expenses and other consisted of the following:
MARCH 31
--------------------
1998 1997
-------- --------
Accrued warranty and product upgrade costs.................. $ 13,646 $ 12,390
Accrued self insured retention.............................. 9,045 11,200
Accrued associate compensation.............................. 18,082 15,185
Accrued taxes............................................... 33,147 20,006
Other accruals.............................................. 56,321 58,192
-------- --------
TOTAL....................................................... $130,241 $116,973
======== ========
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:
MARCH 31
------------------------------
1998 1997 1996
-------- ------- -------
U. S. operations...................................... $110,755 $ 2,995 $70,628
Non-U. S. operations.................................. (3,400) (7,857) (679)
-------- ------- -------
$107,355 $(4,862) $69,949
======== ======= =======
The components of the provision for income taxes consisted of the
following:
MARCH 31
-----------------------------
1998 1997 1996
------- ------- -------
Current provision:
U.S. federal........................................ $24,545 $29,247 $13,470
U.S. state and local................................ 4,465 2,471 3,198
Non-U.S............................................. 2,742 1,061 1,069
------- ------- -------
Total current provision............................... 31,752 32,779 17,737
Deferred expense (benefit)............................ 7,441 (12,173) (1,055)
Taxes allocated to contributed capital for stock
options exercised................................... 2,666 5,138 12,477
------- ------- -------
Total provision for income taxes...................... $41,859 $25,744 $29,159
======= ======= =======
25
26
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 U.S. federal statutory rate as follows:
MARCH 31
-----------------------------
1998 1997 1996
------- ------- -------
Tax computed at the U.S. federal statutory tax rate... $37,574 $(1,702) $24,482
Merger and related costs for which no tax benefit was
provided............................................ 0 22,260 0
State and local taxes, net of federal income tax
benefit............................................. 2,902 1,606 2,079
Amortization of excess cost over net assets
acquired............................................ 530 831 870
Valuation allowance, net.............................. 0 1,646 513
Difference in non-U.S. tax rates...................... 532 500 554
All other, net........................................ 321 603 661
------- ------- -------
Total provision for income taxes...................... $41,859 $25,744 $29,159
======= ======= =======
The significant components of the deferred tax assets and liabilities
recorded in the accompanying balance sheets at March 31, 1998 and 1997, were as
follows:
MARCH 31
--------------------
1998 1997
-------- --------
DEFERRED TAX ASSETS
Post-retirement benefit accrual........................... $ 17,029 $ 17,397
Net operating loss carryforwards.......................... 1,339 7,990
Accrued expenses and other................................ 33,789 29,238
-------- --------
Gross deferred tax assets................................... 52,157 54,625
Valuation allowance......................................... (1,339) (7,990)
-------- --------
Total deferred tax assets................................... $ 50,818 $ 46,635
======== ========
DEFERRED TAX LIABILITIES
Plant & equipment......................................... $(13,031) $ (450)
Intangibles............................................... (2,802) (3,519)
Inventory................................................. (538) (246)
Other..................................................... (5,128) (2,670)
-------- --------
Total deferred tax (liabilities)............................ $(21,499) $ (6,885)
======== ========
For tax return purposes, certain subsidiaries, both U.S. and non-U.S., had
operating loss carryforwards of $3,827. Carryforwards of $311 have no expiration
dates and the balance expires at various dates from 2001 through 2006. 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, 1998 was a decrease of $6,651, primarily due to the effect of foreign
restructuring and application of the "check the box" regulations.
At March 31, 1998, undistributed earnings of non-U.S. subsidiaries included
in consolidated retained earnings amounted to $29,000. These earnings are
indefinitely reinvested in non-U.S. operations. Accordingly, no provision has
been made for withholding taxes related to such earnings, nor is it practicable
to determine the amount of this liability.
26
27
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
H. PENSION PLANS
The Company administers a defined contribution 401(k) Plan (the "Plan") for
eligible Associates. During fiscal 1997, the Company amended the Plan to allow
for matching contributions as determined by the Board of Directors. Matching
contributions were $2,936 and $1,117 for fiscal 1998 and 1997, respectively. In
addition, the Company had administered the Amsco Employees' Retirement Account
(the "AERA"). The AERA was merged into the Plan during fiscal 1998. Contribution
expense for AERA amounted to $1,862 and $3,165 in fiscal 1997 and 1996,
respectively.
The Company also has a defined benefit pension plan which covers
substantially all domestic bargaining unit Associates and provides pension
benefits of stated amounts for each year of service of the Associate. The
Company also has defined benefit plans which cover substantially all bargaining
and non-bargaining Associates of the Company's subsidiaries in Finland and
Germany, as well as certain other foreign distribution entities. The Company's
funding methodologies differ from those used to recognize pension expense in the
accompanying financial statements. Net periodic pension cost includes the
following components:
MARCH 31
-----------------------------------------------------------------
1998 1997 1996
------------------- ------------------- -------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN DOMESTIC FOREIGN
-------- ------- -------- ------- -------- -------
Service cost: benefits earned during the
period................................. $ 908 $ 81 $ 517 $168 $ 464 $139
Interest cost on projected benefit
obligation............................. 2,574 127 2,133 94 2,089 95
Actual return on assets.................. (9,692) 0 (2,863) (12) (7,066) (14)
Net amortization and deferral............ 7,080 0 577 0 5,323 0
------- ---- ------- ---- ------ ----
Net periodic pension cost................ $ 870 $208 $ 364 $250 $ 810 $220
======= ==== ======= ==== ====== ====
The following table sets forth the pension plan's funded status and amounts
recognized in the accompanying consolidated balance sheets:
MARCH 31
------------------------------------------
1998 1997
------------------- -------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN
-------- ------- -------- -------
Actuarial present value of benefit obligations:
Vested............................................ $(38,127) $(1,716) $(28,278) $(2,257)
Nonvested......................................... (238) (53) (936) 0
-------- ------- -------- -------
Accumulated benefit obligation.................... (38,365) (1,769) (29,214) (2,257)
Projected benefit obligation...................... (39,148) (2,130) (29,214) (2,257)
Plan assets at fair value......................... 43,622 0 32,579 0
-------- ------- -------- -------
Plan assets greater (less) than projected benefit
obligation...................................... 4,474 (2,130) 3,365 (2,257)
Unamortized initial net asset..................... (1,291) 0 (1,328) 0
Unrecognized net gain............................. (5,884) (33) (4,734) 0
Unrecognized prior service cost................... 2,687 0 2,439 0
-------- ------- -------- -------
(Accrued) pension cost............................ $ (14) $(2,163) $ (258) $(2,257)
======== ======= ======== =======
A weighted average discount rate of 7.0%, 7.75% and 7.25% was used in
determining the actuarial present value of the projected benefit obligation at
March 31, 1998, 1997 and 1996, respectively. The expected long-term rates of
return on assets at the respective measurement dates were 8% at March 31, 1998
and 1997, and 7.5% at March 31, 1996. The initial net asset is being amortized
and recognized as a component of net periodic pension
27
28
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
cost on a straight-line basis over 15 years. Plan assets consist primarily of
common stocks, corporate bonds, U.S. government obligations, temporary
investments and private placement investments.
I. POSTRETIREMENT BENEFITS
The Company has defined benefit retirement health care plans for the
majority of domestic bargaining unit Associates. Such Associates are generally
eligible for benefits upon retirement after completion of a specified number of
years of creditable service. The Company does not pre-fund these benefits and
has the right to modify these plans in the future. The components of expense
were as follows:
MARCH 31
--------------------------
1998 1997 1996
------ ------ ------
Service costs of benefits earned during the period....... $ 399 $ 99 $ 749
Interest cost on accumulated postretirement benefit
obligation............................................. 3,529 3,321 3,607
------ ------ ------
Net postretirement benefit cost.......................... $3,928 $3,420 $4,356
====== ====== ======
The accumulated postretirement benefit obligation, which is reflected in
the accompanying consolidated balance sheets, is comprised of the following
components:
MARCH 31
------------------
1998 1997
------- -------
Accumulated postretirement benefit obligation
Retirees.................................................... $32,590 $28,043
Fully eligible active plan participants..................... 6,577 10,396
Other active plan participants.............................. 8,537 14,458
------- -------
Total....................................................... 47,704 52,897
Unrecognized prior service costs............................ 949 2,290
Unrecognized net loss....................................... (5,481)
------- -------
Accrued postretirement benefit liability.................... $48,653 $49,706
======= =======
Future benefit costs were estimated assuming medical costs would increase
at approximately a 6.5% annual rate (7.25% in fiscal 1997 and 7.13% in fiscal
1996), decreasing to approximately a 5% annual growth rate ratably through
fiscal 2001 and then remaining at that rate. A 1% increase in this annual trend
rate would have increased the accumulated postretirement benefit obligation at
March 31, 1998, by $5,724 and increased the 1998 postretirement benefit expense
by $980. Unrecognized gains and losses are amortized over a fifteen year period.
The weighted average discount rate used to estimate the accumulated
postretirement benefit obligation was 7.0% for fiscal 1998 and 7.75% for fiscal
1997.
During fiscal 1997, the Company announced changes in certain benefit plans
to better conform benefits available to various Associate groups. One such
change resulted in a curtailment of retiree health care benefits for certain
non-bargaining unit active plan participants. The net postretirement benefit
cost for fiscal 1998 and 1997 reflects the effects of this change. The
curtailment effect in fiscal 1998 was approximately a $2,000 gain, net of income
taxes.
J. NON-RECURRING TRANSACTIONS
Non-recurring charges of $90,831 ($81,300 net of tax, or $2.44 per share)
were recorded in the 1997 fiscal first quarter for costs related to the Amsco
Merger. The charges include transaction costs of approximately
28
29
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$15,000 and other non-recurring charges of approximately $75,800 ($66,300 net of
tax). The transaction costs are for legal, accounting, investment banking, and
related expenses. The other non-recurring charges are for (i) elimination of
redundant facilities and other assets ($27,000), (ii) satisfaction of Amsco
executive employment agreements and other Associate severance ($19,300), (iii)
write-off of goodwill related to Amsco's Finn-Aqua business which was impaired
as a result of the planned merger activities ($27,250), and (iv) other
merger-related items. Property write downs of $20,000 were recorded as part of
the estimated cost of eliminating redundant facilities based on fair value
estimates. During fiscal 1997, STERIS closed a manufacturing and research
facility in Apex, North Carolina, Amsco's headquarters in Pittsburgh,
Pennsylvania, as well as Customer Service facilities in Dallas, Texas and
Atlanta, Georgia. Operations of the closed facilities were consolidated into
existing STERIS facilities. Cash payments related principally to transaction
costs, executive employment agreements and Associate severance. Associate
severance costs incurred related to closed facilities. The planned Associate
severance was substantially complete as of March 31, 1997. Such severance
included approximately 150 individuals and cost approximately $6,000.
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.
K. 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.
L. BUSINESS SEGMENT INFORMATION
The Company operates in a single business segment. The following is
information about the Company's operations by geographic area:
MARCH 31
--------------------------------
1998 1997 1996
-------- -------- --------
Net revenues (including intergeographic net
revenues of $8,260, $11,594, and $13,755 for the
years 1998, 1997 and 1996,
respectively) -- United States................... $590,904 $499,273 $490,667
Net revenues (including intergeographic net
revenues of $41,889, $31,940, and $37,944 for the
years 1998, 1997 and 1996,
respectively) -- Foreign......................... 178,901 132,113 95,644
Adjustments and eliminations..................... (50,149) (43,534) (51,699)
-------- -------- --------
Consolidated net revenues.......................... $719,656 $587,852 $534,612
======== ======== ========
Long-lived assets
United States.................................... $364,334 $184,578 $188,396
Foreign.......................................... 17,949 39,973 11,155
-------- -------- --------
Consolidated long-lived assets..................... $382,283 $224,551 $199,551
======== ======== ========
Transfers between geographic areas are accounted for at prices which
approximate arms-length market prices. To reconcile geographic information with
consolidated amounts, intergeographic net revenues were eliminated. Long-lived
assets are those assets that are identified with the operations in each
geographic area.
29
30
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenues to a single Customer did not aggregate two percent or more of total
revenues. Export revenues were less than 10% of consolidated net revenues in the
years presented and are included in United States net revenues. Revenues by
principal market are as follows:
YEARS ENDED MARCH 31
--------------------------------
1998 1997 1996
-------- -------- --------
Infection Prevention............................... $389,649 $320,664 $290,019
Surgical Support................................... 158,160 128,502 112,400
Scientific and Industrial.......................... 123,106 101,442 101,124
Management Services................................ 48,741 37,244 31,069
-------- -------- --------
Total.............................................. $719,656 $587,852 $534,612
======== ======== ========
M. 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. Common Share equivalents were antidilutive for the
fiscal year 1997 and accordingly were excluded from the computation of earnings
(loss) per Common Share for such period. Following is a summary, in thousands,
of Common Shares and Common Share equivalents outstanding used in the
calculations of earnings (loss) per share:
YEARS ENDED MARCH 31
--------------------------
1998 1997 1996
------ ------ ------
Weighted average Common Shares outstanding -- basic...... 33,949 33,678 32,511
Dilutive effect of stock options......................... 1,163 0 2,346
------ ------ ------
Weighted average Common Shares and
equivalents -- diluted................................. 35,112 33,678 34,857
====== ====== ======
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 provides that no compensation expense
is recognized when the exercise price equals the market price of the stock on
the date of grant.
Effective July 11, 1995, Amsco entered into an employment agreement with
its President and Chief Executive Officer (CEO) that included the granting of
690,000 nonqualified stock options at a discounted exercise price of $26.35. The
fair value of the options was $16.50 per share. 460,000 of the stock options
were performance-based and vested if Amsco's common stock achieved certain
market value criteria. During the second quarter of fiscal 1996, 230,000 of
these performance-based options vested because the average fair market value of
Amsco's common stock exceeded target prices. The remaining performance-based
options vested in fiscal 1997. The employment agreement referred to above also
included an award of 37,939 shares of restricted stock of Amsco. Based on the
terms of the award, this stock became completely vested during fiscal 1997. Upon
granting the stock options and awarding the restricted stock to the Amsco CEO,
Amsco recorded $4,363 of deferred compensation expense, which was amortized over
defined vesting schedules. The unamortized portion of the awards was $2,605 as
of March 31, 1996, and was recorded as a component of the special equity account
entitled "cumulative translation and other" on the accompanying consolidated
statements of shareholders' equity. During the second quarter of fiscal 1996,
Amsco recorded an approximate $1,000 charge to selling, informational and
administrative expense because of the accelerated vesting of the 230,000 options
discussed above. As a result of the Amsco Merger, vesting accelerated for the
remaining stock options and restricted stock agreements. The
30
31
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
related charges were recorded in fiscal 1997 as part of the non-recurring charge
in the accompanying consolidated statement of operations.
Following is a summary of option share information. The average grant price
and fair value shown for fiscal 1996 excludes the options granted at a
discounted exercise price.
BEGINNING OF
YEAR GRANTED EXERCISED CANCELED END OF YEAR
------------ ---------- ----------- --------- -----------
Fiscal 1998
Option Shares.............. 2,961,386 598,202 (326,121) (119,169) 3,114,298
Average Price.............. $ 16.61 $ 38.12 $ 20.19 $ 50.93 $ 19.03
Fair Value................. $ 18.28
Fiscal 1997
Option Shares.............. 3,851,468 725,288 (1,448,695) (166,675) 2,961,386
Average Price.............. $ 16.10 $ 27.38 $ 19.32 $ 28.03 $ 16.61
Fair Value................. $ 13.23
Fiscal 1996
Option Shares.............. 4,351,644 1,021,644 (1,332,348) (189,472) 3,851,468
Average Price.............. $ 11.98 $ 19.72 $ 8.02 $ 21.96 $ 16.10
Fair Value................. $ 9.78
In relation to the exercise of approximately 190,000 options during the
1997 fiscal year, an executive officer of the Company borrowed from the Company
approximately $1,700. The outstanding balance at March 31, 1998 was $1,800 and
the related full recourse note bears interest at 6.4% and is payable on or
before February 28, 2002.
Shares available for future grants were 514,705 at March 31, 1998. At March
31, 1998, 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:
OUTSTANDING EXERCISABLE
----------------------------------- ----------------------
WEIGHTED WEIGHTED
AVERAGE CONTRACT AVERAGE
OPTION EXERCISE LIFE OPTION EXERCISE
RANGE OF EXERCISE PRICES SHARES PRICE (YEARS) SHARES PRICE
------------------------ --------- -------- -------- --------- --------
$0.96 -- $5.99..................... 746,550 $ 1.92 3.1 746,550 $ 1.92
$6.00 -- $17.99.................... 705,151 9.60 5.5 624,651 9.45
$18.00 -- $27.99................... 887,088 24.43 7.8 325,338 23.40
$28.00 -- $56.79................... 775,509 37.89 8.7 183,961 39.39
--------- ------ --- --------- ------
3,114,298 $19.03 6.4 1,880,500 $11.80
========= ====== === ========= ======
At March 31, 1997, options with an average exercise price of $13.26 were
exercisable on 1,892,861 shares; at March 31, 1996, options with an average
exercise price of $13.94 were exercisable on 2,405,675 shares.
Had the compensation cost for the stock options granted in fiscal 1998,
1997 and 1996 been determined based on the fair value at the grant date
consistent with the fair value method, the Company's net earnings and earnings
per share would have been reduced by $3,197 ($.09 per share) in fiscal 1998, net
loss and loss per share would have been increased by $3,060 ($.09 per share) in
fiscal 1997, and net earnings and earnings per share would have been reduced by
$2,960 ($.09 per share) in fiscal 1996. The effect on fiscal 1998, 1997 and 1996
net earnings (loss) may not be representative of the effect on future years' net
earnings amounts as the compensation
31
32
STERIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
cost of each year's grant is recognized over the four-year vesting period. Fair
value was estimated at the date of grant using the Black-Scholes option pricing
model and the following weighted-average assumptions for fiscal 1998, 1997 and
1996: risk-free interest rate of 6.5%; dividend yield of 0%; expected volatility
of 45%; and an expected option life of 5 years.
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
$1.00 per share. The Rights will expire on November 7, 2006, unless redeemed
earlier at one cent per Right.
N. QUARTERLY DATA (UNAUDITED)
QUARTERS ENDED
------------------------------------------------------
MARCH 31 DECEMBER 31 SEPTEMBER 30 JUNE 30
-------- ----------- ------------ --------
FISCAL 1998
Net revenues........................... $204,500 $186,639 $173,383 $155,134
Gross profit........................... 95,489 84,048 78,187 66,834
Percentage of revenues................. 47% 45% 45% 43%
NET INCOME............................. $ 20,270 $ 18,170 $ 15,309 $ 11,747
======== ======== ======== ========
Earnings per share -- basic............ $ 0.60 $ 0.54 $ 0.45 $ 0.35
======== ======== ======== ========
Earnings per share -- diluted.......... $ 0.58 $ 0.52 $ 0.44 $ 0.34
======== ======== ======== ========
FISCAL 1997
Net revenues........................... $170,489 $151,005 $138,490 $127,868
Gross profit........................... 71,460 59,774 53,325 47,286
Percentage of revenues................. 42% 40% 39% 37%
NET INCOME (LOSS)...................... $ 15,916 $ 13,535 $ 11,538 $(71,595)
======== ======== ======== ========
Earnings (loss) per share -- basic..... $ 0.47 $ 0.40 $ 0.35 $ (2.16)
======== ======== ======== ========
Earnings (loss) per share -- diluted... $ 0.45 $ 0.38 $ 0.33 $ (2.16)
======== ======== ======== ========
As discussed in Note J, certain non-recurring expenses were recognized in
the 1997 first fiscal quarter.
32
33
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
COL. A COL. B COL. C COL. D COL. E COL. F
------ ------ ------ ------ ------ ------
ADDITIONS
------------------------
CHARGES TO CHARGES BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES(1) ACCTS. DEDUCTIONS(2) PERIOD
- ---------------------------------------- --------- ------------ -------- -------------- ----------
Year ended March 31, 1998
Deducted from asset accounts:
Allowance for doubtful accounts..... $3,810 $3,561 $0 $591 $6,780
====== ====== == ==== ======
Year ended March 31, 1997
Deducted from asset accounts:
Allowance for doubtful accounts..... $1,947 $2,557 $0 $694 $3,810
====== ====== == ==== ======
Year ended March 31, 1996
Deducted from asset accounts:
Allowance for doubtful accounts..... $1,754 $ 592 $0 $399 $1,947
====== ====== == ==== ======
- ---------------
(1) Charges to costs and expenses during the periods reflect an increase in
allowances to support larger receivable balances.
(2) Uncollectible accounts written off, net of recoveries.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
33
34
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 19, 1998.
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 19, 1998.
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 19, 1998.
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 19, 1998.
34
35
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, 1998 and 1997.
Consolidated Statements of Operations -- Years ended March 31, 1998,
1997 and 1996.
Consolidated Statements of Cash Flows -- Years ended March 31, 1998,
1997 and 1996.
Consolidated Statements of Shareholders' Equity -- Years ended March
31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements -- March 31, 1998 and 1997.
(a)(2) The following consolidated financial statement schedule of STERIS
Corporation and subsidiaries is included in Item 8:
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore, have been
omitted.
(a)(3) Exhibits
- --------
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
3.1 1992 Amended Articles of Incorporation of STERIS
Corporation, amended as of May 13, 1996 (filed as Exhibit
4.2 to the Registration Statement on Form S-3 filed June 21,
1996, and incorporated herein by reference).
3.2 1992 Amended Regulations of STERIS Corporation.
4.1 Specimen Form of Common Stock Certificate (filed as Exhibit
4.1 to Amendment No. 1 to the Registration Statement on Form
S-1 filed April 30, 1992, and incorporated herein by
reference).
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). (A management contract or compensatory
plan or arrangement required to be filed as an exhibit
hereto.)
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).
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).
35
36
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
10.7 Credit Agreement, dated May 13, 1996, among STERIS
Corporation, various financial institutions, and KeyBank
National Association, as Agent (filed as Exhibit 10.14 to
Form 10-K filed for the fiscal year ended March 31, 1996,
and incorporated herein by reference).
10.8 Second Amendment Agreement, dated June 10, 1997, to Credit
Agreement, dated May 13, 1996, 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 June 30, 1997, and incorporated
herein by reference).
10.9 Third Amendment Agreement dated June 10, 1997, to Credit
Agreement, dated May 13, 1996, among STERIS Corporation,
various financial institutions and KeyBank National
Association, as Agent (filed as Exhibit 10.2 to Form 10-Q
filed for the quarter ended June 30, 1997, and incorporated
herein by reference).
10.10 Master Promissory Note.
10.11 Management Incentive Compensation Plan FY 1998.
10.12 Promissory Note.
10.13 The Agreement and Plan of Merger, dated August 12, 1997, by
and among Isomedix Inc., STERIS Corporation, and STERIS
Acquisition Corporation (filed as Exhibit (c) (1) to the
Tender Offer Statement on Schedule 14D-1 filed by STERIS
Corporation and STERIS Acquisition Corporation on August 18,
1997, and incorporated herein by reference).
10.14 STERIS Corporation 1997 Stock Option Plan
21.1 Subsidiaries of STERIS Corporation
23.1 Consent of Independent Auditors
24 Powers of Attorney
27 Financial Data Schedules
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 1998.
36
37
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the date indicated.
STERIS Corporation
(Registrant)
/s/ Michael A. Keresman, III
--------------------------------------
Michael A. Keresman, III
Chief Financial Officer and
Senior Vice President
(Principal Financial Officer)
May 29, 1998
Pursuant to the requirements of Sections 13 or 15 (d) of the Securities
Exchange Act of 1934, this Report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the date indicated.
BILL R. SANFORD, Chairman of the Board of Directors, President, and Chief
Executive Officer (Principal Executive Officer); MICHAEL A. KERESMAN, III,
Senior Vice President and Chief Financial Officer (Principal Financial Officer
and Principal Accounting Officer); RAYMOND A. LANCASTER, Director; THOMAS J.
MAGULSKI, Director; J.B. RICHEY, Director; JERRY E. ROBERTSON, Director; FRANK
E. SAMUEL, JR., Director; and LOYAL W. WILSON, Director.
STERIS Corporation
(Registrant)
/s/ Michael A. Keresman, III
--------------------------------------
Michael A. Keresman, III
Attorney-in-Fact
May 29, 1998
37
38
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
3.1 1992 Amended Articles of Incorporation of STERIS
Corporation, amended as of May 13, 1996 (filed as Exhibit
4.2 to the Registration Statement on Form S-3 filed June 21,
1996, and incorporated herein by reference).
3.2 1992 Amended Regulations of STERIS Corporation.
4.1 Specimen Form of Common Stock Certificate (filed as Exhibit
4.1 to Amendment No. 1 to the Registration Statement on Form
S-1 filed April 30, 1992, and incorporated herein by
reference).
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). (A management contract or compensatory
plan or arrangement required to be filed as an exhibit
hereto.)
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).
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 Credit Agreement, dated May 13, 1996, among STERIS
Corporation, various financial institutions, and KeyBank
National Association, as Agent (filed as Exhibit 10.14 to
Form 10-K filed for the fiscal year ended March 31, 1996,
and incorporated herein by reference).
10.8 Second Amendment Agreement, dated June 10, 1997, to Credit
Agreement, dated May 13, 1996, 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 June 30, 1997, and incorporated
herein by reference).
10.9 Third Amendment Agreement dated June 10, 1997, to Credit
Agreement, dated May 13, 1996, among STERIS Corporation,
various financial institutions and KeyBank National
Association, as Agent (filed as Exhibit 10.2 to Form 10-Q
filed for the quarter ended June 30, 1997, and incorporated
herein by reference).
10.10 Master Promissory Note.
10.11 Management Incentive Compensation Plan FY 1998.
10.12 Promissory Note.
10.13 The Agreement and Plan of Merger, dated August 12, 1997, by
and among Isomedix Inc., STERIS Corporation, and STERIS
Acquisition Corporation (filed as Exhibit (c) (1) to the
Tender Offer Statement on Schedule 14D-1 filed by STERIS
Corporation and STERIS Acquisition Corporation on August 18,
1997, and incorporated herein by reference).
10.14 STERIS Corporation 1997 Stock Option Plan
21.1 Subsidiaries of STERIS Corporation
23.1 Consent of Independent Auditors
24 Powers of Attorney
27 Financial Data Schedules
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.
38
1
EXHIBIT 3.2
1992 Amended Regulations of STERIS Corporation.
STERIS CORPORATION
AMENDED AND RESTATED REGULATIONS
As adopted by the shareholders on
April 26, 1988 and amended by the shareholders
effective July 12, 1988 and June 8, 1992
ARTICLE I
---------
SHAREHOLDERS
------------
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of
the corporation for the election of directors, the consideration of reports to
be laid before the meeting, and the transaction of such other business as may
properly be brought before the meeting shall be held in the place described in
the Articles of Incorporation as the place where the principal office of the
corporation is or is to be located, or at such other place either within or
without the State of Ohio as may be designated by the Board of Directors, the
Chairman of the Board, or the President and specified in the notice of the
meeting, at ten o'clock a.m., or at such other time as may be designated by the
Board of Directors, the Chairman of the Board, or the President and specified in
the notice of the meeting, on the second Tuesday of the fourth month following
the end of each fiscal year of the corporation or on such other day of the
fourth month following the end of each fiscal year of the corporation as may be
designated by the Board of Directors, the Chairman of the Board, or the
President and specified in the notice of the meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders of
the corporation may be held on any business day when called by the Chairman of
the Board, the President, a Vice President, the Board of Directors acting at a
meeting, a majority of the directors acting without a meeting, or the persons
who hold fifty percent of all the shares outstanding and entitled to vote at the
meeting.
Upon request in writing delivered either in person or by registered
mail to the President or the Secretary by any persons entitled to call a meeting
of the shareholders, that officer shall forthwith cause to be given to the
shareholders entitled thereto notice of a meeting to be held on the date not
less than seven or more than sixty days after receipt of the request, as that
officer may fix; if the notice is not given within thirty days after the
delivery or mailing of the request, the persons calling the meeting may fix the
time of the meeting and give notice thereof in the manner provided by law or as
provided in these Regulations or cause the notice to be given by any designated
representative. Each special meeting shall be called to convene between nine
o'clock a.m. and five o'clock p.m., and shall be held at the principal office of
the corporation unless the meeting is called by the directors, acting with or
without a meeting, in which case the meeting may be held at any place either
within or without the State of Ohio designated by the Board of Directors and
specified in the notice of the meeting.
SECTION 3. NOTICE OF MEETINGS. Not less than seven or more than sixty
days before the date
39
2
fixed for a meeting of the shareholders, written notice stating the time, place,
and purposes of the meeting shall be given by or at the direction of the
Secretary, an Assistant Secretary, or any other person or persons required or
permitted by these Regulations to give the notice. The notice shall be given by
personal delivery or by mail to each shareholder entitled to notice of the
meeting who is of record as of the day next preceding the day on which notice is
given or, if a record date therefor is duly fixed, of record as of that date; if
mailed, the notice shall be addressed to the shareholders at their respective
addresses as they appear on the records of the corporation. Notice of the time,
place, and purposes of any meeting of the shareholders may be waived in writing,
either before or after the holding of the meeting, by any shareholder, which
writing shall be filed with or entered upon the records of the corporation.
Attendance of any shareholder at any meeting without protesting, prior to or at
the commencement of the meeting, the lack of proper notice shall be deemed to be
a waiver by him of notice of the meeting.
SECTION 4. QUORUM; ADJOURNMENT. Except as may be otherwise provided by
law or by the Articles of Incorporation, at any meeting of the shareholders the
holders of shares entitling them to exercise a majority of the voting power of
the corporation present in person or by proxy shall constitute a quorum for the
meeting, except that no action required by law, the Articles, or these
Regulations to be authorized or taken by a designated proportion of the shares
of any particular class or of each class of the corporation may be authorized or
taken by a lesser proportion and except that the holders of a majority of the
voting shares represented at the meeting, whether or not a quorum is present,
may adjourn the meeting from time to time; if any meeting is adjourned, notice
of adjournment need not be given if the time and place to which the meeting is
adjourned are fixed and announced at the meeting.
SECTION 5. ACTION WITHOUT A MEETING. Any action which may be authorized
or taken at a meeting of the shareholders may be authorized or taken without a
meeting with the affirmative vote or approval of, and in a writing or writings
signed by or on behalf of, all of the shareholders who would be entitled to
notice of a meeting of the shareholders held for the purpose, which writing or
writings shall be filed with or entered upon the records of the corporation.
SECTION 6. PROXIES. Persons entitled to vote shares or to act with
respect to shares may vote or act in person or by proxy. The person appointed as
proxy need not be a shareholder. Unless the writing appointing a proxy otherwise
provides, the presence at a meeting of the person who appointed a proxy shall
not operate to revoke the appointment. Notice to the corporation, in writing or
in open meeting, of the revocation of the appointment of a proxy shall not
affect any vote or act previously taken or authorized.
SECTION 7. APPROVAL AND RATIFICATION OF ACTS OF OFFICERS AND DIRECTORS.
Except as otherwise provided by the Articles of Incorporation or by law, any
contract, action, or transaction, prospective or past, of the corporation or of
the Board of Directors or of any director or officer may be approved or ratified
by the affirmative vote in person or by proxy of the holders of record of a
majority of the shares held by persons not interested in the contract, action,
or transaction and entitled to vote in the election of directors (without regard
to voting powers which may thereafter exist upon a default, failure, or other
contingency), which approval or ratification shall be as valid and binding as
though affirmatively voted for or consented to by every shareholder of the
corporation.
SECTION 8. SHAREHOLDER PROPOSALS. No proposal made by a shareholder of
the corporation shall be eligible to be submitted to the shareholders for their
approval or adoption at any annual or special meeting of shareholders unless all
of the following requirements are met:
(1) the shareholder submitting the proposal (the "proponent") submits
the proposal to the corporation in writing at the corporation's principal
executive offices;
40
3
(2) at the time the proponent submits such proposal the proponent is a
shareholder of record of the corporation and continues to be a shareholder of
record of the corporation as of the close of business on the record date for
determining shareholders entitled to notice of and to vote at such annual or
special meeting of shareholders, in both instances as reflected in the
shareholder records of the corporation;
(3) at the time the proponent submits such proposal the proponent provides
the corporation in writing with the proponent's name, address, the number of
voting securities held of record, the date upon which the proponent acquired
such securities, and a list of all other proposals submitted by the proponent to
the corporation during the preceding five years; and
(4) the proposal is received at the corporation's principal executive
offices (a) in the case of a proposal to be acted upon at an annual meeting of
shareholders, not less than 120 calendar days in advance of the date of the
previous year's annual meeting of shareholders, or, if no annual meeting was
held in the previous year, a reasonable time (as determined by the corporation
in its sole discretion) before the current year's annual meeting; and (b) in the
case of a proposal to be acted upon at a special meeting of shareholders, a
reasonable time (as determined by the corporation in its sole discretion) before
the special meeting.
Notwithstanding the foregoing provisions of this Section 8, in the case of any
proposal that the corporation is required to include in its proxy statement and
form of proxy under the provisions of Rule 14a-8 (as from time to time amended)
promulgated under the Securities Exchange Act of 1934 (or any similar or
successor rule or regulation under that or any successor act), compliance by the
proponent with all of the requirements of such rule shall be deemed to
constitute compliance with the provisions of this Section 8.
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
SECTION 1. NUMBER; CLASSIFICATION; TERM OF OFFICE. Commencing with the
election of directors at the annual meeting of shareholders in 1992 and at all
times thereafter, the Board of Directors shall be divided into two classes. The
respective terms of the two classes of directors shall be staggered so that at
any time the term of one class will expire at the next annual meeting of
shareholders thereafter occurring and the term of the second class will expire
at the second annual meeting of shareholders thereafter occurring. At each
annual meeting of shareholders of the corporation, the successors to the
directors of the class whose term will expire in that year shall be elected to
hold office for a term expiring at the annual meeting of shareholders occurring
in the second year after the date of their election. In each instance, directors
shall hold office until their successors are chosen and qualified.
At the 1992 annual meeting of shareholders, the size of the Board of
Directors shall be fixed at seven members, divided into one class of three
directors and a second class of four directors. At the 1992 annual meeting of
shareholders three directors shall be elected to the class whose term will
expire at the annual meeting of shareholders in 1993, and four directors shall
be elected to the class whose term will expire at the annual meeting of
shareholders in 1994. The Board of Directors or the shareholders may from time
to time thereafter change the size of the Board of Directors to a total number
of no fewer than six directors and no more than nine directors. The shareholders
may change the number of directors as provided in the immediately preceding
sentence at a meeting of the shareholders called for the purpose of electing
directors at which a
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quorum is present by the affirmative vote of the holders of a majority of the
voting power represented at the meeting and entitled to elect the directors. The
Board of Directors may change the number of directors by a vote of two-thirds of
the directors then in office. If the Board of Directors or the shareholders
change the number of directors, the two classes of the Board of Directors shall
be divided into as equal a number of directors as possible, with the Board of
Directors or the shareholders, as the case may be, fixing or determining the
adjustment to be made in each class. No reduction in the number of directors
shall of itself have the effect of shortening the term of any incumbent
director.
Except as provided in the immediately preceding paragraph, the number of
directors and the number of directors of any class may not be fixed or changed
by the shareholders or directors, except (i) by amending these Regulations in
accordance with the provisions of Article X of these Regulations, or (ii)
pursuant to an agreement of merger or consolidation recommended by two-thirds of
the members of the Board of Directors and adopted by the shareholders at a
meeting held for such purpose by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power on such proposal.
This Section 1 and other provisions of these Regulations are subject to the
provisions of the Articles of Incorporation with respect to special voting
rights of holders of Preferred Shares in the event of certain defaults by the
corporation in redeeming or paying dividends on such Preferred Shares.
SECTION 2. ELECTION OF DIRECTORS; NOMINATIONS; VACANCIES. The directors
shall be elected at each annual meeting of shareholders or at a special meeting
called for the purpose of electing directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. Nominations of persons for election as directors may be made at a
meeting of shareholders by or at the direction of the Board of Directors by any
nominating committee or person appointed by the Board of Directors, or by any
shareholder of the corporation entitled to vote for the election of directors at
the meeting who complies with the notice procedures set forth in this Section 2.
Such nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the corporation. To be timely, a shareholder's notice shall be delivered to
or mailed and received at the principal executive offices of the corporation not
less than sixty (60) days nor more than ninety (90) days prior to the meeting;
provided, however, that in the event that less than seventy-five (75) days'
notice to the shareholders or prior public disclosure of the date of the meeting
is given or made, notice by the shareholder to be timely must be so received not
later than the close of business on the fifteenth (15th) day following the
earlier of the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Such shareholder's notice shall set forth (a)
as to each person who is not an incumbent director when the shareholder proposes
to nominate such person for election as a director: (i) the name, age, business
address and residence address of such person; (ii) the principal occupation or
employment of such person for the past five years; (iii) the class and number of
shares of the corporation which are beneficially owned by such person; and (iv)
any other information relating to such person that is required to be disclosed
in solicitations for proxies for election of director pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended; and (b) as to the
shareholder giving the notice: (i) the name and record address of such
shareholder and (ii) the class and number of shares of the corporation which are
beneficially owned by such shareholder. Such notice shall be accompanied by the
written consent of each proposed nominee to serve as a director of the
corporation, if elected. No person shall be eligible for election as a director
of the corporation unless nominated in accordance with the procedures set forth
in this Section 2.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
provisions of this Section 2, and if he should so determine, the defective
nomination shall be disregarded.
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In the event of the occurrence of any vacancy in the Board of Directors,
however caused, or in the event of the creation of any director's office by an
increase in the number of directors, the remaining directors, though less than a
majority of the whole authorized number of directors, may, by the vote of
two-thirds of their number, fill the vacancy or the newly created office, as the
case may be, for the unexpired term.
SECTION 3. RESIGNATIONS; REMOVAL OF DIRECTORS. The office of a director
becomes vacant if he dies or resigns. Any director may resign at any time by
oral statement to that effect made at a meeting of the Board of Directors or in
a writing to that effect delivered to the Secretary, which resignation shall
take effect immediately or at such other time as the director may specify.
The Board of Directors may remove any director and thereby create a vacancy
in the Board: (a) if by order of court he has been found to be of unsound mind
or if he is adjudicated a bankrupt; (b) if within sixty days from the date of
his election he does not qualify by accepting in writing his election to such
office or by acting at a meeting of directors.
All the directors, or all of the directors of a particular class or any
individual director, may be removed from office, without assigning any cause, by
the vote of the holders of 75% of the voting power entitling them to elect
directors in place of those to be removed. In case of any such removal, a new
director may be elected at the same meeting for the unexpired term of each
director removed. Failure to elect a director to fill the unexpired term of any
director removed shall be deemed to create a vacancy in the Board. Any vacancy
created by virtue of a resignation or removal under this Section 3 shall be
filled by the Board in accordance with Section 2 hereof.
SECTION 4. ORGANIZATION MEETING. Immediately after each annual meeting of
the shareholders, the newly elected directors shall hold an organization meeting
for the purpose of electing officers and transacting any other business. Notice
of the organization meeting need not be given.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held at such times and places within or without the State of Ohio as may be
provided for in bylaws or resolutions adopted by the Board of Directors and upon
such notice, if any, as shall be so provided. Unless otherwise indicated in the
notice of a regular meeting, any business may be transacted at that regular
meeting.
SECTION 6. SPECIAL MEETINGS. Special meetings (including "telephone"
meetings) of the Board of Directors may be held at any time within or without
the State of Ohio (or through use of telephone or other communications equipment
if all persons participating can hear each other) upon call by the Chairman of
the Board, the President, a Vice President, or any two directors. Written notice
of the time and place of each special meeting shall be given to each director
either by personal delivery or by mail, telegram, or cablegram at least two days
before the meeting, which notice need not specify the purposes of the meeting,
except that attendance of any director at any special meeting (and participation
in a meeting employing telephone or other communications equipment) without
protesting, prior to or at the commencement of the meeting, the lack of proper
notice shall be deemed to be a waiver by him of notice of the meeting and except
that notice of a special meeting may be waived in writing, either before or
after the holding of the meeting, by any director, which writing shall be filed
with or entered upon the records of the corporation. Unless otherwise indicated
in the notice of a special meeting, any business may be transacted at that
special meeting.
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SECTION 7. QUORUM; ADJOURNMENT. A quorum of the Board of Directors at an
organization, regular, or special meeting shall consist of at least two-thirds
of the directors then in office, except that a majority of the directors present
at a meeting duly held, whether or not a quorum is present, may adjourn the
meeting from time to time; if any meeting is adjourned, notice of adjournment
need not be given if the time and place to which the meeting is adjourned are
fixed and announced at the meeting. At each meeting of the Board of Directors at
which a quorum is present, all questions and business shall be determined by a
vote of at least two-thirds of the directors then-in office, except as in these
Regulations otherwise expressly provided.
SECTION 8. ACTION WITHOUT A MEETING. Any action which may be authorized or
taken at a meeting of the Board of Directors may be authorized or taken without
a meeting with the affirmative vote or approval of, and in a writing or writings
signed by, all of the directors, which writing or writings shall be filed with
or entered upon the records of the corporation.
SECTION 9. COMMITTEES. The Board of Directors may at any time appoint from
its members an Executive, Finance, or other committee or committees, consisting
of such number of members, not less than three, as the Board of Directors may
deem advisable, together with such alternates as the Board of Directors may deem
advisable, to take the place of any absent member or members at any meeting of
the committee. Each member and each alternate shall hold office during the
pleasure of the Board of Directors. Any committee shall act only in the
intervals between meetings of the Board of Directors and shall have such
authority of the Board of Directors as may, from time to time, be delegated by
the Board of Directors, except the authority to fill vacancies in the Board of
Directors or in any committee of the Board of Directors. Subject to these
exceptions, any person dealing with the corporation shall be entitled to rely
upon any act or authorization of an act by any committee to the same extent as
an act or authorization of the Board of Directors. Each committee shall keep
full and complete records of all meetings and actions, which shall be open to
inspection by the directors. Unless otherwise ordered by the Board of Directors,
any committee may prescribe its own rules for calling and holding meetings,
including telephone meetings, and for its own method of procedure, and may act
at a meeting, including a telephone meeting, by two-thirds of its members or
without a meeting by a writing or writings signed by all of its members.
ARTICLE III
-----------
OFFICERS
--------
SECTION 1. ELECTION AND DESIGNATION OF OFFICERS. The Board of Directors
shall elect a President, a Secretary, and a Treasurer and, in its discretion,
may elect a Chairman of the Board, one or more Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
as the Board of Directors may deem necessary. The Chairman of the Board and the
President shall be directors, but no one of the other officers need be a
director. Any two or more offices may be held by the same person, but no officer
shall execute, acknowledge, or verify any instrument in more than one capacity
if the instrument is required to be executed, acknowledged, or verified by two
or more officers.
SECTION 2. TERM OF OFFICE; VACANCIES. Each officer of the corporation shall
hold office until the next organization meeting of the Board of Directors and
until his successor is elected or until his earlier resignation, removal from
office, or death. The Board of Directors may remove any officer at any time with
or without cause by a two-thirds vote of the directors then in office. Any
vacancy in any office may be filled by the Board of Directors.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any, shall
preside at all
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meetings of the Board of Directors, shall, unless that duty has been delegated
by the Board of Directors to the President or another officer, preside at all
meetings of the shareholders, and shall have such authority and shall perform
such other duties as may be determined by the Board of Directors.
SECTION 4. PRESIDENT. The Secretary shall keep the minutes of meetings
of the shareholders and of the Board of Directors. He shall keep such books as
may be required by the Board of Directors, shall give notices of meetings of the
shareholders and of meetings of the Board of Directors required by law or by
these Regulations or otherwise, and shall have such authority and shall perform
such other duties as may be determined by the Board of Directors.
SECTION 5. VICE PRESIDENTS. The Vice Presidents shall, respectively,
have such authority and perform such duties as may be determined by the Board of
Directors.
SECTION 6. SECRETARY. The Secretary shall keep the minutes of meetings
of the shareholders and of the Board of Directors. He shall keep such books as
may be required by the Board of Directors, shall give notices of meetings of the
shareholders and of meetings of the Board of Directors required by law or by
these Regulations or otherwise, and shall have such authority and shall perform
such other duties as may be determined by the Board of Directors.
SECTION 7. TREASURER. The Treasurer shall receive and have in charge
all money, bills, notes, bonds, securities of other corporations, and similar
property belonging to the corporation and shall do with this property as may be
ordered by the Board of Directors. He shall keep accurate financial accounts and
hold them open for the inspection and examination of the directors and shall
have such authority and shall perform such other duties as may be determined by
the Board of Directors.
SECTION 8. OTHER OFFICERS. The Assistant Secretaries and Assistant
Treasurers, if any, and any other officers whom the Board of Directors may elect
shall, respectively, have such authority and perform such duties as may be
determined by the Board of Directors.
SECTION 9. DELEGATION OF AUTHORITY AND DUTIES. The Board of Directors
is authorized to delegate the authority and duties of any officer to any other
officer and generally to control the action of the officers and to require the
performance of duties in addition to those mentioned herein.
ARTICLE IV
----------
COMPENSATION OF AND TRANSACTIONS WITH
-------------------------------------
DIRECTORS, OFFICERS, AND EMPLOYEES
----------------------------------
SECTION 1. DIRECTORS AND MEMBERS OF COMMITTEES. Members of the Board of
Directors and members of any committee of the Board of Directors shall, as such,
receive such compensation, which may be either a fixed sum for attendance at
each meeting of the Board of Directors or at each meeting of the committee or
stated compensation payable at intervals, or shall otherwise be
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compensated as may be determined by or pursuant to authority conferred by the
Board of Directors or any committee of the Board of Directors, which
compensation may be in different amounts for various members of the Board of
Directors or any committee. No member of the Board of Directors and no member of
any committee of the Board of Directors shall be disqualified from being counted
in the determination of the presence of a quorum or from acting at any meeting
of the Board of Directors or of a committee of the Board of Directors by reason
of the fact that matters affecting his own compensation as a director, member of
a committee of the Board of Directors, officer, or employee are to be
determined.
SECTION 2. OFFICERS AND EMPLOYEES. The compensation of officers and
employees of the corporation, or the method of fixing their compensation, shall
be determined by or pursuant to authority conferred by the Board of Directors or
any committee of the Board of Directors. Compensation may include pension,
disability, and death benefits, and may be by way of fixed salary, on the basis
of earnings of the corporation, any combination thereof, or otherwise, as may be
determined or authorized from time to time by the Board of Directors or any
committee of the Board of Directors.
SECTION 3. TRANSACTIONS WITH DIRECTORS, OFFICERS, AND EMPLOYEES. No
contract, action, or transaction shall be void, or be voidable by the
corporation, for the reason that it is between or affects the corporation and
one or more of the directors, officers, or employees of the corporation or is
between or affects the corporation and another corporation, partnership, joint
venture, trust, or other enterprise in which one or more of the directors,
officers, or employees of the corporation are directors, trustees, or officers
or have a financial or personal interest or for the reason that one or more
interested directors, officers, or employees of the corporation participate in
or vote at the meeting of the Board of Directors or a committee of the Board of
Directors that authorizes the contract, action, or transaction if, in any such
case, the contract, action, or transaction is approved, ratified, or authorized
in the manner prescribed in the Articles of Incorporation, these Regulations, or
by law or if, in any such case, the contract, action, or transaction is fair as
to the corporation as of the time it is authorized or approved by the directors,
a committee of the Board of Directors, or the shareholders.
ARTICLE V
---------
STANDARD OF CARE AND INDEMNIFICATION
------------------------------------
SECTION 1. STANDARD OF CARE OF DIRECTORS. A director of the corporation
shall perform his duties as a director, including his duties as a member of any
committee of the directors upon which he may serve, in good faith, in a manner
he reasonably believes to be in or not opposed to the best interests of the
corporation, and with the care that an ordinarily prudent person in a like
position would use under similar circumstances. In performing his duties a
director is entitled to rely on information, opinions, reports, and statements
that are prepared or presented by such person or persons and under such
circumstances that the director's reliance on the information, opinions,
reports, or statements is at the time found warranted under the provision of the
Ohio General Corporation Law. Other than in connection with an action or suit in
which the liability of a director under Section 1701.95 of the Ohio Revised Code
is the only liability asserted, a director shall not be found to have violated
his duties as specified under the preceding sentences of this Section unless it
is proved by clear and convincing evidence in a court of competent jurisdiction
that the director has not acted in good faith, in a manner he reasonably
believes to be in or not opposed to the best interests of the Company, or with
the care that an ordinarily prudent person in a like position would use under
similar circumstances, in any action brought against a director, including
actions involving or effecting a change or potential change in control of the
corporation, a termination or potential termination of the director's service to
the corporation, and the director's service in any other position or
relationship with the corporation.
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SECTION 2. LIMITATION OF LIABILITY IN DAMAGES. Other than in connection
with an action or suit in which the liability of a director under Section
1701.95 of the Ohio Revised Code is the only liability asserted, a director or
officer of the corporation shall be liable in damages for any action he takes or
fails to take as a director or as an officer, as the case may be, only if it is
proved by clear and convincing evidence in a court of competent jurisdiction
that his act nor failure to act involved an act or omission either undertaken
with deliberate intent to cause injury to the corporation or undertaken with
reckless disregard for the best interests of the corporation.
SECTION 3. THIRD PARTY ACTION INDEMNIFICATION. The corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (other than an action, suit,
or proceeding by or in the right of the corporation), by reason of the fact that
he is or was a director, officer, employee, or agent of the corporation, or is
or was serving at the request of the corporation as a director, trustee,
officer, employee, or agent of another corporation, partnership, joint venture,
employee benefit plan, trust, or other enterprise, against expenses (including
attorney's fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with the action, suit, or proceeding
unless it is proved by clear and convincing evidence in a court of competent
jurisdiction that his action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the corporation or
undertaken with reckless disregard for the best interests of the corporation and
that, with respect to any criminal action or proceeding, he had reasonable cause
to believe his conduct was unlawful; the termination of any action, suit, or
proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, constitute proof.
SECTION 4. DERIVATIVE ACTION INDEMNIFICATION. Other than in connection
with an action or suit in which the liability of a director under Section
1701.95 of the Ohio Revised Code is the only liability asserted, the corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee, or agent of the corporation, or is
or was serving at the request of the corporation as a director, trustee,
officer, employee, or agent of another corporation, partnership, joint venture,
employee benefit plan, trust, or other enterprise, against expenses (including
attorney's fees) actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit unless it is proved by clear and
convincing evidence in a court of competent jurisdiction that his action or
failure to act involved an act or omission undertaken with deliberate intent to
cause injury to the corporation or undertaken with reckless disregards for the
best interests of the corporation, except that the corporation shall indemnify
him to the extent the court in which the action or suit was brought determines
upon application that, despite the proof but in view of all the circumstances of
the case, he is fairly and reasonably entitled to indemnity for such expenses as
the court shall deem proper.
SECTION 5. DETERMINATIONS OF INDEMNIFICATION RIGHTS. Any
indemnification under Section 3 or Section 4 of this Article V (unless ordered
by a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee, or agent is proper in the circumstances. The determination shall be
made (a) by a majority vote of those directors who, in number constitute a
quorum of the directors and who also were not and are not parties to or
threatened with any such action, suit, or proceeding or (b), if such a quorum is
not obtainable (or even if obtainable) and a majority of disinterested directors
so directs, in a written opinion by independent legal counsel (compensated by
the corporation) or (c) by the affirmative vote in person or by proxy of the
holders of record of a majority of the shares held by persons who were not and
are not parties to or threatened with any such action, suit, or proceeding and
entitled to vote in the election of directors without regard to voting power
that may thereafter exist upon a default, failure, or other contingency or (d)
by the court in which the action, suit, or proceeding was brought.
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SECTION 6. ADVANCES OF EXPENSES. Unless the action or suit is one in
which the liability of a director under Section 1701.95 of the Ohio Revised Code
is the only liability asserted, expenses (including attorney's fees) incurred by
a director, officer, employee, or agent of the corporation in defending any
action, suit, or proceeding referred to in Section 3 or Section 4 of this
Article V shall be paid by the corporation, as they are incurred, in advance of
final disposition of the action, suit, or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee, or agent in
which he agrees both (a) to repay the amount if it is proved by clear and
convincing evidence in a court of competent jurisdiction that his action or
failure to act involved an act or omission undertaken with deliberate intent to
cause injury to the corporation or undertaken with reckless disregard for the
best interests of the corporation and (b) to cooperate with the corporation
concerning the action, suit, or proceeding.
SECTION 7. PURCHASE OF INSURANCE. The corporation may purchase and
maintain insurance or furnish similar protection, including trust funds, letters
of credit, and self-insurance, on behalf of or for any person who is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, trustee, officer, employee, or
agent of another corporation, partnership, joint venture, employee benefit plan,
trust, or other enterprise, against any liability asserted against him and
incurred by him in any capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against liability
under the provisions of this Article or of the Ohio General Corporation Law.
Insurance may be purchased from or maintained with a person in which the
corporation has a financial interest.
SECTION 8. MERGERS. Unless otherwise provided in the agreement or
merger pursuant to which there is a merger into this corporation of a
constituent corporation that, if its separate existence had continued, would
have been required to indemnify directors, officers, employees, or agents in
specified situations, any person who served as a director, officer, employee, or
agent of the constituent corporation, or served at the request of the
constituent corporation as a director, trustee, officer, employee, or agent of
another corporation, partnership, joint venture, employee benefit plan, trust,
or other enterprise, shall be entitled to indemnification by this corporation
(as the surviving corporation) to the same extent he would have been entitled to
indemnification by the constituent corporation if its separate existence had
continued.
SECTION 9. HEIRS; NON-EXCLUSIVITY. The limitation of liability in
damages and the indemnification provided by this Article V shall continue as to
a person who has ceased to be a director, officer, employee, or agent of the
corporation and shall inure to the benefit of the heirs, executors and
administrators of such a person and shall not be deemed exclusive of, and shall
be in addition to, any other rights granted to a person seeking indemnification
as a matter of law or under the Articles, these Regulations, any agreement, a
vote of shareholders or disinterested directors, any insurance purchased by the
corporation, any action by the directors to take into account amendments to the
Ohio General Corporation Law that expand the authority of the corporation to
indemnify a director, officer, employee, or agent of the corporation, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding an office.
ARTICLE VI
----------
RECORD DATES
------------
For any lawful purpose, including, without limitation, the
determination of the shareholders who are entitled to receive notice of or to
vote at a meeting of the shareholders, the Board of Directors may fix a record
date in accordance with the provisions of the Ohio General Corporation Law. The
record date for the purpose of the determination of the shareholders who
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are entitled to receive notice of or to vote at a meeting of the shareholders
shall continue to be the record date for all adjournments of the meeting unless
the Board of Directors or the persons who shall have fixed the original record
date shall, subject to the limitations set forth in the Ohio General Corporation
Law, fix another date and shall cause notice thereof and of the date to which
the meeting shall have been adjourned to be given to shareholders of record as
of the newly fixed date in accordance with the same requirements as those
applying to a meeting newly called. The Board of Directors may close the share
transfer books against transfers of shares during the whole or any part of the
period provided for in this Article, including the date of the meeting of the
shareholders and the period ending with the date, if any, to which adjourned. If
no record date is fixed therefor, the record date for determining the
shareholders who are entitled to receive notice of or to vote at a meeting of
the shareholders shall be the date next preceding the day on which notice is
given or the date next preceding the day on which the meeting is held, as the
case may be.
ARTICLE VII
-----------
CERTIFICATES FOR SHARES
-----------------------
SECTION 1. FORM OF CERTIFICATES AND SIGNATURES. Each holder of shares
shall be entitled to one or more certificates, signed by the Chairman of the
Board, the President, or a Vice President and by the Secretary, an Assistant
Secretary, the Treasurer, or an Assistant Treasurer of the corporation, which
shall certify the number and class of shares held by him in the corporation, but
no certificate for shares shall be executed or delivered until the shares are
fully paid. When a certificate is countersigned by an incorporated transfer
agent or registrar, the signature of any officer of the corporation may be
facsimile, engraved, stamped, or printed. Although any officer of the
corporation whose manual or facsimile signature is affixed to a certificate
ceases to be that officer before the certificate is delivered, the certificate
nevertheless shall be effective in all respects when delivered.
SECTION 2. TRANSFER OF SHARES. Shares of the corporation shall be
transferable upon the books of the corporation by the holders thereof, in
person, or by a duly authorized attorney, upon surrender and cancellation of
certificates for a like number of shares of the same class or series, with duly
executed assignment and power of transfer endorsed thereon or attached thereto,
and with such proof of the authenticity of the signatures to such assignment and
power of transfer as the corporation or its agents may reasonably require.
SECTION 3. LOST, STOLEN, OR DESTROYED CERTIFICATES. The corporation may
issue a new certificate for shares in place of any certificate theretofore
issued by it and alleged to have been lost, stolen, or destroyed; the Board of
Directors may, however, in its discretion, require the owner, or his legal
representatives, to give the corporation a bond containing such terms as the
Board of Directors may require to protect the corporation or any person injured
by the execution and delivery of a new certificate.
SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
appoint, or revoke the appointment of, transfer agents and registrars and may
require all certificates for shares to bear the signatures of the transfer
agents and registrars, or any of them.
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ARTICLE VIII
------------
AUTHORITY TO TRANSFER AND VOTE SECURITIES
-----------------------------------------
The Chairman of the Board, the President, any Vice President, the
Secretary, the Treasurer of the corporation, and each such officer are
authorized to sign the name of the corporation and to perform all acts necessary
to effect a sale, transfer, assignment, or other disposition of any shares,
bonds, other evidences of indebtedness or obligations, subscription rights,
warrants, or other securities of another corporation owned by the corporation
and to issue the necessary powers of attorney; and each such officer is
authorized, on behalf of the corporation, to vote the securities, to appoint
proxies with respect thereto, to execute consents, waivers, and releases with
respect thereto, or to cause any such action to be taken.
ARTICLE IX
----------
CORPORATE SEAL
--------------
The Ohio General Corporation Law provides in effect that the absence of
a corporate seal from any instrument executed on behalf of the corporation does
not affect the validity of the instrument; if in spite of that provision a seal
is imprinted on or attached, applied, or affixed to an instrument by embossment,
engraving, stamping, printing, typing, adhesion, or other means, the impression
of the seal on the instrument shall be circular in form and shall contain the
name of the corporation and the words "corporate seal."
ARTICLE X
---------
AMENDMENTS
----------
These Regulations may be amended, or new Regulations may be adopted, by
the shareholders at a meeting held for that purpose, by the affirmative vote of
the holders of shares entitling them to exercise a majority of the voting power
on that proposal. Notwithstanding anything to the contrary contained in these
Regulations or in this Article X, to amend or add to or repeal Article I Section
2 and Section 8, Article II - Sections 2 and 3, and this Article X shall require
the affirmative vote at a meeting of holders of shares entitled to exercise 75%
of the voting power on such proposal, unless such action is recommended by
two-thirds of the members of the Board of Directors.
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EXHIBIT 10.10
MASTER PROMISSORY NOTE
$85,000,000 April 14, 1998
Cleveland, Ohio
FOR VALUE RECEIVED, the undersigned, STERIS CORPORATION, an Ohio
corporation, 5960 Heisley Road, Mentor, Ohio 44060 ("Borrower") promises to pay
to the order of KEYBANK NATIONAL ASSOCIATION, 127 Public Square, Cleveland, Ohio
44114-1306 ("Bank"), at any of its offices, the principal sum of EIGHTY-FIVE
MILLION DOLLARS ($85,000,000), or the aggregate unpaid principal amount of all
Advances made by Bank to Borrower hereunder, whichever is less, in lawful money
of the United States of America, on September 30, 1998.
Advances hereunder shall be made by Bank as Prime Rate Advances or LIBOR
Advances. Borrower promises to pay interest (based on a year having three
hundred sixty (360) days and calculated for the actual number of days elapsed)
on the daily principal balance of each Advance at a rate per annum equal to the
Interest Rate applicable to such Advance, with such interest to be due and
payable (a) with respect to any Prime Advance, on June 30, 1998 and on the
Maturity Date; and (b) with respect to any LIBOR Advance, on the last day of the
Interest Period applicable to such Advance. The daily principal balance of each
Advance that remains outstanding after the Maturity Date shall bear interest at
a rate per annum equal to the Default Rate. No LIBOR Advance may be prepaid
prior to the end of the Interest Period applicable thereto, except that each
LIBOR Advance must be paid upon the Maturity Date and any prepayment of a LIBOR
Advance resulting therefrom shall be subject to the reimbursement provisions set
forth below. Borrower may prepay any Prime Advance.
This Note shall serve as a master note to evidence all Advances; provided,
however, that the aggregate unpaid principal amount of all Advances shall not at
any one time outstanding exceed the Line of Credit. Borrower shall make an
immediate prepayment on this Note in the event that the aggregate unpaid
principal amount of all Advances shall at any time exceed the Line of Credit and
such prepayment shall be subject to the reimbursement provisions set forth
below. Bank shall record (a) the principal amount of each Advance, the Interest
Period, if any, and the Interest Rate applicable thereto, and (b) the amount of
any principal, interest or other payment and the applicable dates with respect
thereto, by such method as Bank may generally employ; provided, however, that
failure to make any such entry shall in no way detract from Borrower's
obligations under this Note. The aforesaid information with respect to the
Advances set forth on the records of Bank shall be rebuttably presumptive
evidence of the principal and interest owing and unpaid on this Note. Borrower
shall provide notice to Bank of a requested LIBOR Advance no fewer than three
(3) days (prior to 11:00 A.M. Cleveland, Ohio time) prior to the proposed date
of borrowing. Borrower may request same day borrowings (prior to 11:00 A.M.
Cleveland, Ohio time) with respect to Prime Advances. Borrower's request for any
Advance shall be in an amount of not less than One Million Dollars ($1,000,000).
Whenever any payment to be made under this Note shall be due on a day which is
not a Business Day, such payment shall be made on the next succeeding Business
Day and such extension of time shall in each case be included in the computation
of the interest payable hereunder; provided, however, that with respect to any
LIBOR Advance, if the next succeeding Business Day falls in the succeeding
calendar month, such payment shall be made on the preceding Business Day and the
relevant Interest Period shall be adjusted accordingly. Borrower waives
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note.
If any LIBOR Advance becomes due and payable or is prepaid prior to the end
of the Interest Period applicable thereto, Borrower also promises to reimburse
Bank on demand for any resulting
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loss, cost or expense incurred (including loss of margin) by Bank as a result
thereof, including, without limitation, any loss incurred in obtaining,
liquidating or employing deposits from third parties. If, because of the
introduction of or any change in, or because of any judicial, administrative or
other governmental interpretation of any law or regulation, there shall be any
increase in the cost to Bank of making, funding, maintaining or allocating
capital to any LIBOR Advance, then Borrower shall, from time to time upon demand
by Bank, pay to Bank additional amounts sufficient to compensate Bank for such
increased cost. If, because of the introduction of or any change in, or because
of any judicial, administrative or other governmental interpretation of, any law
or regulation, it becomes unlawful for Bank to make, fund or maintain any LIBOR
Advance, then Bank's obligation to make, fund or maintain any such LIBOR Advance
shall terminate and each affected outstanding LIBOR Advance shall be converted
to a Prime Advance on the earlier of the last day of the applicable Interest
Period for each such LIBOR Advance or the date the making, funding or
maintaining of each such LIBOR Advance becomes unlawful.
Upon the occurrence of any Event of Default and at all times thereafter, at
the option of Bank (but automatically with respect to Events of Default (f)
through (i)), all Obligations shall become immediately due and payable, Bank may
terminate the Line of Credit and no further Advance may be requested by
Borrower. In addition, Bank may apply or setoff any Deposit Account against all
Obligations, all without any notice to or demand upon Borrower, in addition to
any other rights and remedies Bank may have pursuant to law, this Note or any
other instruments or agreements, which rights and remedies shall be cumulative.
This Note shall bind Borrower and Borrower's successors and assigns and
shall inure to the benefit of Bank and its successors and assigns. Borrower may
not assign or otherwise transfer any of its rights under this Note without the
express written consent of Bank. All provisions hereof shall be subject to,
governed by, and construed in accordance with Ohio law, without regard to
principles of conflict of laws. Unenforceability of any provision hereof or any
application of any provision hereof shall not affect the enforceability of any
other provision or application of any provision. This Note constitutes a final
written expression of all of the terms of this instrument, is a complete and
exclusive statement of those terms and supersedes all oral representations,
negotiations and prior writings, if any, with respect to the subject matter
hereof. The relationship between Borrower and Bank with respect to this Note is
and shall be solely that of debtor and creditor, respectively, and Bank shall
have no fiduciary obligation toward Borrower with respect to this Note or the
transactions contemplated hereby. Any amendment or waiver hereof or any waiver
of any right or remedy otherwise available must be in writing and signed by the
party against whom enforcement of the amendment or waiver is sought.
For the purposes of this Note, the following terms shall have the following
meanings:
"ADVANCES" means, collectively, all loans made by Bank to Borrower pursuant
to the Line of Credit; "ADVANCE" means any of the Advances.
"APPLICABLE FACILITY FEE RATE" means the Applicable Facility Fee Rate, as
defined in the Credit Agreement, which rate shall be immediately adjusted to
correspond with each change of such rate in accordance with the terms of the
Credit Agreement.
"APPLICABLE LIBOR MARGIN" means the Applicable LIBOR Margin, as defined in
the Credit Agreement, which margin shall be immediately adjusted to correspond
with each change of such margin in accordance with the terms of the Credit
Agreement.
"BUSINESS DAY" means a day of the year on which banks are not required or
authorized to close in Cleveland, Ohio and, if the applicable Business Day
relates to any LIBOR Advance, on
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which dealings are carried on in the London interbank eurodollar market.
"CREDIT AGREEMENT" means the Credit Agreement among Borrower, KeyBank
National Association, as Agent, and the banking institutions named on Schedule 1
attached thereto, dated as of May 13, 1996, as amended and as it may from time
to time be further amended, restated or otherwise modified.
"DEFAULT RATE" means a floating rate per annum equal to two percent (2%) in
excess of the Prime Rate from time to time in effect, which rate shall be
immediately adjusted to correspond with each change in the Prime Rate.
"DEPOSIT ACCOUNT" means any demand, time, statement, savings, passbook or
similar account or balance (including, without limitation, any certificate of
deposit) presently or at any time hereafter maintained with Bank at any of its
foreign or domestic offices either by Borrower severally or jointly by Borrower
and another person or entity.
"DERIVED LIBOR RATE" means a rate per annum which shall be the sum of the
Applicable LIBOR Margin plus the LIBOR Rate.
"EUROCURRENCY RESERVE PERCENTAGE" means, for any Interest Period in respect
of any LIBOR Advance, as of any date of determination, the aggregate of the then
stated maximum reserve percentages (including any marginal, special, emergency
or supplemental reserves), expressed as a decimal, applicable to such Interest
Period (if more than one such percentage is applicable, the daily average of
such percentages for those days in such Interest Period during which any such
percentage shall be so applicable) by the Board of Governors of the Federal
Reserve System, any successor thereto, or any other banking authority, domestic
or foreign, to which Bank may be subject in respect to eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of the
Federal Reserve Board) or in respect of any other category of liabilities,
including deposits by reference to which the interest rate on LIBOR Advances is
determined or any category of extension of credit or other assets that include
the LIBOR Advances. For purposes hereof, such reserve requirements shall
include, without limitation, those imposed under Regulation D of the Federal
Reserve Board and the LIBOR Advances shall be deemed to constitute Eurocurrency
Liabilities subject to such reserve requirements without benefit of credits for
proration, exceptions or offsets which may be available from time to time to
Bank under said Regulation D.
"EVENT OF DEFAULT" means the occurrence of any of the following events: (a)
failure of Borrower to pay or perform any Obligation when it becomes due and
payable; (b) an Event of Default or a Possible Default under the Credit
Agreement; (c) the Credit Agreement or the Commitments (as defined in the Credit
Agreement) thereunder shall have been terminated for any reason; (d)
untruthfulness, proved to the satisfaction of Bank, of any statement,
representation or certification contained in any financial statement, or other
document given by Borrower in connection with any Advance; (e) breach by
Borrower of any provision, agreement, representation, warranty or covenant set
forth in this Note, the Credit Agreement or any Loan Document, as defined in the
Credit Agreement, in any other instrument, document or agreement evidencing or
relating to any Obligation; (f) dissolution, termination of existence,
insolvency, business failure or appointment of a receiver of any part of the
property of Borrower; (g) assignment for the benefit of creditors by Borrower;
(h) failure or inability of Borrower to pay its debts as such debts come due;
(i) the commencement of any proceedings under any bankruptcy or insolvency laws
by or against Borrower; or (j) any judgment, attachment, execution, or similar
process is rendered, issued, or levied against Borrower or any material amount
of its property and is not fully satisfied, released, vacated, or bonded within
thirty (30) days after its rendering, issue or levy.
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"INTEREST PERIOD" means, with respect to any LIBOR Advance, the period
commencing on the date such Advance is made and ending on the last day of such
period, as selected by Borrower pursuant to the provisions hereof, and,
thereafter, each subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of such period, as selected
by Borrower pursuant to the provisions hereof. The duration of each Interest
Period for any LIBOR Advance shall be one (1) month, two (2) months or three (3)
months, in each case as Borrower may select upon notice, as set forth herein,
provided that if Borrower fails to so select the duration of any Interest
Period, the LIBOR Advance shall be converted to a Prime Advance.
"INTEREST RATE" means (a) as to any Prime Advance, that floating rate per
annum equal to the Prime Rate, which rate shall be immediately adjusted to
correspond with each change in the Prime Rate, and (b) as to any LIBOR Advance,
that fixed rate per annum (subject to changes in the Applicable Facility Fee
Rate and the Applicable Margin) equal to the sum of the following: (i) the LIBOR
Rate, plus (ii) the Applicable Facility Fee Rate, plus (iii) the Applicable
Margin.
"LIBOR ADVANCE" means any Advance that bears interest determined with
reference to the LIBOR Rate.
"LIBOR RATE" means, for any Interest Period with respect to a LIBOR
Advance, the quotient (rounded upwards, if necessary, to the nearest one
sixteenth of one percent (1/16th of 1%)) of: (a) the per annum rate of interest,
determined by Bank in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) as of approximately 11:00 A.M.
(London time) two (2) Business Days prior to the beginning of such Interest
Period pertaining to such LIBOR Advance, as provided by Telerate Service,
Bloomberg's or Reuters (or any other similar company or service that provides
rate quotations comparable to those currently provided by such companies as the
rate in the London interbank market for dollar deposits in immediately available
funds with a maturity comparable to such Interest Period), DIVIDED BY (b) a
number equal to 1.00 MINUS the Eurocurrency Reserve Percentage. In the event
that such rate quotation is not available for any reason, then the rate (for
purposes of clause (a) hereof) shall be the rate, determined by Bank as of
approximately 11:00 A.M. (London time) two (2) Business Days prior to the
beginning of such Interest Period pertaining to such LIBOR Advance, to be the
average (rounded upwards, if necessary, to the nearest one sixteenth of one
percent (1/16th of 1%)) of the per annum rates at which dollar deposits in
immediately available funds in an amount comparable to such LIBOR Advance and
with a maturity comparable to such Interest Period are offered to the prime
banks by leading banks in the London interbank market. The LIBOR Rate shall be
adjusted automatically on and as of the effective date of any change in the
Eurocurrency Reserve Percentage.
"LINE OF CREDIT" means the line of credit established hereunder by Bank for
Borrower pursuant to which Bank shall make Advances to Borrower up to the
aggregate principal amount at any one time outstanding of Eighty-Five Million
Dollars ($85,000,000).
"MATURITY DATE" means September 30, 1998, or such earlier date on which the
Line of Credit shall have been terminated after an Event of Default.
"OBLIGATION" means (a) each Advance evidenced by this Note or pursuant to
the Line of Credit, (b) the Debt (as defined in the Credit Agreement), and (c)
any other present or future obligation, indebtedness or liability of Borrower
owed to Bank, of whatever kind and however evidenced, together with all
extensions, renewals, amendments, restatements and substitutions thereof or
therefor.
"PRIME ADVANCE" means any Advance that bears interest determined with
reference to the
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Prime Rate.
"PRIME RATE" means that interest rate established from time to time by Bank
as Bank's Prime Rate, whether or not such rate is publicly announced; the Prime
Rate may not be the lowest interest rate charged by Bank for commercial or other
extensions of credit.
Each change in the Prime Rate shall be effective immediately from and after such
change.
Borrower authorizes any attorney at law at any time or times after the
maturity hereof (whether maturity occurs by lapse of time or by acceleration) to
appear in any state or federal court of record in the United States of America,
to waive the issuance and service of process, to admit the maturity of this Note
and the nonpayment thereof when due, to confess judgment against the undersigned
in favor of the holder of this Note for the amount then appearing due, together
with interest and costs of suit, and thereupon to release all errors and to
waive all rights of appeal and stay of execution. The foregoing warrant of
attorney shall survive any judgment, and if any judgment be vacated for any
reason, the holder hereof nevertheless may thereafter use the foregoing warrant
of attorney to obtain an additional judgment or judgments against the
undersigned. The undersigned agrees that Bank's attorney may confess judgment
pursuant to the foregoing warrant of attorney. The undersigned further agrees
that the attorney confessing judgment pursuant to the foregoing warrant of
attorney may receive a legal fee or other compensation from Bank.
JURY TRIAL WAIVER. BORROWER AND BANK WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, BETWEEN BORROWER AND BANK, ARISING OUT OF, IN CONNECTION WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED
THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY
BANK'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR
COGNOVIT PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT BETWEEN BORROWER AND BANK.
STERIS CORPORATION
By: /s/ Bill R. Sanford
----------------------------
Bill R. Sanford, Chairman, President
and Chief Executive Officer
and /s/ Michael A. Keresman, III
----------------------------
Michael A. Keresman, III, Senior
Vice President and Chief Financial
Officer
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"WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE."
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EXHIBIT 10.11
STERIS CORPORATION
MANAGEMENT INCENTIVE COMPENSATION PLAN
FY 1998
OBJECTIVE
- ---------
The objective of the STERIS Corporation Management Incentive Compensation Plan
(MICP) is to encourage greater initiative, resourcefulness, teamwork,
efficiency, and achievement of objectives on the part of key management whose
performance and responsibilities directly affect Company profits.
GENERAL PROVISIONS
- ------------------
The MICP for FY 1998 may be reviewed and revised at the Chief Executive
Officer's discretion within the guidelines established by the Compensation
Committee of the Board of Directors. Any incentive payouts under the terms of
this Plan will be limited by any governmental regulations that are in effect at
the time of such incentive payouts.
The incentive compensation fund available for disbursement to participants shall
be determined by achievement of key parameters of the approved Annual Business
Plan.
Management Incentive Compensation will be calculated after the close of each
quarter and will be cumulative and retroactive. That is, deficiencies in
year-to-date (YTD) performance can be made up by overachievement in subsequent
quarters during the fiscal year.
A portion of the earned Management Incentive Compensation will be paid on a
quarterly basis with another portion held in an escrow account to be paid on an
annual basis. An accrual funding schedule will be developed and maintained by
the Finance Department to reserve adequate funds for the payment of earned
Management Incentive Compensation.
KEY PARAMETERS
- --------------
MICP compensation will be determined through achievement of a combination of
Annual Business Plan (ABP) objectives and Quarterly Individual Objectives (IO).
ABP parameters are the Net Revenue, Operating Income, and Net Income objectives.
IO parameters are approved quarterly personal objectives that are brief,
specific, measurable, and consistent with overall Company objectives.
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ELIGIBILITY
- -----------
The management level classifications of individuals who may be eligible to
participate in the MICP are the following:
Chief Executive Officer
Sr. Vice President
Division President/Unit Head
Vice President
Director
Manager
Supervisor/Professional
Incumbents holding a key management position with one of the above titles are
immediately eligible for participation. New hires for an above titled position
will begin participation in the MICP during the first full fiscal quarter of
employment unless otherwise specified in the employment offer. An individual
promoted to a higher management level during a quarter will have MICP
compensation for that quarter at the management level held by the individual for
the majority of the quarter.
Termination of employment of a participant shall result in his or her forfeiture
of all unpaid incentive earnings.
MICP FY'98 PARTICIPANT BONUS SCHEDULE
- -------------------------------------
The bonus opportunity for each management level upon 100% achievement of the
FY'98 Net Revenue, Operating Income, and Net Income objectives is as follows:
Management Level Quarterly Funding
----------------------- -------------------
Chief Executive Officer 150% of Base Income
Senior Vice President 100% of Base Income
Division President/Unit Head 75% of Base Income
Vice President 50% of Base Income
Director 35% of Base Income
Manager 20% of Base Income
Supervisor/Professional $625
BONUS POOL FUNDING
- ------------------
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The funding of the bonus pool will be determined quarterly on a YTD basis. Any
funding will be dependent upon the Company's YTD achievement of net revenue and
operating income in relationship to the Annual Business Plan parameters. The
following weighting factor will apply to the qualification parameters:
Net Revenue 75%
Operating Income 25%
Funding will occur on a sliding scale basis from 80% to 120% of the Blended
Achievement Percentage. The following is a calculation example based upon YTD
achievement of 104% of net revenue and 110% of operating income parameters of
the ABP.
104 x 3 = 312
110 x 1 = 110
---
422 / 4 = 105.5% - Blended Rate
During FY'98, the Company must achieve at least an 80% blended rate to be
eligible for MICP participation. For divisional MICP participation the Company
and the respective division must achieve an 80% blended rate to be eligible for
MICP participation.
INDIVIDUAL OBJECTIVES (IO)
- --------------------------
Quantifiable management objectives are developed and approved quarterly for each
MICP participant. An individual's performance is evaluated at the end of each
quarter and a percentage Individual Objectives (IO) Achievement calculated. The
Individual Objectives are consistent with the quarterly and longer term
objectives for the Company and the individual business units, profit centers,
corporate services groups, or departments.
BONUS CALCULATION
- -----------------
Individual participant bonuses and bonus payouts will be determined as defined
in this bonus calculation section.
1. The bonus qualifier will be based on the Blended Achievement Percentage
of the Company's Net Revenue and Operating Income objectives.
2. The performance in achieving the Net Revenue and Operating Income bonus
qualification parameters will be determined on a YTD basis with a
weighting of 3X for Net Revenue and 1X for Operating Income.
3. Individual participant payout targets will be taken from the then current
Participant and Target Bonus Schedule.
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4. The YTD Blended Achievement Percentage will be applied to the individual
Target Bonus to determine the quarterly MICP eligible bonus amount.
5. If bonus eligibility on a YTD quarterly basis has occurred, the
individual MICP eligible bonus amount is multiplied by the percentage
achievement of the quarterly Individual Objectives that have been
approved at the beginning of each quarter by the participant's direct
supervisor and the senior executive/business head of the individual's
business unit.
Bonus calculation example:
Vice President
$80,000 Base Salary
50% Target Bonus
Corp Achievement
104% Net Revenue
110% Op Income
104 x 3 = 312
110 x 1 = 110
---
422 / 4 = 105.5% - Blended Rate
Individual Objectives (IO) Achievement
96%
Quarterly Target Bonus
$80,000 x 50% / 4 = $10,000
Sliding Scale Blended Target
$10,000 x 105.5% = $10,550
Earned Bonus
$10,550 x 96% (IO) = $10,128
BONUS PAYMENT
- -------------
Seventy-five percent (75%) of the eligible individual quarterly bonus will be
paid following the end of each quarter. Twenty-five percent (25%) of the
eligible individual quarterly bonus will be held in a bonus escrow account and
will be paid following the end of the fiscal year only if the CORPORATION meets
or exceeds its Net Income objective for the full fiscal year. Should the
Corporation fail to meet or exceed its Net Income objective for the full fiscal
year, all funds in the bonus escrow account will be forfeited.
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EFFECTIVE DATE
- --------------
The STERIS Management Incentive Compensation Plan is effective April 1, 1997,
through March 31, 1998.
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EXHIBIT 10.12
PROMISSORY NOTE
Original Principal Amount Mentor, Ohio
$2,371,813.76 April 15, 1998
FOR VALUE RECEIVED, BILL R. SANFORD ("Maker") promises to pay to the order
of STERIS Corporation ("Holder") the principal amount of Two Million Three
Hundred Seventy-One Thousand Eight Hundred and Thirteen Dollars and Seventy-Six
Cents ($2,371,813.76) together with interest thereon as hereinafter provided.
1. PRINCIPAL. The principal amount hereof shall be due and payable in full
on February 28, 2002 (the "Maturity Date").
2. INTEREST. The principal amount outstanding under this Promissory Note
from time to time shall bear interest from and including the date hereof at the
rate of 5.70% per annum, compounded annually on each anniversary of April 15,
1998, until paid in full. Interest on this Promissory Note shall be computed on
the basis of a 365 day year for the actual number of days elapsed.
3. PAYMENT IN FULL ON MATURITY DATE. Maker shall pay the full amount then
due under this Promissory Note, both principal and interest (including
compounded interest) in a single payment on the Maturity Date. Payment of the
principal of and interest on this Promissory Note shall be made in lawful money
of the United States of America to Holder at 5960 Heisley Road, Mentor, Ohio
44060 or to such other payee or at such other address as may be designated to
Maker by Holder from time to time.
4. MANDATORY PREPAYMENT ON SALE OF SHARES. Maker has used the proceeds of
the loan from STERIS Corporation that is evidenced by this Promissory Note to
fund the exercise of certain options for 186,500 STERIS Corporation Common
Shares (the "Shares") and the taxes incurred in connection with that exercise.
Upon any sale of any portion of the Shares, Maker shall promptly pay to Holder
such amount, if any, as is necessary so that, immediately after that payment,
the portion of the original principal on this Promissory Note that has been
repaid, and as to which all accrued interest has been paid, is at least directly
proportionate to the portion of the 186,500 Shares that have been sold by Maker
through the date of that payment. For example, if, on a particular date Maker,
having not previously sold any of the Shares and having not previously made any
payment on this Promissory Note, sells 46,625 Shares (1/4 of the original
number), Maker shall promptly pay to Holder at least $592,953.44 of principal
(1/4 of the original principal), together with all accrued interest on that
amount of principal. If the facts were the same as in the example just given
except that Maker had previously repaid $100,000 of principal and accrued
interest on this Promissory Note, Maker would be required to promptly pay to
Holder at least $492,953.44 of principal (1/4 of the original principal net of
the earlier $100,000 payment), together with all accrued interest on that amount
of principal.
5. WAIVER OF DEMAND, ETC. Maker waives demand, presentment, notice of
dishonor, protest, notice of protest, and diligence in collection and bringing
suit and agrees that Holder may extend the time for payment, accept partial
payment, or take security therefor without discharging or releasing Maker.
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6. GOVERNING LAW. This Promissory Note has been executed in Mentor, Ohio.
The construction, validity, and enforceability of this Promissory Note shall be
governed by the laws of the State of Ohio applicable to promissory notes made
and to be satisfied entirely within the State of Ohio.
7. COSTS OF ENFORCEMENT. Maker agrees to pay all costs and expenses
(including reasonable attorneys' fees) incurred by Holder in the collection of
this Promissory Note and in the enforcement of the rights under this Promissory
Note.
8. WAIVER. Maker, to the extent not prohibited by law, waives any right to
have a jury participate in resolving any dispute, whether sounding in contract,
tort or otherwise, between Holder and Maker arising out of, in connection with,
related to, or incidental to the relationship established between Maker and
Holder in connection with this Promissory Note, or any other agreement,
instrument, or document executed or delivered in connection therewith or the
transactions related thereto. This waiver shall not in any way affect, waive,
limit, amend, or modify the ability of any Holder hereof to pursue remedies
pursuant to any confession of judgment or cognovit provision contained in this
note.
9. PREPAYMENT. Maker may prepay all or any portion of the principal sum
hereof at any time without penalty. All such prepayments shall be applied to the
payment of the principal due hereon, and shall be accompanied by the payment of
accrued interest on the amount of the prepayment to the date thereof.
10. OVERDUE PAYMENTS. Any payment of principal and interest under this
Promissory Note must be received by Holder by 5:00 p.m. E.S.T. on a business day
in order to be credited on such date. If Maker fails to make any payment of
principal, interest, or other amount becoming due pursuant to the provisions of
this Promissory Note within ten business days of the date due and payable, Maker
also shall pay to Holder a late charge equal to five percent of the amount of
such payment. Such ten day period shall not be construed in any way to extend
the due date of any such or subsequent payment.
11. WARRANT OF ATTORNEY. Maker hereby irrevocably authorizes any
attorney-at-law to appear for Maker in an action on this Promissory Note at any
time after the same becomes due, whether by acceleration or otherwise, in any
court of record in the State of Ohio or elsewhere and to waive the issuing of
service of process against Maker, and to confess judgment in favor of the Holder
against Maker for all amounts that may be due, together with costs of suit, and
thereupon to waive all errors and all rights of appeal and stays of execution in
respect of the judgment rendered. Maker hereby expressly (a) waives any conflict
of interest in an attorney retained by the Holder confessing judgment against
Maker upon this Promissory Note, and (b) consents to any attorney retained by
the Holder receiving a legal fee or other value for legal services rendered for
confessing judgment against Maker upon this Promissory Note. The foregoing
warrant of attorney shall survive any judgment, and if any judgment is vacated
for any reason, the Holder may thereafter use the foregoing warrant of attorney
to obtain an additional judgment or judgments against Maker. A copy of this
Promissory Note, certified by the Holder, may be filed in any proceeding in
place of filing the original as a warrant of attorney.
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"WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE."
/s/ Bill R. Sanford
-------------------
Bill R. Sanford
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Exhibit 10.14
STERIS CORPORATION
1997 STOCK OPTION PLAN
1. Purpose. The purpose of this Plan is to provide to key Employees and to
Directors a proprietary interest in the Company and to thereby stimulate their
interest in the development and financial success of the Company. To achieve
these purposes, the Company may grant Options to selected Employees and
Directors, all in accordance with the terms and conditions hereinafter set
forth. Capitalized terms used in this Plan have the meanings ascribed to them in
Section 22, the last section hereof.
2. Administration.
2.1 Administrator. The Plan shall be administered by the Committee, which
shall consist of three or more Directors appointed from time to time by the
Board of Directors. Unless the Board of Directors determines otherwise, the
Committee shall be comprised solely of individuals who are "outside directors"
within the meaning of Section 162(m) of the Code and are "non-employee"
directors within the meaning of SEC Rule 16b-3. The Board of Directors may, in
its discretion, delegate to a committee or subcommittee of the Board of
Directors that does not meet the requirements set forth in the immediately
preceding sentence any or all of the authority and responsibility of the
Committee with respect to awards of Options to Participants who are not Section
16 Persons or "covered employees" for purposes of Section 162(m) of the Code at
the time any such delegated authority or responsibility is exercised. Such other
committee or subcommittee may consist of three or more directors who may, but
need not, be officers or employees of the Company or of any of its Subsidiaries.
To the extent that the Board of Directors has delegated to such other committee
or subcommittee the authority and responsibility of the Committee, all
references to the Committee in the Plan shall be to such other committee or
subcommittee.
2.2 Administrative Powers. The Committee shall have authority, subject to
the terms of the Plan, (a) to determine the Employees and Directors who are
eligible to receive Options under the Plan and the type, size, and terms of
Options to be granted to any Participant, the time or times at which Options
shall be exercisable or at which restrictions, conditions, and contingencies
shall lapse, and the terms and provisions of the instruments by which Options
shall be evidenced, (b) to establish any other restrictions, conditions, and
contingencies on Options in addition to those prescribed by the Plan, (c) to
interpret the Plan, and (d) to make all determinations necessary for the
administration of the Plan. The construction and interpretation by the Committee
of any provision of the Plan or any Option delivered pursuant to the Plan and
any determination by the Committee pursuant to any provision of the Plan or any
Option Instrument shall be final and conclusive. No member or alternate member
of the Committee shall be liable for any such action or determination made in
good faith. The Committee may act only by a majority of its members. Any
determination of the Committee may be made, without a meeting, by a writing or
writings signed by all of the members of the Committee. In addition, the
Committee may authorize any one or more of their number or any officer of the
Company to execute and deliver documents on behalf of the Committee and the
Committee may delegate to one or more employees, agents, or officers of the
Company, or to one or more third party consultants, accountants, lawyers, or
other advisors, such ministerial duties related to the operation of the Plan as
it may deem appropriate.
3. Eligibility. Options may be granted to any Employee or Director
selected by the Committee in its sole discretion.
4. Common Shares Subject to the Plan.
4.1 Maximum Number in the Aggregate. Subject to Section 4.3, the total
number of Common Shares as to which Options may be granted under the Plan as of
the date on which the Plan is approved by the shareholders of the Company shall
be equal to one percent (1%) of the total number of Common Shares outstanding as
of June 13, 1997 (the "Record Date"). Thereafter, on each January 1
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occurring during the term of the Plan through and including (but not after)
January 1, 2001, the number of Common Shares remaining available as to which
Options may be granted under the Plan shall be increased by an additional one
percent (1%) of the total number of Common Shares outstanding as of the Record
Date (with the effect that the maximum number of Common Shares authorized under
the Plan will not exceed five percent (5%) of the total number of Common Shares
outstanding as of the Record Date), provided, however, that the maximum number
of Common Shares remaining available for grants as of any January 1, taking into
account the additional one percent (1%) added as of that January 1, shall not
exceed three percent (3%) of the total number of Common Shares outstanding as of
the Record Date. Common Shares issued and distributed to Employees in connection
with Options granted under the Plan may be authorized and unissued Common
Shares, treasury Common Shares, or Common Shares acquired on the open market
specifically for distribution under the Plan, as the Board of Directors may from
time to time determine. Notwithstanding any other provision of the Plan, but
subject to adjustment under Section 10, the maximum number of Common Shares that
may be issued under the Plan pursuant to Incentive Stock Options shall be
500,000 Common Shares.
4.2 Maximum Number -- Per Participant. Subject to adjustment under Section
10, the maximum number of Options that may be granted to any particular
Participant in any calendar year during any part of which the Plan is in effect
shall be 500,000 Common Shares.
4.3 Charging of Shares. Common Shares subject to Options that are
forfeited, terminated, or canceled without having been exercised will again be
available for grant under the Plan, without reducing the number of Common Shares
available in any calendar year for grant of Options.
5. Options.
5.1 Types of Options. Options granted may be Incentive Stock Options or
Nonqualified Options, as the Committee may determine at the time of grant. The
Option Instrument pursuant to which any Incentive Stock Option is granted shall
specify that the Option granted thereby shall be treated as an Incentive Stock
Option. The Option Instrument pursuant to which any Nonqualified Option is
granted shall specify that the Option granted thereby shall not be treated as an
Incentive Stock Option.
5.2 Date of Grant of Options. The day on which the Committee authorizes
the grant of an Incentive Stock Option shall be the date on which that Option is
granted. The day on which the Committee authorizes the grant of a Nonqualified
Option shall be considered the date on which that Option is granted, unless the
Committee specifies a later date.
5.3 Exercise Price. The Exercise Price under any Option shall be not less
than the Fair Market Value of the Common Shares subject to the Option on the
date the Option is granted.
5.4 Option Expiration Date. The Option Expiration Date under any Incentive
Stock Option shall not be later than ten years from the date on which the Option
is granted. The Option Expiration Date under any Nonqualified Option shall not
be later than ten years and one month from the date on which the Option is
granted.
6. Exercise of Options.
6.1 Service Requirement. Except as otherwise provided in Section 7, an
Option may be exercised only while the Participant to whom the Option was
granted is in the employ of the Company or of a Subsidiary (or, in the case of a
Participant who is a nonemployee Director of the Company, while the Participant
remains a Director).
6.2 Vesting Schedule. Subject to the service requirement set forth in
Section 6.1, and unless otherwise specified by the Committee in the relevant
Option Instrument, each Option shall first become exercisable to the extent of:
(a) from and after the first anniversary date of the Option
Instrument, 25% of the Common Shares subject to the Option;
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(b) from and after the second anniversary date of the Option
Instrument, an additional 25% of the Common Shares subject to the Option;
(c) from and after the third anniversary date of the Option
Instrument, an additional 25% of the Common Shares subject to the Option;
and
(d) from and after the fourth anniversary date of the Option
Instrument, the remaining 25% of the Common Shares subject to the Option.
If, by reason of the application of Section 7, an Option may be exercised
at a time when a Participant is no longer in the service of the Company, and, on
the Service Termination Date, the Participant held any Options that were not
then otherwise fully exercisable, each such Option shall be exercisable as of
the Service Termination Date (i) to the extent that it was exercisable pursuant
to the foregoing schedule plus (ii) to the extent of an additional percentage
determined by multiplying 25% by a fraction the numerator of which is the number
of days between the Service Termination Date and the immediately preceding
anniversary date of the Participant's Option Instrument (or, if no anniversary
date has occurred, the numerator will be the number of days between the Service
Termination Date and the date of the grant of the Option) and the denominator of
which is 365. Once any portion of an Option becomes exercisable, that portion
shall remain exercisable until expiration or termination of the Option. A
Participant to whom an Option is granted may exercise the Option from time to
time, in whole or in part, up to the total number of Common Shares with respect
to which the Option is then exercisable, except that no fraction of a Common
Share may be purchased upon the exercise of any Option.
6.3 Procedure for Exercise. A Participant electing to exercise an Option
shall deliver to the Company (a) the Exercise Price payable in accordance with
Section 6.4 and (b) written notice of the election that states the number of
whole Common Shares with respect to which the Participant is exercising the
Option.
6.4 Payment For Common Shares. Upon exercise of an Option by a
Participant, the Exercise Price shall be payable by the Participant in cash or
in such other form of consideration as the Committee determines may be accepted,
including, without limitation, (a) by delivery by the Participant (with the
written notice of election to exercise) of irrevocable instructions to a broker
registered under the 1934 Act to promptly deliver to the Company the amount of
sale or loan proceeds to pay the Exercise Price, (b) in Common Shares (including
through an attestation procedure) or other property surrendered to the Company,
(c) by the surrender of all or part of the Option being exercised, or (d) by a
combination of the foregoing methods, as and to the extent permitted by the
Committee. Property for purposes of this section shall include an obligation of
the Company unless prohibited by applicable law. Common Shares surrendered in
connection with the exercise of an Option shall be valued at their Fair Market
Value on the date of exercise. Any other property so surrendered shall be valued
at its fair market value on any reasonable basis established or approved by the
Committee. Any Common Shares surrendered to the Company in connection with the
exercise of an Option (including by attestation) will again be available for
grant under the Plan, without reducing the number of Common Shares otherwise
available in any calendar year for grant of Options.
7. Termination of Service. After a Participant's Service Termination
Date, the rules set forth in this Section 7 shall apply. All factual
determinations with respect to the termination of a Participant's employment or
service as a Director, as the case may be, that may be relevant under this
Section 7 shall be made by the Committee in its sole discretion.
7.1 Termination Other Than Upon Death or Disability or for Cause. Upon
any termination of a Participant's service for any reason other than the
Participant's disability or death or the Participant's termination for Cause,
unless otherwise provided in the relevant Option Instrument, the Participant
shall have the right, during the period ending three months after the Service
Termination Date, but not later than the Option Expiration Date, to exercise any
Options that were outstanding on the Service Termination Date, if and to the
same extent as those Options were exercisable by the Participant on the Service
Termination Date.
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7.2 Termination Due To Disability. Upon any termination of a
Participant's service due to disability, unless otherwise provided in the
relevant Option Instrument, the Participant, or the Participant's
Representative, shall have the right to exercise, from time to time during the
period ending one year after the Service Termination Date, but not later than
the Option Expiration Date, any Options that were outstanding on the Service
Termination Date, if and to the same extent those Options were exercisable by
the Participant on the Service Termination Date.
7.3 Death of a Participant. Upon the death of a Participant while in the
service of the Company or any Subsidiary as an Employee or in the service of the
Company as a Director or within any of the periods referred to in either of
Sections 7.1 or 7.2 during which any particular Option remains potentially
exercisable, unless otherwise provided in the relevant Option Instrument (in
which the Committee may specify a different period of extension of the Option
Expiration Date in the event of the death of the Participant), (a) if the Option
Expiration Date of any Nonqualified Option that had not expired before the
Participant's death would otherwise expire before the first anniversary of the
Participant's death, that Option Expiration Date shall automatically be extended
to the first anniversary of the Participant's death and (b) unless otherwise
provided in the relevant Option Instrument, all Options held by the Participant
at the date of the Participant's death shall become immediately exercisable in
full and the Participant's Representative shall have the right to exercise any
such Options from time to time during the period ending one year after the date
of the Participant's death, but not later than the Option Expiration Date.
7.4 Termination for Cause. Upon any termination of a Participant's
service with the Company or a Subsidiary for Cause, all of the Participant's
rights with respect to unexercised Options shall expire immediately before the
Service Termination Date.
8. Acceleration Upon Change of Control. Unless otherwise specified in the
relevant Option Instrument, upon the occurrence of a Change of Control of the
Company, each Option theretofore granted to any Participant that then remains
outstanding shall become immediately exercisable in full.
9. Transferability. Unless otherwise determined by the Committee, no
Option may be transferred other than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order (as defined in
Section 414(p)(1)(B) of the Code) that satisfies the requirements of Section
414(p)(1)(A) of the Code. During a Participant's lifetime, only the Participant
(or in the case of incapacity of a Participant, the Participant's attorney in
fact or legal guardian) may exercise any Option.
10. Adjustment Upon Changes in Common Shares. In the event of any stock
dividend, stock split, or share combination of the Common Shares or any
reclassification, recapitalization, merger, consolidation, other form of
business combination, liquidation, or dissolution involving the Company or any
spin-off or other distribution to shareholders of the Company (other than normal
cash dividends), (a) the Committee shall make appropriate adjustments to the
maximum number of Common Shares that may be issued under the Plan pursuant to
Section 4.1 and (b) the Committee shall adjust the number and kind of shares
subject to, the price per share under, and the terms and conditions of each then
outstanding Option to the extent necessary and in such manner that the benefits
of Participants under all then outstanding Options shall be maintained
substantially as before the occurrence of such event. Any adjustment so made by
the Committee shall be conclusive and binding for all purposes of the Plan as of
such date as the Committee may determine.
11. Purchase For Investment. Each person acquiring Common Shares pursuant
to an Option may be required by the Company to furnish a representation that he
or she is acquiring the Common Shares so acquired as an investment and not with
a view to distribution thereof if the Company, in its sole discretion,
determines that such representation is required to insure that a resale or other
disposition of the Common Shares would not involve a violation of the Securities
Act of 1933, as amended, or of applicable blue sky laws. Any investment
representation so furnished shall no longer be applicable at any time such
representation is no longer necessary for such purposes.
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12. Withholding of Taxes. The Company will withhold from any payments of
cash made pursuant to the Plan such amount as is necessary to satisfy all
applicable federal, state, and local withholding tax obligations. The Committee
may, in its discretion and subject to such rules as the Committee may adopt from
time to time, permit or require a Participant to satisfy, in whole or in part,
any withholding tax obligation that may arise in connection with the grant of an
Option, the lapse of any restrictions with respect to an Option, the acquisition
of Common Shares pursuant to any Option, or the disposition of any Common Shares
received pursuant to any Option by such means as the Committee may determine
including, without limitation, by having the Company hold back some portion of
the Common Shares that would otherwise be delivered pursuant to the Option or by
delivering to the Company an amount equal to the withholding tax obligation
arising with respect to such grant, lapse, acquisition, or disposition in (a)
cash, (b) Common Shares, or (c) such combination of cash and Common Shares as
the Committee may determine. The Fair Market Value of the Common Shares to be so
held back by the Company or delivered by the Participant shall be determined as
of the date on which the obligation to withhold first arose. The Company may
apply the provisions of this Section 12 based upon generally applicable
withholding rates and without regard to any statutory minimum rate applicable to
special payments.
13. Options in Substitution for Options Granted by Other
Companies. Options, whether Incentive Stock Options or Nonqualified Options,
may be granted under the Plan in substitution for options held by employees of a
company who become Employees of the Company or a Subsidiary as a result of the
merger or consolidation of the employer company with the Company or a
Subsidiary, or the acquisition by the Company or a Subsidiary of the assets of
the employer company, or the acquisition by the Company or a Subsidiary of stock
of the employer company as a result of which it becomes a Subsidiary. The terms,
provisions, and benefits of the substitute Options so granted may vary from the
terms, provisions, and benefits set forth in or authorized by the Plan to such
extent as the Committee at the time of the grant may deem appropriate to
conform, in whole or in part, to the terms, provisions, and benefits of the
options in substitution for which they are granted.
14. Legal Requirements. No Options shall be granted and the Company shall
have no obligation to make any payment under the Plan, whether in Common Shares,
cash, or any combination thereof, except in compliance with all applicable
Federal and state laws and regulations, including, without limitation, the Code
and Federal and state securities laws.
15. Effective Date and Termination of the Plan. The Plan shall become
effective and shall be deemed to have been adopted on the date on which it is
approved by the shareholders of the Company and shall remain in effect
thereafter through April 23, 2007, unless earlier terminated by the Board of
Directors of the Company. In no event shall an Incentive Stock Option be granted
under the Plan more than ten years from the date the Plan is adopted by the
Board of Directors, or the date the Plan is approved by the shareholders of the
Company, whichever is earlier. No termination of the Plan shall adversely affect
the rights of any Participant with respect to any Option granted before the
effective date of the termination.
16. Amendments. Subject to any applicable shareholder approval
requirements of applicable law or the rules of the registered national
securities association through whose inter-dealer quotation system the Common
Shares are quoted, the Board of Directors, or a duly authorized committee
thereof, may alter or amend the Plan from time to time prior to its termination
in any manner the Board of Directors, or such duly authorized committee, may
deem to be in the best interests of the Company and its shareholders, except
that, without shareholder approval, no amendment shall increase the aggregate
number of shares that may be issued under Incentive Stock Options under the
Plan. The Committee shall have the authority to amend the terms and conditions
applicable to outstanding Options (a) in any case where expressly permitted by
the terms of the Plan or of the relevant Option Instrument or (b) in any other
case with the consent of the Participant to whom the Option was granted. Except
as expressly provided in the Plan or in the Option Instrument evidencing the
Option, the Committee may not, without the consent of the holder of an Option
granted under the Plan, amend the terms and conditions applicable to that Option
in a manner adverse to the interests of the Participant.
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17. Plan Noncontractual. Nothing herein contained shall be construed as a
commitment to or agreement with any person employed by the Company or a
Subsidiary or serving as a Director of the Company to continue such person's
employment or service as a Director with the Company or the Subsidiary, and
nothing herein contained shall be construed as a commitment or agreement on the
part of the Company or any Subsidiary to continue the employment, other service,
or the annual rate of compensation of any such person for any period. All
Employees shall remain subject to discharge and all Directors shall remain
subject to removal to the same extent as if the Plan had never been put into
effect.
18. Claims of Other Persons. The provisions of the Plan shall in no event
be construed as giving any person, firm, or corporation any legal or equitable
right against the Company or any Subsidiary, their officers, employees, agents,
or directors, except any such rights as are specifically provided for in the
Plan or are hereafter created in accordance with the terms and provisions of the
Plan.
19. Absence of Liability. No member of the Board of Directors of the
Company or a Subsidiary, of the Committee, of any other committee of the Board
of Directors, or any officer or Employee of the Company or a Subsidiary shall be
liable for any act or action under the Plan, whether of commission or omission,
taken by any other member, or by any officer, agent, or Employee, or, except in
circumstances involving his or her bad faith or willful misconduct, for anything
done or omitted to be done by himself or herself.
20. Severability. The invalidity or unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.
21. Governing Law. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
22. Definitions.
22.1 1934 Act. The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
22.2 Board of Directors. The term "Board of Directors" means the Board of
Directors of the Company.
22.3 Cause. The Company shall be deemed to have "Cause" for the
termination of an Employee's employment if the Employee has committed any act or
series of acts determined by the Committee (in a determination made either
before or after the Service Termination Date) to warrant discharge from
employment, including, without limitation, any act of theft or dishonesty in
connection with the Employee's employment with the Company, any unauthorized
disclosure of confidential information belonging to the Company, or other
similar action.
22.4 Change of Control. A "Change of Control" shall be deemed to have
occurred if at any time or from time to time after the date of adoption of the
Plan:
(a) there is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form, or report), each as adopted under the 1934 Act,
disclosing the acquisition of 25% or more of the voting stock of the
Company in a transaction or series of transactions by any person (as the
term "person" is used in Section 13(d) and Section 14(d)(2) of the 1934
Act),
(b) during any period of 730 consecutive days or less, individuals who
at the beginning of such period constitute the Directors of the Company
cease for any reason to constitute at least a majority thereof unless the
election of each new Director of the Company was approved or recommended by
the vote of at least two-thirds of the Directors of the Company then still
in office who were Directors of the Company at the beginning of any such
period,
(c) the Company merges with or into or consolidates with another
corporation following approval of the shareholders of the Company of such
merger or consolidation and, after giving effect to such merger or
consolidation, less than fifty percent (50%) of the then outstanding voting
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securities of the surviving or resulting corporation represent or were
issued in exchange for voting securities of the Company outstanding
immediately prior to such merger or consolidation,
(d) there is a sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of the Company following approval of the shareholders of
the Company of such transaction or series of transactions, or
(e) the shareholders of the Company shall approve any plan or proposal
for the liquidation or dissolution of the Company.
22.5 Code. The term "Code" means the Internal Revenue Code of 1986, as
amended.
22.6 Committee. The term "Committee" means the Compensation Committee of
the Board of Directors or such other committee or subcommittee designated by the
Board of Directors to administer the Plan.
22.7 Common Shares. The term "Common Shares" means common shares of the
Company without par value.
22.8 Company. The term "Company" means STERIS Corporation and its
successors, including the surviving or resulting corporation of any merger of
STERIS Corporation with or into, or any consolidation of STERIS Corporation
with, any other corporation or corporations.
22.9 Director. The term "Director" means any member of the Board of
Directors.
22.10 Disability. A Participant shall be deemed to have suffered a
"Disability" if and only if (a) the Participant has established to the
satisfaction of the Committee that the Participant is unable to perform the
Participant's normal duties and responsibilities with the Company by reason of a
medically determinable physical or mental impairment that can be expected to
result in death or that has lasted or can be expected to last for a continuous
period of not less than 12 months, all within the meaning of Section 22(e)(3) of
the Code and (b) the Participant has satisfied any other requirement that may be
imposed by the Committee.
22.11 Employee. The term "Employee" means any individual employed by the
Company or by any Subsidiary.
22.12 Exercise Price. The term "Exercise Price" with respect to an Option
means the price specified in the Option at which the Common Shares subject to
the Option may be purchased by the holder of the Option.
22.13 Fair Market Value. Except as otherwise determined by the Committee,
the term "Fair Market Value" with respect to Common Shares means the closing
sales price of the Common Shares as reported on the national securities exchange
on which the Common Shares are traded, or, if applicable, as reported on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
National Market, on the date for which the determination of fair market value is
made or, if there are no sales of Common Shares on that date, then on the next
preceding date on which there were any sales of Common Shares. If the Common
Shares are not or cease to be traded on a national securities exchange or on the
NASDAQ National Market, the "Fair Market Value" of Common Shares shall be
determined in the manner prescribed by the Committee.
22.14 Incentive Stock Option. The term "Incentive Stock Option" means an
Option intended by the Committee to qualify as an "incentive stock option"
within the meaning of Section 422 of the Code.
22.15 Nonqualified Option. The term "Nonqualified Option" means an Option
intended by the Committee not to qualify as an "incentive stock option" under
Section 422 of the Code.
22.16 Option. The term "Option" means an award entitling the holder
thereof to purchase a specified number of Common Shares at a specified price
during a specified period of time.
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22.17 Option Expiration Date. The term "Option Expiration Date" with
respect to any Option means the date selected by the Committee after which the
Option may not be exercised, except as provided in Section 7.3 in the case of
the death of the Participant to whom the option was granted.
22.18 Option Instrument. The term "Option Instrument" means a written
instrument evidencing an Option in such form and with such provisions as the
Committee may prescribe. Each Option Instrument shall provide that acceptance of
the Option Instrument by an Employee constitutes agreement to the terms of the
Option evidenced thereby.
22.19 Participant. The term "Participant" means any Director or Employee
selected by the Committee to receive one or more Options under the Plan.
22.20 Participant's Representative. The term "Participant's
Representative" means, (a) in the case of a deceased Participant, the
Participant's executor or administrator or the person or persons to whom the
Participant's rights under any award are transferred by will or the laws of
descent and distribution and (b) in the case of a disabled or incapacitated
Participant, the Participant's attorney in fact or legal guardian.
22.21 Plan. The term "Plan" means this STERIS Corporation 1997 Stock
Option Plan as from time to time hereafter amended in accordance with Section 16
hereof.
22.22 SEC Rule 16b-3. The term "SEC Rule 16b-3" means Rule 16b-3 or any
successor provision under the 1934 Act.
22.23 Section 16 Person. The term "Section 16 Person" means a person
subject to potential liability under Section 16(b) of the 1934 Act with respect
to transactions involving equity securities of the Company.
22.24 Service Termination Date. The term "Service Termination Date" with
respect to an Employee means the first date on which the Employee is no longer
employed by the Company or any Subsidiary and with respect to a Director means
the first date on which the Director ceases to be a Director of the Company.
22.25 Subsidiary. The term "Subsidiary" means any corporation,
partnership, joint venture, or other business entity in which the Company owns,
directly or indirectly, 50 percent (50%) or more of the total combined voting
power of all classes of stock (in the case of a corporation) or other ownership
interests (in the case of any entity other than a corporation).
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EXHIBIT 21.1
SUBSIDIARIES OF STERIS CORPORATION
STERIS has no parent company. As of March 31, 1998, certain of its direct
and indirect subsidiaries were as follows:
Subsidiary Location
---------- --------
STERIS Foreign Sales Corporation US Virgin Islands
Medical & Environmental Designs, Inc. (MED Inc.) Missouri
STERIS GmbH Germany
STERIS S.A. Belgium
STERIS S.r.l. Italy
Ecomed, Inc. Indiana
STERIS Korea Limited Korea
Surgicot, Inc. Delaware
Calgon Vestal, Inc. Delaware
Isomedix Inc. Delaware
Isomedix Corporation Canada
Isomedix Management Inc. Delaware
Isomedix Operations Inc Delaware
American Sterilizer Company Pennsylvania
STERIS Inc. Delaware
STERIS Canada Inc. Canada
STERIS Canada Corporation Canada
STERIS Europe, Inc. Delaware
CLBV Limited United Kingdom
AEI AMSCO Holdings B.V. Netherlands
AMSCO Finn-Aqua Oy Finland
AMSCO Finn-Aqua GmbH Germany
AMSCO S.A./N.V. Belgium
AMSCO Finn-Aqua, S.A. (Spain) Spain
AMSCO Finn-Aqua S.A. (France) France
STERIS Limited United Kingdom
STERIS Asia Pacific, Inc. Delaware
AMSCO Japan, K.K. Japan
AMSCO Hong Kong Limited Hong Kong
STERIS Singapore Pte. Ltd. Singapore
American Sterilizer (Thailand) Co. Ltd. Thailand
STERIS Latin America, Inc. Delaware
AMSCO Brasil Comercio e Servicos Ltda. Brazil
AMSCO de Costa Rica, S.A. Costa Rica
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
and related Prospectuses of our report dated April 20, 1998, with respect to the
consolidated financial statements and schedule of STERIS Corporation and
Subsidiaries included in this Annual Report (Form 10-K) for the year ended March
31, 1998:
Registration
Number Description Filing Date
------------- ------------------------------------------------------------------ ----------------------
333-32005 Form S-8 Registration Statement -- STERIS Corporation 1997 Stock July 24, 1997
Option Plan
333-06529 Form S-3 Registration Statement -- STERIS Corporation June 21, 1996
333-01610 Post-effective Amendment to Form S-4 on Form S-8 -- STERIS May 16, 1996
Corporation
33-91444 Form S-8 Registration Statement -- STERIS Corporation 1994 Equity April 24, 1995
Compensation Plan
33-91442 Form S-8 Registration Statement -- STERIS Corporation 1994 April 24, 1995
Nonemployee Directors Equity Compensation Plan
33-55976 Form S-8 Registration Statement -- STERIS Corporation 401(k)Plan December 21, 1992
33-55258 Form S-8 Registration Statement -- STERIS Corporation Amended and December 4, 1992
Restated Non-Qualified Stock Option Plan
Ernst & Young LLP
Cleveland, Ohio
May 26, 1998
74
1
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director,
of STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1998 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, David C. Dvorak, and Roy
L. Turnell, and each of them, as attorney for the undersigned, with full power
of substitution and resubstitution, for and in the name, place, and stead of the
undersigned, to sign and file the Annual Report, and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts whatsoever requisite and necessary to be done in the premises,
hereby ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of April 23,
1998.
/S/ Bill R. Sanford
----------------------------------
Bill R. Sanford,
Chairman of the Board,
President, Chief Executive Officer
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director,
of STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1998 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, David C. Dvorak, and Roy
L. Turnell, and each of them, as attorney for the undersigned, with full power
of substitution and resubstitution, for and in the name, place, and stead of the
undersigned, to sign and file the Annual Report, and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts whatsoever requisite and necessary to be done in the premises,
hereby ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of April 23,
1998.
/S/ Michael A. Keresman, III
----------------------------------
Michael A. Keresman, III,
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
75
2
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director,
of STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1998 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, David C. Dvorak, and Roy
L. Turnell, and each of them, as attorney for the undersigned, with full power
of substitution and resubstitution, for and in the name, place, and stead of the
undersigned, to sign and file the Annual Report, and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts whatsoever requisite and necessary to be done in the premises,
hereby ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of April 23,
1998.
/S/ Raymond A. Lancaster
----------------------------------
Raymond A. Lancaster
Director
76
3
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director,
of STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1998 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, David C. Dvorak, and Roy
L. Turnell, and each of them, as attorney for the undersigned, with full power
of substitution and resubstitution, for and in the name, place, and stead of the
undersigned, to sign and file the Annual Report, and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts whatsoever requisite and necessary to be done in the premises,
hereby ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of April 23,
1998.
/S/ Thomas J. Magulski
----------------------------------
Thomas J. Magulski
Director
77
4
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director,
of STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1998 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, David C. Dvorak, and Roy
L. Turnell, and each of them, as attorney for the undersigned, with full power
of substitution and resubstitution, for and in the name, place, and stead of the
undersigned, to sign and file the Annual Report, and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts whatsoever requisite and necessary to be done in the premises,
hereby ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of April 23,
1998.
/S/ J.B. Richey
----------------------------------
J. B. Richey
Director
78
5
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director,
of STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1998 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, David C. Dvorak, and Roy
L. Turnell, and each of them, as attorney for the undersigned, with full power
of substitution and resubstitution, for and in the name, place, and stead of the
undersigned, to sign and file the Annual Report, and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts whatsoever requisite and necessary to be done in the premises,
hereby ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of April 23,
1998.
/S/ Jerry E. Robertson, Ph.D.
----------------------------------
Jerry E. Robertson, Ph.D.
Director
79
6
POWER OF ATTORNEY
The undersigned, an officer or director, or both an officer and director,
of STERIS Corporation, an Ohio corporation, which proposes to file with the
Securities and Exchange Commission, Washington, D. C. under the provisions of
the Securities and Exchange Act of 1934, as amended, its Annual Report on Form
10-K for the fiscal year ended March 31, 1998 (the "Annual Report"), hereby
constitutes Bill R. Sanford, Michael A. Keresman, III, David C. Dvorak, and Roy
L. Turnell, and each of them, as attorney for the undersigned, with full power
of substitution and resubstitution, for and in the name, place, and stead of the
undersigned, to sign and file the Annual Report, and exhibits thereto, and any
and all amendments thereto, with full power and authority to do and perform any
and all acts whatsoever requisite and necessary to be done in the premises,
hereby ratifying and approving the acts of such attorney or any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of April 23,
1998.
/S/ Frank E. Samuel, Jr.
----------------------------------
Frank E. Samuel, Jr.
Director
80
5
12-MOS 6-MOS 3-MOS 12-MOS
MAR-31-1998 MAR-31-1998 MAR-31-1998 MAR-31-1996
MAR-31-1998 SEP-30-1997 JUN-30-1997 MAR-31-1996
17,172 35,815 24,429 140,789
0 933 1,020 9,193
203,992 177,402 156,181 129,312
0 0 0 0
90,998 86,896 82,876 73,718
334,332 334,601 295,970 367,694
289,658 280,865 184,756 159,084
(84,366) (81,505) (77,511) (65,338)
732,325 723,550 538,989 592,697
169,654 195,523 147,148 135,698
0 0 0 0
0 0 0 0
0 0 0 0
230,477 233,524 229,877 209,751
128,475 91,010 76,123 94,308
732,325 723,550 538,989 592,697
719,656 328,517 155,134 534,612
719,656 328,517 155,134 534,612
395,098 183,496 88,300 331,911
395,098 183,496 88,300 331,911
0 0 0 0
0 0 0 0
6,239 1,395 522 6,202
107,355 44,355 19,273 69,949
41,859 17,299 7,526 29,159
65,496 27,056 11,747 40,790
0 0 0 0
0 0 0 0
0 0 0 0
65,496 27,056 11,747 40,790
1.93 0.80 0.35 1.25
1.87 0.78 0.34 1.17
5
12-MOS 9-MOS 6-MOS 3-MOS
MAR-31-1997 MAR-31-1997 MAR-31-1997 MAR-31-1997
MAR-31-1997 DEC-31-1996 SEP-30-1996 JUN-30-1996
20,576 34,822 56,701 142,820
2,977 6,120 6,077 6,102
164,163 147,877 131,953 126,555
0 0 0 0
78,762 88,775 80,890 77,822
300,042 294,060 292,784 373,477
177,184 168,163 141,564 138,856
(74,332) (73,931) (63,514) (63,368)
539,455 554,035 479,948 557,611
156,308 151,717 150,885 250,638
0 0 0 0
0 0 0 0
0 0 0 0
231,278 239,316 223,411 211,904
63,438 50,214 37,029 25,480
539,455 554,035 479,948 557,611
587,852 417,363 266,358 127,868
587,852 417,363 266,358 127,868
356,007 256,978 165,747 80,582
356,007 256,978 165,747 80,582
0 0 0 0
0 0 0 0
2,919 2,140 1,948 0
(4,862) (30,865) (53,232) (73,636)
25,744 15,657 6,825 (2,041)
(30,606) (46,522) (60,057) (71,595)
0 0 0 0
0 0 0 0
0 0 0 0
(30,606) (46,522) (60,057) (71,595)
(0.91) (1.39) (1.81) (2.16)
(0.91) (1.39) (1.81) (2.16)
