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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to
__________
Commission file number 0-20165
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STERIS CORPORATION
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(Exact name of registrant as specified in its charter)
OHIO 34-1482024
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5960 HEISLEY ROAD, MENTOR, OHIO 44060
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(Address of principal executive offices) (Zip Code)
(440) 354-2600
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common shares, as of the latest practicable date.
Common Shares, without par value 33,907,037
- --------------------------------- ---------------------------------------
(Title of Class) (Outstanding at December 31, 1997)
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PART I FINANCIAL INFORMATION
STERIS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
================================================================================
DECEMBER 31, MARCH 31,
1997 1997
-------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 16,601 $ 20,576
Marketable securities 883 2,977
Accounts receivable 195,175 164,163
Inventories 92,362 78,762
Current portion of deferred income taxes 24,577 24,888
Prepaid expenses and other assets 9,046 8,676
-------------- ---------------
TOTAL CURRENT ASSETS 338,644 300,042
Property, plant, and equipment 283,707 177,184
Accumulated depreciation (79,264) (74,332)
-------------- ---------------
Net property, plant, and equipment 204,443 102,852
Intangibles 248,693 186,417
Accumulated amortization (68,874) (67,032)
-------------- ---------------
Net intangibles 179,819 119,385
Deferred income taxes 5,772 14,862
Other assets 4,819 2,314
-------------- ---------------
TOTAL ASSETS $ 733,497 $ 539,455
============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term indebtedness $ 2,100 $ 12
Accounts payable 43,906 39,323
Accrued income taxes 31,978 19,059
Accrued expenses and other 117,040 100,294
-------------- ---------------
TOTAL CURRENT LIABILITIES 195,024 158,688
Long-term indebtedness 153,204 35,879
Other liabilities 49,760 50,172
-------------- ---------------
TOTAL LIABILITIES 397,988 244,739
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 33,907 at December 31, 1997 and 33,984 at
March 31, 1997, excluding 332 and 255 treasury shares, respectively 227,015 231,278
Retained earnings 114,739 69,513
Cumulative translation adjustment (6,245) (6,075)
-------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 335,509 294,716
-------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 733,497 $ 539,455
============== ===============
See notes to consolidated condensed financial statements.
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STERIS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
================================================================================
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31 DECEMBER 31
------------------------------ -----------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
Net revenues $ 186,639 $ 151,005 $ 515,156 $ 417,363
Cost of goods and services sold 102,591 91,231 286,087 256,978
------------- ------------- ------------- -------------
Gross profit 84,048 59,774 229,069 160,385
Costs and expenses:
Selling, informational, and administrative 46,099 32,505 133,815 86,193
Research and development 5,989 5,425 17,919 15,598
Non-recurring items 0 0 0 90,831
------------- ------------- ------------- -------------
52,088 37,930 151,734 192,622
------------- ------------- ------------- -------------
Income (loss) from operations 31,960 21,844 77,335 (32,237)
Interest expense (2,453) (192) (3,848) (2,140)
Interest income and other 263 715 638 3,512
------------- ------------- ------------- -------------
Income (loss) before income taxes 29,770 22,367 74,125 (30,865)
Income tax expense 11,600 8,832 28,899 15,657
------------- ------------- ------------- -------------
Net income (loss) $ 18,170 $ 13,535 $ 45,226 $ (46,522)
============= ============= ============= =============
Net income (loss) per share - basic $ 0.54 $ 0.40 $ 1.33 $ (1.39)
============= ============= ============= =============
Net income (loss) per share - diluted $ 0.52 $ 0.38 $ 1.29 $ (1.39)
============= ============= ============= =============
See notes to consolidated condensed financial statements.
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STERIS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
================================================================================
NINE MONTHS ENDED
DECEMBER 31
---------------------------------
1997 1996
-------------- ---------------
OPERATING ACTIVITIES
Net income (loss) $ 45,226 $ (46,522)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 16,531 10,872
Deferred income taxes 1,066 51
Non-recurring items 0 53,261
Other items (5,118) 5,581
Changes in operating assets and liabilities:
Accounts receivable (23,128) (17,182)
Inventories (12,675) (3,078)
Other assets (1,917) 1,697
Accounts payable and accruals (20,371) 157
Accrued income taxes 5,835 2,242
-------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,449 7,079
INVESTING ACTIVITIES
Purchases of property, plant, equipment, and patents (29,377) (12,231)
Investment in businesses (126,505) (82,482)
Sale of assets 43,084 0
Proceeds from notes receivable 0 8,438
Purchases of marketable securities 0 (4,068)
Proceeds from sales of marketable securities 2,094 7,147
-------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (110,704) (83,196)
FINANCING ACTIVITIES
Payments on long-term obligations (4,287) (100,035)
Borrowing under Credit Facility 110,000 40,000
Purchase of treasury shares (10,051) 0
Proceeds from exercise of stock options 4,645 26,086
Tax benefits from exercise of stock options 1,143 3,419
-------------- ---------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 101,450 (30,530)
Effect of exchange rate changes on cash and cash equivalents (170) 681
-------------- ---------------
DECREASE IN CASH AND CASH EQUIVALENTS (3,975) (105,966)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,576 140,788
-------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,601 $ 34,822
============== ===============
See notes to consolidated condensed financial statements.
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STERIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Periods Ended December 31, 1997 and 1996
A. - REPORTING ENTITY
STERIS Corporation (the "Company" or "STERIS") is a leading provider of
infection prevention, contamination prevention, microbial reduction, and
surgical support systems, products, services, and technologies to healthcare,
scientific, research, and industrial Customers throughout the world. The Company
has over 4,000 Associates (employees) worldwide, including more than 1,200
direct sales, service, and field support personnel. Customer Support facilities
are located in major global market centers with manufacturing operations in the
United States, Canada, Germany, and Finland. STERIS operates in a single
business segment.
B. - BASIS OF PRESENTATION
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 for using the pooling-of-interests method. Accordingly, the
accompanying unaudited consolidated condensed financial statements give
retroactive effect to the Amsco Merger and include the combined operations of
STERIS and Amsco for all periods presented.
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q; they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete audited financial statements. Accordingly,
the reader of these financial statements may wish to refer to the audited
consolidated financial statements of STERIS filed with the Securities and
Exchange Commission as part of STERIS's Form 10-K for the year ended March 31,
1997.
The accompanying consolidated condensed financial statements have been prepared
in accordance with STERIS's customary accounting practices and have not been
audited. Management believes that the financial information included herein
reflects all adjustments necessary for a fair presentation of interim results
and, except as discussed in Note D, all such adjustments are of a normal and
recurring nature. The interim results reported are not necessarily indicative of
the results to be expected for the fiscal year ending March 31, 1998.
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STERIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
C. - EARNINGS (LOSS) PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share." Statement 128 eliminates
reporting of primary and fully diluted earnings per share and requires reporting
of basic and diluted earnings per share. Basic earnings per share is based on
average Common Shares outstanding. Diluted earnings per share includes the
dilutive effect of stock options. All earnings per share amounts presented
conform to the Statement 128 requirements. Following is a summary, in thousands,
of Common Shares and Common Share equivalents outstanding used in the
calculations of earnings (loss) per share:
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31 DECEMBER 31
--------------------------------- ----------------------------
1997 1996 1997 1996
--------------- ------------ ----------- -----------
Weighted average Common Shares
outstanding - basic 33,904 34,161 33,943 33,535
Dilutive effect of stock options 1,214 1,928 1,127 0
--------------- ------------ ----------- -----------
Weighted average Common Shares and
equivalents - diluted 35,118 36,089 35,070 33,535
=============== ============ =========== ===========
D. - NON-RECURRING ITEMS
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. Costs related to the transaction include
tangible and intangible assets relating to the business, impairment cost of
redundant assets, and transaction related costs. These costs are based on
estimates and may be adjusted in the future.
Non-recurring charges of $90,831 ($81,300 net of tax, or $2.44 per share) were
recorded in the 1997 fiscal first quarter for costs related to the Amsco Merger.
The charges include transaction costs of approximately $15,000 and other
non-recurring charges of approximately $75,800 ($66,300 net of tax). The
transaction costs were for legal, accounting, investment banking, and related
expenses. The other non-recurring charges were 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 ($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
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STERIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
facilities in Dallas, Texas and Atlanta, Georgia. Operations of the closed
facilities were consolidated into existing STERIS facilities.
The effective income tax rate for the nine months ended December 31, 1996
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.
E. - INVENTORIES
Inventories were as follows:
DECEMBER 31, MARCH 31,
1997 1997
--------------------- -------------------
Raw material $31,581 $30,027
Work in process 18,504 15,240
Finished goods 42,277 33,495
--------------------- -------------------
$92,362 $78,762
===================== ===================
F. - FINANCING
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. The Credit Facility
contains customary covenants which include maintenance of certain financial
ratios. Outstanding borrowings under the Credit Facility were $145,000 at
December 31, 1997.
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. Outstanding obligations
under the industrial development revenue bonds were $8,000 at December 31, 1997.
G. - CONTINGENCIES
There are various pending lawsuits and claims arising out of the conduct of
STERIS's business. In the opinion of management, the ultimate outcome of these
lawsuits and claims will not have a material adverse effect on STERIS's
consolidated financial position or results of operations. STERIS presently
maintains product liability insurance coverage in amounts and with
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STERIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
deductibles that it believes are prudent.
H. - ACQUISITIONS
On September 17, 1997, 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 $ 21,778
Property, plant, and equipment 94,546
Excess purchase price over net assets acquired 63,000
Other assets 1,044
Current liabilities (30,096)
Long-term debt (7,900)
Deferred income taxes (8,270)
----------
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.
Nine Months Ended
December 31
----------------------------------
1997 1996
-------------- --------------
Net revenues $ 536,426 $ 450,751
============== ==============
Income (loss) from continuing operations $ 45,123 $ (45,686)
Income (loss) from discontinued operations 200 (258)
-------------- --------------
Net income (loss) $ 45,323 $ (45,944)
============== ==============
Income (loss) from continuing operations per share - diluted $ 1.28 $ (1.36)
============== ==============
Net income (loss) per share - diluted $ 1.29 $ (1.37)
============== ==============
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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
BASIS OF DISCUSSION
- -------------------
The Amsco Merger has been accounted for by the pooling-of-interests method.
Accordingly, the accompanying unaudited consolidated condensed financial
statements give retroactive effect to the transaction and include the combined
operations of STERIS and Amsco for all periods presented.
RESULTS OF OPERATIONS
- ---------------------
Net revenue increased by 23.6% to $186.6 million in the third quarter fiscal
1998 from $151.0 million in the third quarter fiscal 1997. Net revenue increased
by 23.4% to $515.2 million in the first nine months of fiscal 1998 from $417.4
million in the same period in fiscal 1997. Infection Prevention revenues
increased by 22.8% to $98.7 million in the third quarter fiscal 1998 from $80.4
million in the third quarter fiscal 1997. Infection Prevention revenues
increased by 25.2% to $279.0 million in the first nine months of fiscal 1998
from $222.9 million in the same period in fiscal 1997. Surgical Support revenues
increased by 37.1% to $41.3 million in the third quarter fiscal 1998 from $30.1
million in the third quarter fiscal 1997. Surgical Support revenues increased by
24.4% to $113.0 million in the first nine months of fiscal 1998 from $90.8
million in the same period in fiscal 1997. Scientific, Management Services and
Other revenue increased by 15.1% to $46.7 million in the third quarter fiscal
1998 from $40.5 million in the third quarter fiscal 1997. Scientific, Management
Services and Other revenue increased by 18.8% to $123.2 million in the first
nine months of fiscal 1998 from $103.7 million in the same period in fiscal
1997. The increase in net revenues was due mainly to increases in the sales of
consumable products and capital equipment during the first nine months of fiscal
1998, as well as an increase in Management Services revenues through the
acquisition of Isomedix. Revenues related to the Infection Prevention, Surgical
Support, and Scientific, Management Services and Other classifications each
include revenues related to consumable products, capital equipment and services.
In addition to increases in sales of existing products, a portion of the
increase in sales of consumable products results from the benefits of the
December 1996 acquisition of the assets of the infection control and
contamination control 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.
The costs of products and services sold increased by 12.5% to $102.6 million in
the third quarter fiscal 1998 from $91.2 million in the third quarter fiscal
1997. The costs of products and services sold increased by 11.3% to $286.1
million for the first nine months of fiscal 1998 from $257.0 million for the
first nine months of fiscal 1997. The cost of products and services sold as a
percentage of net revenue was 55.0% for the third quarter fiscal 1998 compared
to 60.4% for the same period in fiscal 1997. The decrease in the cost of
products and services sold as a percentage of net revenue for the third quarter
fiscal 1998 resulted principally from favorable changes in the mix of products
sold, vertical integration, improved overhead absorption from plant
consolidation and volume increases, and the benefits from the restructuring of
the acquired and merged businesses.
Selling, informational, and administrative expenses increased by 41.8% to $46.1
million in the
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third quarter fiscal 1998 from $32.5 million in the third quarter fiscal 1997.
Selling, informational, and administrative expenses increased by 55.3% to $133.8
million in the first nine months of fiscal 1998 from $86.2 million in the first
nine months of fiscal 1997. The expenses as a percentage of net revenue
increased to 24.7% in the third quarter fiscal 1998 from 21.5% in the third
quarter fiscal 1997. The increase was primarily attributable to the acquisition
of Isomedix, investments in Customer Support, direct sales efforts in key global
markets, business development, management information systems, and the inclusion
of acquired companies' selling, informational, and administrative expenses.
Selling, informational, and administrative expenses include costs incurred in
preparing certain systems and applications for the year 2000. The Company
expects to incur internal staff costs as well as external costs related to the
conversion and testing of certain systems and applications that currently do not
recognize dates beginning in the year 2000. These costs, which are expensed as
incurred, have been immaterial to date and are not expected to have a material
impact on the Company's earnings in the future.
The costs of the Company's research activities relating to the discovery and
development of new products and the improvement of existing products are charged
directly to income as incurred. Research and development expenses increased by
10.4% to $6.0 million in the third quarter fiscal 1998 from $5.4 million in the
third quarter fiscal 1997. Research and development expenses increased by 14.9%
to $17.9 million in the first nine months of fiscal 1998 from $15.6 million in
the first nine months of fiscal 1997. The increases were due to additional
product and application development expenditures. Research and development
expenses as a percentage of net revenue were 3.2% for the third quarter fiscal
1998 compared to 3.6% for the third quarter fiscal 1997.
Interest expense increased to $2.5 million in the third quarter fiscal 1998 from
$0.2 million in the third quarter fiscal 1997. Interest expense increased by
79.8% to $3.8 million in the first nine months of fiscal 1998 from $2.1 million
in the first nine months of 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 63.2% to $0.3 million in the third
quarter fiscal 1998 from $0.7 million in the third quarter fiscal 1997. Interest
income and other decreased by 81.8% to $0.6 million in the first nine months of
fiscal 1998 from $3.5 million in the first nine months of fiscal 1997. The
decrease in interest income was due primarily to lower cash, cash equivalents,
and marketable security balances, with the lower balances resulting primarily
from the July 1996 redemption of approximately $100 million of Amsco 4.5%/6.5%
Convertible Subordinated Notes.
Income for the third quarter of fiscal 1998 increased by 34.2% to $18.2 million
($.52 per share) from $13.5 million ($.38 per share) in the same period fiscal
1997. Excluding the effect of non-recurring items, income for the first nine
months of fiscal 1998 increased by 30.0% to $45.2 million ($1.29 per share) from
$34.8 million ($.98 per share) in the first nine months of fiscal 1997.
The effective income tax rate for the nine months ended December 31, 1996
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.
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As a result of the foregoing factors, net income for the first nine months of
fiscal 1998 was $45.2 million, compared to a net loss of $46.5 million in the
first nine months of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company had $17.5 million in cash, cash equivalents and marketable
securities as of December 31, 1997, compared to $23.6 million of the same at
March 31, 1997. The decrease was due mainly to 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.
Accounts receivable increased by 18.9% to $195.2 million as of December 31,
1997, compared to $164.2 million at March 31, 1997. The increase was due mainly
to the increase in revenues and the acquisition of businesses.
Inventory increased by 17.3% to $92.4 million as of December 31, 1997, compared
to $78.8 million at March 31, 1997. The increase was due to the build up of
inventory to support increased sales volume.
Property, plant, and equipment increased by 60.1% to $283.7 million as of
December 31, 1997, compared to $177.2 million at March 31, 1997. The increase
was primarily a result of the acquisitions of Isomedix and Joslyn.
Intangibles increased by 33.4% to $248.7 million as of December 31, 1997,
compared to $186.4 million at March 31, 1997. The increase was primarily a
result of the acquisitions of Isomedix and Joslyn.
Deferred tax assets decreased by 61.2% to $5.8 million as of December 31, 1997,
compared to $14.9 million at March 31, 1997. The decrease was primarily a result
of the acquisition of Isomedix.
Current liabilities increased by 22.9% to $195.0 million as of December 31,
1997, compared to $158.7 million at March 31, 1997. The increase was due to the
assumption of liabilities through the acquisitions of Isomedix and Joslyn and
the accrual of costs relating to the sale of the assets of the Management
Services Division.
Other liabilities were $49.8 million as of December 31, 1997, compared to $50.2
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. The Credit Facility
contains customary covenants which include maintenance of certain financial
ratios. Outstanding borrowings under the Credit Facility were $145 million at
December 31, 1997.
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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, consolidated net worth, and working capital. Outstanding
obligations under the industrial development revenue bonds were $8,000 at
December 31, 1997.
The Company has no material commitments for capital expenditures. The Company
believes that its cash requirements will increase due to increased sales
requiring more working capital, accelerated research and development, and
potential acquisitions or investments in complementary businesses. However, the
Company believes that its available cash, cash flow from operations, and sources
of credit will be adequate to satisfy its capital needs for the foreseeable
future.
CONTINGENCIES
- -------------
For a discussion of contingencies, see Note G to the consolidated condensed
financial statements.
SEASONALITY
- -----------
Historical data indicates that financial results of acquired businesses,
including Amsco, were subject to recurring seasonal fluctuations. A number of
factors have contributed to the seasonal patterns, including sales promotion and
compensation programs, customer buying patterns, international business
practices, and differing fiscal year ends. Sales and profitability of certain of
the acquired and consolidated product lines have historically been
disproportionately weighted toward the latter part of each quarter and each
fiscal year. Various changes in business practices resulting from the
integration of Amsco and other acquired businesses into STERIS, including the
change to a March ending fiscal year, may alter the historical patterns of the
previously independent businesses.
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FORWARD-LOOKING INFORMATION
- ---------------------------
This Form 10-Q contains statements concerning certain trends and other
forward-looking information affecting or relating to the Company and its
industry that are intended to qualify for the protections afforded
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. 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.
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
- ------ -----------------
Reference is made to Part I, Item 1., Note G of this Report on Form 10-Q, which
is incorporated herein by reference.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
- ------ --------------------------------
(a) Exhibits
--------
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STERIS Corporation
(Registrant)
/s/ Michael A. Keresman, III
------------------------------------
Michael A. Keresman, III
Chief Financial Officer and
Senior Vice President
(Principal Financial Officer)
February 13, 1998
14
5
9-MOS
MAR-31-1998
DEC-31-1997
16,601
883
195,175
0
92,362
338,644
283,707
(79,264)
733,497
195,024
0
0
0
227,015
108,494
733,497
515,156
515,156
286,087
286,087
0
0
3,848
74,125
28,899
45,226
0
0
0
45,226
1.33
1.29
