1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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
- --------------------------------------------------------------------------------
(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)
(216) 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 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 33,145,039
- -------------------------------- ------------------------------
(Title of Class) (Outstanding at June 30, 1996)
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STERIS CORPORATION
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE
----
ITEM 1 CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
------ ----------------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30 and March 31, 1996 3
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three months ended June 30, 1996 and 1995 4
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Three months ended June 30, 1996 and 1995 5
Notes to Consolidated Condensed Financial Statements 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
------ -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS 11
-----------------------------------
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS 14
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ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
------ ---------------------------------------------------
ITEM 6 EXHIBITS AND REPORT ON FORM 8-K 14
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Signature 15
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PART I FINANCIAL INFORMATION
STERIS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
================================================================================
JUNE 30, MARCH 31,
1996 1996
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 142,820 $ 140,788
Marketable securities 6,102 9,193
Accounts receivable 126,555 129,312
Inventories 77,822 73,718
Current portion of deferred income taxes 11,241 5,219
Prepaid expenses and other assets 8,937 9,463
--------- ---------
TOTAL CURRENT ASSETS 373,477 367,693
Property, plant, and equipment 138,856 155,470
Accumulated depreciation (63,368) (61,724)
--------- ---------
Net property, plant, and equipment 75,488 93,746
Other assets:
Intangibles 126,456 156,391
Accumulated amortization (54,709) (52,683)
--------- ---------
Net intangibles 71,747 103,708
Deferred income taxes 34,937 28,757
Other 1,962 2,098
--------- ---------
108,646 134,563
--------- ---------
TOTAL ASSETS $ 557,611 $ 596,002
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term indebtedness $ 100,347 $ 471
Accounts payable 30,024 31,308
Accrued income taxes 13,755 10,375
Accrued expenses and other 106,512 82,932
--------- ---------
TOTAL CURRENT LIABILITIES 250,638 125,086
Long-term obligations 2,499 102,572
Other liabilities 67,090 64,285
--------- ---------
TOTAL LIABILITIES 320,227 291,943
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 33,145
at June 30, 1996 and
32,995 at March 31, 1996 211,904 209,811
Retained earnings 28,524 100,119
Cumulative translation adjustment and other (3,044) (5,871)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 237,384 304,059
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 557,611 $ 596,002
========= =========
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
JUNE 30
----------------------
1996 1995
--------- --------
NET REVENUE $ 127,868 $120,871
Cost of goods and services sold 80,582 74,320
--------- --------
GROSS PROFIT 47,286 46,551
Cost and expenses:
Selling, general, and administrative 26,118 27,587
Research and development 4,302 3,782
Non-recurring transactions--Note E 90,831
--------- --------
121,251 31,369
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INCOME (LOSS) FROM OPERATIONS (73,965) 15,182
Other income, net 329 444
--------- --------
INCOME (LOSS) BEFORE INCOME TAXES (73,636) 15,626
Income tax (benefit) expense (2,041) 6,454
--------- --------
NET INCOME (LOSS) $ (71,595) $ 9,172
========= ========
NET INCOME (LOSS) PER SHARE $ (2.16) $ 0.27
========= ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
USED IN COMPUTING EARNINGS (LOSS) PER SHARE 33,113 33,922
========= ========
See notes to consolidated condensed financial statements.
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STERIS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
================================================================================
THREE MONTHS ENDED
JUNE 30
-----------------------
1996 1995
--------- ---------
OPERATING ACTIVITIES
Net income (loss) $ (71,595) $ 9,172
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 3,670 5,204
Deferred taxes (91) 9,318
Non-recurring transactions 65,810 0
Other items 780 427
Changes in operating assets and liabilities:
Accounts receivable 3,916 18,383
Inventories (4,131) (6,468)
Other assets 590 (1,879)
Accounts payable and accruals (1,701) (10,975)
Accrued income taxes 3,256 (5,325)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 504 17,857
INVESTING ACTIVITIES
Purchases of property, plant, equipment, and patents (3,458) (4,557)
Investment in businesses 0 (270)
Proceeds from notes receivable 19 0
Purchases of marketable securities (981) (967)
Proceeds from sales of marketable securities 4,069 532
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (351) (5,262)
FINANCING ACTIVITIES
Payments on notes payable (76) (166)
Proceeds from exercise of stock options 1,964 3,006
Tax benefits from exercise of stock options 129 2,138
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,017 4,978
Effect of exchange rate changes on cash and cash equivalents (138) 1,943
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 2,032 19,516
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 140,788 121,272
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 142,820 $ 140,788
========= =========
See notes to consolidated condensed financial statements.
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STERIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
PERIODS ENDED JUNE 30, 1996 AND 1995
A. - REPORTING ENTITY
STERIS Corporation ("STERIS") is a leading provider of infection prevention and
surgical support systems, products, services, and technologies to healthcare,
scientific, and industrial customers throughout the world. The Company has
approximately 3,500 Associates, Customer Support facilities in major global
markets, and manufacturing operations in the United States, Canada, Germany, and
Finland. STERIS operates in a single business segment.
On May 13, 1996, STERIS consummated a merger with AMSCO International, Inc.
("AMSCO") in a tax-free, stock-for-stock transaction (the "AMSCO Merger"). See
Note D.
B. - BASIS OF PRESENTATION
The AMSCO Merger has been accounted for by the pooling-of-interests method.
Accordingly, the accompanying consolidated condensed 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 on fiscal years ending
December 31) has been recast to conform to STERIS's annual reporting period
ending March 31.
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 financial statements. Accordingly, the reader
of these financial statements may wish to refer to the audited consolidated
financial statements of STERIS (Form 10-K for the year ended March 31, 1996) and
AMSCO (Form 8-K/A dated May 13, 1996 and filed June 25, 1996 for the year ended
December 31, 1995) filed by STERIS with the Securities and Exchange Commission.
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 E, all such adjustments are of a normal and
recurring nature. The results for the three months ended June 30, 1996, are not
necessarily indicative of the results to be expected for the fiscal year ending
March 31, 1997.
C. - EARNINGS (LOSS) PER SHARE
The computations of earnings (loss) per common and common equivalent share give
retroactive
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effect to the AMSCO Merger and are based upon the weighted average number of
common shares outstanding. In addition, the fiscal 1996 computations also
included the dilutive effect of common share equivalents (consisting of stock
options). Common share equivalents were antidilutive for the fiscal 1997
computations. Following is a summary in thousands of common and common
equivalent shares outstanding used in the calculations of earnings (loss) per
share.
THREE MONTHS ENDED
JUNE 30,
---------------------
1996 1995
------ ------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 33,113 31,772
Dilutive effect of stock options--primary basis 0 2,150
------ ------
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENTS--PRIMARY BASIS 33,113 33,922
Additional dilutive effect of stock options--fully
diluted basis 0 202
------ ------
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENTS--FULLY DILUTED BASIS 33,113 34,124
====== ======
D. - AMSCO MERGER
On May 1, 1996, the shareholders of both STERIS and AMSCO approved the AMSCO
Merger. The AMSCO Merger was consummated on May 13, 1996. 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 share of STERIS common shares.
The AMSCO Merger has been accounted for as a pooling of interests and,
accordingly, the consolidated condensed financial statements give retroactive
effect to the combined operations of STERIS and AMSCO for all periods presented.
Summarized operating results of the separate entities for the period prior to
the AMSCO Merger follow (in thousands):
STERIS AMSCO COMBINED
------ ----- --------
Quarter ended June 30, 1995:
Revenues $19,818 $101,053 $120,871
Income from operations 3,843 11,339 15,182
Net income 2,476 6,696 9,172
Retained earnings were increased by $2,966,000 as a result of net income
recorded by AMSCO in the three month period ended March 31, 1996.
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E. - NON-RECURRING TRANSACTIONS
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 acquisition and merger. The charges include transaction
costs of $15.0 million and restructuring charges of $66.3 million net of tax
($75.8 million pre-tax). The transaction costs are for legal, accounting,
investment banking, and related expenses. The restructuring charges are for (i)
elimination of 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 ($29.5 million), and (iv) other merger-related items.
The effective income tax rate for the three months ended June 30, 1996 was lower
than statutory rates principally because certain non-recurring items are
non-deductible for tax purposes. The lower effective tax rate increased the loss
for the quarter. 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.
F. - INVENTORIES
Inventories were as follows (in thousands):
JUNE 30, MARCH 31,
1996 1996
------- -------
Raw material $24,047 $24,746
Work in process 21,623 19,139
Finished goods 32,152 29,833
------- -------
$77,822 $73,718
======= =======
G. - FINANCING
Concurrent with the consummation of the AMSCO Merger, STERIS entered into a two
and one-half year $125 million unsecured revolving Credit Facility. The Credit
Facility will provide credit to facilitate the integration of the operations of
STERIS or could 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
$0 at June 30, 1996.
In July 1996, STERIS redeemed $99.4 million of AMSCO's $100 million 4.5%/6.5%
Convertible Subordinated Notes which were convertible into STERIS common shares.
This transaction will have no material effect on earnings per common and common
equivalent share.
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H. - CONTINGENCIES
Product Liability Exposure. As of June 30, 1996, 13 product liability lawsuits
related to AMSCO ethylene oxide ("EtO") sterilizers were pending. A significant
number of similar suits related to EtO have been either dismissed or settled
without a finding of liability. These settlements and the monetary damages in
one case where a verdict was returned against AMSCO have been nominal or have
been covered by insurance.
As of June 30, 1996, 19 product liability lawsuits unrelated to EtO, such as
AMSCO non-EtO sterilizers, surgical tables and operating room lights, were
pending. Plaintiffs request all forms of damage, including compensatory,
special, exemplary and punitive damages. A significant number of similar suits
have been either dismissed or settled without a finding of liability. Most of
these settlements have been nominal, and all have been covered by insurance.
STERIS presently anticipates having sufficient primary and excess insurance
coverage for each policy year to cover existing asserted claims for compensatory
damages, subject to applicable and customary deductibles. STERIS continues to
defend itself vigorously in all of the above actions. Although there can be no
assurance that the outcome of any of these pending lawsuits will be favorable to
STERIS, STERIS believes that pending litigation will not have a material adverse
effect on STERIS's business or financial condition.
FDA Regulation. As disclosed in the AMSCO financial statements that are included
in the STERIS 8-K/A filed with the SEC on June 25, 1996, AMSCO was notified by
the FDA on January 20, 1995 that the FDA has applied its Application Integrity
Policy to AMSCO. Consequently, pre-market approval applications and 510(k)
notifications submitted by AMSCO will not be reviewed by the FDA until AMSCO has
completed certain corrective actions to the satisfaction of the FDA, including
audits of certain previously cleared 510(k) notifications. The FDA's Application
Integrity Policy has not been applied to 510(k) notifications submitted by
STERIS. The audits finalized to date have identified certain corrective actions
that AMSCO has completed or will complete during 1996. STERIS cannot predict how
long 510 (k) notifications filed by AMSCO will not be reviewed by the FDA.
STERIS believes that there are no material AMSCO product introductions planned
for 1996 that require pre-market clearance. STERIS has entered into discussions
with the FDA regarding steps necessary for the FDA to resume its review of
510(k) notifications filed by AMSCO.
As a consequence of these corrective actions and given the experience of other
companies subject to the Application Integrity Policy, it is more likely than
not that the FDA will refer this matter to the Department of Justice (the "DOJ")
and that the DOJ will pursue sanctions, including, but not limited to, fines
and/or criminal sanctions. STERIS cannot predict, at this time, the impact
of this continuing FDA review or corrective actions resulting therefrom,
or the financial or other effect any fines or sanctions could have on the
business, the consolidated financial position or the results of operations. In
the event the DOJ pursues sanctions, the DOJ could apply certain guidelines
that, if strictly adhered to, could result in any such fines and/or sanctions
not being material.
Subject to the matters described above, STERIS believes that it is currently in
conformity in all
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material respects with all regulatory requirements. It is, however, possible
that the FDA would disagree with these beliefs and seek to apply one or more of
the remedies available to it under applicable law as described above, which
could have a material adverse effect on STERIS. STERIS is committed to
maintaining compliance with all applicable FDA, EPA, and other governmental laws
and regulations.
Environmental Matters. AMSCO has been identified by the EPA as one of
approximately 50 potential responsible parties ("PRPs") within the meaning of
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
(the "Superfund Act") with respect to a Superfund Act site near Erie,
Pennsylvania (the "Site"). In 1992, the EPA issued a unilateral administrative
order (the "Administrative Order") to 37 PRPs, including AMSCO, to complete the
remediation of the Site. AMSCO, together with 19 other named PRPs, have formed a
group to coordinate efforts to respond to the EPA's unilateral Administrative
Order. It is estimated that the work needed to complete the remediation of the
Site will cost between $10 million and $13 million.
Although STERIS believes that the resolution of AMSCO's liability with respect
to the Site will not have a material adverse effect on STERIS, there can be no
assurance that the ultimate liability will not exceed current expectations.
Certain Litigation. A complaint, purporting to be a class action on behalf of
the stockholders of AMSCO, was filed in the Chancery Court of the State of
Delaware, New Castle County on December 22, 1995. The complaint names AMSCO,
STERIS, and certain directors of AMSCO as defendants. The complaint alleges,
among other things, that the AMSCO Board breached its fiduciary duties in
considering and approving the Merger Agreement. Management of STERIS believes
that the complaint is without merit and intends to vigorously defend the action.
There are other 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.
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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 consolidated condensed 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 on fiscal years ending
December 31) has been recast to conform to STERIS's annual reporting period
ending March 31.
RESULTS OF OPERATIONS
- ---------------------
Net revenue increased by 5.8% to $127.9 million in the first quarter fiscal 1997
from $120.9 million in the first quarter fiscal 1996. Infection Prevention
revenues increased by 3.0% in the first quarter fiscal 1997 to $66.7 million
from $64.7 million. Surgical Support sales increased by 16.7% to $30.0 million
in the first quarter fiscal 1997 from $25.8 million over the comparable fiscal
1996 period. Scientific, Management Services and Other revenue increased by 2.4%
to $31.1 million in the first quarter of fiscal 1997 from $30.4 million in the
first quarter fiscal 1996.
The costs of products and services sold increased in the first quarter fiscal
1997 by 8.4% to $80.6 million from $74.3 million in the first quarter fiscal
1996. The cost of products and services sold as a percentage of net revenue was
63.0% for the first quarter for fiscal 1997 compared to 61.5% for the same
period in fiscal 1996. The increase in the cost of products and services sold as
a percentage of net revenue resulted principally from changes in the mix of
products sold.
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 acquisition and merger. The charges include transaction
costs of $15.0 million and restructuring charges of $66.3 million net of tax
($75.8 million pre-tax). The transaction costs are for legal, accounting,
investment banking, and related expenses. The restructuring charges are for (i)
elimination of 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 ($29.5 million), and (iv) other merger-related items.
Selling, general, and administrative expenses decreased in the first quarter
fiscal 1997 by 5.3% to $26.1 million from $27.6 million in the first quarter
fiscal 1996. Lower costs were incurred resulting from the AMSCO acquisition and
merger. The cost reductions included reduced depreciation and amortization
charges on assets that were written-down and lower personnel costs resulting
from employee severance. Selling, general, and administrative expenses as a
percentage of net revenue decreased to 20.4% in the first quarter fiscal 1997
from 22.8% for the same period in fiscal 1996. The decrease was primarily
attributable to the cost reductions resulting from the AMSCO acquisition and
merger.
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Research and development expenses increased in the first quarter fiscal 1997 by
13.1% to $4.3 million from $3.8 million in the first quarter fiscal 1996.
Research and development expenses as a percentage of net revenue were 3.4% for
the first quarter fiscal 1997 compared to 3.1% for the first quarter fiscal
1996. The increase in dollars was due primarily to additional product and
application development expenditures.
Net interest income increased by 34.6% for the first quarter fiscal 1997 to $.6
million from $.4 million in the first quarter fiscal 1996. The increase was due
primarily to higher average investment balances.
Excluding the effect of non-recurring transactions, first quarter fiscal 1997
income increased by 5.8% to $9.7 million ($.28 per share) from $9.2 million
($.27 per share) in the first quarter fiscal 1996.
The effective income tax rate for the three months ended June 30, 1996 was lower
than statutory rates principally because certain non-recurring items are
non-deductible for tax purposes. The lower effective tax rate increased the loss
for the quarter. 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 valuation allowances were provided to reflect the
effects of merger activities.
As a result of the foregoing factors, the net loss for the first quarter fiscal
1997 was $71.6 million, compared to net income of $9.2 million in the first
quarter fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company had $142.8 million in cash and cash equivalents as of June 30, 1996,
compared to $140.8 million of the same at March 31, 1996.
Marketable securities decreased by 33.6% to $6.1 million as of June 30, 1996,
compared to $9.2 million at March 31, 1996.
Accounts receivable decreased by 2.1% to $126.6 million as of June 30, 1996,
compared to $129.3 million at March 31, 1996.
Inventory increased by 5.6% to $77.8 million as of June 30, 1996, compared to
$73.7 million at March 31, 1996.
Property, plant, and equipment decreased by 10.7% to $138.9 million as of June
30, 1996, compared to $155.5 million at March 31, 1996. The decrease was due
primarily to the write-down of assets resulting from the AMSCO acquisition and
merger.
Intangibles decreased by 19.1% to $126.5 million as of June 30, 1996, compared
to $156.4 million at March 31, 1996. The decrease was due primarily to the
write-down of goodwill related to the Finn-Aqua business, resulting from the
AMSCO acquisition and merger.
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Deferred income taxes increased by 21.5% to $34.9 million as of June 30, 1996,
compared to $28.8 million at March 31, 1996. The increase was due primarily to
the recognition of costs resulting from the AMSCO acquisition and merger.
Other assets were $2.0 million as of June 30, 1996, compared to $2.1 million of
the same at March 31, 1996.
Current liabilities increased by 100.4% to $250.6 million as of June 30, 1996,
compared to $125.1 million at March 31, 1996. The current portion of long-term
indebtedness increased to $100.3 million as of June 30, 1996 compared to $.5
million as of March 31, 1996 as a result of a planned redemption of debt. In
July 1996, STERIS redeemed $99.4 million of AMSCO's $100 million 4.5%/6.5%
Convertible Subordinated Notes which were convertible into STERIS common shares.
Other current liabilities increased as a result of the AMSCO merger and
acquisition.
Other liabilities were $67.1 million as of June 30, 1996, compared to $64.3
million of the same at March 31, 1996.
Concurrent with the consummation of the AMSCO Merger, STERIS entered into a two
and one-half year $125 million unsecured revolving Credit Facility. The Credit
Facility will provide credit to facilitate the integration of the operations of
STERIS or could 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
$0 at June 30, 1996. Following completion of the July 1996 redemption of
AMSCO's $100 million 4.5%/6.5% Convertible Subordinated Notes, STERIS will
have no long-term indebtedness.
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.
BACKLOG
- -------
The backlog of customer equipment orders is not material, often covers multiple
reporting periods, and represents less than 15% of annual sales volume. In
addition, backlog is difficult to assess because orders are subject to
cancellation by the customer upon notification.
CONTINGENCIES
- -------------
For a discussion of contingencies, see Note H to the consolidated condensed
financial statements.
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PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
- ------ -----------------
Reference is made to Part I, Item 2., Note H of this Report on Form 10-Q, which
is incorporated herein by reference.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
(a) A special meeting of the shareholders of STERIS was held on May 1,
1996, at 10:00 a.m. (the "Special Meeting") at 5960 Heisley Road, Mentor, Ohio.
(b) At the Special Meeting, the shareholders of STERIS considered and
voted upon proposals to (i) adopt a Restated Agreement and Plan of Merger, dated
as of December 16, 1995 and restated as of March 28, 1996, as it had been
amended, supplemented, or otherwise modified to the date of the Special Meeting
(the "Merger Agreement"), among STERIS, STERIS Acquisition Corporation, and
AMSCO International, Inc. and approve the transactions contemplated thereby,
including the issuance in connection with the Merger of 0.46 STERIS Common
Shares for each outstanding share of AMSCO Common Stock and unexercised options
for the purchase thereof and (ii) adopt an amendment to STERIS's Amended
Articles of Incorporation to increase the number of authorized STERIS Common
Shares from 30 million shares to 100 million shares (the "Charter Amendment").
Of the shares represented at the Special Meeting in person or by proxy and
entitled to vote thereat, there were 11,436,550 votes cast for, 2,411,934 votes
cast against, and 78,445 abstentions with respect to the proposal to adopt the
Merger Agreement and approve the transactions contemplated thereby. With respect
to the proposal to adopt the Charter Amendment, there were 11,728,459 votes cast
for, 1,882,415 votes cast against, and 316,055 abstentions. There were no broker
non-votes with respect to either proposal at the Special Meeting.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
- ------ --------------------------------
(a) 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 (filed as
Exhibit 3(b).4(b) to Form 10-Q filed for the quarter ended
June 30, 1992, and incorporated herein by reference).
Page 14
15
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).
4.2 Indenture governing the 4 1/2 % / 6 1/2% Step-Up Convertible
Subordinated Debentures due 2002, including the form of
4 1/2% / 6 1/2% Step-Up Convertible Debenture due 2002
(incorporated by reference to Exhibit 2.1 of the
Registration Statement on Form 8-A of AMSCO International,
Inc. filed on September 10, 1992 and amended on October 16,
1992).
4.3 First Supplemental Indenture, dated May 13, 1996 among AMSCO
International, Inc., STERIS Corporation, and The Bank of New
York (incorporated by reference to Exhibit 4.3 of the STERIS
Annual Report on Form 10-K for the fiscal year ended March
31, 1996).
27.1 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
May 13, 1996 -Item 2. Acquisition or Disposition of Assets. On May 13, 1996,
STERIS and AMSCO completed the merger of STERIS Acquisition Corporation, a
newly-formed, wholly-owned subsidiary of STERIS, with and into AMSCO, as a
result of which AMSCO became a wholly-owned subsidiary of STERIS.
Item 7. Financial Statements, Pro Forma Financial Information, and
Exhibits. STERIS filed certain financial statements of AMSCO and its
subsidiaries for the three year period ended December 31, 1995, and certain pro
forma financial information for the fiscal years ended March 31, 1994, March 31,
1995, and, pursuant to the amendment to Form 8-K filed by STERIS on June 25,
1996, for the fiscal year ended March 31, 1996, giving effect to the merger of
STERIS and AMSCO based on historical consolidated financial statements of STERIS
and AMSCO.
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)
August 14, 1996
Page 15
5
3-MOS
MAR-31-1997
JUN-30-1996
142,820
6,102
126,555
0
77,822
373,477
138,856
(63,368)
557,611
250,638
0
211,904
0
0
25,480
557,611
127,868
127,868
80,582
80,582
0
0
0
(73,636)
(2,041)
(71,595)
0
0
0
(71,595)
(2.16)
(2.16)
