1
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 June 30, 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
---------------
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, MENTOR, OHIO 44060
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(216) 354-2600
- --------------------------------------------------------------------------------
(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 33,950,274
- ------------------------------------ -------------------------------
(Title of Class) (Outstanding at June 30, 1997)
2
PART I FINANCIAL INFORMATION
STERIS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
=================================================================================================
JUNE 30, MARCH 31,
1997 1997
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 24,429 $ 20,576
Marketable securities 1,020 2,977
Accounts receivable 156,181 164,163
Inventories 82,876 78,762
Current portion of deferred income taxes 24,888 24,888
Prepaid expenses and other assets 6,576 8,676
--------- ---------
TOTAL CURRENT ASSETS 295,970 300,042
Property, plant, and equipment 184,756 177,184
Accumulated depreciation (77,511) (74,332)
--------- ---------
Net property, plant, and equipment 107,245 102,852
Intangibles 184,979 186,417
Accumulated amortization (66,500) (67,032)
--------- ---------
Net intangibles 118,479 119,385
Deferred income taxes 14,862 14,862
Other assets 2,433 2,314
--------- ---------
TOTAL ASSETS $ 538,989 $ 539,455
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term indebtedness $ 0 $ 12
Accounts payable 35,661 39,323
Accrued income taxes 19,854 19,059
Accrued expenses and other 91,633 100,294
--------- ---------
TOTAL CURRENT LIABILITIES 147,148 158,688
Long-term indebtedness 35,854 35,879
Other liabilities 49,987 50,172
--------- ---------
TOTAL LIABILITIES 232,989 244,739
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 33,950 at June 30, 1997 and 33,984 at
March 31, 1997, excluding 289 and 255 treasury shares, respectively 229,877 231,278
Retained earnings 81,260 69,513
Cumulative translation adjustment (5,137) (6,075)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 306,000 294,716
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 538,989 $ 539,455
========= =========
See notes to consolidated condensed financial statements.
2
3
STERIS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
================================================================================
THREE MONTHS ENDED
JUNE 30
------------------------
1997 1996
--------- ---------
Net revenues $ 155,134 $ 127,868
Cost of goods and services sold 88,300 80,582
--------- ---------
Gross profit 66,834 47,286
Cost and expenses:
Selling, informational, and administrative 41,143 26,118
Research and development 5,956 4,302
Non-recurring items 0 90,831
--------- ---------
47,099 121,251
--------- ---------
Income (loss) from operations 19,735 (73,965)
Interest expense (522) (1,602)
Interest income and other 60 1,931
--------- ---------
Income (loss) before income taxes 19,273 (73,636)
Income tax expense (benefit) 7,526 (2,041)
Net income (loss) $ 11,747 $ (71,595)
========= =========
Net income (loss) per share $ 0.34 $ (2.16)
========= =========
Weighted average number of shares
outstanding used in computing net
income (loss) per share 34,956 33,113
========= =========
See notes to consolidated condensed financial statements.
3
4
STERIS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
=========================================================================================
THREE MONTHS ENDED
JUNE 30
------------------------
1997 1996
-------- ----------
OPERATING ACTIVITIES
Net income (loss) $11,747 $(71,595)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 4,593 3,670
Deferred income taxes 0 (91)
Non-recurring items 0 65,810
Other items (1,233) 780
Changes in operating assets and liabilities:
Accounts receivable 7,982 3,916
Inventories (4,114) (4,131)
Other assets 1,948 590
Accounts payable and accruals (12,323) (1,701)
Accrued income taxes 795 3,256
-------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,395 504
INVESTING ACTIVITIES
Purchases of property, plant, equipment, and patents (6,999) (3,458)
Proceeds from notes receivable 0 19
Purchases of marketable securities 0 (981)
Proceeds from sales of marketable securities 1,957 4,069
-------- ---------
NET CASH USED IN INVESTING ACTIVITIES (5,042) (351)
FINANCING ACTIVITIES
Payments on long-term obligations (37) (76)
Purchase of treasury shares (2,386) 0
Proceeds from exercise of stock options 364 1,964
Tax benefits from exercise of stock options 621 129
-------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,438) 2,017
Effect of exchange rate changes on cash and cash equivalents 938 (138)
-------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 3,853 2,032
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,576 140,788
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $24,429 $142,820
======== =========
See notes to consolidated condensed financial statements.
4
5
STERIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PERIODS ENDED JUNE 30, 1997 AND 1996
A.-REPORTING ENTITY
STERIS Corporation (the "Company" or "STERIS") develops, manufactures, markets,
and services contamination prevention, contamination control, and surgical
support systems, products, and technologies for healthcare, scientific, research
and industrial Customers throughout the world. The Company has approximately
4,000 Associates (employees) worldwide, including more than 1,200 direct sales,
service, and field support personnel. Customer Support facilities are 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
reflect 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 results for the three months ended June 30, 1997, are not
necessarily indicative of the results to be expected for the fiscal year ending
March 31, 1998.
5
6
C.-EARNINGS (LOSS) PER SHARE
The computations of earnings (loss) per Common Share and Common Share
equivalents are based upon the weighted average number of Common Shares
outstanding and when applicable, the dilutive effect of Common Share equivalents
(consisting solely of stock options). Common Share equivalents were antidilutive
for the three month period ended June 30, 1996 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.
THREE MONTHS ENDED
JUNE 30
------------------
1997 1996
------ ------
WEIGHTED AVERAGE COMMON SHARES 33,935 33,113
OUTSTANDING
Dilutive effect of stock options--primary basis 1,021 0
------ ------
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENTS--PRIMARY BASIS 34,956 33,113
Additional dilutive effect of stock options--fully
diluted basis 0 0
------ ------
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENTS--FULLY DILUTED BASIS 34,956 33,113
====== ======
The FASB has issued Statement 128, "Earnings Per Share," that will require the
Company to calculate earnings per share using different methods beginning in the
1998 fiscal third quarter (early adoption is prohibited). Under the Statement
128 calculation of "basic" earnings per share, the dilutive effect of stock
options will be excluded. The Company does not expect that applying the new
methods to the 1998 fiscal first quarter operations would materially change the
calculation of "diluted" earnings per share (the replacement under Statement 128
for fully diluted earnings per share).
D.-NON-RECURRING ITEMS
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
6
7
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 three months ended June 30, 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:
JUNE 30, MARCH 31,
1997 1997
------- -------
Raw material $30,073 $30,027
Work in process 17,306 15,240
Finished goods 35,497 33,495
------- -------
$82,876 $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 borrowing under the Credit Facility was $35,000 at June 30,
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.
H.-ACQUISITION
Late in the first fiscal quarter 1998, STERIS reached an agreement to acquire
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 Joslyn acquisition closed in early July. The
acquisition will be accounted for using the purchase method of accounting.
7
8
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 21.3% to $155.1 million in the first quarter fiscal
1998 from $127.9 million in the first quarter fiscal 1997. Infection Prevention
revenues increased by 34.2% to $89.5 million in the first quarter fiscal 1998
from $66.7 million in the first quarter fiscal 1997. Surgical Support revenues
increased by 7.7% to $32.4 million in the first quarter fiscal 1998 from $30.1
million in the first quarter fiscal 1997. Scientific, Management Services and
Other revenue increased by 6.9% to $33.3 million in the first quarter fiscal
1998 from $31.1 million in the first quarter fiscal 1997. The increase in net
revenues was due mainly to increases in the sales of consumable products and
capital equipment during the first quarter fiscal 1998. The increase in sales of
consumable products includes 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 1996 acquisition of
Surgicot, Inc., a manufacturer and supplier of biological and chemical sterile
process monitors, sterilization wraps and pouches, and other consumable
infection prevention products.
The costs of products and services sold increased by 9.6% to $88.3 million in
the first quarter fiscal 1998 from $80.6 million in the first quarter fiscal
1997. The cost of products and services sold as a percentage of net revenue was
56.9% for the first quarter fiscal 1998 compared to 63.0% 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 first quarter fiscal 1998 resulted principally
from changes in the mix of products sold, 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 57.5% to $41.1
million in the first quarter fiscal 1998 from $26.1 million in the first quarter
fiscal 1997. The expenses as a percentage of net revenue increased to 26.5% in
the first quarter fiscal 1998 from 20.5% in the first quarter fiscal 1997. The
increase was primarily attributable to the investments in Customer Support,
domestic and international sales organization expansion, business development,
management information systems, and the inclusion of acquired companies'
selling, informational and administrative expenses. The first quarter fiscal
1998 expenses included the costs of exhibiting at several major national and
international conventions, including the Association of Operating Room Nurses
Congress.
Research and development expenses increased by 38.4% to $6.0 million in the
first quarter fiscal 1998 from $4.3 million in the first quarter fiscal 1997.
Research and development expenses as a percentage of net revenue were 3.8% for
the first quarter fiscal 1998 compared to 3.4% for the first quarter fiscal
1997. The increase was due to additional product and application
8
9
development expenditures.
Interest expense decreased by 67.4% to $0.5 million in the first quarter fiscal
1998 from $1.6 million in the first quarter fiscal 1997. 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 96.9% to $0.1 million in the first
quarter fiscal 1998 from $1.9 million in the first quarter 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
cash redemption of the aforementioned Amsco Convertible Subordinated Notes.
Excluding the effect of non-recurring items, income for the first quarter of
fiscal 1998 increased by 21.0% to $11.7 million ($.34 per share) from $9.7
million ($.28 per share) in the same period fiscal 1997.
The effective income tax rate for the three months ended June 30, 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.
As a result of the foregoing factors, net income for the first quarter fiscal
1998 was $11.7 million, compared to net loss of $71.6 million in the first
quarter fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company had $25.4 million in cash, cash equivalents and marketable
securities as of June 30, 1997, compared to $23.6 million of the same at March
31, 1997.
Accounts receivable decreased by 4.9% to $156.2 million as of June 30, 1997,
compared to $164.2 million at March 31, 1997.
Inventory increased by 5.2% to $82.9 million as of June 30, 1997, compared to
$78.8 million at March 31, 1997.
Property, plant, and equipment increased by 4.3% to $184.8 million as of June
30, 1997, compared to $177.2 million at March 31, 1997.
Intangibles decreased by 0.8% to $185.0 million as of June 30, 1997, compared to
$186.4 million at March 31, 1997.
Current liabilities decreased by 7.3% to $147.1 million as of June 30, 1997,
compared to $158.7 million at March 31, 1997.
9
10
Other liabilities were $50.0 million as of June 30, 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 borrowing under the Credit Facility was $35 million at June
30, 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.
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 in
profit margins, and (c) the possibility of reduced demand, or reductions in
10
11
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 2., Note G of this Report on Form 10-Q, which
is incorporated herein by reference.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
The Company held its Annual Meeting of Shareholders on July 24, 1997, at 5960
Heisley Road, Mentor, Ohio. At the Annual Meeting, shareholders: (a) re-elected
three directors to serve in the class with a term expiring at the Annual Meeting
of Shareholders in 1999, and (b) approved the STERIS Corporation 1997 Stock
Option Plan for employees and directors. Results of the voting on directors
were: Raymond A. Lancaster 29,816,569 votes for, 352,696 withheld; Thomas J.
Magulski 29,827,740 votes for, 341,525 withheld; J. B. Richey 29,826,645 votes
for, 342,620 withheld. Results of the voting on the Stock Option Plan were
26,189,012 votes for, 3,703,960 against, 125,820 abstain, and 150,473 broker
non-votes.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
- ------ --------------------------------
(a) Exhibits
--------
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
10.1 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
10.2 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
27.1 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None
11
12
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 12, 1997
12
1
EXHIBIT 10.1
SECOND AMENDMENT AGREEMENT
This Second Amendment Agreement is made as of the 10th day of June, 1997, by and
among STERIS CORPORATION, an Ohio corporation ("Borrower"), KEYBANK NATIONAL
ASSOCIATION (successor by merger to Society National Bank), as Agent ("Agent")
and the banking institutions listed on the signature pages hereto ("Banks"):
WHEREAS, Borrower, Agent and the Banks are parties to a certain Credit Agreement
dated as of May 13, 1996, as amended and as it may from time to time be further
amended, restated or otherwise modified, which provides, among other things, for
revolving loans and swing loans aggregating not more than One Hundred
Twenty-Five Million Dollars, all upon certain terms and conditions ("Credit
Agreement");
WHEREAS, Borrower, Agent and the Banks desire to amend the Credit Agreement to
modify certain provisions thereof;
WHEREAS, each term used herein shall be defined in accordance with the Credit
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein and for other valuable considerations, Borrower, Agent and the Banks
agree as follows:
1. Article I of the Credit Agreement is hereby amended to delete the definition
of "Consolidated EBIT" in its entirety and to insert in place thereof the
following:
"Consolidated EBIT" shall mean, for any period on a consolidated basis for
Borrower and its Subsidiaries, the sum of the amounts for such period of:
(a) Consolidated Net Earnings, provided that: (i) all gains and all losses
realized by Borrower and its Subsidiaries upon the sale or other disposition
(including, without limitation, pursuant to sale and leaseback transactions) of
property or assets which are not sold or otherwise disposed of in the ordinary
course of business, or pursuant to the sale of any capital stock of Borrower or
any Subsidiary, shall be excluded from such Consolidated Net Earnings, (ii) net
income or net loss of Borrower and its Subsidiaries combined on a "pooling of
interests" basis attributable to any period prior to the date of such
combination shall be excluded from such Consolidated Net Earnings, (iii)(A) all
items of gain or loss which are properly classified as extraordinary in
accordance with GAAP, (B) all charges recorded for costs in connection with the
Merger which are properly classified as non-recurring in accordance with GAAP,
and (C) all non-recurring (in accordance with GAAP) restructuring charges
incurred in connection with any acquisition shall be excluded from such
Consolidated Net Earnings, (iv) all items which are properly classified in
accordance with GAAP as cumulative effects of accounting changes shall be
excluded from such Consolidated Net Earnings, and (v) net income of any Person
which is not a Subsidiary of Borrower and its Subsidiaries and which is
consolidated with Borrower and its Subsidiaries or is accounted for by Borrower
and its Subsidiaries by the equity method of accounting shall be included in
such Consolidated Net Earnings only to the extent of the amount of dividends or
distributions paid to Borrower and its Subsidiaries or a Subsidiary;
(b) Consolidated Interest Expense; and
13
2
(c) charges for federal, state, local and foreign income taxes.
2. Section 5.9 of the Credit Agreement is hereby deleted in its entirety with
the following being inserted in place thereof:
SECTION 5.9 LEVERAGE. Borrower shall not suffer or permit at any time, for
Borrower and its Subsidiaries, on a consolidated basis, the ratio of (a) (i)
Funded Senior Debt, plus (ii) Subordinated Indebtedness, to (b) (i) Funded
Senior Debt, plus (ii) Subordinated Indebtedness, plus (iii) Consolidated Net
Worth, to be greater than .50 to 1.00, based upon the financial statements of
Borrower and its Subsidiaries for the most recent calendar quarter.
3. Section 5.10 of the Credit Agreement is hereby deleted in its entirety with
the words "Intentionally Omitted" to be inserted in place thereof.
4. Section 5.11 of the Credit Agreement is hereby amended to delete sub-part (d)
in its entirety and to insert in place thereof the following:
(d) purchase money Liens on real estate and fixed assets securing loans not in
excess of the aggregate amount, for all Companies, of Twenty Five Million
Dollars ($25,000,000); and
5. Borrower hereby represents and warrants to Agent and the Banks that (a)
Borrower has the legal power and authority to execute and deliver this Second
Amendment Agreement; (b) officials executing this Second Amendment Agreement
have been duly authorized to execute and deliver the same and bind Borrower with
respect to the provisions hereof; (c) the execution and delivery hereof by
Borrower and the performance and observance by Borrower of the provisions hereof
do not violate or conflict with the organizational agreements of Borrower or any
law applicable to Borrower or result in a breach of any provision of or
constitute a default under any other agreement, instrument or document binding
upon or enforceable against Borrower; (d) no Possible Default or Event of
Default exists under the Credit Agreement, nor will any occur immediately after
the execution and delivery of the Second Amendment Agreement or by the
performance or observance of any provision hereof; (e) neither Borrower nor any
Subsidiary has any claim or offset against, or defense or counterclaim to, any
of Borrower's or any Subsidiary's obligations or liabilities under the Credit
Agreement or any Related Writing, and Borrower and each Subsidiary hereby waives
and releases Agent and each of the Banks from any and all such claims, offsets,
defenses and counterclaims of which Borrower and any Subsidiary is aware, such
waiver and release being with full knowledge and understanding of the
circumstances and effect thereof and after having consulted legal counsel with
respect thereto and (f) this Second Amendment Agreement constitutes a valid and
binding obligation of Borrower in every respect, enforceable in accordance with
its terms.
6. Each reference that is made in the Credit Agreement or any other writing to
the Credit Agreement shall hereafter be construed as a reference to the Credit
Agreement as amended hereby. Except as herein otherwise specifically provided,
all provisions of the Credit Agreement shall remain in full force and effect and
be unaffected hereby.
7. This Second Amendment Agreement may be executed in any number of
counterparts, by different parties hereto in separate counterparts and by
facsimile signature, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
14
3
8. The rights and obligations of all parties hereto shall be governed by the
laws of the State of Ohio.
Address: 5960 Heisley Road STERIS CORPORATION
Mentor, OH 44060 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
Address: Key Tower KEYBANK NATIONAL ASSOCIATION
127 Public Square as a Bank and as Agent
Mailcode: OH-01-27-0611 By: /s/ Thomas A. Crandell
Cleveland, OH 44114-0611 --------------------------------------
Thomas A. Crandell, Assistant Vice
President
Address: 600 Superior Avenue BANK ONE, COLUMBUS, NA
Cleveland, OH 44114-2650 By: /s/ Babette C. Coerdt
Attention: N. Ohio Large Corp. --------------------------------------
Markets Group, #0149 Babette C. Coerdt, Vice President and Group
Manager
Address: 611 Woodland Avenue NBD BANK
Detroit, MI 48226 By: /s/ Paul R. DeMelo
Attention: Mid-corporate --------------------------------------
Banking Division Paul R. DeMelo, Vice President
Address: One Cleveland Center PNC BANK, NATIONAL ASSOCIATION
1375 E. 9th St., Ste. 1250 By: /s/ Bryon A. Pike
Cleveland, OH 44114 --------------------------------------
Attention: Corporate Banking Bryon A. Pike, Vice President
Attention: Pittsburgh Branch ABN AMRO BANK N.V., PITTSBURGH
One PPG Place, Ste. 2950 BRANCH
Pittsburgh, PA 15222-5400 By: ABN AMRO North America, Inc., as
agent
By: /s/ Roy D. Hasbrook
--------------------------------------
Roy D. Hasbrook, Group Vice President and
Director
And: /s/ Kathyrn C. Toth
-------------------------------------
Kathyrn C. Toth, Vice President
15
4
The undersigned each consent to the terms hereof.
AMSCO INTERNATIONAL, INC.
MEDICAL & ENVIRONMENTAL DESIGNS, INC.
ECOMED, INC.
AMERICAN STERILIZER COMPANY
AMSCO STERILE RECOVERIES, INC.
AMSCO INTERNATIONAL SALES CORPORATION
HAS, INC.
AMSCO EUROPE, INC.
AMSCO ASIA PACIFIC, INC.
AMSCO LATIN AMERICA, INC.
CALGON VESTAL, INC.
SURGICOT, INC.
By: /s/ Bill R. Sanford
------------------------------
Bill R. Sanford, President of each of the Companies listed
above
And: /s/ Michael A. Keresman, III
-----------------------------
Michael A. Keresman, III, Vice President, and Secretary of
each of the Companies listed above
16
1
EXHIBIT 10.2
THIRD AMENDMENT AGREEMENT
This Third Amendment Agreement is made as of the 10th day of June, 1997, by and
among STERIS CORPORATION, an Ohio corporation ("Borrower"), KEYBANK NATIONAL
ASSOCIATION (successor by merger to Society National Bank), as Agent ("Agent")
and the banking institutions listed on Schedule 1 attached hereto and made a
part hereof ("Banks"):
WHEREAS, Borrower, Agent and the Banks are parties to a certain Credit Agreement
dated as of May 13, 1996, as amended and as it may from time to time be further
amended, restated or otherwise modified, which provides, among other things, for
revolving loans and swing loans aggregating not more than One Hundred
Twenty-Five Million Dollars, all upon certain terms and conditions ("Credit
Agreement");
WHEREAS, Borrower, Agent and the Banks desire to amend the Credit Agreement to
increase the amount of the credit facility and to modify certain other
provisions thereof;
WHEREAS, each term used herein shall be defined in accordance with the Credit
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein and for other valuable considerations, Borrower, Agent and the Banks
agree as follows:
1. Article I of the Credit Agreement is hereby amended to delete the definitions
of "Commitment Period" and "Total Commitment Amount" in their entirety and to
insert in place thereof the following:
"Commitment Period" shall mean the period from the Effective Date to September
30, 2001.
"Total Commitment Amount" shall mean the obligation hereunder of the Banks to
make Loans up to the maximum aggregate principal amount of Two Hundred Fifteen
Million Dollars ($215,000,000) during the Commitment Period (or such lesser
amount as shall be determined pursuant to Section 2.5 hereof).
2. The Credit Agreement is hereby amended by deleting Schedule 1 thereof in its
entirety and be inserting in place thereof a new Schedule 1 in the form of
Schedule 1 attached hereto.
3. The Credit Agreement is hereby amended by deleting Exhibit A in its entirety
and by substituting in place thereof a new Exhibit A in the form of Exhibit A
attached hereto.
17
2
4. Concurrently with the execution of this Third Amendment Agreement, Borrower
shall:
(a) execute and deliver to each Bank a new Revolving Credit Note dated as of May
13, 1996, and such new Revolving Credit Note shall be in the form and substance
of Exhibit A attached hereto. After a Bank receives a new Revolving Credit Note,
such Bank will mark its Revolving Credit Note being replaced thereby "Replaced"
and return the same to Borrower; and
(b) pay to Agent for the benefit of the Banks an amendment fee in the amount of
five (5) basis points times the amount of the increase in the Total Commitment
Amount.
5. Borrower hereby represents and warrants to Agent and the Banks that (a)
Borrower has the legal power and authority to execute and deliver this Third
Amendment Agreement; (b) officials executing this Third Amendment Agreement have
been duly authorized to execute and deliver the same and bind Borrower with
respect to the provisions hereof; (c) the execution and delivery hereof by
Borrower and the performance and observance by Borrower of the provisions hereof
do not violate or conflict with the organizational agreements of Borrower or any
law applicable to Borrower or result in a breach of any provision of or
constitute a default under any other agreement, instrument or document binding
upon or enforceable against Borrower; (d) no Possible Default or Event of
Default exists under the Credit Agreement, nor will any occur immediately after
the execution and delivery of the Third Amendment Agreement or by the
performance or observance of any provision hereof; (e) neither Borrower nor any
Subsidiary has any claim or offset against, or defense or counterclaim to, any
of Borrower's or any Subsidiary's obligations or liabilities under the Credit
Agreement or any Related Writing, and Borrower and each Subsidiary hereby waives
and releases Agent and each of the Banks from any and all such claims, offsets,
defenses and counterclaims of which Borrower and any Subsidiary is aware, such
waiver and release being with full knowledge and understanding of the
circumstances and effect thereof and after having consulted legal counsel with
respect thereto, and (f) this Third Amendment Agreement constitutes a valid and
binding obligation of Borrower in every respect, enforceable in accordance with
its terms.
6. Each reference that is made in the Credit Agreement or any other writing to
the Credit Agreement shall hereafter be construed as a reference to the Credit
Agreement as amended hereby. Except as herein otherwise specifically provided,
all provisions of the Credit Agreement shall remain in full force and effect and
be unaffected hereby.
7. This Third Amendment Agreement may be executed in any number of counterparts,
by different parties hereto in separate counterparts and by facsimile signature,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
18
3
8. The rights and obligations of all parties hereto shall be governed by the
laws of the State of Ohio.
Address: 5960 Heisley Road STERIS CORPORATION
Mentor, OH 44060 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
Address: Key Tower KEYBANK NATIONAL ASSOCIATION
127 Public Square as a Bank and as Agent
Mailcode: OH-01-27-0611 By: /s/ Thomas A. Crandell
Cleveland, OH 44114-0611 --------------------------------------
Thomas A. Crandell, Assistant Vice
President
Address: 600 Superior Avenue BANK ONE, COLUMBUS, NA
Cleveland, OH 44114-2650 By: /s/ Babette C. Coerdt
Attention: N. Ohio Large Corp. --------------------------------------
Markets Group, #0149 Babette C. Coerdt, Vice President and Group
Manager
Address: 611 Woodland Avenue NBD BANK
Detroit, MI 48226 By: /s/ Paul R. DeMelo
Attention: Mid-corporate --------------------------------------
Banking Division Paul R. DeMelo, Vice President
Address: One Cleveland Center PNC BANK, NATIONAL ASSOCIATION
1375 E. 9th St., Ste. 1250 By: /s/ Bryon A. Pike
Cleveland, OH 44114 --------------------------------------
Attention: Corporate Banking Bryon A. Pike, Vice President
Attention: Pittsburgh Branch ABN AMRO BANK N.V., PITTSBURGH
One PPG Place, Ste. 2950 BRANCH
Pittsburgh, PA 15222-5400 By: ABN AMRO North America, Inc., as
agent
By: /s/ Roy D. Hasbrook
--------------------------------------
Roy D. Hasbrook, Group Vice President and
Director
And: /s/ Kathyrn C. Toth
--------------------------------------
Kathyrn C. Toth, Vice President
19
4
The undersigned each consent to the terms hereof.
AMSCO INTERNATIONAL, INC.
MEDICAL & ENVIRONMENTAL DESIGNS, INC.
ECOMED, INC.
AMERICAN STERILIZER COMPANY
AMSCO STERILE RECOVERIES, INC.
AMSCO INTERNATIONAL SALES CORPORATION
HAS, INC.
AMSCO EUROPE, INC.
AMSCO ASIA PACIFIC, INC.
AMSCO LATIN AMERICA, INC.
CALGON VESTAL, INC.
SURGICOT, INC.
By: /s/ Bill R. Sanford
---------------------------------------------
Bill R. Sanford, President of each of the Companies listed
above
And: /s/ Michael A. Keresman, III
---------------------------------------------
Michael A. Keresman, III, Vice President, and Secretary of
each of the Companies listed above
20
5
SCHEDULE 1
MAXIMUM
BANKING INSTITUTIONS PERCENTAGE AMOUNT
-------------------- ---------- ------
KeyBank National Association 25.3% $54,320,000
Bank One, Columbus, NA 19.5% 42,000,000
NBD Bank 18.4% 39,560,000
PNC Bank, National Association 18.4% 39,560,000
ABN AMRO Bank N.V.,
Pittsburgh Branch 18.4% 39,560,000
-----
Total Commitment Amount 100.0% $215,000,000
===== ============
21
6
EXHIBIT A
REVOLVING CREDIT NOTE
$ ___________ Cleveland, Ohio
As of May 13, 1996
FOR VALUE RECEIVED, the undersigned STERIS CORPORATION, an Ohio corporation,
("Borrower"), promises to pay on September 30, 2001, to the order of ________
("Bank") at the Main Office of KeyBank National Association (successor by merger
to Society National Bank), as Agent, 127 Public Square, Cleveland, Ohio
44114-1306 the principal sum of
____________________________________________________________________DOLLARS or
the aggregate unpaid principal amount of all Revolving Loans made by Bank to
Borrower pursuant to Section 2.1 of the Credit Agreement, as hereinafter
defined, whichever is less, in lawful money of the United States of America. As
used herein, "Credit Agreement" means the Credit Agreement dated as of May 13,
1996, among Borrower, the banks named therein and KeyBank National Association,
as Agent, as amended and as the same may from time to time be further amended,
restated or otherwise modified. Capitalized terms used herein shall have the
meanings ascribed to them in the Credit Agreement.
Borrower also promises to pay interest on the unpaid principal amount of each
Revolving Loan from time to time outstanding, from the date of such Revolving
Loan until the payment in full thereof, at the rates per annum which shall be
determined in accordance with the provisions of Section 2.1A of the Credit
Agreement. Such interest shall be payable on each date provided for in such
Section 2.1A; provided, however, that interest on any principal portion which is
not paid when due shall be payable on demand.
The portions of the principal sum hereof from time to time representing Prime
Rate Loans and LIBOR Loans, and payments of principal of any thereof, shall be
shown on the records of Bank 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.
If this Note shall not be paid at maturity, whether such maturity occurs by
reason of lapse of time or by operation of any provision for acceleration of
maturity contained in the Credit Agreement, the principal hereof and the unpaid
interest thereon shall bear interest, until paid, at the Default Rate. All
payments of principal of and interest on this Note shall be made in immediately
available funds.
This Note is one of the Revolving Credit Notes referred to in the Credit
Agreement. Reference is made to the Credit Agreement for a description of the
right of the undersigned to anticipate payments hereof, the right of the holder
hereof to declare this Note due prior to its stated maturity, and other terms
and conditions upon which this Note is issued.
22
7
The undersigned 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 State of Ohio 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 the Agent or the Banks' 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 the Agent
or the Banks.
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, Chief Financial Officer
"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."
23
5
3-MOS
MAR-31-1998
JUN-30-1997
24,429
1,020
156,181
0
82,876
295,970
184,756
(77,511)
538,989
147,148
0
229,877
0
0
76,123
538,989
155,134
155,134
88,300
88,300
0
0
522
19,273
7,526
11,747
0
0
0
11,747
0.34
0.34
