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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2002

Commission file number 0-20165

STERIS Corporation
(Exact name of registrant as specified in its charter)

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 o

The number of Common Shares outstanding as of July 31, 2002: 68,873,103

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STERIS Corporation

Index

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PART I - FINANCIAL INFORMATION

STERIS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)

See notes to consolidated financial statements.

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STERIS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)

See notes to consolidated financial statements.

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STERIS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

See notes to consolidated financial statements.

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STERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the Three Months Ended
June 30, 2002 and 2001
(dollars in thousands, except per share amounts)

Significant Accounting and Reporting Policies

1. Reporting Entity

            STERIS Corporation (the “Company” or “STERIS”) develops, manufactures, and markets infection prevention, contamination prevention, microbial reduction, and medical and therapy support systems, products, services, and technologies for healthcare, scientific, research, and industrial customers throughout the world. The Company has over 4,500 employees worldwide, with approximately 1,700 involved in direct sales, service, and field support. Customer support facilities are located in several major global market centers with manufacturing operations in the United States, Australia, Canada, Germany, Finland, and Sweden. STERIS operates in a single business segment.

2. Basis of Presentation

            The Company’s unaudited consolidated financial statements for the three months ended June 30, 2002 and June 30, 2001 included in this Quarterly Report on Form 10-Q have been prepared in accordance with the accounting policies described in the Notes to Consolidated Financial Statements for the fiscal year ended March 31, 2002 which were included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 20, 2002, and in management’s opinion contain all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Form 10-K referred to above. The consolidated balance sheet at March 31, 2002 has been derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

            The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated upon consolidation. Certain reclassifications have been made to the Company’s prior year financial statements to conform to the current year classification.

3. Recently Issued Accounting Standards

            In June 2001, Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS 141”), and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), were issued by the Financial Accounting Standards Board. SFAS 141 eliminates the pooling-of-interests method for business combinations and requires the use of the purchase method and establishes criteria to be used in the determining whether acquired intangible assets are to be separated from goodwill.

SFAS 142 changes the accounting for goodwill and indefinite life intangibles from an amortization approach to a non-amortization approach, and requires periodic tests for impairment of these assets. SFAS 142 requires the discontinuance of amortization of goodwill and indefinite life intangibles that had been recorded in connection with previous business combinations. The Company has conducted valuations of its reporting units, and based on these valuations, the Company has concluded that goodwill is not impaired.

The Company adopted SFAS 141 and SFAS 142 on April 1, 2002. The following table reflects the reconciliation of reported net income and net income per share to the amounts adjusted for the exclusion of goodwill amortization.

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STERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the Three Months Ended
June 30, 2002 and 2001
(dollars in thousands, except per share amounts)

            In August 2001, Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations,” was issued. This Statement requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes the associated retirement costs by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the remaining estimated useful life of the related asset. The Company is required to adopt this Statement for the year ending March 31, 2004. The Company believes that the impact of the adoption on the Company’s consolidated financial statements will not be material.

            In October 2001, Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“SFAS 144”) was issued. The Company adopted SFAS 144 on April 1, 2002 and the impact of the adoption on the Company’s consolidated financial statements was not considered material.

4. Earnings per Share

The following is a summary of Common Shares and Common Share equivalents outstanding used in the calculations of earnings per share:

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STERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the Three Months Ended
June 30, 2002 and 2001
(dollars in thousands, except per share amounts)

5. Comprehensive Income

            Comprehensive income amounted to $15,700 and $3,930, net of tax, for the three months ended June 30, 2002 and 2001, respectively. The difference between net income and comprehensive income for the periods resulted from the change in the cumulative foreign currency translation adjustment.

6. Inventories

            Inventories are stated at cost, which does not exceed market. The Company uses the last-in, first-out (LIFO) and first-in, first-out (FIFO) cost methods. Inventory costs include material, labor, and overhead. Inventories were as follows:

7. Non-recurring Transactions

Fiscal 2001 Charge

            The Company concluded its review of manufacturing, service, and support functions during the fourth quarter of fiscal 2001. Those efforts were used to identify opportunities for efficiency and productivity improvements beyond those initiated during the fourth quarter of fiscal 2000. As a result of this review and the related plan to initiate improvements in those and other functions, a non-recurring charge of $41,476 ($28,204 net of tax, or $0.41 per diluted share) was recorded. This charge primarily related to plans for manufacturing consolidations, upgrading of the Company’s service, sales, and distribution organizations, and associated workforce reductions. The implementation of these actions began in the fourth quarter of fiscal 2001 and resulted in a reduction of approximately 335 employees in the manufacturing and support functions by the end of the fourth quarter of fiscal 2002. Of the $41,476 charge, $21,510 was charged to cost of products sold and $19,966 was charged to selling, general, and administrative expenses in the consolidated statement of income.

            The charge to cost of products sold included $10,923 for inventory write-downs and asset disposals relating to the restructuring of the Company’s production, distribution, service, and sales activities. The charge to cost of products sold also included $10,587 for the consolidation of manufacturing operations. The Company’s production operations in Medina, Ohio were consolidated into the Company’s Montgomery, Alabama facility in August 2001. The Company’s two St. Louis, Missouri manufacturing facilities were consolidated into one facility in March 2002. The consolidation costs primarily included severance and property abandonment costs.

            The charge to selling, general, and administrative expenses included $10,163 to write off goodwill related to purchased product lines that the Company discontinued. The remaining $9,803 was composed of severance and asset write-offs related to portions of the sales, service, and distribution organizations.

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STERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the Three Months Ended
June 30, 2002 and 2001
(dollars in thousands, except per share amounts)

            Reductions to the restructuring reserves during the first quarter of fiscal 2003 related to employee severance payments of $594 and other payments and adjustments. The Company paid $555 in settlement of pension liabilities for terminated employees. The restructuring reserves were reduced by approximately $636 in the first quarter of fiscal 2003 as the Company received a favorable ruling regarding certain salary continuation benefits accrued for terminated union employees. This adjustment was recorded as a reduction of costs of products sold on the accompanying consolidated statement of income for the first quarter of fiscal 2003. Restructuring reserves of $2,438 and $4,223 remained as of June 30, and March 31, 2002, respectively, primarily related to severance obligations.

Fiscal 2000 Charge

            The Company performed a review of certain manufacturing and support functions during the fourth quarter of fiscal 2000. The review of manufacturing operations included an outside consultant’s study and evaluation of manufacturing practices at several manufacturing plants. As a result of the review and study performed and the related plan to initiate improvements in these and other functions, a nonrecurring charge of $39,722 ($24,628 net of tax, or $0.36 per diluted share) was recorded in the fourth quarter of fiscal 2000. The Company has completed all aspects of the operational changes related to the fiscal 2000 nonrecurring charge.

            Reductions to the restructuring reserves during the first quarter of fiscal 2003 related primarily to employee severance and lease payments of $154. The Restructuring reserves of $260 and $414 remained as of June 30, and March 31, 2002, respectively, primarily related to severance obligations.

8. 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 taken as a whole. STERIS presently maintains product liability insurance coverage in amounts and with deductibles that it believes are prudent.

9. Business Segment Information

            The Company operates in a single business segment. The following is information about the Company’s operations by geographic area:

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STERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the Three Months Ended
June 30, 2002 and 2001
(dollars in thousands, except per share amounts)

            During the quarters ended June 30, 2002 and 2001, no revenues from a single customer represented more than one and one half percent of total net revenues. Revenues by principal customer group are as follows:

10. Treasury Shares

            On January 30, 1997, the Company announced that it’s Board of Directors had authorized the periodic repurchase of up to 6.0 million STERIS Common Shares (adjusted for a 2-for-1 stock split on August 24, 1998) in the open market. As of March 31, 2002, the Company had purchased and subsequently reissued 3.7 million STERIS Common Shares.

            On June 27, 2002, the Company purchased 0.9 million Common Shares at an average purchase price of $17.86 per Common Share. The purchase transaction did not settle until July 2, 2002, and therefore a current liability for the settlement of the purchase of $16,070 has been recorded in the accompanying consolidated balance sheet.

            On July 24, 2002 the Company announced that it’s Board of Directors had authorized the purchase of up to 3.0 million STERIS Common Shares in the open market and in private transactions. The shares may be used for the Company’s employee benefit plans or for general corporate purposes. This share repurchase authorization replaced the existing authorization from which 1.4 million had remained available.

            On July 25, 2002, the Company amended its unsecured $325,000 Revolving Credit Facility (the “Facility”) to allow for the repurchase of Common Shares for an amount up to $125,000 from June 27, 2002 to October 25, 2002. The amendment also modifies the definition of “consolidated net worth” for the purposes of certain covenant calculations to exclude any reductions to shareholders’ equity resulting from the repurchase of Common Shares during this time period.

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INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

Board of Directors and Shareholders
STERIS Corporation

            We have reviewed the accompanying consolidated balance sheet of STERIS Corporation and subsidiaries as of June 30, 2002, and the related consolidated statements of income and cash flows for the three months ended June 30, 2002 and 2001. These financial statements are the responsibility of the Company’s management.

            We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

            Based upon our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.

            We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of STERIS Corporation and subsidiaries as of March 31, 2002 and the related consolidated statements of income, shareholders’ equity and cash flows for the year then ended, not presented herein, and in our report dated April 23, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of March 31, 2002, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

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Overview

            During the first quarter of fiscal 2003, the Company delivered improved financial results based on more efficient operations, a stronger financial position, and core customer demand. Revenues for the first quarter of fiscal 2003 increased 12% to $221.4 million as compared to first quarter fiscal 2002 revenues of $197.1 million. Gross margin percentages increased to 41.5% for the first quarter of fiscal 2003 from 41.2% in the first quarter of fiscal 2002. Operating expenses for the first quarter of fiscal 2003 decreased as a percentage of revenues to 32.2% as compared to 36.1% in the comparable quarter of fiscal 2002. Net income for the first quarter of fiscal 2003 increased to $12.8 million, or $0.18 per diluted share, compared with first quarter fiscal 2002 net income of $4.4 million, or $0.06 per diluted share.

Results of Operations

Net Revenues and Cost of Products Sold

            The increase in Healthcare revenues for the first quarter of fiscal 2003 reflected stronger demand from U.S. hospitals, particularly for capital equipment. The Company believes stronger capital spending is due to the upgrade of aging facilities and equipment as well as new building to accommodate growing patient needs. The increase in Scientific and Industrial revenues reflected stronger demand primarily from pharmaceutical production and lab research customers, particularly in Europe. The Company continues to address capacity constraints with expansion projects at three facilities and is achieving improved throughput.

            Net revenues for the first quarter of fiscal 2003 from capital goods were $100.1 million, or 45.2% of consolidated revenues, as compared to $85.9 million, or 43.6%, in the first quarter of fiscal 2002. For the reasons stated above, net revenues from capital goods increased $14.2 million, or 16.6%, for the first quarter of fiscal 2003 as compared to the comparable quarter in fiscal 2002. Revenues from consumables and services contributed $121.3 million, or 54.8% of total revenues, for the first quarter of fiscal 2003 compared to $111.2 million, or 56.4% of total revenues, in the comparable prior year quarter. Revenues from consumables and services increased $10.1 million, or 9.0%, for the first quarter of fiscal 2003 as compared to the prior year quarter due to an increase in the installed base of capital equipment as well as incremental revenues related to a long-term contract to service infection prevent ion and decontamination equipment for a division of a Fortune 500 Company not present in the prior year quarter’s results.

            United States revenues for the first quarter of fiscal 2003 were $183.4 million, or 82.8% of total revenues, with $38.0 million, or 17.2%, from international markets. United States revenues for the first quarter of fiscal 2002 were $168.3 million, or 85.4% of total revenues, with $28.8 million, or 14.6%, from international markets.

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            Cost of products sold for the first quarter of fiscal 2003 increased by 12% to $129.5 million compared to $115.9 million for the comparable period in fiscal 2002. The cost of products sold as a percentage of revenues was 58.5% in the first quarter of fiscal 2003 compared to 58.8% in the first quarter of fiscal 2002. The corresponding gross margin percentages were 41.5% and 41.2% for the first quarters of fiscal 2003 and 2002, respectively. Gross margins were favorably impacted by higher than anticipated gross margins in the Company’s Healthcare group of $3.8 million, or 1.7% and other efficiency gains of $0.6 million or 0.3%. These margin increases were driven by volume related efficiencies. The efficiencies gained in the Healthcare group were partially offset by lower than anticipated gross margins in the Company’s Scientific and Industrial group of $2.0 million, or 0.9%. These lower than anticipated margins were largely due to a product mix weighted towards large capital systems, which typically carry relatively lower gross margins. Additionally, the Company provided for approximately $2.6 million, or 1.1%, of inventory obsolescence related to products that are at the end of their respective life cycles. During the first quarter of fiscal 2003, the Company reduced restructuring reserves by $0.6 million, or 0.3%, from the restructuring reserves related to the fiscal 2001 charge for the settlement of salary continuation benefits.

Operating Expenses

            Selling, general, and administrative expenses as a percent of revenues were 30.0% and 32.8% in the first quarters of fiscal 2003 and 2002, respectively, as management continued its focus on controlling costs while supporting revenue growth.

            Selling, general, and administrative expenses increased as a result of increased compensation of $1.7 million, increased provisions for bad debts of $1.4 million, and increased administrative, telephone, occupancy, insurance, and tax expenses of $1.3 million. These increases were partially offset by reduced commissions of $1.5 million, marketing and selling expenses of $0.8 million, and lower depreciation and amortization of $0.7 million. Compensation increased as the result of merit salary increases as well as increased benefit costs relative to the comparable quarter in the prior fiscal year, increased incentive compensation related to higher profitability, and a redesign of the Company’s commission plan. The increase in bad debt provisions was due to several customers declaring bankruptcy and the abandonment of a large number of small balance accounts. Marketing and selling expenses decreased due to cost control efforts, including those related to trade show expenditures. The decrease in depreciation and amortization was primarily due to the absence of goodwill amortization of $1.4 million as the result of the Company’s adoption of SFAS 142 as of April 1, 2002. This was partially offset by accelerated depreciation of $0.7 million related to capitalized software costs anticipated to be replaced by the Company’s Enterprise Resource Planning system implementation project.

            Research and development expenses decreased in both gross dollars and as a percentage of revenues in fiscal 2003 as compared to fiscal 2002. Research and development expenses as a percentage of revenues were 2.2% in first quarter fiscal 2003 compared to 3.2% in the comparable quarter of fiscal 2002. This decrease was primarily due to project cost control efforts.

            During the first quarter of fiscal 2003, the Company terminated an employee benefit plan of one of its subsidiaries and consolidated those benefits with the Company’s other benefit programs. The Company anticipates that this pension obligation will be settled during the fourth quarter of fiscal 2003. In accordance with the requirements of Statement of Financial Accounting Standards No. 88, “Employers’ Accounting for Settlements and Curtailments of

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Defined Benefit Pension Plans and for Termination Benefits,” the Company expects to record a settlement loss of approximately $1.3 million at that time.

Interest Expense

            Interest expense, net, decreased by 82.9% to $0.5 million in the first quarter of fiscal 2003 from $3.2 million in the first quarter of the prior year. The decrease was due principally to the effects of lower interest rates and the reduction in the amount of debt outstanding. The weighted average interest rate applicable to the Company’s outstanding debt was 2.90% as of June 30, 2002 compared to 5.94% as of June 30, 2001. Additionally, the Company paid down its long-term debt by approximately $92.2 million during fiscal 2002 and an additional $13.0 million during the first quarter of fiscal 2003.

Income Taxes

            Income tax expense was 36.0% of pretax earnings in the first quarter of fiscal 2003. During the first quarter of fiscal 2002, the effective income tax rate was 37.0%. The effective tax rate decreased for the first quarter of fiscal 2003 as compared with the first quarter of fiscal 2002 due to the absence of non-deductible goodwill amortization partially offset by a reduction in the foreign tax rate differential and a reduction in the benefit associated with research and development credits.

Liquidity and Capital Resources

Cash Flows

            The decrease in operating cash flows for first quarter of fiscal 2003 as compared with the first quarter of fiscal 2002 was due to the increase in aggregate payment of outstanding accounts payable during the first quarter of fiscal 2003 as compared to the first quarter in the prior year of $12.4 million, a decrease in the cash flow impact of the collection of

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accounts receivable of $6.9 million, and the payment of accrued expenses and other of $2.1 million. These decreases were offset by increased net income of $8.5 million and other items of $2.0 million.

            Net cash used for financing activities was decreased significantly primarily due to decreased repayments to reduce the outstanding balance on the Facility.

Working Capital

            During the first quarter of fiscal 2003, the Company made continued progress in decreasing its investment in net working capital and more effectively utilizing its asset base. This was accomplished while maintaining financial flexibility as the Company had, as of June 30, 2002, $229.0 million available on its Facility. Decreased investment in accounts receivable, improved management of current liabilities, and the unused Facility continued to reduce the Company’s need to maintain a large cash and cash equivalent balance.

            As described further in the cash flows discussion above, the Company utilized a significant portion of its operating cash flows to reduce its outstanding debt by $13.0 million during the first quarter of fiscal 2003 and continued to reduce its debt-to-total capital ratio. As of June 30, 2002 and March 31, 2002 the Company’s outstanding balance related to the Facility was $96.0 million and $109.0 million, respectively.

            The decrease in the Company’s working capital as of June 30, 2002 as compared to March 31, 2002 was primarily attributable to the recording of an amount payable for the repurchase of shares and the decrease in the Company’s investment in accounts receivable. The decrease in accounts receivable was primarily due to the relative decrease in revenues for the first quarter of fiscal 2003 as compared to the fourth quarter of fiscal 2002, which is believed to reflect the Company’s typical business cycle. The Company’s weighted days sales outstanding increased to 55 days as of June 30, 2002 from 49 days as of March 31, 2002. The present level of weighted days sales outstanding is a significant improvement over the prior year first quarter. As of June 30, 2001, the Company’s weighted days sales outstanding was 63 days.

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            The Company’s inventory turns declined to 3.2 as of June 30, 2002 as compared to 3.8 as of March 31, 2002. Work-In-Process and raw material inventories increased $11.5 million as the Company level-loaded its manufacturing operations to smooth production levels and gain efficiencies for the expected demand profile in future periods. The increase in work-in-process and raw material inventories was partially offset by a decrease in finished goods inventories of $4.0 million. As of June 30, 2001, the Company’s inventory turns were 3.5.

            Accounts payable decreased and therefore increased working capital, primarily due to the payment of capital expenditures accrued at March 31, 2002. The expenditures primarily related to plant capacity projects and hardware and software costs for the Company’s information systems projects. Lower operating expenses also contributed to the decrease.

            The decrease in accrued expenses primarily reflected the payment of accruals for capital expenditures of $1.5 million and employee expenses of $1.6 million made as of March 31, 2002. This was supplemented by reductions to the restructuring reserves aggregating $1.8 million.

            The Company believes that its available cash, cash flow from operations, and sources of credit will be adequate to satisfy its operating and capital needs for the foreseeable future.

Inflation

            The overall effects of inflation on the Company’s business during the periods discussed have not been significant. The Company monitors the prices it charges for its products and services on an ongoing basis and believes that it will be able to adjust those prices to take into account future changes in the rate of inflation.

Market Risk

            The overall effects of foreign currency exchange rates on the Company’s business during the periods discussed have not been significant. Movements in foreign currency exchange rates create a degree of risk to the Company’s operations. These movements affect the United States dollar value of sales made in foreign currencies and the United States dollar value of costs incurred in foreign currencies. Changing currency exchange rates also affect the Company’s competitive position, as exchange rate changes may affect profitability and business and/or pricing strategies of non-United States based competitors.

Contingencies

For a discussion of contingencies, see Note 8 to the consolidated financial statements.

Seasonality

            The Company’s financial results have been subject to recurring seasonal fluctuations. A number of factors have contributed to the seasonal patterns, including sales promotion and compensation programs, customer capital equipment buying patterns, and international business practices. Sales and profitability of certain of the Company’s acquired and consolidated product lines have historically been disproportionately weighted toward the latter part of each quarter and generally weighted toward the latter part of each fiscal year. However, there is no assurance that these patterns will continue.

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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. Forward-looking statements may be identified by the use of forward-looking terms such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” and “seeks,” or the negative of such terms or other variations on such terms or comparable terminology. The Company does not undertake to update or revise any forward looking statements even if events make clear that any projected results, express or implied, will not be realized. Many important factor s 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 or the application thereof, could cause actual results to differ materially from the Company’s expectations. No assurance can be provided as to any future financial results. Other potential risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, (a) the potential for increased pressure on pricing that leads to erosion of profit margins, (b) the possibility that market demand will not develop for new technologies, products, and applications, (c) the possibility that compliance with the regulations and certification requirements of domestic and foreign authorities may delay or prevent new product introductions or affect the production and marketing of exis ting products, (d) the potential effects of fluctuations in foreign currencies where the Company does a sizable amount of business, (e) the possibility that implementation of the Company’s business improvement initiatives will take longer, cost more, or produce lower benefits than anticipated, and (f) the possibility of reduced demand, or reductions in the rate of growth in demand, for the Company’s products and services.

             A discussion of market risk exposures is included in Part II, Item 7a, “Quantitative and Qualitative Disclosure about Market Risk,” of the Company’s 2002 Annual Report and Form 10-K. There were no material changes during the three months ended June 30, 2002.

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PART II – OTHER INFORMATION

             Reference is made to Part I, Item 1., Note 8 of this Report on Form 10-Q, which is incorporated herein by reference.

             The company held its Annual Meeting of Shareholders on July 24, 2002, at the Renaissance Quail Hollow Resort, 11080 Concord-Hambden Road, Concord, Ohio, USA. At the Annual Meeting, shareholders re-elected four Class II directors to serve for terms expiring at the Annual Meeting of Shareholders in 2004 and approved the STERIS Corporation 2002 Stock Option Plan. Results of the voting on directors were: Kevin M. McMullen, 58,542,752 votes for, 1,030,047 withheld, Jerry E. Robertson, 58,878,876 votes for, 693,923 withheld, John P. Wareham, 58,894,048 votes for, 678,751 withheld, and Loyal W. Wilson 58,502,196 votes for, 1,070,603 withheld. Results of the voting on the STERIS Corporation 2002 Stock Option Plan were 41,081,644 votes for, 6,672,066 against, 499,966 abstain, and 11,319,123 broker non-votes.

             (a)   Exhibits

            (b)   Reports on Form 8-K:

On June 10, 2002, STERIS filed a Current Report on Form 8-K attaching Amendment No. 1 (the “Amendment”), dated June 7, 2002, to the Amended and Restated Rights Agreement, dated January 21, 1999, between the Company and National City Bank (successor to Harris Trust and Savings Bank), as rights agent (the “Rights Agreement”).

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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.