Fiscal 2015Annual Report

Fiscal 2015 Annual Report Fiscal 2015 Annual Report Document #ANNRPT15.2015-06, Rev. A ©2015 STERIS Corporation. All rights reserved. Printed in USA. Dear Fellow Shareholders, Fiscal 2015 was another year of achievement for the people of STERIS and record results for our shareholders. We closed on the fifth and largest acquisition in the instrument repair space, announced the proposed acquisition of Synergy Health and continued to make progress becoming a leaner Company - all while generating record revenue and profits on an adjusted basis. Looking back at the year, we are pleased with total revenue growth of 14% - with growth in all three business segments and contributions from acquisitions. That growth comes even with a headwind from foreign exchange rates that reduced our revenue by one percent on a dollar basis, and made it more difficult to win business in international markets due to the strength of the U.S. Dollar. We leveraged that revenue growth to generate 21% bottom line improvement, to a record $2.99 in adjusted earnings per diluted share, primarily due to margin expansion from operational improvements, foreign exchange cost favorability and a lower tax rate. You may recall that we purchased Integrated Medical Systems International, Inc. (IMS) at the beginning of the fiscal year. IMS is the largest of the multiple instrument repair businesses we have purchased to form what we now call IMS, our Specialty Services business unit. One of our most significant opportunities for improvement in profitability during fiscal 2015 was the improvement of IMS operating margins, which have exceeded our expectations for the year. We have substantially completed the integration of this business. Our Healthcare segment grew revenue 18% for the year, which reflects solid growth in consumables and in our legacy service business, and of course the addition of the IMS and Eschmann acquisitions. Capital equipment ended flat with the prior year. Our performance in capital equipment was mixed this year, with stronger performance in our infection prevention capital equipment than in our surgical capital equipment, which we believe was largely a result of the late-year release of our newer products. In particular, we saw our new generation of lights and booms begin to ship in the fourth quarter after a bit of a delay versus our expectations. We continue to see stability in terms of hospital capital spending, and remain optimistic about our ability to grow capital equipment revenue in Healthcare in fiscal 2016, even in the face of continued foreign exchange headwinds in our international markets. We have new products throughout our portfolio to facilitate growth in Healthcare, including a new smaller footprint V-PRO Hydrogen Peroxide Sterilizer and accessories, new OR lights, new OR booms and the strongest release of new products in US Endoscopy history. Life Sciences revenue finished the year up 2%, with growth in consumables and service somewhat offset by a decline in capital equipment. Despite the modest revenue growth, Life Sciences once again generated meaningful profitability improvement, both in dollars and as a percent of revenue, as a result of strong mix and good expense control. We expect our Life Sciences segment to continue to grow consumables as it has in the past, and continue to add meaningfully to our profitability. We have new products in both capital equipment and consumables in Life Sciences and expect to continue to expand our service offerings; all of which will contribute to our growth in the coming years. Isomedix revenue increased 6% for the year, driven by continued demand from our core medical device Customers. As we’ve discussed for some time, our facilities are running at high levels of capacity and we will continue to invest in expansions that are supported by Customer demand. Margins in Isomedix declined slightly for the year, as we have increased our spending on quality and regulatory over the past year. We continue to believe that the current operating margin levels are reasonable for Isomedix over the longer term. As I am sure you are aware, we announced our proposed acquisition of Synergy Health in October of fiscal year 2015. Based in the United Kingdom, Synergy Health is a global leader in outsourced sterilization services for medical device manufacturers, hospitals and other industries. The depth and breadth of experience across the Synergy Health and STERIS teams is greatly respected in the marketplace. Our clear intention is that the combination of our businesses will catalyze growth in profitability in both companies as we share experience and utilize each other’s knowledge and skills. The end result will be an expansion of our global footprint and a business better positioned as a global leader in infection prevention. Our timeline for the closing of this strategic and geographically complimentary acquisition has been delayed as the FTC has recently announced its intentions to challenge the merger of our companies, and we have announced our plan to contest their challenge. In the interim, we remain committed to our disciplined capital allocation priorities; maintaining and growing our dividend responsibly relative to our growth, investing in organic businesses, targeting acquisitions in adjacent product and market areas, reducing our total Company leverage (upon completion of the Synergy acquisition), and finally, share repurchases if the other uses of cash are lower than our desires and do not offset dilution. As we look ahead at the new fiscal year, we are excited about the opportunities we see. STERIS’s people have continued to focus on our Customers to deliver results. We are anticipating another year of solid growth in fiscal 2016. I would like to thank the people of STERIS for their dedication to serving our Customers, our Board of Directors for their counsel and all of you for your continued support. Until next year, Walt Rosebrough President and Chief Executive Officer June 2015 Adjusted financials have been included in this document. Please eferr to the reconciliation of adjusted results to GAAP results contained at the end of this annual report under “Non-GAAP Financial Measures” United States Securities and Exchange Commission Washington, D. C. 20549 ___________________________________________________________________ FORM 10-K Annual Report Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 For the fiscal year ended March 31, 2015 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 1-14643 STERIS Corporation (Exact name of registrant as specified in its charter) Ohio 34-1482024 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 5960 Heisley Road, 440-354-2600 Mentor, Ohio 44060-1834 (Registrant’s telephone number (Address of principal executive offices) (Zip Code) including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Title of each class Name of Exchange on Which Registered Common Shares, without par value New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No 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 No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer Accelerated Filer Non-Accelerated Filer Smaller Reporting Company (Do not check if a smaller reporting company) Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No The aggregate market value of the voting stock held by non-affiliates of the Registrant, computed by reference to the closing price of such stock as of September 30, 2014: 3,117,279,156 The number of Common Shares outstanding as of May 22, 2015: 59,724,004 DOCUMENTS INCORPORATED BY REFERENCE None STERIS Corporation and Subsidiaries Table of Contents Page Part I Item 1 Business 3 Introduction 3 Information Related to Business Segments 3 Information with Respect to Our Business

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