---

UNITED STATESSECURITIES 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 December 31, 2000

Commission file number 0-20165

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

|Ohio                                                                                |  | 34-1482024                                                        
|----------------------------------------------------------------------------------- |  | ------------------------------------------------------------------
|(State or other jurisdiction of

incorporation or organization)                     |  | (IRS Employer

Identification No.)                                
|                                                                                    |  |                                                                   
|                                                                                    |  |                                                                   
|5960 Heisley Road
Mentor, Ohio 44060-1834

(Address of principal executive offices) |  | 440-354-2600 (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 o.

The number of Common Shares outstanding as of January 31, 2001: 68,601,073

---



STERIS Corporation

Index

|Part I - Financial Information        |         | Page                                                                               
|------------------------------------- | ------- | -----------------------------------------------------------------------------------
|                                      |         |                                                                                    
|                                      | Item 1. | Financial Statements                                                               
|                                      |         |                                                                                    
|                                      | Item 2. | Management's Discussion and Analysis ofFinancial Condition and Results ofOperations
|                                      |         |                                                                                    
|                                      | Item 3. | Quantitative and Qualitative DisclosuresAbout Market Risk                          
|                                      |         |                                                                                    
|Part II - Other Financial Information |         |                                                                                    
|                                      |         |                                                                                    
|                                      | Item 1. | Legal Proceedings                                                                  
|                                      |         |                                                                                    
|                                      | Item 6. | Exhibits and Reports on Form 8-K                                                   
|                                      |         |                                                                                    
|                                      |         | Signature                                                                          



PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

STERIS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)



|                                                                                               |                                                                                                                                                               |   |          |         |  |   |          |        
|---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------- | ------- |  | - | -------- | -------
|                                                                                              
|
|                                                                                               |                                                                                                                                                               |   |          |         |  |  
|Assets                                                                                         |                                                                                                                                                               |   |          |         |  |   |          |        
|Current assets:                                                                                |                                                                                                                                                               |   |          |         |  |   |          |        
|Cash and cash equivalents                                                                      |                                                                                                                                                               | $ | 21,500   |         |  | $ | 35,476   |        
|Accounts receivable (net of allowances of $5,756 and $6,047, respectively)                     |                                                                                                                                                               |   | 203,928  |         |  |   | 209,448  |        
|Inventories                                                                                    |                                                                                                                                                               |   | 80,198   |         |  |   | 104,624  |        
|Current portion of deferred income taxes                                                       |                                                                                                                                                               |   | 23,923   |         |  |   | 23,923   |        
|Prepaid expenses and other assets                                                              |                                                                                                                                                               |   | 20,013   |         |  |   | 15,648   |        
|                                                                                               |                                                                                                                                                               |   |          |         |  |  
|Total current assets                                                                           |                                                                                                                                                               |   | 349,562  |         |  |   | 389,119  |        
|                                                                                               |                                                                                                                                                               |   |          |         |  |   |          |        
|Property, plant, and equipment                                                                 |                                                                                                                                                               |   | 446,750  |         |  |   | 443,608  |        
|Accumulated depreciation                                                                       |                                                                                                                                                               |   | (134,389 | )       |  |   | (138,603 | )      
|                                                                                               |                                                                                                                                                               |   |          |         |  |  
|Net property, plant, and equipment                                                             |                                                                                                                                                               |   | 312,361  |         |  |   | 305,005  |        
|Intangibles                                                                                    |                                                                                                                                                               |   | 283,257  |         |  |   | 282,639  |        
|Accumulated amortization                                                                       |                                                                                                                                                               |   | (83,689  | )       |  |   | (78,300  | )      
|                                                                                               |                                                                                                                                                               |   |          |         |  |  
|Net intangibles                                                                                |                                                                                                                                                               |   | 199,568  |         |  |   | 204,339  |        
|Other assets                                                                                   |                                                                                                                                                               |   | 2,704    |         |  |   | 5,111    |        
|                                                                                               |                                                                                                                                                               |   |          |         |  |  
|Total assets                                                                                   |                                                                                                                                                               | $ | 864,195  |         |  | $ | 903,574  |        
|                                                                                               |                                                                                                                                                               |   |          |         |  |  
|Liabilities and shareholders' equity                                                           |                                                                                                                                                               |   |          |         |  |   |          |        
|Current liabilities:                                                                           |                                                                                                                                                               |   |          |         |  |   |          |        
|Current portion of long-term indebtedness                                                      |                                                                                                                                                               | $ | 700      |         |  | $ | 1,816    |        
|Accounts payable                                                                               |                                                                                                                                                               |   | 44,319   |         |  |   | 51,374   |        
|Accrued expenses and other                                                                     |                                                                                                                                                               |   | 100,410  |         |  |   | 102,712  |        
|                                                                                               |                                                                                                                                                               |   |          |         |  |  
|Total current liabilities                                                                      |                                                                                                                                                               |   | 145,429  |         |  |   | 155,902  |        
|Long-term indebtedness                                                                         |                                                                                                                                                               |   | 220,200  |         |  |   | 268,700  |        
|Deferred income taxes                                                                          |                                                                                                                                                               |   | 8,880    |         |  |   | 8,880    |        
|Other long-term liabilities                                                                    |                                                                                                                                                               |   | 49,181   |         |  |   | 48,998   |        
|                                                                                               |                                                                                                                                                               |   |          |         |  |  
|Total liabilities                                                                              |                                                                                                                                                               |   | 423,690  |         |  |   | 482,480  |        
|Shareholders' equity:                                                                          |                                                                                                                                                               |   |          |         |  |   |          |        
|Serial preferred shares, without par value, 3,000,000 shares authorized; no shares outstanding |                                                                                                                                                               |   |          |         |  |   |          |        
|Common Shares, without par value; 300,000,000 shares authorized;                               |                                                                                                                                                               |   |          |         |  |   |          |        
|                                                                                               | issued and outstanding shares of 68,498,389 at December 31, 2000 and 67,517,075 at March 31, 2000, excluding none and 1,052,419 treasury shares, respectively |   |          | 201,873 |  |   |          | 198,253
|Retained earnings                                                                              |                                                                                                                                                               |   | 248,291  |         |  |   | 230,348  |        
|Cumulative translation adjustment                                                              |                                                                                                                                                               |   | (9,659   | )       |  |   | (7,507   | )      
|                                                                                               |                                                                                                                                                               |   |          |         |  |  
|Total shareholders' equity                                                                     |                                                                                                                                                               |   | 440,505  |         |  |   | 421,094  |        
|                                                                                               |                                                                                                                                                               |   |          |         |  |  
|Total liabilities and shareholders' equity                                                     |                                                                                                                                                               | $ | 864,195  |         |  | $ | 903,574  |        
|                                                                                               |                                                                                                                                                               |   |          |         |  |  

See notes to consolidated financial statements.

STERIS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts)

(Unaudited)



|                                    |  |   |         |   |   |         |   |  |   |         |   |  |   |         |  
|----------------------------------- |  | - | ------- | - | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                   
|                                   
|
|
|                                    |  |   |         |   |   |         |   |  |   |         |   |  |   |         |  
|Net revenues                        |  | $ | 204,465 |   | $ | 195,119 |   |  | $ | 581,456 |   |  | $ | 570,534 |  
|Cost of goods and services sold     |  |   | 113,958 |   |   | 108,038 |   |  |   | 327,605 |   |  |   | 310,840 |  
|                                    |  |   |         |   |   |         |   |  |   |         |  
|Gross profit                        |  |   | 90,507  |   |   | 87,081  |   |  |   | 253,851 |   |  |   | 259,694 |  
|Costs and expenses:                 |  |   |         |   |   |         |   |  |   |         |   |  |   |         |  
|General and administrative expenses |  |   | 63,447  |   |   | 61,054  |   |  |   | 193,946 |   |  |   | 177,339 |  
|Research and development            |  |   | 5,752   |   |   | 5,812   |   |  |   | 17,052  |   |  |   | 17,735  |  
|                                    |  |   |         |   |   |         |   |  |   |         |  
|                                    |  |   | 69,199  |   |   | 66,866  |   |  |   | 210,998 |   |  |   | 195,074 |  
|                                    |  |   |         |   |   |         |   |  |   |         |  
|Income from operations              |  |   | 21,308  |   |   | 20,215  |   |  |   | 42,853  |   |  |   | 64,620  |  
|Interest expense, net               |  |   | (4,682  | ) |   | (2,579  | ) |  |   | (14,144 | ) |  |   | (8,727  | )
|                                    |  |   |         |   |   |         |   |  |   |         |  
|Income before income taxes          |  |   | 16,626  |   |   | 17,636  |   |  |   | 28,709  |   |  |   | 55,893  |  
|Income tax expense                  |  |   | 6,235   |   |   | 6,701   |   |  |   | 10,766  |   |  |   | 21,215  |  
|                                    |  |   |         |   |   |         |   |  |   |         |  
|Net income                          |  | $ | 10,391  |   | $ | 10,935  |   |  | $ | 17,943  |   |  | $ | 34,678  |  
|                                    |  |   |         |   |   |         |   |  |   |         |  
|                                    |  |   |         |   |   |         |   |  |   |         |   |  |   |         |  
|Net income per share - basic        |  | $ | 0.15    |   | $ | 0.16    |   |  | $ | 0.26    |   |  | $ | 0.51    |  
|                                    |  |   |         |   |   |         |   |  |   |         |  
|Net income per share - diluted      |  | $ | 0.15    |   | $ | 0.16    |   |  | $ | 0.26    |   |  | $ | 0.51    |  
|                                    |  |   |         |   |   |         |   |  |   |         |  

See notes to consolidated financial statements.





STERIS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

|                                                                                  |        |         |   |  |        |         |  
|--------------------------------------------------------------------------------- | ------ | ------- | - |  | ------ | ------- | -
|                                                                                 
|
|
|                                                                                  |        |         |   |  |        |         |  
|Operating activities                                                              |        |         |   |  |        |         |  
|Net income                                                                        | $      | 17,943  |   |  | $      | 34,678  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |        |         |   |  |        |         |  
|Depreciation and amortization                                                     |        | 33,968  |   |  |        | 30,107  |  
|Other items                                                                       |        | 426     |   |  |        | (748    | )
|Changes in working capital:                                                       |        |         |   |  |        |         |  
|Accounts receivable                                                               |        | 5,520   |   |  |        | 6,510   |  
|Inventories                                                                       |        | 24,426  |   |  |        | (30,946 | )
|Other current assets                                                              |        | (4,365  | ) |  |        | 4,515   |  
|Accounts payable and accruals                                                     | (9,357 | )       |   |  | (6,150 | )      
|                                                                                  |        |         |   |  |       
|Net cash provided by operating activities                                         |        | 68,561  |   |  |        | 37,966  |  
|                                                                                  |        |         |   |  |        |         |  
|Investing activities                                                              |        |         |   |  |        |         |  
|Purchases of property, plant, equipment, and patents                              |        | (37,329 | ) |  |        | (49,828 | )
|Proceeds from sales of assets                                                     |        | 90      |   |  |        |        |  
|Investment in businesses                                                          |        |        |   |  |        | (6,259  | )
|                                                                                  |        |         |   |  |       
|Net cash used in investing activities                                             |        | (37,239 | ) |  |        | (56,087 | )
|                                                                                  |        |         |   |  |        |         |  
|Financing activities                                                              |        |         |   |  |        |         |  
|Payments on long-term obligations                                                 |        | (1,616  | ) |  |        | (1,659  | )
|(Payments) borrowing under credit facility                                        |        | (48,000 | ) |  |        | 45,000  |  
|Purchase of treasury shares                                                       |        |        |   |  |        | (28,712 | )
|Stock option and other equity transactions                                        |        | 6,470   |   |  |        | 8,193   |  
|                                                                                  |        |         |   |  |       
|Net cash (used in) provided by financing activities                               |        | (43,146 | ) |  |        | 22,822  |  
|Effect of exchange rate changes on cash and cash equivalents                      |        | (2,152  | ) |  |        | 199     |  
|                                                                                  |        |         |  
|(Decrease) increase in cash and cash equivalents                                  |        | (13,976 | ) |  |        | 4,900   |  
|Cash and cash equivalents at beginning of period                                  |        | 35,476  |   |  |        | 23,680  |  
|                                                                                  |        |         |   |  |       
|Cash and cash equivalents at end of period                                        | $      | 21,500  |   |  | $      | 28,580  |  
|                                                                                  |        |         |   |  |       

See notes to consolidated financial statements.



STERIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three Months and Nine Months Ended

December 31, 2000 and 1999





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 therapy support systems,
products, services, and technologies for health care, scientific, research, food, and industrial customers throughout the world. The Company has over 4,500 employees worldwide, including over 2,200 direct sales, service, field, and Customer Support
personnel. Customer Support facilities are located in several major global market centers with production and 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 and nine months ended December 31, 2000 and December 31, 1999 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, 2000 which were included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission on June 22, 2000, and in management's opinion contain all adjustments (consisting of normal recurring accruals) 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 generally accepted accounting principles have been condensed or omitted in accordance with the rules and regulations of
the Securities and Exchange Commission. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K referred to above. The balance sheet at March 31, 2000 has been derived from the
audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles 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 prior year amounts to conform to the current presentation.

3. Earnings per Share

Following is a summary of Common Shares and Common Share equivalents outstanding used in the calculations of earnings per share (in thousands):



|                                                         |  |        |  |  |        |  |        |  |  |        | 
|-------------------------------------------------------- |  | ------ |  |  | ------ |  | ------ |  |  | ------ | 
|
|
|Weighted average Common Shares outstanding - basic       |  | 68,118 |  |  | 67,495 |  | 67,730 |  |  | 67,484
|Dilutive effect of stock options                         |  | 1,311  |  |  | 893    |  | 967    |  |  | 1,156 
|                                                         |  |        |  |  |        |  |        |  |  |       
|Weighted average Common Shares and equivalents - diluted |  | 69,429 |  |  | 68,388 |  | 68,697 |  |  | 68,640
|                                                         |  |        |  |  |        |  |        |  |  |       



4. Comprehensive Income

Comprehensive income amounted to $9,953,000 and $10,240,000, net of tax, for the quarters ended December 31, 2000 and 1999, respectively. Comprehensive income amounted to $15,791,000 and
$34,032,000, net of tax, for the nine months ended December 31, 2000 and 1999, respectively. The difference between net income and comprehensive income for the periods resulted from the change in the cumulative translation adjustment.

5. 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 (in thousands):



|                  | December 31,2000 |        | March 31,

2000
|----------------- | ---------------- | ------ | ---------------
|Raw material      | $                | 22,043 |                
|                  |                  |        |                
|Work in process   |                  | 25,149 |                
|                  |                  |        |                
|Finished goods    |                  | 33,006 |                
|                  |                  |        |                
|Total Inventories | $                | 80,198 |                
|                  |                  |        |                

6. Financing

On June 19, 2000, the Company entered into a $325,000,000 Revolving Credit Facility (the "Facility") which replaced the prior credit facility. The Facility matures on June 29, 2003 and
provides financial covenants and borrowing alternatives which are more appropriate for the Company's strategic objectives. The Facility may be used to refinance existing indebtedness, as well as for general corporate purposes. The Facility bears interest
at LIBOR plus 1.25 to 2.25 percent or KeyBank National Association's prime rate. The Facility contains customary covenants which include maintenance of certain financial ratios such as a fixed charge covenant and consolidated leverage ratios. The Facility
also places restrictions on the Company's ability to pay dividends.

7. Contingencies

In December 1999, STERIS received a warning letter from the United States Food and Drug Administration ("FDA") in connection with the FDA's inspection of STERIS's manufacturing facility in
Mentor, Ohio. From August 28 through September 15, 2000, the FDA conducted a follow-up inspection of this facility to assess STERIS's response to the concerns identified by the FDA in the warning letter. On October 5, 2000, the FDA issued a letter to the
Company which stated that the FDA's observations from this inspection "do not appear to warrant consideration of regulatory follow-up at this time." Based on the FDA's findings, the agency stated that it will endorse applicable pending premarket
(PMA) submissions or Export Certificates for products manufactured at the Mentor facility. The FDA subsequently reiterated that the Company has addressed the concerns identified in the warning letter, and therefore is no longer subject to warning letter
conditions. As is its practice, the Company will continue to cooperate with the FDA to ensure effective compliance with applicable FDA laws and regulations.



8. Derivatives

Financial Accounting Standards Board ("FASB") Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by Statements No. 137 and No. 138, is
required to be adopted in fiscal years beginning after June 15, 2000. The Company will be adopting FASB No. 133, as amended, in the next fiscal year and does not expect its adoption to have a significant impact on the Company's financial position or
results of operations.

9. Revenues

Securities and Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition," explains how the SEC staff believes existing revenue
recognition rules should be applied. The Company is currently studying the provisions of SAB No. 101 and the SEC interpretive guidance to determine if any change is required to ensure compliance with SAB No. 101. The Company will be implementing SAB No.
101 in the fourth quarter of fiscal year 2001 and does not expect its implementation to have a significant impact on the Company's financial position or results of operations.

10. Non-recurring Transactions

During the fourth quarter of fiscal 2000, the Company recorded a special charge of $39,722,000. This charge related to plans for manufacturing consolidations, productivity improvements in both
manufacturing and support functions, restructuring of the remanufactured equipment business, and associated workforce reductions in the manufacturing and support functions. The implementation of these actions has resulted in the elimination of over 150
positions. At December 31, 2000, the total termination benefits paid and charged against the restructure reserve amounted to approximately $6,423,000. The Company has also completed the closing of its sterility assurance production operations in North
Carolina, which has been consolidated into a dedicated facility in Mentor, Ohio. As of December 31, 2000, the Company has a remaining restructure reserve balance of approximately $779,000.

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 December 31, 2000, and the related consolidated statements of income and cash flows for the
three and nine months ended December 31, 2000 and 1999. 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, 2000
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 20, 2000, except for Note E, as to which the date is June 19, 2000, 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, 2000, is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.

| | /s/ Ernst & Young LLP
| | ---------------------

Cleveland, Ohio

January 22, 2001



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Net revenue increased by 4.8% to $204,465,000 in the third quarter of fiscal 2001 from $195,119,000 in the third quarter of fiscal 2000. The increase in revenues was primarily attributable to
significant growth in Scientific and Industrial Group products offset by lower levels of capital equipment purchases by hospitals in the United States. Health Care Group revenues in the third quarter decreased 1.9% to $142,415,000 from $145,181,000 in the
prior year period. Scientific and Industrial Group revenues increased 24.3% to $62,050,000 in the third quarter as compared to $49,938,000 in the prior year period. Net revenue for the first nine months increased by 1.9% to $581,456,000 from $570,534,000
in the comparable period last year. Health Care Group revenues in the first nine months of fiscal 2001 were $411,584,000 as compared to $424,444,000 for the prior year period, a decrease of 3.0%. Scientific and Industrial Group revenues were $169,872,000
in the first nine months of fiscal 2001, an increase of 16.3% from $146,090,000 in the first nine months of fiscal 2000.

The costs of products and services sold for the 3 and 9 months ended December 31, 2000 increased to $113,958,000 and $327,605,000, respectively, from $108,038,000 and $310,840,000 for the comparable
periods last year. The cost of products and services sold as a percentage of net revenues was 55.7% and 56.3% for the 3 and 9 months ended December 31, 2000, respectively, as compared to 55.4% and 54.5% for the comparable periods last year. The third
quarter increase in costs of products and services sold was primarily a result of the significant growth in Scientific and Industrial Group capital sales. The average margin on these capital products is lower than most of the Company's product groups and
the mix change resulted in the negative margin impact. Year to date margins were also impacted by this mix change but were lower primarily due to a $6,470,000 overhead expense recognition related to finished goods inventory reduction. This inventory
reduction resulted from the Company's on-going efficiency improvement programs.

General and administrative expenses were $63,447,000 or 31.0% and $193,946,000 or 33.4% of net revenues for the 3 and 9 months ended December 31, 2000, respectively, as compared to $61,054,000 or
31.3% and $177,339,000 or 31.1% of net revenues for the 3 and 9 months ended December 31, 1999, respectively. The Company continued efforts to implement programs which are targeted at improving the sales and operating planning process, improving the
efficiency and productivity of its operations, and investing in future growth opportunities through sales and marketing activities and system upgrades.

Research and development expenses for the 3 months ended December 31, 2000 decreased by 1.0% to $5,752,000 in the third quarter of fiscal 2001 from $5,812,000 in the third quarter of fiscal 2000.
Research and development expenses decreased by 3.9% to $17,052,000 in the first 9 months of fiscal 2001 from $17,735,000 in the first 9 months of fiscal 2000.

Interest expense, net, increased by 81.5% to $4,682,000 in the third quarter of fiscal 2001 from $2,579,000 in the third quarter of fiscal 2000. Interest expense, net, increased by 62.1% to
$14,144,000 in the first 9 months of fiscal 2001 from $8,727,000 in the first nine months of fiscal 2000. The increase relates primarily to the effect of higher interest rates in the current year and interest income on a settlement amount that offset
interest expense in the prior year.

Net income, as a result of the foregoing factors, was $10,391,000 for the third quarter of fiscal 2001 as compared to $10,935,000 for the third quarter of fiscal 2000. Net income in the first 9 months
of fiscal 2001 was $17,943,000 as compared to $34,678,000 in the first 9 months of fiscal 2000.

Liquidity and Capital Resources

The Company's operating activities generated $68,561,000 of cash during the 9 months ended December 31, 2000, which was an increase of $30,595,000 over the comparable period last year. A significant
decrease in



inventory, coupled with a moderate decrease in accounts receivable, combined to more than offset the negative cashflow impact of decreased year-over-year net income. Accounts receivable decreased
$5,520,000 or 2.6% and inventory decreased $24,426,000 or 23.3% since the year ended March 31, 2000. The decrease in inventory was due to the enhancement of the sales and operating planning process, coupled with the Company's on-going manufacturing
improvement initiatives. The most significant use of working capital was in accounts payable and other accruals, which decreased in the aggregate by $9,357,000 or 6.1%.

Net cash used for investing activities was $37,239,000 for the 9 months ended December 31, 2000 versus $56,087,000 in the comparable prior year period. The decrease was primarily due to the
acquisition of businesses in fiscal 2000 and a decrease in capital spending.

Net cash used for financing activities was $43,146,000 for the 9 months ended December 31, 2000. Current year financing activities primarily represent the repayment of $48,000,000 to reduce the
outstanding balance of the credit facility. Net cash provided by financing in the comparable prior year period primarily represented borrowings under the Company's prior credit facility and the payment of $28,712,000 for the purchase of treasury shares.

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. The Company has a $325,000,000 credit facility available through June 2003. As of December 31, 2000, the Company has outstanding borrowings of $215,000,000 under its credit facility. The year to date weighted average interest rate on
all borrowings was 7.9%. For a discussion of the facility, see Note 6 to the consolidated financial statements.

The Company is in the final stages of reviewing its processes, structure, and facilities, which has been ongoing during the past year. These efforts have identified opportunities for efficiency and
productivity improvements beyond those initiated during the fourth quarter of fiscal year 2000. As a result of its current review, the Company expects that it will take a pre-tax charge of approximately $40 million in the fourth quarter of the current
fiscal year ending March 31, 2001, to cover costs and asset write-downs related to the implementation of these business improvement activities. These initiatives will focus on the Company's service and distribution operations, utilization of facilities,
and other organizational and support activity restructurings.

Contingencies

For a discussion of contingencies, see Note 7 to the consolidated financial statements.

Seasonality

Historical data indicates that financial results are subject to recurring seasonal fluctuations. A number of factors have contributed to the seasonal patterns, including sales promotion and
compensation programs, customer buying patterns of capital equipment, and international business practices. 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 generally weighted toward the latter part of each fiscal year.

Euro

On January 1, 1999, eleven of the fifteen member countries of the European Monetary Union (EMU) began a three-year transition phase during which a common currency called the Euro was adopted. The Euro
trades on currency exchanges and is available for non-cash transactions. During the transition period, parties may pay for goods and services using either the Euro or the participating country's legacy currency on a "no compulsion, no
prohibition" basis. The conversion rates between the existing legacy currencies and the Euro were fixed on January 1, 1999. The legacy currencies will remain legal tender for cash transactions between January 1, 1999, and January 1, 2002, at which
time all legacy currencies will be withdrawn from circulation and the new Euro denominated bills and coins will be used for cash transactions.



The Company has several operations within the eleven participating countries that are utilizing the Euro. Additionally, the Company's operations in other countries will be conducting business
transactions with customers and suppliers that will be denominated in the Euro. Euro denominated bank accounts have been established to accommodate Euro transactions.

The Company has established and implemented certain plans to review strategic and tactical areas arising from the Euro conversion. Initial efforts were focused on aspects of the Euro conversion that
required adjustment or compliance by January 1, 1999, and for conducting Euro-denominated business. These aspects included transacting business in the Euro, the competitive impact on product pricing, and adjustments to billing systems to handle parallel
currencies. The Company has determined that these systems have the capability to handle Euro transactions and is currently in a position to transact business in Euros. Continuing analysis and development efforts will help ensure that the implementation of
the Euro meets the timetable and regulations established by the EMU. Based on current estimates, the Company does not expect the costs incurred to address the Euro will have a material impact on its financial condition or results of operations.

Cautionary Statements Regarding Forward-Looking Statements

This Form 10-Q contains statements concerning certain trends and other forward-looking information affecting or relating to the Company and its industry that are intended to qualify for the
protections afforded "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. 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," or "seeks" or the negative of such terms or other variations on such terms
or comparable terminology. 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 potential risks and uncertainties
that could cause actual results to differ materially from those in the forward-looking statements include (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 existing 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 previously announced business improvement
initiatives will take longer 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.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A discussion of market risk exposures is included in Part II, Item 7a, "Quantitative and Qualitative Disclosure about Market Risk," of the Company's 2000 Annual Report and Form 10-K. There
were no material changes during the nine months ended December 31, 2000.



PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Reference is made to Part I, Item 1., Note 7 of this Report on Form 10-Q, which is incorporated herein by reference.

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits



|Exhibit Number | Exhibit Description                               
|-------------- | --------------------------------------------------
|               |                                                   
|15.1           | Letter RE: Unaudited Interim Financial Information

(b)  Reports on Form 8-K: None



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/ Laurie Brlas

Laurie Brlas

Senior Vice President and

Chief Financial Officer

February 14, 2001
| | ---------------------------------------------------------------------------------------------------------------------------------------