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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549



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Form 10-Q



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QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarter ended December 31, 2004



Commission file number 1-14643



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STERIS Corporation

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                                     
|-------------------------------------------------------------- |  | ----------------------------------------------------
|Ohio                                                           |  | 34-1482024                                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)                   
|                                                               | 
|5960 Heisley Road, Mentor, Ohio 44060-1834                     |  | 440-354-2600                                        
|(Address of principal executive offices)                       |  | (Registrants telephone number, including area code)



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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act).    Yes  x    No ̈



The number of Common Shares outstanding as of January 31, 2005: 69,294,481



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##### Table of Contents

STERIS Corporation

Form 10-Q

Index



|                               |  |         |  |                                                                                                                      |  |   
|------------------------------ |  | ------- |  | -------------------------------------------------------------------------------------------------------------------- |  | --
|                               |  | Page   
|Part I - Financial Information |  |        
|                               |  |         | 
|                               |  | Item 1. |  | Financial Statements (unaudited, except Consolidated Balance Sheet as of March 31, 2004)                             |  | 3 
|                               |  |         | 
|                               |  |         |  | Consolidated Balance Sheets as of December 31, 2004 and March 31, 2004                                               |  | 3 
|                               |  |         | 
|                               |  |         |  | Consolidated Statements of Income for the Three and Nine Month Periods Ended December 31, 2004 and December 31, 2003 |  | 4 
|                               |  |         | 
|                               |  |         |  | Consolidated Statements of Cash Flows for the Nine Month Periods Ended December 31, 2004 and December 31, 2003       |  | 5 
|                               |  |         | 
|                               |  |         |  | Notes to Consolidated Financial Statements                                                                           |  | 6 
|                               |  |         | 
|                               |  |         |  | Report of Independent Registered Public Accounting Firm                                                              |  | 15
|                               |  |         | 
|                               |  | Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                |  | 16
|                               |  |         | 
|                               |  | Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                                                           |  | 30
|                               |  |         | 
|                               |  | Item 4. |  | Controls and Procedures                                                                                              |  | 30
|                               | 
|Part II - Other Information    |  |        
|                               |  |         | 
|                               |  | Item 1. |  | Legal Proceedings                                                                                                    |  | 31
|                               |  |         | 
|                               |  | Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                          |  | 31
|                               |  |         | 
|                               |  | Item 5. |  | Other Information                                                                                                    |  | 31
|                               |  |         | 
|                               |  | Item 6. |  | Exhibits                                                                                                             |  | 31
|                               |  |         | 
|                               |  |         |  | Signature                                                                                                            |  | 33



2



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##### Table of Contents

PART I - FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



STERIS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands)



|                                                                                                                              |  |                  |           |   |               |   |           |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | --------- | - | ------------- | - | --------- | -
|                                                                                                                              |  | December 31,2004 |           |   | March 31,2004 |  
|                                                                                                                              |  | (Unaudited)      |           |   |               |  
|Assets                                                                                                                        |  |                  |           |   |               |   |           |  
|Current assets:                                                                                                               |  |                  |           |   |               |   |           |  
|Cash and cash equivalents                                                                                                     |  | $                | 62,196    |   |               | $ | 80,408    |  
|Accounts receivable (net of allowances of $8,846 and $8,623, respectively)                                                    |  |                  | 249,003   |   |               |   | 253,797   |  
|Inventories                                                                                                                   |  |                  | 103,646   |   |               |   | 98,249    |  
|Current portion of deferred income taxes                                                                                      |  |                  | 18,454    |   |               |   | 18,246    |  
|Prepaid expenses and other current assets                                                                                     |  |                  | 9,955     |   |               |   | 10,338    |  
|                                                                                                                              |  |                  |           |   |               |   |           |  
|Total current assets                                                                                                          |  |                  | 443,254   |   |               |   | 461,038   |  
|                                                                                                                              |  |                 
|Property, plant, and equipment, net                                                                                           |  |                  | 389,119   |   |               |   | 374,102   |  
|Goodwill and intangibles, net                                                                                                 |  |                  | 283,901   |   |               |   | 230,993   |  
|Other assets                                                                                                                  |  |                  | 2,482     |   |               |   | 2,037     |  
|                                                                                                                              |  |                  |           |   |               |   |           |  
|Total assets                                                                                                                  |  | $                | 1,118,756 |   |               | $ | 1,068,170 |  
|                                                                                                                              |  |                  |           |   |               |   |           |  
|Liabilities and shareholders equity                                                                                          |  |                  |           |   |               |   |           |  
|Current liabilities:                                                                                                          |  |                  |           |   |               |   |           |  
|Current portion of long-term indebtedness                                                                                     |  | $                | 2,169     |   |               | $ | 4,049     |  
|Accounts payable                                                                                                              |  |                  | 52,919    |   |               |   | 67,988    |  
|Accrued income taxes                                                                                                          |  |                  | 12,057    |   |               |   | 2,277     |  
|Accrued payroll and other related liabilities                                                                                 |  |                  | 35,941    |   |               |   | 41,972    |  
|Accrued expenses and other                                                                                                    |  |                  | 82,730    |   |               |   | 72,502    |  
|                                                                                                                              |  |                  |           |   |               |   |           |  
|Total current liabilities                                                                                                     |  |                  | 185,816   |   |               |   | 188,788   |  
|                                                                                                                              |  |                 
|Long-term indebtedness                                                                                                        |  |                  | 103,432   |   |               |   | 109,090   |  
|Deferred income taxes                                                                                                         |  |                  | 35,110    |   |               |   | 29,568    |  
|Other liabilities                                                                                                             |  |                  | 63,350    |   |               |   | 60,025    |  
|                                                                                                                              |  |                  |           |   |               |   |           |  
|Total liabilities                                                                                                             |  |                  | 387,708   |   |               |   | 387,471   |  
|                                                                                                                              |  |                 
|Serial preferred shares, without par value; 3,000 shares authorized; no shares issued or outstanding                          |  |                  |          |   |               |   |          |  
|Common Shares, without par value; 300,000 shares authorized; issued and outstanding shares of 69,176 and 69,946, respectively |  |                  | 202,341   |   |               |   | 224,999   |  
|Retained earnings                                                                                                             |  |                  | 512,513   |   |               |   | 451,546   |  
|Accumulated other comprehensive (loss) income:                                                                                |  |                  |           |   |               |   |           |  
|Minimum pension liability                                                                                                     |  |                  | (4,582    | ) |               |   | (4,582    | )
|Cumulative foreign currency translation adjustment                                                                            |  |                  | 20,776    |   |               |   | 8,736     |  
|                                                                                                                              |  |                  |           |   |               |   |           |  
|Total shareholders equity                                                                                                    |  |                  | 731,048   |   |               |   | 680,699   |  
|                                                                                                                              |  |                  |           |   |               |   |           |  
|Total liabilities and shareholders equity                                                                                    |  | $                | 1,118,756 |   |               | $ | 1,068,170 |  
|                                                                                                                              |  |                  |           |   |               |   |           |  



See notes to
consolidated financial statements.





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STERIS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(Unaudited)



|                                      |  |                                |         |                               |   |         |  |      |         |  |   |        
|------------------------------------- |  | ------------------------------ | ------- | ----------------------------- | - | ------- |  | ---- | ------- |  | - | -------
|                                      |  | Three Months EndedDecember 31, |         | Nine Months EndedDecember 31,
|                                      |  | 2004                           |         | 2003                          |   | 2004    |  | 2003
|Revenues:                             |  |                                |         |                               |   |         |  |      |         |  |   |        
|Product                               |  | $                              | 193,111 |                               | $ | 191,362 |  | $    | 538,148 |  | $ | 549,481
|Service                               |  |                                | 91,278  |                               |   | 82,924  |  |      | 265,884 |  |   | 241,474
|                                      |  |                                |         |                               |   |         |  |      |         |  |   |        
|Total revenues                        |  |                                | 284,389 |                               |   | 274,286 |  |      | 804,032 |  |   | 790,955
|                                      |  |                                |         |                              
|Cost of revenues:                     |  |                                |         |                               |   |         |  |      |         |  |   |        
|Product                               |  |                                | 112,223 |                               |   | 112,120 |  |      | 310,005 |  |   | 320,007
|Service                               |  |                                | 52,604  |                               |   | 47,069  |  |      | 153,085 |  |   | 138,666
|                                      |  |                                |         |                               |   |         |  |      |         |  |   |        
|Total cost of revenues                |  |                                | 164,827 |                               |   | 159,189 |  |      | 463,090 |  |   | 458,673
|                                      |  |                                |         |                              
|Gross profit                          |  |                                | 119,562 |                               |   | 115,097 |  |      | 340,942 |  |   | 332,282
|                                      |  |                                |         |                              
|Operating expenses:                   |  |                                |         |                               |   |         |  |      |         |  |   |        
|Selling, general, and administrative  |  |                                | 70,465  |                               |   | 69,623  |  |      | 214,975 |  |   | 214,182
|Research and development              |  |                                | 9,185   |                               |   | 7,648   |  |      | 27,173  |  |   | 21,726 
|                                      |  |                                |         |                               |   |         |  |      |         |  |   |        
|Total operating expenses              |  |                                | 79,650  |                               |   | 77,271  |  |      | 242,148 |  |   | 235,908
|                                      |  |                                |         |                               |   |         |  |      |         |  |   |        
|Income from operations                |  |                                | 39,912  |                               |   | 37,826  |  |      | 98,794  |  |   | 96,374 
|Interest expense, net                 |  |                                | 634     |                               |   | 448     |  |      | 2,020   |  |   | 1,432  
|                                      |  |                                |         |                               |   |         |  |      |         |  |   |        
|Income before income tax expense      |  |                                | 39,278  |                               |   | 37,378  |  |      | 96,774  |  |   | 94,942 
|Income tax expense                    |  |                                | 14,821  |                               |   | 10,285  |  |      | 35,807  |  |   | 31,008 
|                                      |  |                                |         |                               |   |         |  |      |         |  |   |        
|Net income                            |  | $                              | 24,457  |                               | $ | 27,093  |  | $    | 60,967  |  | $ | 63,934 
|                                      |  |                                |         |                               |   |         |  |      |         |  |   |        
|Net income per common share - basic   |  | $                              | 0.35    |                               | $ | 0.39    |  | $    | 0.88    |  | $ | 0.92   
|                                      |  |                                |         |                               |   |         |  |      |         |  |   |        
|Net income per common share - diluted |  | $                              | 0.35    |                               | $ | 0.38    |  | $    | 0.87    |  | $ | 0.91   
|                                      |  |                                |         |                               |   |         |  |      |         |  |   |        



See notes to
consolidated financial statements.





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STERIS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)



|                                                                                             |  |                               |         |   |      |   |         |  
|-------------------------------------------------------------------------------------------- |  | ----------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                             |  | Nine Months EndedDecember 31, |        
|                                                                                             |  | 2004                          |         |   | 2003 |  
|Operating activities:                                                                        |  |                               |         |   |      |   |         |  
|Net income                                                                                   |  | $                             | 60,967  |   |      | $ | 63,934  |  
|Adjustments to reconcile net income to net cash provided by operating activities:            |  |                               |         |   |      |   |         |  
|Depreciation and amortization                                                                |  |                               | 37,493  |   |      |   | 36,488  |  
|Deferred income taxes                                                                        |  |                               | 5,432   |   |      |   | 144     |  
|Other items                                                                                  |  |                               | (3,072  | ) |      |   | 6,882   |  
|Changes in operating assets and liabilities, excluding the effects of business acquisitions: |  |                               |         |   |      |   |         |  
|Accounts receivable                                                                          |  |                               | 10,476  |   |      |   | 1,772   |  
|Inventories                                                                                  |  |                               | 3,343   |   |      |   | (704    | )
|Other current assets                                                                         |  |                               | 629     |   |      |   | 918     |  
|Accounts payable                                                                             |  |                               | (19,414 | ) |      |   | (30,938 | )
|Accruals and other, net                                                                      |  |                               | 3,203   |   |      |   | (11,281 | )
|                                                                                             |  |                               |         |   |      |   |         |  
|Net cash provided by operating activities                                                    |  |                               | 99,057  |   |      |   | 67,215  |  
|                                                                                             |  |                              
|Investing activities:                                                                        |  |                               |         |   |      |   |         |  
|Purchases of property, plant, equipment, and intangibles                                     |  |                               | (38,793 | ) |      |   | (48,430 | )
|Purchase of business related assets                                                          |  |                               |        |   |      |   | (2,900  | )
|Investments in businesses, net of cash acquired                                              |  |                               | (53,323 | ) |      |   | (36,814 | )
|                                                                                             |  |                               |         |   |      |   |         |  
|Net cash used in investing activities                                                        |  |                               | (92,116 | ) |      |   | (88,144 | )
|                                                                                             |  |                              
|Financing activities:                                                                        |  |                               |         |   |      |   |         |  
|Net (payments) proceeds under credit facilities                                              |  |                               | (4,398  | ) |      |   | 46,800  |  
|Payments on long-term obligations and capital leases                                         |  |                               | (3,273  | ) |      |   | (4,933  | )
|Repurchases of Common Shares                                                                 |  |                               | (33,868 | ) |      |   | (16,609 | )
|Deferred financing fees and debt issuance costs                                              |  |                               |        |   |      |   | (537    | )
|Stock option and other equity transactions, net                                              |  |                               | 14,581  |   |      |   | 7,748   |  
|                                                                                             |  |                               |         |   |      |   |         |  
|Net cash (used in) provided by financing activities                                          |  |                               | (26,958 | ) |      |   | 32,469  |  
|                                                                                             |  |                              
|Effect of exchange rate changes on cash and cash equivalents                                 |  |                               | 1,805   |   |      |   | 1,371   |  
|                                                                                             |  |                               |         |   |      |   |         |  
|(Decrease) increase in cash and cash equivalents                                             |  |                               | (18,212 | ) |      |   | 12,911  |  
|Cash and cash equivalents at beginning of period                                             |  |                               | 80,408  |   |      |   | 25,941  |  
|                                                                                             |  |                               |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                                   |  | $                             | 62,196  |   |      | $ | 38,852  |  
|                                                                                             |  |                               |         |   |      |   |         |  



See notes to
consolidated financial statements.





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STERIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Nine Months Ended

December 31, 2004 and 2003

(dollars in thousands, except per share amounts)



1. Basis of Presentation



Throughout this document, references to STERIS Corporation,
STERIS, or the Company, mean STERIS Corporation and its subsidiaries.



The Companys fiscal year ends on March 31. Reference to a particular year or year-end refers to the Companys fiscal year.



Nature of Operations



The Company develops, manufactures, and markets a combination of equipment,
consumables, and services to healthcare, pharmaceutical, industrial, and government customers throughout the world. The Company operates in three business segments: Healthcare, Life Sciences, and STERIS Isomedix Services.



Interim Financial Statements



The accompanying unaudited consolidated financial statements of the Company
have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all material adjustments (including normal
recurring accruals and adjustments) necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the periods presented.



The information included in this Quarterly Report on Form 10-Q should be read in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of Operations, Quantitative and Qualitative Disclosures About Market Risk, and the consolidated financial statements and notes thereto included in Items 7, 7A, and 8,
respectively, of the Companys Annual Report on Form 10-K for the year ended March 31, 2004, filed with the Securities and Exchange Commission on June 14, 2004. The consolidated balance sheet at March 31, 2004 has been derived from the audited
consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.



Principles of Consolidation



The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated upon consolidation.



Use of Estimates



The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and
assumptions in certain circumstances that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from
these estimates and, therefore, operating results for the three and nine month periods ended December 31, 2004 are not necessarily indicative of results that may be expected for the full fiscal year ending March 31, 2005.



Reclassifications



Certain prior period amounts have been reclassified to conform to the
current periods presentation.



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##### Table of Contents

STERIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Nine Months Ended

December 31, 2004 and 2003

(dollars in thousands, except per share amounts)

Significant Accounting Policies

A detailed description of the Companys significant and critical accounting policies, estimates, and assumptions is included in the
Companys Annual Report on Form 10-K for the year ended March 31, 2004 filed with the Securities and Exchange Commission on June 14, 2004 in the section of Item 7, Managements Discussion and Analysis of Financial Condition and
Results of Operations, titled, Critical Accounting Policies, Estimates, and Assumptions, and in Note 1 to the consolidated financial statements, Accounting Policies. The Companys significant and critical
accounting policies, estimates, and assumptions have not changed materially from March 31, 2004.



Stock-based Compensation

The Company has granted nonqualified stock options to
certain employees to purchase the Companys Common Shares at the market price on the date of grant. Stock options granted generally become exercisable to the extent of one-fourth of the optioned shares for each full year of employment following
the date of grant and expire approximately 10 years after the date of grant, or earlier if an option holder ceases to be employed by the Company. Certain option agreements have provisions that provide for an adjustment to the normal vesting
schedule, whereby, options vest on a prorated basis as defined by specific option agreements in the event of employment termination. The Company accounts for stock-based compensation under the provisions of Accounting Principles Board Opinion No. 25
(APB No. 25), Accounting for Stock Issued to Employees, as permitted by Statement of Financial Accounting Standards No. 123 (SFAS No. 123), Accounting for Stock-Based Compensation, as amended by Statement of
Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, and accordingly recognizes no compensation expense when the exercise price equals the market price of the stock on the date of
grant.

The following table illustrates the effect on the Companys net income, earnings per basic Common Share, and earnings per
diluted Common Share, had compensation cost for all options been determined based upon the fair market value recognition provisions of SFAS No. 123:

|                                                                                            |  |                                |        |                               |   |        |  |      |        |  |   |       
|------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | ----------------------------- | - | ------ |  | ---- | ------ |  | - | ------
|                                                                                            |  | Three Months EndedDecember 31, |        | Nine Months EndedDecember 31,
|                                                                                            |  | 2004                           |        | 2003                          |   | 2004   |  | 2003
|Net income:                                                                                 |  |                                |        |                               |   |        |  |      |        |  |   |       
|As reported                                                                                 |  | $                              | 24,457 |                               | $ | 27,093 |  | $    | 60,967 |  | $ | 63,934
|Less: Stock-based compensation expense, net of income taxes, assuming the fair value method |  |                                | 1,528  |                               |   | 1,626  |  |      | 4,501  |  |   | 4,498 
|                                                                                            |  |                                |        |                               |   |        |  |      |        |  |   |       
|Pro forma                                                                                   |  | $                              | 22,929 |                               | $ | 25,467 |  | $    | 56,466 |  | $ | 59,436
|                                                                                            |  |                                |        |                               |   |        |  |      |        |  |   |       
|Earnings per common share:                                                                  |  |                                |        |                               |   |        |  |      |        |  |   |       
|Basic:                                                                                      |  |                                |        |                               |   |        |  |      |        |  |   |       
|As reported                                                                                 |  | $                              | 0.35   |                               | $ | 0.39   |  | $    | 0.88   |  | $ | 0.92  
|Pro forma                                                                                   |  |                                | 0.33   |                               |   | 0.37   |  |      | 0.81   |  |   | 0.86  
|Diluted:                                                                                    |  |                                |        |                               |   |        |  |      |        |  |   |       
|As reported                                                                                 |  |                                | 0.35   |                               |   | 0.38   |  |      | 0.87   |  |   | 0.91  
|Pro forma                                                                                   |  |                                | 0.33   |                               |   | 0.36   |  |      | 0.81   |  |   | 0.84  

For the purpose of computing pro forma net income, the fair value of option grants was estimated at
their grant date using the Black-Scholes option pricing model and the following assumptions for the three and nine months ended December 31, 2004 and 2003:

|                        |  |                                 |  |                                |  |             |  |            
|----------------------- |  | ------------------------------- |  | ------------------------------ |  | ----------- |  | -----------
|                        |  | Three Months Ended December 31, |  | Nine Months Ended December 31,
|                        |  | 2004                            |  | 2003                           |  | 2004        |  | 2003       
|Risk free interest rate |  | 3.54%- 5.50%                    |  | 3.54%-6.46%                    |  | 3.54%-5.50% |  | 3.54%-6.46%
|Dividend yield          |  | 0%                              |  | 0%                             |  | 0%          |  | 0%         
|Expected volatility     |  | 45%                             |  | 45%                            |  | 45%         |  | 45%        
|Option life (in years)  |  | 5                               |  | 5                              |  | 5           |  | 5          



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STERIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Nine Months Ended

December 31, 2004 and 2003

(dollars in thousands, except per share amounts)



The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable, characteristics that are not present in the Companys option
grants. If the model permitted consideration of the unique characteristics of employee stock options, the resulting estimate of the fair value of the stock options could be different.



Recently Issued Accounting Standards and Accounting Standards Pending Adoption



In December 2004, the Financial Accounting Standards Board finalized
Statement of Financial Accounting Standards No. 123R (SFAS No. 123R), Share-Based Payment. This revised standard addresses the accounting for share-based payment transactions in which a company receives employee services in
exchange for either equity instruments of the company or liabilities that are based on the fair value of the companys equity instruments. Under the revised standard, companies will no longer be able to account for share-based compensation
transactions using the intrinsic value method in accordance with APB No. 25. Instead, companies will be required to account for such transactions using a fair value method and recognize expense in the consolidated statements of income. SFAS No. 123R
is effective for interim or annual periods beginning after June 15, 2005 and allows, but does not require, companies to restate the full fiscal year during the period of adoption or restate all periods presented to reflect the impact of expensing
share-based payments under SFAS No. 123R. The Company will adopt SFAS No. 123R as of July 1, 2005. The Company has not yet determined which fair value model and transitional provision it will follow. Note 1, Basis of Presentation,
contains pro forma disclosures regarding the effect on the Companys net income, earnings per basic Common Share, and earnings per diluted Common Share, had the Company applied a fair value method of accounting for share-based compensation as
prescribed by SFAS No. 123. Depending on the model used to calculate share-based compensation expense in the future and other requirements of SFAS No. 123R, the pro forma disclosures currently used by the Company may not be indicative of the
share-based compensation expense that will be recognized in the Companys future financial statements. Further, the structure and timing of future grants may also have differing impacts on future results.



In October 2004, the American Jobs Creation Act of 2004 (the Jobs Creation
Act) was signed into law. The Jobs Creation Act contains a number of provisions that might affect the Companys future effective income tax rate. The most significant provisions would allow the Company to elect to deduct from its taxable income
85% of certain eligible dividends received by the Company from non-U.S. subsidiaries before the end of 2005 if those dividends are reinvested in the U.S. for eligible purposes. On December 21, 2004, the Financial Accounting Standards Board issued
FASB Staff Position No. FAS 109-2 (FSP No. 109-2), Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004. FSP No. 109-2 provides accounting and disclosure
guidance for the repatriation provision and became effective upon issuance. The Company is currently evaluating the amount, if any, of such eligible dividends that its non-U.S. subsidiaries will remit, as well as the effects the Jobs Creation Act
will have on its effective income tax rate and deferred assets and liabilities.



In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law. The Act expands Medicare benefits, primarily adding a prescription drug benefit
for Medicare-eligible retirees beginning in 2006. The law provides a federal subsidy to companies that sponsor post-retirement healthcare plans that provide prescription drug coverage. In January 2004, the Financial Accounting Standards Board issued
FSP No. FAS 106-1 and in May 2004 issued FSP No. FAS 106-2 both titled Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (FSP No. 106-1 and FSP
No. 106-2). FSP No. 106-1 allows companies to make a one-time election to defer the accounting for the effects of the Act.



8



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STERIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Nine Months Ended

December 31, 2004 and 2003

(dollars in thousands, except per share amounts)



FSP No. 106-2
provides guidance on the accounting for the effects of the Act for employers that sponsor post-retirement healthcare plans with prescription drug benefits. Under the guidance of FSP No. 106-1, the Company elected to defer accounting for the effects
of the Act. This deferral remains in effect until the appropriate effective date of FSP No. 106-2. For entities that elected deferral and for which the impact of the Act is significant, FSP No. 106-2 is effective for the first interim or annual
period beginning after June 15, 2004. Entities for which FSP No. 106-2 does not have a significant impact are permitted to delay recognition of the effects of the Act until the next regularly scheduled measurement date following the issuance of FSP
No. 106-2. The Company does not expect that the effects of the Act will have a significant impact on the Companys financial position, results of operations, or cash flows and will therefore delay recognition until the Companys regularly
scheduled measurement date. The reported post-retirement benefit cost for the three and nine months ended December 31, 2004, presented in Note 7, Benefit Plans, does not reflect the effects of the Act on the Companys
post-retirement benefit plan.



2. Business Acquisition



On September 15, 2004, the Company announced that a subsidiary had
acquired Albert Browne Limited and its subsidiaries (Browne), a privately-held manufacturer of chemical indicators, headquartered in Leicester, England for 28.9 million British pounds sterling ($52,132), net of 3.2 million British pounds
sterling ($5,807) of cash acquired at the close of the transaction. Browne is a leading provider of chemical indicators to healthcare facilities in over 70 countries. The acquisition provides the Company with an established European distribution
channel and expands the Companys offering of consumable products used with its broad line of capital equipment for infection control and decontamination.



The purchase price is subject to the final settlement of certain working capital adjustments as guaranteed by the seller. The purchase price of
$59,130, which includes $1,191 of direct acquisition costs associated with the transaction, has been preliminarily allocated to net assets and goodwill and is subject to further adjustment as the Company finalizes costs associated with the
acquisition and the valuation of identified intangible assets. Through December 31, 2004, $23,108 has been preliminarily allocated to goodwill within the Companys Healthcare segment and $23,871 has been preliminarily allocated to identified
intangible assets, such as trademarks, technology and patents, customer lists, and non-competition agreements, which are expected to be amortized over a weighted average life of approximately seven years. The consolidated financial statements
include the operating results of Browne from the date of acquisition. Pro forma results of operations have not been presented because the effect of this acquisition is not deemed significant.



3. Common Shares



Basic earnings per share is calculated based upon the weighted average number of Common Shares outstanding. Diluted
earnings per share is calculated based upon the weighted average number of Common Shares outstanding plus the dilutive effect of Common Share equivalents determined using the treasury stock method. The following is a summary of Common Shares and
Common Share equivalents outstanding used in the calculations of basic and diluted earnings per share:



|                                                         |  |                                |  |                               |  |        |  |       
|-------------------------------------------------------- |  | ------------------------------ |  | ----------------------------- |  | ------ |  | ------
|                                                         |  | Three Months EndedDecember 31, |  | Nine Months EndedDecember 31,
|                                                         |  | 2004                           |  | 2003                          |  | 2004   |  | 2003  
|                                                         |  | (shares in thousands)         
|Weighted average Common Shares outstanding - basic       |  | 69,134                         |  | 69,468                        |  | 69,206 |  | 69,425
|Dilutive effect of Common Share equivalents              |  | 704                            |  | 1,091                         |  | 802    |  | 1,206 
|                                                         |  |                                |  |                               |  |        |  |       
|Weighted average Common Shares and equivalents - diluted |  | 69,838                         |  | 70,559                        |  | 70,008 |  | 70,631
|                                                         |  |                                |  |                               |  |        |  |       



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STERIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Nine Months Ended

December 31, 2004 and 2003

(dollars in thousands, except per share amounts)



Options to purchase the following number of Common Shares at the following weighted average exercise prices were outstanding but excluded from the computation of diluted earnings per share because the exercise prices were greater than the
average market price for the Common Shares during the period:



|                                |  |                                |       |                               |   |       |  |      |       |  |   |      
|------------------------------- |  | ------------------------------ | ----- | ----------------------------- | - | ----- |  | ---- | ----- |  | - | -----
|                                |  | Three Months EndedDecember 31, |       | Nine Months EndedDecember 31,
|                                |  | 2004                           |       | 2003                          |   | 2004  |  | 2003
|                                |  | (shares in thousands)         
|Number of Common Share options  |  |                                | 2,554 |                               |   | 1,766 |  |      | 2,546 |  |   | 699  
|Weighted average exercise price |  | $                              | 26.05 |                               | $ | 25.29 |  | $    | 26.06 |  | $ | 29.43



4. Comprehensive Income



Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, establishes standards for reporting comprehensive income. Comprehensive income includes net income as currently reported under U.S. generally accepted accounting principles and other comprehensive income.
Other comprehensive income considers the effect of additional economic events that are not required to be recorded in determining net income, but rather are reported as a separate component of shareholders equity. The following table
illustrates the components of the Companys comprehensive income for the three and nine month periods ended December 31, 2004 and 2003:



|                                         |  |                                |        |                               |   |        |  |      |        |  |   |       
|---------------------------------------- |  | ------------------------------ | ------ | ----------------------------- | - | ------ |  | ---- | ------ |  | - | ------
|                                         |  | Three Months EndedDecember 31, |        | Nine Months EndedDecember 31,
|                                         |  | 2004                           |        | 2003                          |   | 2004   |  | 2003
|Net income                               |  | $                              | 24,457 |                               | $ | 27,093 |  | $    | 60,967 |  | $ | 63,934
|Foreign currency translation adjustments |  |                                | 6,306  |                               |   | 8,425  |  |      | 12,040 |  |   | 13,736
|                                         |  |                                |        |                               |   |        |  |      |        |  |   |       
|Total comprehensive income               |  | $                              | 30,763 |                               | $ | 35,518 |  | $    | 73,007 |  | $ | 77,670
|                                         |  |                                |        |                               |   |        |  |      |        |  |   |       



5. Inventories



Inventories are stated at the lower of cost or market. The Company uses the
last-in, first-out (LIFO) and first-in, first-out (FIFO) cost methods. An actual valuation of inventory under the LIFO method is made only at the end of the fiscal year based on the inventory levels and costs at that time. Accordingly, interim LIFO
calculations are based on managements estimates of expected year-end inventory levels and are subject to the final year-end LIFO inventory valuation. Inventory costs include material, labor, and overhead. Inventories consisted of the
following:



|                  |  |                  |         |               |   |       
|----------------- |  | ---------------- | ------- | ------------- | - | ------
|                  |  | December 31,2004 |         | March 31,2004
|Raw materials     |  | $                | 28,447  |               | $ | 27,916
|Work in process   |  |                  | 20,264  |               |   | 24,420
|Finished goods    |  |                  | 54,935  |               |   | 45,913
|                  |  |                  |         |               |   |       
|Total inventories |  | $                | 103,646 |               | $ | 98,249
|                  |  |                  |         |               |   |       



6. Income Taxes



Income tax expense includes U.S. federal, state and local, and
foreign income taxes, and is based on reported pre-tax income. Income tax expense is provided on an interim basis based upon the Companys estimate of the annual effective income tax rate. In determining the estimated annual effective income
tax rate, the Company analyzes various factors, including projections of the Companys annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income



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STERIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Nine Months Ended

December 31, 2004 and 2003

(dollars in thousands, except per share amounts)



taxes, the
Companys ability to use tax credits and net operating loss carryforwards, and available tax planning alternatives. The effective income tax rates for the three month periods ended December 31, 2004 and 2003 were 37.7% and 27.5%, respectively.
For the nine month periods ended December 31, 2004 and 2003, the effective income tax rates were 37.0% and 32.7%, respectively. The higher effective income tax rates in both fiscal 2005 periods resulted primarily from a reduction of operating
profits generated in international tax jurisdictions and the resulting inability of the Company to fully utilize a portion of foreign tax credits against foreign profits taxed in the United States.



7. Benefit Plans



The Company provides defined benefit pension plans for certain manufacturing and plant administrative personnel
throughout the world as determined by collective bargaining agreements or employee benefit standards set at the time of acquisition of certain businesses. In addition to providing pension benefits to certain employees, the Company sponsors an
unfunded post-retirement medical benefit plan for two groups of U.S. employees comprised substantially of the same employees who receive pension benefits under the U.S. defined benefit plans. Benefits under this plan include retiree life insurance
and retiree medical insurance, including prescription drug coverage and Medicare supplemental coverage. Additional information regarding the Companys defined benefit pension plans and post-retirement medical benefit plan, including detailed
information regarding employees covered and assumptions used to determine the benefit obligation and net periodic benefit cost is included in Note 9, Benefit Plans, to the Companys consolidated financial statements included in the
Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 14, 2004.



The components of net periodic benefit cost for the Companys defined benefit pension plans and other post-retirement benefit plan were as follows:



|                                |  |                               |        |   |                            |   |        |      |  |      |       |  |   |      
|------------------------------- |  | ----------------------------- | ------ | - | -------------------------- | - | ------ | ---- |  | ---- | ----- |  | - | -----
|                                |  | Defined Benefit Pension Plans |        |   | Other Post-Retirement Plan
|Three-Months Ended December 31, |  | 2004                          |        |   | 2003                       |   |        | 2004 |  | 2003
|Service cost                    |  | $                             | 377    |   |                            | $ | 374    |      |  | $    | 235   |  | $ | 235  
|Interest cost                   |  |                               | 793    |   |                            |   | 776    |      |  |      | 1,172 |  |   | 1,158
|Expected return on plan assets  |  |                               | (822   | ) |                            |   | (720   | )    |  |      |      |  |   |     
|Net amortization and deferral   |  |                               | 144    |   |                            |   | 256    |      |  |      | 476   |  |   | 422  
|                                |  |                               |        |   |                            |   |        |      |  |      |       |  |   |      
|Net periodic benefit cost       |  | $                             | 492    |   |                            | $ | 686    |      |  | $    | 1,883 |  | $ | 1,815
|                                |  |                               |        |   |                            |   |        |      |  |      |       |  |   |      
|                                |  |                              
|                                |  | Defined Benefit Pension Plans |        |   | Other Post-Retirement Plan
|Nine-Months Ended December 31,  |  | 2004                          |        |   | 2003                       |   |        | 2004 |  | 2003
|Service cost                    |  | $                             | 1,131  |   |                            | $ | 1,122  |      |  | $    | 705   |  | $ | 705  
|Interest cost                   |  |                               | 2,379  |   |                            |   | 2,328  |      |  |      | 3,516 |  |   | 3,474
|Expected return on plan assets  |  |                               | (2,466 | ) |                            |   | (2,160 | )    |  |      |      |  |   |     
|Net amortization and deferral   |  |                               | 432    |   |                            |   | 768    |      |  |      | 1,428 |  |   | 1,266
|                                |  |                               |        |   |                            |   |        |      |  |      |       |  |   |      
|Net periodic benefit cost       |  | $                             | 1,476  |   |                            | $ | 2,058  |      |  | $    | 5,649 |  | $ | 5,445
|                                |  |                               |        |   |                            |   |        |      |  |      |       |  |   |      



8. Contingencies



The Company is involved in various patent, product liability, consumer,
commercial, environmental, tax proceedings and claims, government investigations, and other legal and regulatory proceedings and claims that arise from time to time in the ordinary course of business. In accordance with Statement of Financial
Accounting Standards No. 5, Accounting for Contingencies, the Company records accruals for such contingencies to the extent that the Company concludes that their occurrence is both probable and estimable. The Company considers many
factors in making these assessments, including the professional judgment of experienced members of management and the Companys legal counsel. The Company has made estimates as to the likelihood of unfavorable outcomes and the amounts of such
potential losses. In the opinion of management, the ultimate outcome of these proceedings



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##### Table of Contents

STERIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Nine Months Ended

December 31, 2004 and 2003

(dollars in thousands, except per share amounts)



and claims is
not anticipated to have a material adverse effect on the Companys consolidated financial position, results of operations, or cash flows. Litigation is inherently unpredictable and actual results could materially differ from the Companys
estimates. The Company records anticipated recoveries under applicable insurance contracts when assured of recovery.



To the extent that management of the Company believes it is probable that a taxing authority will take a sustainable position on a matter contrary to the
position taken by the Company, the Company provides tax accruals. If the Company does not prevail in matters for which accruals have been established or is required to pay amounts in excess of established accruals, the Companys effective
income tax rate in a given financial statement period may be materially impacted.



Refer to Part II, Item 1, Legal Proceedings, on page 31 of this Form 10-Q.



9. Business Segment Information



The Company operates and reports in three business segments: Healthcare, Life Sciences, and STERIS Isomedix Services. Note 12, Business Segment
Information, to the Companys consolidated financial statements included in the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 14, 2004 provides detailed information regarding each
business segment. Operating income (loss) for each business segment reflects the full allocation of all distribution, corporate, and research and development expenses to the reporting segment. The accounting policies for reportable business segments
are the same as those for the consolidated Company. Financial information for each of the Companys reportable business segments is presented in the following table:



|                         |  |                                |         |                               |      |   |         |  |   |         |   |  |   |        
|------------------------ |  | ------------------------------ | ------- | ----------------------------- | ---- | - | ------- |  | - | ------- | - |  | - | -------
|                         |  | Three Months EndedDecember 31, |         | Nine Months EndedDecember 31,
|                         |  | 2004                           |         |                               | 2003 |   | 2004    |  |   | 2003   
|Revenues:                |  |                                |         |                               |      |   |         |  |   |         |   |  |   |        
|Healthcare               |  | $                              | 204,942 |                               |      | $ | 188,583 |  | $ | 568,657 |   |  | $ | 547,824
|Life Sciences            |  |                                | 54,522  |                               |      |   | 63,917  |  |   | 161,769 |   |  |   | 179,217
|STERIS Isomedix Services |  |                                | 24,925  |                               |      |   | 21,786  |  |   | 73,606  |   |  |   | 63,914 
|                         |  |                                |         |                               |      |   |         |  |   |         |   |  |   |        
|Total revenues           |  | $                              | 284,389 |                               |      | $ | 274,286 |  | $ | 804,032 |   |  | $ | 790,955
|                         |  |                                |         |                               |      |   |         |  |   |         |   |  |   |        
|Operating income (loss): |  |                                |         |                               |      |   |         |  |   |         |   |  |   |        
|Healthcare               |  | $                              | 38,067  |                               |      | $ | 31,364  |  | $ | 94,516  |   |  | $ | 83,863 
|Life Sciences            |  |                                | (3,112  | )                             |      |   | 3,255   |  |   | (10,575 | ) |  |   | 3,127  
|STERIS Isomedix Services |  |                                | 4,957   |                               |      |   | 3,207   |  |   | 14,853  |   |  |   | 9,384  
|                         |  |                                |         |                               |      |   |         |  |   |         |   |  |   |        
|Total operating income   |  | $                              | 39,912  |                               |      | $ | 37,826  |  | $ | 98,794  |   |  | $ | 96,374 
|                         |  |                                |         |                               |      |   |         |  |   |         |   |  |   |        



Financial information
for each of the Companys U.S. and International geographic areas is presented in the following table. Revenues are based on the location of these operations and their customers. Long-lived assets are those assets that are identified within the
operations in each geographic area, including property, plant, equipment, goodwill, intangibles, and other assets.



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##### Table of Contents

STERIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Nine Months Ended

December 31, 2004 and 2003

(dollars in thousands, except per share amounts)



|               |  |                                |         |                               |   |         |  |      |         |  |   |        
|-------------- |  | ------------------------------ | ------- | ----------------------------- | - | ------- |  | ---- | ------- |  | - | -------
|               |  | Three Months EndedDecember 31, |         | Nine Months EndedDecember 31,
|               |  | 2004                           |         | 2003                          |   | 2004    |  | 2003
|Revenues:      |  |                                |         |                               |   |         |  |      |         |  |   |        
|United States  |  | $                              | 219,533 |                               | $ | 213,585 |  | $    | 633,894 |  | $ | 616,560
|International  |  |                                | 64,856  |                               |   | 60,701  |  |      | 170,138 |  |   | 174,395
|               |  |                                |         |                               |   |         |  |      |         |  |   |        
|Total revenues |  | $                              | 284,389 |                               | $ | 274,286 |  | $    | 804,032 |  | $ | 790,955
|               |  |                                |         |                               |   |         |  |      |         |  |   |        



|                        |  |                  |         |               |   |        
|----------------------- |  | ---------------- | ------- | ------------- | - | -------
|                        |  |                 
|                        |  | December 31,2004 |         | March 31,2004
|Long-lived assets:      |  |                  |         |               |   |        
|United States           |  | $                | 531,006 |               | $ | 525,980
|International (1)       |  |                  | 144,496 |               |   | 81,152 
|                        |  |                  |         |               |   |        
|Total long-lived assets |  | $                | 675,502 |               | $ | 607,132
|                        |  |                  |         |               |   |        

---

|(1) | Long-lived tangible and intangible assets and goodwill related to the acquistion of Browne have been included as international assets atDecember 31, 2004 in
the above table. Refer to Note 2, Business Acquisition, for further information.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



10. Repurchases of Common Shares



On July 28, 2004, the Company announced that its Board of Directors had authorized the repurchase of up to 3.0 million STERIS Common Shares. This Common
Share repurchase authorization replaced the Common Share repurchase authorization of July 24, 2002. During the first six months of fiscal 2005, the Company repurchased 1,539,100 of its Common Shares for $33,868, representing an average price of
$22.01 per Common Share. The Company did not repurchase any Common Shares during the third quarter of fiscal 2005. At December 31, 2004, 2,726,000 Common Shares remained authorized for repurchase and 825,146 Common Shares were held in treasury.



11. Financial and Other Guarantees



The Company generally offers a limited one-year parts and labor warranty on
its capital equipment. The specific terms and conditions of those warranties vary depending on the product sold and the country where the Company conducts business. The Company provides for the estimated cost of product warranties at the time
product revenue is recognized. Amounts due to customers for the Companys future performance under these warranties are recorded as a current liability on the accompanying consolidated balance sheets. Factors that affect the Companys
warranty liability include the number and type of installed units, historical and anticipated rates of product failures, and material and service costs per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities
and adjusts the amounts as necessary.



Changes to the
Companys warranty liability during the first nine months of fiscal 2005 were as follows:



|                                    |  |   |        |  
|----------------------------------- |  | - | ------ | -
|Balance, March 31, 2004             |  | $ | 5,914  |  
|Warranties issued during the period |  |   | 6,295  |  
|Settlements made during the period  |  |   | (6,288 | )
|                                    |  |   |        |  
|Balance, December 31, 2004          |  | $ | 5,921  |  
|                                    |  |   |        |  



The Company also
issues product maintenance contracts to its customers that are accounted for in accordance with the requirements of FASB Technical Bulletin No. 90-1, Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts.
Such contracts generally range in terms from 1 to 5 years and require the Company to maintain and repair the Companys product over the maintenance contract term. Amounts received from customers under these contracts are initially recorded as a
liability for deferred service contract revenue on the accompanying consolidated balance sheets.



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##### Table of Contents

STERIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Nine Months Ended

December 31, 2004 and 2003

(dollars in thousands, except per share amounts)



The liability
recorded for deferred service contract revenue was $10,713 and $12,342 as of December 31, 2004 and March 31, 2004, respectively. Such deferred service contract revenue is then amortized on a straight-line basis over the contract term and recognized
as service revenue on the accompanying consolidated statements of income. The activity related to the liability for deferred service contract revenue has been excluded from the table presented above.



12. Foreign Currency Forward Contracts



The Company has entered into foreign currency forward contracts with
notional values of 9.6 million euro and 5.3 million British pounds sterling to reduce its transactional foreign currency exposures. The Company has recorded an accrued loss of $1.3 million related to these contracts at December 31, 2004, which is
included in Accrued expenses and other on the accompanying consolidated balance sheets. The contracts are marked to market, with gains and losses recognized in the consolidated statements of income.



13. Subsequent Events



On January 7, 2005, the Company announced that it had completed the previously announced (November 16, 2004) agreement to
acquire certain assets of Cosmed Group, Inc. (Cosmed), a privately-held contract sterilization service provider with corporate offices located in Jamestown, Rhode Island, for $73,000. The acquisition was funded through a combination of
cash and the Companys existing revolving credit facility. The acquired business will be integrated into the Companys Isomedix Services segment. As a result of this transaction, Isomedix added five ethylene oxide processing facilities to
its current network of locations. The Companys financial position, results of operations, and cash flows as of and for the three and nine month periods ended December 31, 2004 do not reflect the effects of this transaction. The operating
results of Cosmed will be included in the Companys consolidated financial statements from the date of the acquisition.



On January 26, 2005, the Company announced, in its fiscal 2005 third quarter earnings release, that it had completed a detailed analysis of strategic
alternatives within its Life Sciences segment designed to reshape the segments product portfolio and improve profitability. As a first step in this process, the Company announced the sale of its Detach product line (automated cleaning systems for comparative medicine) subsequent to the
end of the third quarter. The sale of the Detach
product line did not have a material impact to the Companys financial position, results of operations, or cash flows subsequent to December 31, 2004. In addition, the Company announced that it intends to explore the sale of its lyophilizer
(freeze dryer), pure steam generator, and water still product lines, which currently represent approximately 30% of Life Sciences revenues.





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##### Table of Contents

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

STERIS Corporation



We have reviewed the consolidated balance sheet of STERIS Corporation and subsidiaries as of December 31, 2004, and the related consolidated statements of
income for the three and nine month periods ended December 31, 2004 and 2003, and the consolidated statements of cash flows for the nine month periods ended December 31, 2004 and 2003. These financial statements are the responsibility of the
Companys management.



We conducted our review in
accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an opinion.



Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting
principles.



We have previously audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of STERIS Corporation and subsidiaries as of March 31, 2004 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 June 4, 2004, 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, 2004, 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 24, 2005





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##### Table of Contents

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



Financial Measures



In the following sections of Managements Discussion and Analysis of Financial Condition and Results of Operations, the Company, at times, may refer
to financial measures that are not required to be presented in the financial statements under U.S. generally accepted accounting principles. The Company has used the following financial measures that are not required to be presented under U.S.
generally accepted accounting principles in the context of this report: Backlog, debt to capital, and days sales outstanding. The Company defines these financial measures as follows:



| |  |  | Backlog- is defined by the Company as the amount of unfilled capital purchase orders at a point in time. At December 31, 2004, September 30, 2004, and December 31, 2003, the
Companys backlog amounted to $140.4 million, $133.5 million, and $146.2 million, respectively. Backlog at December 31, 2004 was comprised of $76.1 million related to the Companys Healthcare segment and $64.3 million related to the
Companys Life Sciences segment. Management uses this figure as a measure to assist in the projection of short-term financial results and inventory requirements.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Debt to capital- is defined by the Company as total long-term debt divided by the sum of long-term debt and shareholders equity. At December 31, 2004 and March 31, 2004, the
Companys debt to capital amounted to 12.4% and 13.8%, respectively. Management uses this figure as a financial liquidity measure to gauge the Companys ability to borrow, provide strength/protection against creditors, fund growth, develop
outside of current business operations, and measure the risk of the Companys financial structure.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Days sales outstanding- is defined by the Company as the average collection period for sales revenue. It is calculated as net accounts receivable divided by the trailing four
quarters revenues, multiplied by 365. At December 31, 2004 and March 31, 2004, the Companys days sales outstanding amounted to 83 days and 85 days, respectively. Management uses this figure to help gauge the quality of accounts receivable.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company has presented these financial
measures because it believes that meaningful analysis of the Companys financial performance is enhanced by an understanding of certain additional factors underlying that performance and managements judgments about those particular
factors. These financial measures should not be considered an alternative to measurements required by GAAP. The Companys calculation of these measures may differ from similar measures used by other companies and investors should be careful
when comparing the these financial measures to those of other companies.



Executive Overview



Revenues for the third quarter of fiscal 2005 were $284.4 million, an increase of $10.1 million, or 3.7%, as compared to $274.3 million during the prior year third quarter. For the first nine months of fiscal 2005, revenues were $804.0
million as compared to $791.0 million for the same period of fiscal 2004, representing an increase of $13.1 million, or 1.7%. Increased revenues in the Companys Healthcare and Isomedix Services segments were the drivers of overall revenue
growth during both periods. These factors were partially offset by a decline in revenues in the Companys Life Sciences segment during both periods. Additional discussion of segment revenues for the three and nine month periods is presented in
subsequent sections of Managements Discussion and Analysis of Financial Condition and results of Operations titled, Revenues and Business Segment Results of Operations.



The Companys gross margin percentage was relatively flat for both
fiscal 2005 periods presented as compared to the respective fiscal 2004 periods. Strong gross margin growth in the Companys Isomedix Services segment offset continued margin erosion within the Companys Life Sciences segment for both
periods presented. Healthcare margins decreased slightly quarter over quarter due to changes in revenue mix and remained flat for the 2005 year to date period as compared to the same prior year period. The addition of the Albert Browne Limited
(Browne) product line during the fiscal 2005 third quarter benefited the Healthcare segments gross margins. Additional discussion of the Companys gross margin is presented in a subsequent section of Managements
Discussion and Analysis of Financial Condition and Results of Operations titled, Gross Profit.





16



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##### Table of Contents

The Companys net income was $24.5 million, or $0.35 per diluted share, for the third quarter of
fiscal 2005, representing a decrease of 9.7% from the comparable prior year periods net income of $27.1 million, or $0.38 per diluted share. For the first nine months of fiscal 2005, net income was $61.0 million, or $0.87 per diluted share, as
compared to $64.0 million, or $0.91 per diluted share, representing a decrease of $3.0 million, or 4.6%. The decline in net income for both periods reflects significantly higher effective income tax rates during fiscal 2005, which offset operating
income increases of 5.5% and 2.5% for the three and nine month periods ended December 31, 2004, respectively. Information related to the effective income tax rate changes for both periods is discussed in a subsequent section of Managements
Discussion and Analysis of Financial Condition and Results of Operations titled, Income Tax Expense.



The Company continues to focus its capital spending on investments in new and existing facilities, business expansion projects, and information technology
improvements. For the first nine months of fiscal 2005, capital expenditures amounted to $38.8 million, of which $13.3 million related to third quarter spending. The Company also continued to step up its investment in research and development to
strengthen its competitive position in global marketplaces. The increase in research and development expenditures during the first nine months of fiscal 2005 reflects an increased emphasis on new product development, product improvements, and the
development of new technological innovations.



On September 15,
2004, the Company announced that a subsidiary had acquired Browne, a manufacturer of chemical indicators based in Leicester, England. The acquired business, which has been integrated into the Companys Healthcare segment, provides the Company
with an established European distribution channel and expands its offering of consumable products used with its broad line of capital equipment for infection control and decontamination. For the quarter ended December 31, 2004, revenues resulting
from the Browne acquisition amounted to 1.4% of total Company revenues and contributed 2.3% to the Companys overall gross margins.



On January 7, 2005, the Company announced that it had completed the previously announced (November 16, 2004) acquisition of certain assets of Cosmed
Group, Inc. (Cosmed), a contract sterilization service provider with corporate offices located in Jamestown, Rhode Island. This acquired business will be integrated into the Companys Isomedix Services segment. As a result of this
transaction, Isomedix Services added five ethylene oxide processing facilities to its current network of locations.



On January 26, 2005, the Company announced, in its fiscal 2005 third quarter earnings release, that it had completed a detailed analysis of its
customers needs in the Life Sciences segment and identified several steps to reshape the segments product portfolio and improve profitability. As a first step of this strategy, the Company announced the sale of its Detachproduct line (automated cleaning systems for comparative medicine) subsequent to the end of the
third quarter. The sale of the Detachproduct line did not have a material impact to the
Companys financial position, results of operations, or cash flows subsequent to December 31, 2004. In addition, the Company announced that it is exploring the sale of its lyophilizer (freeze dryer), pure steam generator, and water still
product lines, which account for approximately 30% of Life Sciences segment revenues. These strategic steps will enable the Company to dedicate more management resources to further develop its core sterilization, washing, and decontamination product
offerings to the pharmaceutical, biopharmaceutical, and research markets. Assuming all of these steps are executed during fiscal 2006, the Company anticipates a reduction in pre-tax earnings of approximately $2.0 to $3.0 million, excluding any gain
or loss from asset sales. In the first full fiscal year following completion, the Company expects these steps to add approximately $3.0 million to $5.0 million to annual pre-tax earnings.



Results of Operations



In the following subsections, the Company has presented its fiscal 2005 third quarter and fiscal 2005 year to date results of operations, and has
compared these results to the corresponding periods of the prior fiscal year.



17



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##### Table of Contents

Revenues



As prescribed by Regulation S-X, the Company has presented separately on its Consolidated Statements of Income for each period presented, revenues
generated as either product revenues or service revenues. In discussing revenues, the Company, at times, may refer to revenues in differing detail than that which is prescribed by Regulation S-X. The terminology, definitions, and applications of
terms that the Company employs to describe revenues may differ significantly from terms used by other companies. The Company uses the following terms to describe revenues:



| |  |  | Revenues- The Companys revenues are presented net of sales returns and allowances.
| | - |  | -----------------------------------------------------------------------------------



| |  |  | Product Revenues- Product revenues are defined by the Company as revenues generated from sales of capital equipment, which includes steam and low temperature liquid
sterilizers, washing systems, freeze dryers, VHP technology, water stills, and pure steam generators; surgical lights and tables; and the consumable family of products, which includes STERIS SYSTEM 1® consumables, sterility assurance products,
skin care products, and cleaning consumables.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Service Revenues- Service revenues are defined by the Company as revenues generated from parts and labor associated with the maintenance, repair, and installation of
the Companys capital equipment, as well as revenues generated from contract sterilization offered through the Companys Isomedix Services segment.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Capital Revenues- Capital revenues are defined by the Company as revenues generated from sales of capital equipment, which includes steam and low temperature liquid
sterilizers, washing systems, freeze dryers, VHP technology, water stills, and pure steam generators; and surgical lights and tables.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Consumable Revenues- Consumable revenues are defined by the Company as revenues generated from sales of the consumable family of products which includes STERIS SYSTEM
1® consumables, sterility assurance products, skin care products, and cleaning consumables.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Recurring Revenues- Recurring revenues are defined by the Company as revenues generated from sales of consumable products and service revenues.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



18



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##### Table of Contents

The following table illustrates the changes in the Companys revenues for the three and nine month
periods ended December 31, 2004 as compared to the same periods in the prior year:



(dollars in thousands)



|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|------------------- |  | ------------------------------ | ------- | ---- | - | ------- | -------------- | - | ------- | ------------------------- |  | ---- | ------- |  | ----- | - |  | ----- | -
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |  
|                    |  | Three Months EndedDecember 31, |         |      |   |         | Percent Change |   |         | Percent of Total Revenues | 
|                    |  | 2004                           |         | 2003 |   | Change  |                |   |         | 2004(1)                   |  |      | 2003(1) | 
|Capital Revenues    |  | $                              | 132,231 |      | $ | 133,549 |                | $ | (1,318  | )                         |  | -1.0 | %       |  | 46.5  | % |  | 48.7  | %
|Consumable Revenues |  |                                | 60,880  |      |   | 57,813  |                |   | 3,067   |                           |  | 5.3  | %       |  | 21.4  | % |  | 21.1  | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|Product Revenues    |  |                                | 193,111 |      |   | 191,362 |                |   | 1,749   |                           |  | 0.9  | %       |  | 67.9  | % |  | 69.8  | %
|                    |  |                                |         |      |   |        
|Service Revenues    |  |                                | 91,278  |      |   | 82,924  |                |   | 8,354   |                           |  | 10.1 | %       |  | 32.1  | % |  | 30.2  | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|Total Revenues      |  | $                              | 284,389 |      | $ | 274,286 |                | $ | 10,103  |                           |  | 3.7  | %       |  | 100.0 | % |  | 100.0 | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|Service Revenues    |  | $                              | 91,278  |      | $ | 82,924  |                | $ | 8,354   |                           |  | 10.1 | %       |  | 32.1  | % |  | 30.2  | %
|Consumable Revenues |  |                                | 60,880  |      |   | 57,813  |                |   | 3,067   |                           |  | 5.3  | %       |  | 21.4  | % |  | 21.1  | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|Recurring Revenues  |  |                                | 152,158 |      |   | 140,737 |                |   | 11,421  |                           |  | 8.1  | %       |  | 53.5  | % |  | 51.3  | %
|                    |  |                                |         |      |   |        
|Capital Revenues    |  |                                | 132,231 |      |   | 133,549 |                |   | (1,318  | )                         |  | -1.0 | %       |  | 46.5  | % |  | 48.7  | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|Total Revenues      |  | $                              | 284,389 |      | $ | 274,286 |                | $ | 10,103  |                           |  | 3.7  | %       |  | 100.0 | % |  | 100.0 | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|United States       |  | $                              | 219,533 |      | $ | 213,585 |                | $ | 5,948   |                           |  | 2.8  | %       |  | 77.2  | % |  | 77.9  | %
|International       |  |                                | 64,856  |      |   | 60,701  |                |   | 4,155   |                           |  | 6.8  | %       |  | 22.8  | % |  | 22.1  | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|Total Revenues      |  | $                              | 284,389 |      | $ | 274,286 |                | $ | 10,103  |                           |  | 3.7  | %       |  | 100.0 | % |  | 100.0 | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|                    |  |                                |         |     
|                    |  | Nine Months EndedDecember 31,  |         |      |   |         | Percent Change |   |         | Percent of Total Revenues | 
|                    |  | 2004                           |         | 2003 |   | Change  |                |   |         | 2004(1)                   |  |      | 2003(1) | 
|Capital Revenues    |  | $                              | 362,714 |      | $ | 379,844 |                | $ | (17,130 | )                         |  | -4.5 | %       |  | 45.1  | % |  | 48.0  | %
|Consumable Revenues |  |                                | 175,434 |      |   | 169,637 |                |   | 5,797   |                           |  | 3.4  | %       |  | 21.8  | % |  | 21.5  | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|Product Revenues    |  |                                | 538,148 |      |   | 549,481 |                |   | (11,333 | )                         |  | -2.1 | %       |  | 66.9  | % |  | 69.5  | %
|                    |  |                                |         |      |   |        
|Service Revenues    |  |                                | 265,884 |      |   | 241,474 |                |   | 24,410  |                           |  | 10.1 | %       |  | 33.1  | % |  | 30.5  | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|Total Revenues      |  | $                              | 804,032 |      | $ | 790,955 |                | $ | 13,077  |                           |  | 1.7  | %       |  | 100.0 | % |  | 100.0 | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|Service Revenues    |  | $                              | 265,884 |      | $ | 241,474 |                | $ | 24,410  |                           |  | 10.1 | %       |  | 33.1  | % |  | 30.5  | %
|Consumable Revenues |  |                                | 175,434 |      |   | 169,637 |                |   | 5,797   |                           |  | 3.4  | %       |  | 21.8  | % |  | 21.5  | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|Recurring Revenues  |  |                                | 441,318 |      |   | 411,111 |                |   | 30,207  |                           |  | 7.3  | %       |  | 54.9  | % |  | 52.0  | %
|                    |  |                                |         |      |   |        
|Capital Revenues    |  |                                | 362,714 |      |   | 379,844 |                |   | (17,130 | )                         |  | -4.5 | %       |  | 45.1  | % |  | 48.0  | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|Total Revenues      |  | $                              | 804,032 |      | $ | 790,955 |                | $ | 13,077  |                           |  | 1.7  | %       |  | 100.0 | % |  | 100.0 | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|United States       |  | $                              | 633,894 |      | $ | 616,560 |                | $ | 17,334  |                           |  | 2.8  | %       |  | 78.8  | % |  | 78.0  | %
|International       |  |                                | 170,138 |      |   | 174,395 |                |   | (4,257  | )                         |  | -2.4 | %       |  | 21.2  | % |  | 22.0  | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  
|Total Revenues      |  | $                              | 804,032 |      | $ | 790,955 |                | $ | 13,077  |                           |  | 1.7  | %       |  | 100.0 | % |  | 100.0 | %
|                    |  |                                |         |      |   |         |                |   |         |                           |  |      |         |  |       |   |  |       |  

---

|(1) | Certain percentages may not calculate precisely due to rounding.
|--- | ----------------------------------------------------------------



Quarter over Quarter Comparison



Revenues for the third quarter of fiscal 2005 were $284.4 million, an increase of $10.1 million, or 3.7%, as compared to $274.3 million during the third
quarter of the prior year. Improved overall revenues, quarter over quarter, were driven by an increase of 8.1% in recurring revenues. A 14.4% increase in service revenues within the Companys Isomedix Services segment, resulting from increased
demand, higher utilization of recently expanded facilities capacity, and a temporary reduction in industry processing capacity, contributed to the overall increase in consumable revenues. Double digit growth of capital revenues and improvements in
recurring revenue streams within the Healthcare segment, which resulted from strengthening demand in the United States hospital market, also contributed to the increase in overall Company revenues. Overall revenues for the quarter were negatively
impacted by a 14.7% decline in Life Sciences revenues, primarily the result of continued declines in overall capital spending within the pharmaceutical industry in the European and United States marketplaces.



19



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##### Table of Contents

International revenues for the quarter amounted to $64.9 million, representing an increase of $4.2
million, or 6.8%, as compared to the third quarter of fiscal 2004. International revenues were positively impacted by an increase in recurring revenues of 37.4% quarter over quarter. Contributing to international recurring revenue growth was an
increase of 78.1% in consumables revenues, primarily the result of additional revenues generated from the integration of the Browne product line. International revenues were negatively impacted by a decrease in capital revenues of 7.1% quarter over
quarter, primarily the result of weaknesses in the Life Sciences segment throughout Europe.



United States revenues for the quarter amounted to $219.5 million, representing an increase of $5.9 million, or 2.8%, as compared to the third quarter of fiscal 2004. United States revenues were positively impacted by
an increase in service revenues of 9.0%, which resulted from increased demand within the Companys Healthcare segment and increased volumes and capacity utilization within the Companys Isomedix Services segment. United States revenues
were also positively impacted during the quarter by a net increase in capital revenues of 1.8%, which represents a 16.1% increase in United States Healthcare capital revenues resulting from increased demand from the United States hospital market.
The United States Healthcare capital revenue growth was offset by a decrease of 40.7% in United States Life Sciences capital revenue.



Revenues are further discussed on a segment basis in the section of Managements Discussion and Analysis of Financial Condition and Results of
Operations, titled Business Segment Results of Operations.



Year over Year Comparison



Revenues for the first nine months of fiscal 2005 were $804.0 million, an increase of $13.1 million, or 1.7%, as compared to $791.0 million during the first nine months of fiscal 2004. For the year to date period, a 10.1% increase in
service revenues and a 3.4% increase in consumable revenues resulted in an increase in overall recurring revenues of 7.3% as compared to the same period in the prior year. Service revenues, which increased across all segments, were driven by a $9.7
million, or 15.2%, increase in the Isomedix Services segment. Within the Companys Healthcare and Life Sciences segments, service revenues for the year to date period increased 5.4% and 28.8%, respectively, as compared to the same prior year
period. Capital revenues declined $17.1 million, or 4.5%, as compared to the first nine months of fiscal 2004. Strong Healthcare capital sales within the United States hospital market during the fiscal 2005 third quarter resulted in a 4.1% increase
in the segments year to date capital revenues as compared to the same period in fiscal 2004. This performance was offset by a 20.7% decrease in Life Sciences capital revenues, year over year, as a result of reduced capital spending within the
pharmaceutical industry in the European and United States marketplaces.



International revenues for the first nine months of fiscal 2005 amounted to $170.1 million, a decrease of $4.3 million, or 2.4%, as compared to the first nine months of fiscal 2004. The decline in year over year international revenues was
attributable to a 15.7% decline in capital equipment sales within the Companys Healthcare and Life Sciences segments, primarily within the European marketplace. Within Europe, year to date capital revenues within the Companys Healthcare
and Life Sciences segments decreased 13.4% and 32.0%, respectively, as compared to the same prior year period. The decline in international capital equipment sales was partially offset by a 27.8% increase in international recurring revenue streams
year over year.



United States revenues for the first nine
months of fiscal 2005 amounted to $633.9 million, an increase of $17.3 million, or 2.8%, as compared to the first nine months of fiscal 2004. United States revenues were positively impacted by an increase of 4.3% in recurring revenues, driven by an
increase of 15.2% in service revenues within the Companys Isomedix Services segment. Increased volumes within the Companys Healthcare segment also contributed to the year over year increase in consumable revenues. Year over year, United
States capital revenues remained relatively flat. A surge in Healthcare capital sales within the United States hospital marketplace during the latter part of the second quarter and throughout the third quarter of fiscal 2005 resulted in a 7.5%
increase in capital revenues in the segment, year over year. A year over year decrease in United States capital revenues of 23.1% within the Companys Life Sciences segment, as a result of reduced capital spending within the pharmaceutical
industry, offset the Healthcare segments performance.



Revenues are further discussed on a segment basis in the section of Managements Discussion and Analysis of Financial Condition and Results of Operations, titled Business Segment Results of Operations.



20



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##### Table of Contents

Gross Profit



The following table illustrates the changes in gross profit for the three and nine month periods ended December 31, 2004 and 2003:



(dollars in thousands)



|                              |  |                                 |         |   |        |   |         |                |  |   |        |   |  |      |  
|----------------------------- |  | ------------------------------- | ------- | - | ------ | - | ------- | -------------- |  | - | ------ | - |  | ---- | -
|                              |  | Three Months Ended December 31, |         |   | Change |   |         | Percent Change | 
|                              |  | 2004                            |         |   | 2003   |   |         |               
|Gross Profit:                 |  |                                 |         |   |        |   |         |                |  |   |        |   |  |      |  
|Product                       |  | $                               | 80,888  |   |        | $ | 79,242  |                |  | $ | 1,646  |   |  | 2.1  | %
|Service                       |  |                                 | 38,674  |   |        |   | 35,855  |                |  |   | 2,819  |   |  | 7.9  | %
|                              |  |                                 |         |   |        |   |         |                |  |   |        |   |  |      |  
|Total Gross Profit            |  | $                               | 119,562 |   |        | $ | 115,097 |                |  | $ | 4,465  |   |  | 3.9  | %
|                              |  |                                 |         |   |        |   |         |                |  |   |        |   |  |      |  
|Gross Profit Percentage:      |  |                                 |         |   |        |   |         |                |  |   |        |   |  |      |  
|Product                       |  |                                 | 41.9    | % |        |   | 41.4    | %              |  |   |        |   |  |      |  
|Service                       |  |                                 | 42.4    | % |        |   | 43.2    | %              |  |   |        |   |  |      |  
|                              |  |                                 |         |   |        |   |         |                |  |   |        |   |  |      |  
|Total Gross Profit Percentage |  |                                 | 42.0    | % |        |   | 42.0    | %              |  |   |        |   |  |      |  
|                              |  |                                 |         |   |        |   |         |                |  |   |        |   |  |      |  
|                              |  |                                 |        
|                              |  | Nine Months Ended December 31,  |         |   | Change |   |         | Percent Change | 
|                              |  | 2004                            |         |   | 2003   |   |         |               
|Gross Profit:                 |  |                                 |         |   |        |   |         |                |  |   |        |   |  |      |  
|Product                       |  | $                               | 228,143 |   |        | $ | 229,474 |                |  | $ | (1,331 | ) |  | -0.6 | %
|Service                       |  |                                 | 112,799 |   |        |   | 102,808 |                |  |   | 9,991  |   |  | 9.7  | %
|                              |  |                                 |         |   |        |   |         |                |  |   |        |   |  |      |  
|Total Gross Profit            |  | $                               | 340,942 |   |        | $ | 332,282 |                |  | $ | 8,660  |   |  | 2.6  | %
|                              |  |                                 |         |   |        |   |         |                |  |   |        |   |  |      |  
|Gross Profit Percentage:      |  |                                 |         |   |        |   |         |                |  |   |        |   |  |      |  
|Product                       |  |                                 | 42.4    | % |        |   | 41.8    | %              |  |   |        |   |  |      |  
|Service                       |  |                                 | 42.4    | % |        |   | 42.6    | %              |  |   |        |   |  |      |  
|                              |  |                                 |         |   |        |   |         |                |  |   |        |   |  |      |  
|Total Gross Profit Percentage |  |                                 | 42.4    | % |        |   | 42.0    | %              |  |   |        |   |  |      |  
|                              |  |                                 |         |   |        |   |         |                |  |   |        |   |  |      |  



Gross profit is
impacted by the volume, pricing, and mix of sales of the Companys products and services, as well as the costs associated with the products and services that are sold. The Companys gross profit percentage was flat quarter over quarter and
increased 40 basis points year over year. Strong margin growth, resulting from higher volumes, within the Companys Isomedix Services segment offset continued margin erosion within the Companys Life Sciences segment for both periods
presented. Healthcare margins were negatively impacted during fiscal 2005 as a result of a change in revenue mix. However, the addition of the Albert Browne Limited (Browne) product line during the 2005 third quarter benefited the
Healthcare segments gross margins. Gross margins for both periods presented were positively impacted by changes in foreign currency exchange rates in relation to the U.S. dollar. The Companys gross profit percentage for the nine month
period ending December 31, 2003 was negatively impacted by costs associated with the closing of an Australian manufacturing facility.



21



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##### Table of Contents

Operating Expenses



The following table illustrates the changes in operating expenses for the three and nine month periods ended December 31, 2004 and 2003:



(dollars in thousands)



|                                     |  |                                |         |        |   |                |  |   |       |  |      |  
|------------------------------------ |  | ------------------------------ | ------- | ------ | - | -------------- |  | - | ----- |  | ---- | -
|                                     |  | Three Months EndedDecember 31, |         | Change |   | Percent Change | 
|                                     |  | 2004                           |         | 2003   |   |               
|Operating Expenses:                  |  |                                |         |        |   |                |  |   |       |  |      |  
|Selling, General, and Administrative |  | $                              | 70,465  |        | $ | 69,623         |  | $ | 842   |  | 1.2  | %
|Research and Development             |  |                                | 9,185   |        |   | 7,648          |  |   | 1,537 |  | 20.1 | %
|                                     |  |                                |         |        |   |                |  |   |       |  |      |  
|Total Operating Expenses             |  | $                              | 79,650  |        | $ | 77,271         |  | $ | 2,379 |  | 3.1  | %
|                                     |  |                                |         |        |   |                |  |   |       |  |      |  
|                                     |  |                                |        
|                                     |  | Nine Months EndedDecember 31,  |         | Change |   | Percent Change | 
|                                     |  | 2004                           |         | 2003   |   |               
|Operating Expenses:                  |  |                                |         |        |   |                |  |   |       |  |      |  
|Selling, General, and Administrative |  | $                              | 214,975 |        | $ | 214,182        |  | $ | 793   |  | 0.4  | %
|Research and Development             |  |                                | 27,173  |        |   | 21,726         |  |   | 5,447 |  | 25.1 | %
|                                     |  |                                |         |        |   |                |  |   |       |  |      |  
|Total Operating Expenses             |  | $                              | 242,148 |        | $ | 235,908        |  | $ | 6,240 |  | 2.6  | %
|                                     |  |                                |         |        |   |                |  |   |       |  |      |  



Significant
components of total selling, general, and administrative expenses (SG&A) are compensation and associated costs, fees for professional services, travel and entertainment, and other general and administrative expenses. As a percentage of total
revenues, SG&A expenses were 24.8% and 26.7% for the three and nine month periods ended December 31, 2004, respectively, as compared to 25.4% and 27.1%, respectively, for the comparable prior year periods. As a percentage of revenues, SG&A
expenses decreased in both fiscal 2005 periods. SG&A expenses remained relatively flat for the three and nine month periods ended December 31, 2004, as compared to the same prior year periods.



As a percentage of total revenues, research and development expenses were
3.2% and 3.4% for the three and nine month periods ended December 31, 2004, respectively, as compared to 2.8% and 2.7%, respectively, for the same prior year periods. For the three and nine month periods ended December 31, 2004, research and
development expenses increased 20.1% and 25.1% to $9.2 million and $27.2 million, respectively, as compared to $7.6 million and $21.7 million, respectively, during the same prior year periods. The increase in research and development expenses during
both periods is attributable to an increased emphasis on new product development, product improvements, and the development of new technological innovations.



Interest Expense, Net



The following table illustrates the changes in interest expense, net for the three and nine month periods ended December 31, 2004 and 2003:



(dollars in thousands)



|                                            |  |                                |       |   |      |   |       |        |  |   |       |  
|------------------------------------------- |  | ------------------------------ | ----- | - | ---- | - | ----- | ------ |  | - | ----- | -
|                                            |  | Three Months EndedDecember 31, |       |   |      |  
|                                            |  | 2004                           |       |   | 2003 |   |       | Change | 
|Interest Expense, Net:                      |  |                                |       |   |      |   |       |        |  |   |       |  
|Interest Expense                            |  | $                              | 1,118 |   |      | $ | 440   |        |  | $ | 678   |  
|Interest and Miscellaneous (Income) Expense |  |                                | (484  | ) |      |   | 8     |        |  |   | (492  | )
|                                            |  |                                |       |   |      |   |       |        |  |   |       |  
|Interest Expense, Net                       |  | $                              | 634   |   |      | $ | 448   |        |  | $ | 186   |  
|                                            |  |                                |       |   |      |   |       |        |  |   |       |  
|                                            |  |                               
|                                            |  | Nine Months EndedDecember 31,  |       |   |      |  
|                                            |  | 2004                           |       |   | 2003 |   |       | Change | 
|Interest Expense, Net:                      |  |                                |       |   |      |   |       |        |  |   |       |  
|Interest Expense                            |  | $                              | 3,008 |   |      | $ | 1,486 |        |  | $ | 1,522 |  
|Interest and Miscellaneous (Income) Expense |  |                                | (988  | ) |      |   | (54   | )      |  |   | (934  | )
|                                            |  |                                |       |   |      |   |       |        |  |   |       |  
|Interest Expense, Net                       |  | $                              | 2,020 |   |      | $ | 1,432 |        |  | $ | 588   |  
|                                            |  |                                |       |   |      |   |       |        |  |   |       |  



Interest expense, net
consists of interest expense on debt, offset by interest earned on cash, cash equivalents, short-term investment balances, and other miscellaneous income. The most significant driver of the increase in both fiscal 2005 periods is interest expense,
which resulted from higher interest rates on the Companys outstanding debt during fiscal 2005 as compared to the prior year. A detailed discussion of the Companys outstanding debt is included in the Companys Annual Report on Form
10-K for the year ended March 31, 2004 filed with the Securities and Exchange Commission on June 14, 2004 in the section of Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, titled,
Sources of Credit, and in Note 6 to the Companys consolidated financial statements, Long-Term Debt. The Companys credit facilities have not changed materially from March 31, 2004.



22



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##### Table of Contents

Income Tax Expense

The following table illustrates the changes in income tax expense for the three and nine month periods ended December 31, 2004 and 2003, and provides a comparison of the effective income tax rates for the
aforementioned periods:



(dollars in thousands)



|                          |  |                                |        |   |        |   |                |   |  |   |       |  |      |  
|------------------------- |  | ------------------------------ | ------ | - | ------ | - | -------------- | - |  | - | ----- |  | ---- | -
|                          |  | Three Months EndedDecember 31, |        |   | Change |   | Percent Change |  
|                          |  | 2004                           |        |   | 2003   |   |                |  
|Income Tax Expense        |  | $                              | 14,821 |   |        | $ | 10,285         |   |  | $ | 4,536 |  | 44.1 | %
|Effective Income Tax Rate |  |                                | 37.7   | % |        |   | 27.5           | % |  |   |       |  |      |  
|                          |  |                                |       
|                          |  | Nine Months EndedDecember 31,  |        |   | Change |   | Percent Change |  
|                          |  | 2004                           |        |   | 2003   |   |                |  
|Income Tax Expense        |  | $                              | 35,807 |   |        | $ | 31,008         |   |  | $ | 4,799 |  | 15.5 | %
|Effective Income Tax Rate |  |                                | 37.0   | % |        |   | 32.7           | % |  |   |       |  |      |  



The Company provides
for income tax expense on an interim basis based upon the Companys estimate of the annual effective income tax rate. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of
the Companys annual earnings and the taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the Companys ability to use tax credits and net operating loss carryforwards, and available
tax planning alternatives. The effective income tax rates for the third quarters of fiscal 2005 and 2004 were 37.7% and 27.5%, respectively. For the first nine months of fiscal 2005 and 2004, the effective income tax rates were 37.0% and 32.7%,
respectively. The higher effective income tax rates during both fiscal 2005 periods resulted primarily from a reduction of operating profits generated in international tax jurisdictions and the resulting inability of the Company to fully utilize a
portion of foreign tax credits against foreign profits taxed in the United States.



Business Segment Results of Operations

The Company operates and reports in three business segments: Healthcare, Life
Sciences, and STERIS Isomedix Services. Note 12, Business Segment Information, to the Companys consolidated financial statements included in the Companys Annual Report on Form 10-K filed with the Securities and Exchange
Commission on June 14, 2004, provides detailed information regarding each business segment. The following table provides a summary of the Companys revenues by business segment for the three and nine month periods ended December 31, 2004 and
2003:



(dollars in thousands)



|                         |  |                                |         |        |   |         |                |   |         |   |  |       |  
|------------------------ |  | ------------------------------ | ------- | ------ | - | ------- | -------------- | - | ------- | - |  | ----- | -
|                         |  | Three Months EndedDecember 31, |         | Change |   |         | Percent Change |  
|                         |  | 2004                           |         | 2003   |   |        
|Revenues:                |  |                                |         |        |   |         |                |   |         |   |  |       |  
|Healthcare               |  | $                              | 204,942 |        | $ | 188,583 |                | $ | 16,359  |   |  | 8.7   | %
|Life Sciences            |  |                                | 54,522  |        |   | 63,917  |                |   | (9,395  | ) |  | -14.7 | %
|STERIS Isomedix Services |  |                                | 24,925  |        |   | 21,786  |                |   | 3,139   |   |  | 14.4  | %
|                         |  |                                |         |        |   |         |                |   |         |   |  |       |  
|Total Revenues           |  | $                              | 284,389 |        | $ | 274,286 |                | $ | 10,103  |   |  | 3.7   | %
|                         |  |                                |         |        |   |         |                |   |         |   |  |       |  
|                         |  |                                |        
|                         |  | Nine Months EndedDecember 31,  |         | Change |   |         | Percent Change |  
|                         |  | 2004                           |         | 2003   |   |        
|Revenues:                |  |                                |         |        |   |         |                |   |         |   |  |       |  
|Healthcare               |  | $                              | 568,657 |        | $ | 547,824 |                | $ | 20,833  |   |  | 3.8   | %
|Life Sciences            |  |                                | 161,769 |        |   | 179,217 |                |   | (17,448 | ) |  | -9.7  | %
|STERIS Isomedix Services |  |                                | 73,606  |        |   | 63,914  |                |   | 9,692   |   |  | 15.2  | %
|                         |  |                                |         |        |   |         |                |   |         |   |  |       |  
|Total Revenues           |  | $                              | 804,032 |        | $ | 790,955 |                | $ | 13,077  |   |  | 1.7   | %
|                         |  |                                |         |        |   |         |                |   |         |   |  |       |  



23



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##### Table of Contents

Healthcare Segment



Healthcare segment revenues represented 72.0% of total revenues for the third quarter of fiscal 2005 as compared to 68.8% of
total revenues for the third quarter of fiscal 2004. Healthcare revenues increased $16.4 million, or 8.7%, to $204.9 million for the third quarter of fiscal 2005 as compared to $188.6 million for the third quarter of fiscal 2004. The increase in
Healthcare revenues for the quarter was primarily driven by a 12.3% increase in capital revenues, which resulted from increased demand generated in the United States hospital market. At December 31, 2004, the Healthcare segments backlog
amounted to $76.1 million, representing increases of $3.7 million, or 5.0%, and $7.6 million, or 11.2%, over the September 30, 2004 and December 31, 2003 levels, respectively. The Healthcare segments fiscal 2005 third quarter revenues were
also positively impacted by a 4.5% increase in consumable revenues, primarily attributable to increased chemical indicator sales resulting from the business integration of Browne.



Healthcare segment revenues represented 70.7% of total revenues for the first nine months of fiscal 2005 as compared to
69.2% of total revenues for the third quarter of fiscal 2004. Healthcare revenues increased $20.8 million, or 3.8%, to $568.7 million for the first nine months of fiscal 2005 as compared to $547.8 million for the first nine months of fiscal 2004.
Healthcare capital revenues increased 4.1% year over year, for the reasons presented in the preceding paragraph. Service revenues within the segment increased 5.4%, year over year, and contributed to the overall increase in segment revenues.



Life Sciences Segment



Life Sciences segment revenues represented 19.2% of total revenues for the
third quarter of fiscal 2005 as compared to 23.3% of total revenues for the third quarter of fiscal 2004. Life Sciences revenues decreased $9.4 million, or 14.7%, to $54.5 million for the third quarter of fiscal 2005 as compared to $63.9 million for
the third quarter of fiscal 2004. The decrease in Life Sciences revenues for the quarter was driven by a 25.1% decrease in capital revenues. Consolidations within the European pharmaceutical marketplace during the Companys first two fiscal
2005 quarters continued to impact European capital equipment sales. The quarter over quarter decline in capital revenues was further impacted by more prevalent cautiousness by pharmaceutical customers in the North American marketplace regarding
capital spending. At December 31, 2004, backlog for the segment was $64.3 million, compared to backlogs of $61.1 million at September 30, 2004, and $77.8 million at December 31, 2003. An increase of 15.5% in recurring revenue streams partially
offset the segments quarter over quarter decline in capital revenues.



Life Sciences segment revenues represented 20.1% of total revenues for the first nine months of fiscal 2005 as compared to 22.7% of total revenues for the first nine months of fiscal 2004. Life Sciences revenues
decreased $17.4 million, or 9.7%, to $161.8 million for the first nine months of fiscal 2005 as compared to $179.2 million for the first nine months of fiscal 2004. The decrease in Life Sciences revenues for the year to date period was driven by a
20.7% decline in capital revenues, the reasons for which were presented in the previous paragraph. An increase of 20.6% in recurring revenue streams partially offset the segments year over year decline in capital revenues.



STERIS Isomedix Services Segment



STERIS Isomedix Services segment revenues represented 8.8% and 9.2% of total
revenues for the three and nine month periods ended December 31, 2004 as compared to 7.9% and 8.1% during the comparable prior year periods. The segment experienced revenue growth of 14.4% and 15.2%, respectively, for the three and nine month
periods ended December 31, 2004, as compared to the same periods in the prior year. The revenue growth in both periods presented is the result of increased demand, higher utilization of recently expanded facilities in the segment, and a temporary
reduction in industry processing capacity.



24



---

##### Table of Contents

The following table provides a summary of the Companys operating results by business segment for
the three and nine month periods ended December 31, 2004 and 2003:



(dollars in thousands)



|                         |  |                                |         |        |      |   |                |  |   |         |   |  |      |  
|------------------------ |  | ------------------------------ | ------- | ------ | ---- | - | -------------- |  | - | ------- | - |  | ---- | -
|                         |  | Three Months EndedDecember 31, |         | Change |      |   | Percent Change | 
|                         |  | 2004                           |         |        | 2003 |   |               
|Operating Income (Loss): |  |                                |         |        |      |   |                |  |   |         |   |  |      |  
|Healthcare               |  | $                              | 38,067  |        |      | $ | 31,364         |  | $ | 6,703   |   |  | 21.4 | %
|Life Sciences            |  |                                | (3,112  | )      |      |   | 3,255          |  |   | (6,367  | ) |  | NM   |  
|STERIS Isomedix Services |  |                                | 4,957   |        |      |   | 3,207          |  |   | 1,750   |   |  | 54.6 | %
|                         |  |                                |         |        |      |   |                |  |   |         |   |  |      |  
|Total Operating Income   |  | $                              | 39,912  |        |      | $ | 37,826         |  | $ | 2,086   |   |  | 5.5  | %
|                         |  |                                |         |        |      |   |                |  |   |         |   |  |      |  
|                         |  |                                |        
|                         |  | Nine Months EndedDecember 31,  |         | Change |      |   | Percent Change | 
|                         |  | 2004                           |         |        | 2003 |   |               
|Operating Income (Loss): |  |                                |         |        |      |   |                |  |   |         |   |  |      |  
|Healthcare               |  | $                              | 94,516  |        |      | $ | 83,863         |  | $ | 10,653  |   |  | 12.7 | %
|Life Sciences            |  |                                | (10,575 | )      |      |   | 3,127          |  |   | (13,702 | ) |  | NM   |  
|STERIS Isomedix Services |  |                                | 14,853  |        |      |   | 9,384          |  |   | 5,469   |   |  | 58.3 | %
|                         |  |                                |         |        |      |   |                |  |   |         |   |  |      |  
|Total Operating Income   |  | $                              | 98,794  |        |      | $ | 96,374         |  | $ | 2,420   |   |  | 2.5  | %
|                         |  |                                |         |        |      |   |                |  |   |         |   |  |      |  

---

NM- Not meaningful



To determine segment operating income (loss), the Company reduces the
respective segments revenues by direct expenses and indirect cost allocations, which reflect the full allocation of all distribution, corporate, and research and development expenses. Corporate cost allocations are based on each segments
portion of revenues, headcount, or other variables in relation to the total Company.



Healthcare Segment



Healthcare-
Operating income increased $6.7 million, or 21.4%, to $38.1 million for the third quarter of fiscal 2005, as compared to $31.4 million during the comparable prior year period. As a percentage of segment revenues, operating income represented 18.6%
and 16.6% for the quarters ended December 31, 2004 and 2003, respectively, reflecting lower operating expenses as a percentage of revenue. Healthcare gross margins were 47.3% for the third quarter of fiscal 2005 as compared to 47.7% during the same
prior year period, and were impacted by a continued shift in revenue mix toward capital equipment sales which carry lower margins. For the 2005 year to date period, the segments operating income was $94.5 million, representing an increase of
$10.7 million, or 12.7%, as compared to the first nine months of fiscal 2004. For the year to date periods of fiscal 2005 and 2004, gross margins remained relatively flat at 47.7% and 47.6%, respectively.



Life Sciences Segment



Life Sciences- Operating loss was $3.1 million and $10.6 million for the
third quarter and first nine months of fiscal 2005 as compared to operating income of $3.3 million and $3.1 million during the respective prior year periods. For the third quarter and year to date period of fiscal 2005, gross margins were 29.3% and
30.7%, as compared to 32.9% and 32.2% during the comparable prior year periods. Both fiscal 2005 periods were negatively impacted by reduced sales volumes and the resulting lower fixed cost absorption in the segment.



STERIS Isomedix Services Segment



STERIS Isomedix Services- Operating income increased $1.8 million, or 54.6%,
to $5.0 million for the third quarter of fiscal 2005, as compared to $3.2 million during the third quarter of fiscal 2004. For the nine month period ended December 31, 2004, the segments operating income was $14.9 million, representing an
increase of $5.5 million, or 58.3%, over the comparable prior year periods operating income of $9.4 million. The drivers of the increase in both periods were more favorable gross margins. Gross margins benefited from increased volume and
improvements in processing utilization as a result of capital investments made during the past year.



25



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##### Table of Contents

Liquidity and Capital Resources



The following table summarizes significant components of the Companys cash flow for the nine months
ended December 31, 2004 and 2003:



Cash Flows



(dollars in thousands)



|                                                                                            |  |                               |         |   |        |   |         |                |  |   |         |   |  |        |  
|------------------------------------------------------------------------------------------- |  | ----------------------------- | ------- | - | ------ | - | ------- | -------------- |  | - | ------- | - |  | ------ | -
|                                                                                            |  | Nine Months EndedDecember 31, |         |   | Change |   |         | Percent Change | 
|                                                                                            |  | 2004                          |         |   | 2003   |   |         |               
|Operating activities:                                                                       |  |                               |         |   |        |   |         |                |  |   |         |   |  |        |  
|Net income                                                                                  |  | $                             | 60,967  |   |        | $ | 63,934  |                |  | $ | (2,967  | ) |  | -4.6   | %
|Non-cash items                                                                              |  |                               | 39,853  |   |        |   | 43,514  |                |  |   | (3,661  | ) |  | -8.4   | %
|Changes in operating assets and liabilities, excluding the effects of business acquisitions |  |                               | (1,763  | ) |        |   | (40,233 | )              |  |   | 38,470  |   |  | 95.6   | %
|                                                                                            |  |                               |         |   |        |   |         |                |  |   |         |   |  |        |  
|Net cash provided by operating activities                                                   |  | $                             | 99,057  |   |        | $ | 67,215  |                |  | $ | 31,842  |   |  | 47.4   | %
|                                                                                            |  |                               |         |   |        |   |         |                |  |   |         |   |  |        |  
|Investing activities:                                                                       |  |                               |         |   |        |   |         |                |  |   |         |   |  |        |  
|Purchases of property, plant, equipment, and intangibles                                    |  | $                             | (38,793 | ) |        | $ | (48,430 | )              |  | $ | 9,637   |   |  | 19.9   | %
|Purchase of business related assets                                                         |  |                               |        |   |        |   | (2,900  | )              |  |   | 2,900   |   |  | NM     |  
|Investments in businesses, net of cash acquired                                             |  |                               | (53,323 | ) |        |   | (36,814 | )              |  |   | (16,509 | ) |  | -44.8  | %
|                                                                                            |  |                               |         |   |        |   |         |                |  |   |         |   |  |        |  
|Net cash used in investing activities                                                       |  | $                             | (92,116 | ) |        | $ | (88,144 | )              |  | $ | (3,972  | ) |  | -4.5   | %
|                                                                                            |  |                               |         |   |        |   |         |                |  |   |         |   |  |        |  
|Financing activities:                                                                       |  |                               |         |   |        |   |         |                |  |   |         |   |  |        |  
|Net (payments) proceeds under credit facilities                                             |  | $                             | (4,398  | ) |        | $ | 46,800  |                |  | $ | (51,198 | ) |  | NM     |  
|Payments of long-term obligations and capital leases                                        |  |                               | (3,273  | ) |        |   | (4,933  | )              |  |   | 1,660   |   |  | 33.7   | %
|Repurchases of Common Shares                                                                |  |                               | (33,868 | ) |        |   | (16,609 | )              |  |   | (17,259 | ) |  | -103.9 | %
|Stock option and other equity transactions, net                                             |  |                               | 14,581  |   |        |   | 7,748   |                |  |   | 6,833   |   |  | 88.2   | %
|Deferred financing fees and debt issuance costs                                             |  |                               |        |   |        |   | (537    | )              |  |   | 537     |   |  | NM     |  
|                                                                                            |  |                               |         |   |        |   |         |                |  |   |         |   |  |        |  
|Net cash (used in) provided by financing activities                                         |  | $                             | (26,958 | ) |        | $ | 32,469  |                |  | $ | (59,427 | ) |  | -183.0 | %
|                                                                                            |  |                               |         |   |        |   |         |                |  |   |         |   |  |        |  

---

NM- Not meaningful



Net Cash Provided by Operating Activities



Net cash provided by operating activities was $99.1 million for the first
nine months of fiscal 2005 as compared to $67.2 million for the same prior year period. Non-cash items include depreciation and amortization and fluctuations in deferred income taxes and other items. Deferred income tax liabilities increased during
the first nine months of fiscal 2005 due to increases in deferred income taxes attributable to long-term customer contracts and utilization of net operating loss carryforwards. Significant components of the Companys operating cash flows for
the nine months ended December 31, 2004 and 2003 driving the increase in net cash inflow from operating activities of $31.8 million include:



| |  |  | Accounts receivables, net- Excluding the impact of foreign currency translation adjustments and businesses acquired, accounts receivable, net decreased $10.5 million and $1.8
million during the first nine months of fiscal 2005 and 2004, respectively. Accounts receivable balances are influenced by the timing of revenues, customer payments, and progress billings for contracts which are accounted for under the percentage of
completion method of accounting for construction-type contracts. At December 31, 2004 and March 31, 2004, accounts receivables represent 83 days and 85 days outstanding, respectively.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Inventories- Excluding the impact of foreign currency translation adjustments and businesses acquired, inventories decreased $3.3 million during the first nine months of fiscal
2005, as compared to an increase of $0.7 million during the same period of the prior year. The Company has established targeted inventory production levels at manufacturing facilities in a process called modified level-loading, whereby a relatively
constant stream of inventory production occurs, which may result in varying inventory levels during the year as a result of customer demand fluctuations.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



26



---

##### Table of Contents

| |  |  | Accounts payable, net- Excluding the impact of foreign currency translation adjustments and businesses acquired, accounts payable decreased $19.4 million and $30.9 million during
the first nine months of fiscal 2005 and 2004, respectively. Based upon varying payment due dates of accounts payable obligations and the Companys cash management strategies, accounts payable balances may fluctuate from period to period.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Accruals and other, net- Excluding the impact of foreign currency translation adjustments and businesses acquired, accruals and other, net decreased $3.2 million and increased $11.3
million during the first nine months of fiscal 2005 and 2004, respectively. Accruals and other, net decreased during the first nine months of fiscal 2005 due to decreased accrued payroll and related liabilities that resulted from the timing of
compensation related payments, reduced projected bonus payouts under the Companys profit sharing plan, and reduced 401(k) obligations due to the timing of their funding. The decrease in accruals and other, net was further impacted by reduced
levels of accrued employee and dealer commissions and deferred revenues.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Net Cash Used In Investing Activities



For the first nine months of fiscal 2005, net cash used in investing activities amounted to $92.1 million as compared to $88.1 million during the same prior year period. The following discussion summarizes the significant components of the
Companys investing cash flows for the nine months ended December 31, 2004 and 2003:



| |  |  | Purchases of property, plant, equipment, and intangibles- During the first nine months of fiscal 2005, the Companys capital expenditures amounted to $38.8 million as compared
to $48.4 million during the comparable prior year period. The decrease in capital spending year over year resulted from a reduction of in process corporate facilities expansion projects during fiscal 2005 as compared to the prior year. In addition,
certain information technology initiatives were completed during the first half of fiscal 2005, thus reducing the level of capital expenditures during the current year. Additionally, during fiscal 2004, as a result of Isomedix Services facilities
expansions, incremental cobalt requirements were funded by capital expenditures.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Investments in businesses, net of cash acquired- During the second quarter of fiscal 2005, the Company announced that a subsidiary had acquired Albert Browne Limited
(Browne). Investment in this business, including direct acquisition costs, net of cash acquired, amounted to $53.3 million. Further discussion of the Companys acquisition of Browne is included in Note 2, Business
Acquisition. Net cash flows used in investing activities for the first nine months of fiscal 2004 reflect the acquisition of Hamo Holdings AG (Hamo) of $36.8 million. The Company completed this acquisition during the first quarter
of fiscal 2004.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Purchases of business related assets- During the first quarter of fiscal 2004, the Company acquired certain assets related to the sterilization container business from Sterion
Incorporated for $2.9 million. The purchase of these assets is presented as cash used in investing activities for the nine month period ended December 31, 2003.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Net Cash (Used In) Provided By Financing Activities



For the first nine months of fiscal 2005, net cash used in financing activities amounted to $27.0 million as compared to net
cash provided by financing activities of $32.5 million during the same prior year period. The following discussion summarizes the significant components of the Companys financing cash flows for the nine months ended December 31, 2004 and 2003:



| |  |  | Net (payments) proceeds under credit facilities- During the first nine months of fiscal 2005, net payments under credit facilities amounted to $4.4 million. During the first nine
months of fiscal 2004, net proceeds under the Companys credit facilities amounted to $46.8 million and were partially used by the Company to fund the acquisition of Hamo. A detailed description of the Companys sources of credit is
included in the Companys Annual Report on Form 10-K for the year ended March 31, 2004 filed with the Securities and Exchange Commission on June 14, 2004 in the section of Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations, titled, Sources of Credit, and in Note 6, Long-Term Debt, to the consolidated financial statements. There have been no significant changes in the Companys sources of credit
since March 31, 2004.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Repurchases of Common Shares- As discussed in Note 10, Repurchases of Common Shares, the Companys Board of Directors has authorized the periodic repurchase of the
Companys Common Shares. From time to time, the Company engages in open market transactions to repurchase its Common Shares. During the first nine months of fiscal 2005, the Company repurchased 1.5 million of its Common Shares for $33.9
million, representing an average purchase price of $22.01 per Common Share. During the first nine months of fiscal 2004, the Company repurchased 0.8 million of its Common Shares for $16.6 million, representing an average purchase price of $21.82 per
Common Share.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Stock option and other equity transactions- Cash flows from stock option and other equity transactions are primarily derived from the issuance of the Companys Common Shares
under various employee stock compensation programs. During the first nine months of fiscal 2005, cash proceeds, net of tax benefits, from the issuance of Common Shares under these programs totaled $4.7 million as compared to $3.9 million during the
same period of fiscal 2004.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Cash Requirements



The Company believes that its available cash, cash
flows from operations, and sources of credit will be adequate to satisfy its operating and capital needs for the next twelve months. The Companys management and Board of Directors continually review the operating and capital requirements, as
well as the overall capital structure of the Company.



Sources of Credit
and Contractual and Commercial Commitments



A
discussion of the Companys sources of credit and contractual and commercial commitments is included in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, included in the
Companys Annual Report on Form 10-K for the year ended March 31, 2004, filed with the Securities and Exchange Commission on June 14, 2004. The Companys sources of credit and contractual and commercial commitments have not changed
materially from March 31, 2004. At December 31, 2004 and March 31, 2004, debt to capital (as defined on page 16) amounted to 12.4% and 13.8%, respectively.



Critical Accounting Policies, Estimates, and Assumptions



A discussion of the Companys critical accounting policies, estimates, and assumptions is included in Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations, included in the Companys Annual Report on Form 10-K for the year ended March 31, 2004, filed with the Securities and Exchange Commission on June 14, 2004. The
Companys critical accounting policies, estimates, and assumptions have not changed materially from March 31, 2004.



Contingencies



The Company is involved in various patent, product liability, consumer, commercial, environmental, tax proceedings and claims, government investigations,
and other legal and regulatory proceedings and claims that arise from time to time in the ordinary course of business. In accordance with Statement of Financial Accounting Standards No. 5, Accounting for Contingencies, the Company
records accruals for such contingencies to the extent that the Company concludes that their occurrence is both probable and estimable. The Company considers many factors in making these assessments, including the professional judgment of experienced
members of management and the Companys legal counsel. The Company has made estimates as to the likelihood of unfavorable outcomes and the amounts of such potential losses. In the opinion of management, the ultimate outcome of these proceedings
and claims is not anticipated to have a material adverse effect on the Companys consolidated financial position, results of operations, or cash flows. Litigation is inherently unpredictable and actual results could materially differ from the
Companys estimates. The Company records anticipated recoveries under applicable insurance contracts when assured of recovery.



To the extent that management of the Company believes it is probable that a taxing authority will take a sustainable position on a matter contrary to the
position taken by the Company, the Company provides tax accruals. If the Company does not prevail in matters for which accruals have been established or is required to pay amounts in excess of established accruals, the Companys effective
income tax rate in a given financial statement period may be materially impacted.



Refer to Part II, Item 1, Legal Proceedings, on page 31 of this Form 10-Q.



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International Operations



The Company conducts operations outside of the United States through its subsidiaries in the same business segments as the
Companys domestic operations. Depending on the direction of change relative to the U.S. dollar, foreign currency values can increase or reduce the reported dollar value of the Companys net assets and results of operations. Revenues were
favorably impacted by $5.4 million, or 1.9%, and net income was favorably impacted by $1.1 million, or 4.5%, during the third quarter of fiscal 2005 as compared to a favorable impact to revenues and net income of $6.4 million, or 2.4%, and $0.6
million, or 2.3%, respectively, during the comparable prior year period. Foreign currency fluctuations favorably impacted revenues during the first nine months of fiscal 2005 by $10.4 million, or 1.3%, and net income by $0.7 million, or 1.2%, as
compared to a favorable impact to revenues and net income of $17.2 million, or 2.2%, and $1.5 million, or 2.4%, respectively, during the comparable prior year period.



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 buying patterns, and international business practices. Sales and profitability of certain of the Companys 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.



Forward-Looking Statements



This document may contain statements and data concerning certain trends, expectations, forecasts, estimates, or other forward-looking information
affecting or relating to the Company or its industry that are intended to qualify for the protections afforded forward-looking statements under the Private Securities Litigation Reform Act of 1995 and other laws and regulations.
Forward-looking statements speak only as to the date of this report and 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. Many important factors
could cause actual results to differ materially from those in the forward-looking statements including, without limitation, disruption of production or supplies, changes in market conditions, political events, pending or future claims or litigation,
competitive factors, technology advances, and changes in government regulations or the application or interpretation thereof. Other risk factors are described in the Companys Form 10-K and other securities filings. Many of these important
factors are outside STERISs control. No assurances can be provided as to any future financial results. Unless legally required, 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. 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, or applications, or the Companys business initiatives will take longer, cost
more, or produce lower benefits than anticipated, (c) the possibility that compliance with laws, court rulings, regulations, or certification requirements of domestic and foreign authorities may delay or prevent new product introductions, affect the
production and marketing of existing products, or otherwise affect Company performance, (d) the potential of international unrest or effects of fluctuations in foreign currencies of countries where the Company does a sizeable amount of business, and
(e) the possibility of reduced demand, or reductions in the rate of growth in demand, for the Companys products and services, and (f) the ability of the Company to successfully complete and/or realize the anticipated benefits of the proposed
divestiture of certain Life Sciences product lines.



Availability of Securities and Exchange Commission Filings



The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports, and other information with the Securities and Exchange Commission (the
SEC). Copies of these materials can be obtained by visiting the SECs Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549 or by accessing the SECs website at http://www.sec.gov. Information may
be obtained by calling the SEC at 1-800-SEC-0330. In addition, as soon as reasonably practicable after such materials are filed with or furnished to the SEC, the Company makes copies available to the public, free of charge, on or through the
investor relations section of its website at http://www.steris.com. Information on the Companys website is not incorporated by reference into this report.



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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 Disclosures about Market Risk, of the
Companys Annual Report on Form 10-K for the year ended March 31, 2004 filed with the Securities and Exchange Commission on June 14, 2004. The Companys exposures to market risk have not changed materially since March 31, 2004. During the
second quarter of fiscal 2005, the Company began to manage its foreign currency risk by entering into forward contracts. These contracts are entered into in order to mitigate the impact of currency fluctuations on transactions and other exposures.
The Company does not enter into forward contracts for speculative purposes.



ITEM 4. CONTROLS AND PROCEDURES



The Companys management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934 (the Exchange
Act). As of December 31, 2004, an evaluation was performed under the supervision and with the participation of the Companys management, including the Chief Executive Officer (CEO) and the Chief Financial Officer
(CFO), of the effectiveness of the Companys disclosure controls and procedures. Based on that evaluation, the Companys management, including the CEO and the CFO, concluded that the Companys disclosure controls and
procedures as of December 31, 2004 were effective in ensuring material information required to be disclosed in this Quarterly Report on Form 10-Q was recorded, processed, summarized, and reported on a timely basis. In addition, there were no changes
in the Companys internal control over financial reporting as defined under Exchange Act Rules 13a-15(f) and 15d-15(f) that occurred during the quarter ended December 31, 2004 that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.



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PART II - OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



The Company is involved in a number of legal proceedings and claims which the Company believes arise from the ordinary course of its business, given its size, history, complexity, nature of its business, and industries in which it
participates. These legal proceedings and claims generally involve a variety of legal theories and allegations, including without limitation, personal injury (e.g., slip and falls, automobile accidents), product liability (e.g., based on the
operation or claimed malfunction of products), product exposure (e.g., claimed exposure to chemicals, asbestos, contaminants), property damage (e.g., claimed damage due to leaking equipment, fire), economic loss (e.g., breach of contract, other
commercial claims), employment (e.g., wrongful termination), and other claims for damage and relief. In fiscal 2004, the Company settled a wrongful discharge lawsuit with a former employee. In connection with that settlement, the Company became
aware of an investigation which the Company believes was initiated based on discussions between the former employee and the FDA regarding the Companys SYSTEM 1 ® sterile processing system. The investigation is currently being conducted by
the FDA and the U.S. Department of Justice and is ongoing. The Company has offered and intends to cooperate with the government agencies regarding this matter and has received a subpoena for documents relating to this matter.



The Company believes it has adequately reserved for its current litigation
and that the ultimate outcome of its pending lawsuits and claims will not have a material adverse effect on the Companys consolidated financial position or results of operations taken as a whole. Due to their inherent uncertainty, however,
there can be no assurance of the ultimate outcome of current or future litigation, proceedings, investigations, or claims or their effect. The Company presently maintains product liability insurance coverage and other liability coverage in amounts
and with deductibles that it believes are prudent.



From time
to time, STERIS is also involved in legal proceedings as a plaintiff involving contract, patent protection, and other claims asserted by the Company. Gains, if any, from these proceedings are recognized when they are realized. The Company believes
there have been no material recent developments concerning the Companys legal proceedings since March 31, 2004 and no new material pending legal proceedings required to be reported.



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



No repurchases of Common Shares were made by or on behalf of the Company during the third quarter of fiscal 2005. As of December 31, 2004,
2,726,000 shares remained authorized for repurchase under the new share repurchase program that was approved by the Companys Board of Directors and announced on July 28, 2004. This Common Share repurchase authorization does not have a stated
maturity date.



ITEM 5. OTHER INFORMATION



On
February 8, 2005, the Company entered into an executive retention agreement with Peter A. Burke, the Companys Senior Vice President and Chief Technology Officer. The agreement provides that Dr. Burke will receive a base salary of $24,167 per
month for the fiscal year ending March 31, 2005, as well as the opportunity to participate in the Companys cash bonus plan, benefit plans and stock option programs.



Under the terms of the agreement, if Dr. Burkes employment with the Company is terminated prior to the third
anniversary of the agreement (or, after an extension of the agreement, prior to the third anniversary of the extension) by the Company without cause (as defined in the agreement) or by Dr. Burke for good reason (as defined in
the agreement), Dr. Burke will be entitled to receive, subject to his execution of a release of all claims against the Company and his compliance with his obligations under the agreement, (a) his then-current salary for either (1) the number of
months remaining from the date of his termination to the date of the third anniversary of the agreement or any extension thereof, as applicable, or (2) twelve months, whichever is greater, (b) continuation of medical and dental benefits for such
period, and (c) a one-time payment equal to the amount Dr. Burke would have been entitled to receive as a bonus relating to the fiscal year in which the termination occurred, pro rated to the date of termination. In addition, if Dr. Burkes
employment with the Company is terminated during the first twelve months of the agreement by the Company without cause or by Dr. Burke for good reason, for purposes of calculating Dr. Burkes service requirements under the Companys 2002
Stock Option Plan, Dr. Burke will be considered to have additional service credit with the Company equal to the number of months from the date of such termination to the date of the first anniversary of the agreement.



ITEM 6. EXHIBITS



(a)
Exhibits required by Item 601 of Regulation S-K



|              |  |                                                                                                                                                                                                                                                   
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                                                                                                                                               
|3.1           |  | 1992 Amended Articles of Incorporation of STERIS Corporation, as amended on May 14, 1996, November 6, 1996, and August 6, 1998 (filed as Exhibit 3.1 to Form 10-K for the fiscal year ended
March 31, 2000, and incorporated herein by reference).
|              | 
|3.2           |  | Amended and Restated Regulations of STERIS Corporation effective July 28, 2004 (filed as Exhibit 3.2 to Form 10-Q for the fiscal quarter ended September 30, 2004, as originally filed, and
incorporated herein by reference).                    
|              | 
|4.1           |  | Specimen Form of Common Stock Certificate (filed as Exhibit 4.1 to Form 10-K for the fiscal year ended March 31, 2002, and incorporated herein by reference).                                                                                     



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|     |  |                                                                                                                                                                                                                                                                                                                 
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.2  |  | Amended and Restated Rights Agreement, dated as of January 21, 1999, between STERIS Corporation and National City Bank, as successor Rights Agent (filed as Exhibit 4.2 to the Registration
Statement on Form 8-A filed April 16, 1999, and incorporated herein by reference).                                  
|     | 
|4.3  |  | Amendment No. 1, dated June 7, 2002, to Amended and Restated Rights Agreement, dated as of January 21, 1999, between STERIS Corporation and National City Bank, as successor Rights Agent
(filed as Exhibit 4.1 to the Registration Statement on Form 8-A/A filed June 10, 2002, and incorporated by reference).
|     | 
|10.1 |  | Asset Purchase Agreement dated as of November 15, 2004 between Cosmed Group, Inc. and Registrant.                                                                                                                                                                                                               
|     | 
|10.2 |  | Form of STERIS Corporation Nonqualified Stock Option Agreement for Employees.                                                                                                                                                                                                                                   
|     | 
|10.3 |  | Form of STERIS Corporation Notice of Restricted Grant for Directors.                                                                                                                                                                                                                                            
|     | 
|10.4 |  | Form of STERIS Corporation Nonqualified Stock Option Grant Agreement for Directors.                                                                                                                                                                                                                             
|     | 
|15.1 |  | Letter Regarding Unaudited Interim Financial Information.                                                                                                                                                                                                                                                       
|     | 
|31.1 |  | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                         
|     | 
|31.2 |  | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                         
|     | 
|32.1 |  | Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                  



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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.



STERIS Corporation/s/ Laurie BrlasLaurie BrlasSenior Vice President and Chief Financial Officer February 8, 2005




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