What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-09 compared with 2021-11-08 · 179 added, 166 removed, 336 unchanged (51% of the section changed)

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• where cash will come from to fund future debt principal repayments, growth outside of core operations, repurchases of shares, cash dividends and future working capital needs.

As you read the MD&A, it may be helpful to refer to information in our consolidated financial statements, which present the results of our operations for the second quarter and first half of fiscal 2022 and fiscal 2021.

As you read the MD&A, it may be helpful to refer to information in our consolidated financial statements, which present the results of our operations for the third quarter and first nine months of fiscal 2022 and fiscal 2021.

It may also be helpful to read the MD&A in our Annual Report on Form 10-K for the year ended March 31, 2021 dated May 28, 2021.

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• Service Revenues – We define service revenues as revenues generated from parts and labor associated with the maintenance, repair, and installation of our capital equipment.

Service revenues also include outsourced reprossing services, instrument and scope repairs, as well as revenues generated from contract sterilization and laboratory services offered through our Applied Sterilization Technologies segment.

Service revenues also include outsourced reprocessing services and instrument and scope repairs, as well as revenues generated from contract sterilization and laboratory services offered through our Applied Sterilization Technologies segment.

• Capital Equipment Revenues – We define capital equipment revenues as revenues generated from sales of capital equipment, which includes:

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General Company Overview and Executive Summary

STERIS is a leading global provider of products and services that support patient care with an emphasis on infection prevention.

O ur MISSION IS TO HELP OUR CUSTOMERS CREATE A HEALTHIER AND SAFER WORLD by providing innovative healthcare and life science products and services around the globe.

S TERIS is a leading global provider of products and services that support patient care with an emphasis on infection prevention.

WE HELP OUR CUSTOMERS CREATE A HEALTHIER AND SAFER WORLD by providing innovative healthcare, life sciences and dental products and services.

We offer our Customers a unique mix of innovative consumable products, such as detergents, gastrointestinal (“GI”) endoscopy accessories, barrier product solutions, and other products and services, including:

equipment installation and maintenance, microbial reduction of medical devices, dental instruments and tools, instrument and scope repair solutions, laboratory testing services, outsourced reprocessing, and capital equipment products, such as sterilizers and surgical tables, automated endoscope reprocessors, and connectivity solutions such as operating room (“OR”) integrati on.

equipment installation and maintenance, microbial reduction of medical devices, dental instruments and tools, instrument and scope repair, laboratory testing services, outsourced reprocessing, and capital equipment products, such as sterilizers and surgical tables, automated endoscope reprocessors, and connectivity solutions such as operating room (“OR”) integrati on.

We operate our business and report our financial information in four reportable business segments:

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Acquisitions .

On June 2, 2021, we acquired all outstanding equity interests Cantel Medical LLC.

On June 2, 2021, we acquired all outstanding equity interests in Cantel Medical LLC.

("Cantel") through a U.S.

Cantel, headquartered in Little Falls, New Jersey, with approximately 3,700 employees, is a global provider of infection prevention products and services primarily to endoscopy and dental Customers.

Cantel, formerly headquartered in Little Falls, New Jersey, with approximately 3,700 employees, is a global provider of infection prevention products and services primarily to endoscopy and dental Customers.

We believe that the acquisition will strengthen STERIS’s leadership in infection prevention by bringing together two complementary businesse s able to offer a broader set of Customers a more diversified selection of infection prevention, endoscopy and sterilization products and services.

Cantel is being integrated into our existing Healthcare and Life Sciences segments.

Cantel was integrated into our existing Healthcare and Life Sciences segments.

Cantel’s Dental business extends our business into a new Customer segment where there is an increasing focus on infection prevention protocols and processes.

This business will be reported as the Dental segment.

This business is reported as the Dental segment.

Additionally, the acquisition is expected to result in cost savings from optimizing global back-office infrastructure, leveraging best-demonstrated practices across locations and eliminating redundant public company costs.

The results of Cantel are only reflected in the results of operations and cash flows from June 2, 2021 forward, which will affect results of comparability to the prior period operations and cash flows.

Divestitures.

In December 2021, we entered into an Asset Purchase Agreement to sell STERIS's Renal Care business to Evoqua Water Technologies Corp., for cash consideration of approximately $196.0 million, subject to certain potential adjustments, including a customary working capital adjustment and contingent consideration of $12.3 million.

We anticipate no material gain (loss) on the sale.

The net assets are not reported as held for sale as they are not material to the balance sheet as of December 31, 2021.

The transaction closed on January 3, 2022.

We acquired the Renal Care business as part of the Cantel transaction, which closed on June 2, 2021, and had been integrated into STERIS's Healthcare segment.

The Renal Care business generated annual revenues of approximately $180.0 million.

The proceeds from the sale received at closing were used to repay outstanding debt.

COVID-19 Pandemic.

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We have successfully managed our liquidity throughout the COVID-19 pandemic and continue to invest in expansion projects as planned.

We obtained additional funding in the second half of fiscal 2021 to continue to advance our growth strategy to supplement organic growth with acquisitions.

For additional information on our risk factors related to the COVID-19 pandemic please refer to our Annual Report on Form 10-K for the year ended March 31, 2021 dated May 28, 2021, and our amended risk factors contained in Item 1A.

We obtained addi tional funding in the second half o f fiscal 2021 to continue to advance our growth strategy to supplement organic growth with acquisitions.

As a result, we do not believe that the COVID-19 pandemic or the actions we took in respo nse to the pandemic will negatively impact our long-term ability to generate revenues or meet existing and future financial obligations.For additional information on our risk factors related to the COVID-19 pandemic please refer to our Annual Report on Form 10-K for the year ended March 31, 2021 dated May 28, 2021, and our amended risk factors contained in Item 1A.

of this Quarterly Report.

Revenues increased 58.3%, to $1,197.0 million for the three months ended September 30, 2021, as compared to $756.1 million for the same period in the prior year.

Revenues increased 52.0%, to $2,165.4 million for the six months ended September 30, 2021, as compared to $1,425.1 million.

These increases reflect organic growth in the Healthcare, Applied Sterilization Technologies and Life Sciences segments, added volume from Cantel and other recent acquisitions, and favorable fluctuations in currencie s.

Gross profit percentage for the second quarter of fiscal 2022 was 40.1% compared to the gross profit percentage for the second quarter of fiscal 2021 of 43.6%.

Gross profit percentage for the first half of fiscal 2022 was 41.9% compared to the gross profit percentage for the first half of fiscal 2021 of 43.3%.

Unfa vorable impacts from our recent acquisitions, inflation, and f luctuations in currencies, exceeded favorable impact from pricing, mix and other adjustments.

Additionally, the prior year periods were negatively impacted by incremental costs associated with COVID-19.

Operating income for the second quarter of fiscal 2022 was $116.5 million, compared to $141.3 million for second quarter of fiscal 2021.

Operating income during the first half of fiscal 2022 was $130.8 million, compared to $257.1 million for the first half of fiscal 2021.

Contributing to these declines in operating income were acquisition and integration expenses and incremental amortization expense primarily related to the acquisition of Cantel.

Cash flows from operations were $268.8 million and free cash flow was $135.8 million in the first half of fiscal 2022 compared to cash flows from operations of $296.1 million and free cash flow of $185.6 million for first half of fiscal 2021 (see the subsection below titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow).

The fiscal 2022 decreases in cash flows from operations and free cash flow were primarily due to anticipated costs associated with the acquisition and integration of Cantel and higher capital expenditures in fiscal 2022.

Our debt-to-total capital ratio was 34.5% at September 30, 2021 and 29.8% at March 31, 2021.

During the first half of fiscal 2022, we declared and paid cash dividends totaling $0.83 per ordinary share.

Additional information regarding our financial performance during the second quarter and first half of fiscal 2022 is included in the subsection below titled “Results of Operations.”

Revenues increased 49.5%, to $1,209.0 million for the three months ended December 31, 2021, as compared to $808.9 million for the same period in the prior year.

Revenues increased 51.0%, to $3,374.4 million for the nine months ended December 31, 2021, as compared to $2,234.0 million for the same period in the prior year.

These increases reflect added volume from Cantel and other recent acquisitions, organic growth in the Healthcare, Applied Sterilization Technologies and Life Sciences segments, and favorable fluctuations in currencie s in the year-to-date period.

Gross profit percentage for the third quarter of fiscal 2022 was 44.5% compared to the gross profit percentage for the third quarter of fiscal 2021 of 42.8%.

Favorable impacts from our recent acquisitions, productivity, pricing and mix and other adjustments, exceeded unfavorable impacts from material costs, inflation and fluctuations in currencies.

Gross profit percentage for the first nine months of fiscal 2022 was 42.8% compared to the gross profit percentage for the first nine months of fiscal 2021 of 43.1%.

Unfavorable impacts from our recent acquisitions, material costs, inflation and fluctuations in currencies, exceeded favorable impact from productivity, pricing, mix and other adjustments.

Operating income for the third quarter of fiscal 2022 was $202.9 million, compared to $147.0 million for third quarter of fiscal 2021 This increase reflects higher gross margin attainment, primarily due to added volumes from Cantel and our other recent acquisitions.

Operating income during the first nine months of fiscal 2022 was $333.8 million, compared to $404.1 million for the first nine months of fiscal 2021.

This decline was primarily due to additional acquisition and integration expenses and incremental amortization expense primarily related to the acquisition of Cantel.

Cash flows from operations were $513.1 million and free cash flow was $300.3 million in the first nine months of fiscal 2022 compared to cash flows from operations of $501.8 million and free cash flow of $337.7 million for first nine months of fiscal 2021 (see the subs ection below titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow).

The fiscal 2022 decrease in free cash flow was primarily due to anticipated costs associated with the acquisition and integration of Cantel and higher capital expenditures in fiscal 2022.

Our debt-to-total capital ratio was 33.3% at December 31, 2021 and 29.8% at March 31, 2021.

During the first nine months of fiscal 2022, we declared and paid cash dividends totaling $1.26 per ordinary share.

Additional information regarding our financial performance during the third quarter and first nine months of fiscal 2022 is included in the subsection below titled “Results of Operations.”

NON-GAAP FINANCIAL MEASURES

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We use this as a measure to gauge our ability to pay cash dividends, fund growth outside of core operations, fund future debt principal repayments, and repurchase shares.

The following table summarizes the calculation of our free cash flow for the six months ended September 30, 2021 and 2020:

Six Months Ended September 30,

The following table summarizes the calculation of our free cash flow for the nine months ended December 31, 2021 and 2020:

Nine Months Ended December 31,

(dollars in thousands) 2021 2020

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Results of Operations

In the following subsections, we discuss our earnings and the factors affecting them for the second quarter and first half of fiscal 2022 compared with the same fiscal 2021 periods.

In the following subsections, we discuss our earnings and the factors affecting them for the third quarter and first nine months of fiscal 2022 compared with the same fiscal 2021 periods.

We begin with a general overview of our operating results and then separately discuss earnings for our operating segments.

The following tables compare our revenues for the three and six months ended September 30, 2021 to the revenues for the three and six months ended September 30, 2020:

Three Months Ended September 30,

The following tables compare our revenues for the three and nine months ended December 31, 2021 to the revenues for the three and nine months ended December 31, 2020:

Three Months Ended December 31,

(dollars in thousands) 2021 2020 Change Percent Change

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Other foreign revenues 337,593 216,211 121,382 56.1 %

Revenues increased 58.3%, to $1,197.0 million for the three months ended September 30, 2021, as compared to $756.1 million for the same period in the prior year.

The increase was primarily related to organic growth in the Healthcare, Applied Sterilization Technologies and Life Science segments, added volume of $346.1 million from Cantel and other recent acquisitions and favorable fluctuations in currencies.

Service revenues increased 22.8% for the three months ended September 30, 2021, as compared to the same period in the prior year, reflecting growth in the Healthcare, Life Sciences and Applied Sterilization Technologies business segments.

Consumable revenues increased by 150.7% for the three months ended September 30, 2021, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments and added volume from the addition of our new Dental segment.

Capital equipment revenues increased 47.6%, for the three months ended September 30, 2021, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments.

Ireland revenues increased 17.3% to $20.0 million for the three months ended September 30, 2021, as compared to $17.1 million for the same period in the prior year, reflecting growth in service, consumable and capital equipment revenues.

United States revenues increased 55.2%, to $852.5 million for the three months ended September 30, 2021, as compared to $549.4 million for the same period in the prior year, reflecting growth in service, consumable, and capital equipment revenues.

Revenues increased 49.5%, to $1,209.0 million for the three months ended December 31, 2021, as compared to $808.9 million for the same period in the prior year.

The increase reflects added volume of $332.7 million from Cantel and other recent acquisitions and organic growth in the Healthcare, Applied Sterilization Technologies and Life Science segments.

Service revenues increased 18.0% for the three months ended December 31, 2021, as compared to the same period in the prior year, reflecting growth in the Healthcare, Life Sciences and Applied Sterilization Technologies business segments.

Consumable revenues increased by 121.9% for the three months ended December 31, 2021, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments and added volume from the addition of our new Dental segment.

Capital equipment revenues increased 45.3%, for the three months ended December 31, 2021, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments.

Ireland revenues decreased 1.1% to $20.1 million for the three months ended December 31, 2021, as compared to $20.3 million for the same period in the prior year, reflecting a decline in capital equipment revenues, which was partially offset by growth in service and consumable revenues.

United States revenues increased 48.7%, to $851.3 million for the three months ended December 31, 2021, as compared to $572.4 million for the same period in the prior year, reflecting growth in service, consumable, and capital equipment revenues.

These increases represent both organic growth and the impact of Cantel and our other recent acquisitions.

Revenues from other foreign locations, increased 71.1%, to $324.4 million for the three months ended September 30, 2021, as compared to $189.6 million for the same period in the prior year.

The increase is due to growth within Canada and the Europe, Middle East & Africa ("EMEA"), Asia Pacific, and Latin American regions.

Revenues from other foreign locations, increased 56.1%, to $337.6 million for the three months ended December 31, 2021, as compared to $216.2 million for the same period in the prior year.

The increase reflects growth within Canada and the Europe, Middle East & Africa ("EMEA"), Asia Pacific, and Latin American regions.

These increases represent both organic growth and the impact of Cantel and our other recent acquisitions.

Six Months Ended September 30,

Nine Months Ended December 31,

(dollars in thousands) 2021 2020 Change Percent Change

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Other foreign revenues 929,262 568,655 360,607 63.4 %

Revenues increased 52.0%, to $2,165.4 million for the six months ended September 30, 2021, as compared to $1,425.1 million for the same period in the prior year.

The increase was primarily related to organic growth in the Healthcare, Applied Sterilization Technologies and Life Science segments, added volume of $487.4 million from Cantel and other recent acquisitions and favorable fluctuations in currencies.

Service revenues increased 26.3% for the six months ended September 30, 2021, as compared to the same period in the prior year, reflecting growth in the Healthcare, Applied Sterilization, and Life Science segments.

Consumable revenues increased by 132.5% for the six months ended September 30, 2021, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments and added volume from the addition of our new Dental segment.

Capital equipment revenues increased 33.9% for the six months ended September 30, 2021, reflecting growth in the Healthcare and Life Sciences segments.

Ireland revenues increased 33.5% to $42.0 million for the six months ended September 30, 2021, as compared to $31.5 million for the same period in the prior year, reflecting growth in service, consumable, and capital equipment revenues.

United States revenues increased 47.1%, to $1,531.7 million for the six months ended September 30, 2021, as compared to $1,041.2 million for the same period in the prior year, reflecting growth in service, consumable, and capital equipment revenues.

Revenues increased 51.0%, to $3,374.4 million for the nine months ended December 31, 2021, as compared to $2,234.0 million for the same period in the prior year.

The increase reflects added volume of $820.2 million from Cantel and other recent acquisitions, organic growth in the Healthcare, Applied Sterilization Technologies and Life Science segments and favorable fluctuations in currencies.

Service revenues increased 23.4% for the nine months ended December 31, 2021, as compared to the same period in the prior year, reflecting growth in the Healthcare, Applied Sterilization, and Life Science segments.

Consumable revenues increased by 128.4% for the nine months ended December 31, 2021, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments and added volume from the addition of our new Dental segment.

Capital equipment revenues increased 38.0% for the nine months ended December 31, 2021, reflecting growth in the Healthcare and Life Sciences segments.

Ireland revenues increased 19.9% to $62.1 million for the nine months ended December 31, 2021, as compared to $51.8 million, reflecting growth in service and consumable revenues, which were partially offset by a decline in capital equipment revenues.

United States revenues increased 47.7%, to $2,383.0 million for the nine months ended December 31, 2021, as compared to $1,613.6 million for the same period in the prior year, reflecting growth in service, consumable, and capital equipment revenues.

These increases represent both organic growth and the impact of Cantel and our other recent acquisitions.

Revenues from other foreign locations increased 67.9%, to $591.7 million for the six months ended September 30, 2021, as compared to $352.4 million for the same period in the prior year.

Revenues from other foreign locations increased 63.4%, to $929.3 million for the nine months ended December 31, 2021, as compared to $568.7 million for the same period in the prior year.

The increase is due to growth within Canada and the Europe, Middle East & Africa ("EMEA"), Asia Pacific, and Latin American regions.

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Gross Profit.

The following table compares our gross profit for the three and six months ended September 30, 2021 to the three and six months ended September 30, 2020:

Three Months Ended September 30, Change Percent

The following table compares our gross profit for the three and nine months ended December 31, 2021 to the three and nine months ended December 31, 2020:

Three Months Ended December 31, Change Percent

(dollars in thousands) 2021 2020

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Total gross profit percentage 44.5 % 42.8 %

Six Months Ended September 30, Change Percent

Nine Months Ended December 31, Change Percent

(dollars in thousands) 2021 2020

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Our gross profit is affected by the volume, pricing, and mix of sales of our products and services, as well as the costs associated with the products and services that are sold.

Gross profit percentage for the second quarter of fiscal 2022 was 40.1% compared to the gross profit percentage for the second quarter of fiscal 2021 of 43.6%.

Unfavorable impacts from our recent acquisitions (460 basis points), inflation (40 basis points), and fluctuations in currencies (20 basis points), exceeded favorable impact from pricing (70 basis points), mix and other adjustments (50 basis points).

Additionally, the prior year was negatively impacted by incremental costs associated with COVID-19 (50 basis points).

Gross profit percentage for the first half of fiscal 2022 was 41.9% compared to the gross profit percentage for the first half of fiscal 2021 of 43.3%.

Unfa vorable impacts from our recent acquisitions (340 basis points), inflation (40 basis points), and f luctuations in currencies (30 basis points), exceeded favorable impact from pricing (70 basis points), mix and other adjustments (110 basis points).

Additionally, the prior year was negatively impacted by incremental costs associated with COVID-19 (90 basis points).

Gross profit percentage for the third quarter of fiscal 2022 was 44.5% compared to the gross profit percentage for the third quarter of fiscal 2021 of 42.8%.

Favorable impacts from our recent acquisitions (110 basis points), productivity (140 basis points), pricing (60 basis points) and mix and other adjustments (30 basis points), exceeded unfavorable impacts from material costs (90 basis points), inflation (70 basis points) and fluctuations in currencies (10 basis points).

Gross profit percentage for the first nine months of fiscal 2022 was 42.8% compared to the gross profit percentage for the first nine months of fiscal 2021 of 43.1%.

Unfavorable impacts from our recent acquisitions (170 basis points), material costs (50 basis points), inflation (50 basis points) and fluctuations in currencies (20 basis points), exceeded favorable impact from productivity (190 basis points), pricing (60 basis points), mix and other adjustments (10 basis points).

Operating Expenses.

The following table compares our operating expenses for the three and six months ended September 30, 2021 to the three and six months ended September 30, 2020:

Three Months Ended September 30, Change Percent

The following table compares our operating expenses for the three and nine months ended December 31, 2021 to the three and nine months ended December 31, 2020:

Three Months Ended December 31, Change Percent

(dollars in thousands) 2021 2020

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Total operating expenses $ 335,181 $ 198,831 $ 136,350 68.6 %

Six Months Ended September 30, Change Percent

Nine Months Ended December 31, Change Percent

(dollars in thousands) 2021 2020

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Significant components of total selling, general, and administrative expenses (“SG&A”) are compensation and benefit costs, fees for professional services, travel and entertainment, facilities costs, and other general and administrative expenses.

SG&A increased 99.6% and 125.3% in the second quarter and first half of fiscal 2022, respectively over the same prior year periods.

During the fiscal 2022 periods we had significant increases in acquisition related costs, which included acquisition and integration costs, amortization of acquired intangible assets, and "step-up" of plant, property and equipment to fair value, which were primarily related to the acquisition of Cantel.

In addition to these costs we also added additional expenses associated with the operations of our recent acquisitions.

SG&A increased 70.3% and 105.6% in the third quarter and first nine months of fiscal 2022, respectively over the same prior year periods.

During the fiscal 2022 periods we had significant increases in acquisition related costs, which included amortization of acquired intangible assets, "step-up" of plant, property and equipment to fair value, and acquisition and integration expenses, which were primarily related to the acquisition of Cantel.

The increases also reflect the addition of expenses associated with the operations of Cantel and our other recent acquisitions.

Research and Development.

Resea rch and development expenses increased 16.7% and 14.4% in the second quarter and first half of fiscal 2022, respectively over the same prior year periods.

Resea rch and development expenses increased 51.0% and 26.7% in the third quarter and first nine months of fiscal 2022, respectively over the same prior year periods, primarily due to the addition of Cantel and our other recent acquisitions.

Research and development expenses are influenced by the number and timing of in-process projects and labor hours and other costs associated with these projects.

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Restructuring Expenses .

Amounts related to restructuring expenses were not material for the three and six month periods ending September 30, 2021 or 2020, respectively.

Amounts related to restructuring expenses were not material for the three and nine month periods ending December 31, 2021 or 2020, respectively.

For information on our restructuring efforts, refer to our Annual Report on Form 10-K filed with the SEC on May 28, 2021.

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Non-operating expenses, net consists of interest expense on debt, offset by interest earned on cash, cash equivalents, and short-term investment balances, and other miscellaneous income.

The following table compares our net non-operating expenses for the three and six months ended September 30, 2021 and 2020:

Three Months Ended September 30,

The following table compares our net non-operating expenses for the three and nine months ended December 31, 2021 and 2020:

Three Months Ended December 31,

(dollars in thousands) 2021 2020 Change

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Interest expense $ 22,971 $ 8,899 $ 14,072

Fair value adjustment related to convertible debt, premium liability 4,883 — 4,883

Interest income and miscellaneous expense (2,447) (1,299) (1,148)

Non-operating expenses, net $ 20,524 $ 7,600 $ 12,924

Six Months Ended September 30,

Nine Months Ended December 31,

(dollars in thousands) 2021 2020 Change

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Non-operating expenses, net $ 90,721 $ 22,280 $ 68,441

Interest expense increased $14.4 million and $26.7 million during the second quarter and first half of fiscal 2022, respectively over the same prior year periods , primarily due to debt incurred for acquisition financing including term loans and Senior Public Notes.

Interest expense increased $14.1 million and $40.8 million during the third quarter and first nine months of fiscal 2022, respectively over the same prior year periods , primarily due to debt incurred for acquisition financing including term loans and Senior Public Notes.

For more information refer to Not e 5 of our Consolidated Financial Statements titled "Debt." Interest (income) and miscellaneous expense is not material.

During the second quarter and first half of fiscal 2022, we recorded fair value adjustments of $4.9 million and $27.8 million, respect ively, based on appreciation in our share price related to premium liability associated with the convertible debt assumed in the acquisition of Cantel.

During the first nine months of fiscal 2022, we recorded fair value adjustments of $27.8 million, based on appreciation in our share price related to premium liability associated with the convertible debt assumed in the acquisition of Cantel.

For more information on the Cantel convertible debt refer to N ote 5 of our Consolidated Financial Statements titled, "Debt."

Income Tax Expense.

The following table compares our income tax expense and effective income tax rates for the three and six months ended September 30, 2021 and September 30, 2020:

Three Months Ended September 30, Change Percent

The following table compares our income tax expense and effective income tax rates for the three and nine months ended December 31, 2021 and December 31, 2020:

Three Months Ended December 31, Change Percent

(dollars in thousands) 2021 2020

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Effective income tax rate 21.6 % 17.8 %

Six Months Ended September 30, Change Percent

Nine Months Ended December 31, Change Percent

(dollars in thousands) 2021 2020

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We analyze various factors to determine the estimated annual effective income tax rate, including projections of our annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, our 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 September 30, 2021 and 2020 were 22.3% and 20.8%, respective ly.

The effective income tax rates for the six month periods ended September 30, 2021 and 2020 were 21.3% and 19.3%, respectively.

The effective income tax rates for the three month periods ended December 31, 2021 and 2020 were 21.6% and 17.8%, respective ly.

The effective income tax rates for the nine month periods ended December 31, 2021 and 2020 were 21.5% and 18.8%, respectively.

The fiscal 2022 effective tax rates increased when compared to the same fiscal 2021 periods, primarily due to Cantel and our other recent acquisitions, which historically have had higher effective tax rates than STERIS.

The fiscal 2022 effective tax rates also include one-time, non-deductible acquisition related costs.

The fiscal 2022 effective tax rates are also impacted by certain one-time, non-deductible acquisition related costs.

Business Segment Results of Operations.

As a result of the acquisition of Cante l, we have reassessed the organization of our business and have added a new segment called Dental.

As a result of the acquisition of Cantel, we have rea ssessed the organization of our business and have added a new segment called Dental.

We now operate and report our financial information in four reportable business segments:

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Non-allocated operating costs that support the entire Company and items not indicative of operating trends are excluded from segment operating income.

Our Healthcare segment provides a comprehensive offering for healthcare providers worldwide, focused on sterile processing departments and procedural centers, such as operating rooms, endoscopy suites, and renal dialysis centers.

Our products and services range from infection prevention consumables and capital equipment, as well as services to maintain that equipment;

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In addition, our procedural solutions also include single-use devices and capital equipment infrastructure used primarily in operating rooms, ambulatory surgery centers, endoscopy suites, and other procedural areas.

Our Applied Sterilization Technologies ("AST") segment is a third-party service provider for contract sterilization, as well as the testing services needed to validate sterility services for medical device and pharmaceutical manufacturers.

Our Applied Sterilization Technologies ("AST") segment is a third-party service provider for contract sterilization, as well as testing services needed to validate sterility services for medical device and pharmaceutical manufacturers.

Our technology-neutral offering supports Customers every step of the way, from testing through sterilization.

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The accounting policies for reportable segments are the same as those for the consolidated Company.

For the three and six months ended September 30, 2021, revenues from a single Customer did not represent ten percent or more of the Healthcare, Applied Sterilization Technologies or Life Sciences segment’s revenues.

Three customers collectively accounted for approximately 40.6% and 39.5% of our Dental segment revenues for the three months and six months ended September 30, 2021, respectively.

Additional information regarding our segments is included in our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2021, dated May 28, 2021.

The following table compares business segment revenues, segment operating income and total operating income for the three and six months ended September 30, 2021 and 2020:

For the three and nine months ended December 31, 2021, revenues from a single Customer did not represent ten percent or more of the Healthcare, Applied Sterilization Technologies or Life Sciences segment’s revenues.

Three Customers collectively consistently account for more than 40.0% of our Dental segment revenue.

The percentage associated with these three Customers collectively in any one period may vary due to the buying patterns of these three Customers as well as other Dental Customers.

These three Customers collectively accounted for appr oximately 55.8% and 46.1% of our Dental segment revenues for the three months and nine months ended December 31, 2021, respectively.

Additional informatio n regarding certain of our segments is included in our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2021, dated May 28, 2021.

The following table compares business segment revenues, segment operating income and total operating income for the three and nine months ended December 31, 2021 and 2020:

Financial information for each of our segments is presented in the following table:

Three Months Ended September 30, Six Months Ended September 30,

Three Months Ended December 31, Nine Months Ended December 31,

(dollars in thousands) 2021 2020 2021 2020

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118 296 228 850

Net (gain) loss on divestiture of businesses (1)

(Gain) on fair value adjustment of acquisition related contingent consideration (1)

— (500) — (500)

Net loss on divestiture of businesses (1)

Amortization of inventory and property "step up" to fair value (1)

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*Certain amounts have been adjusted to reflect the change in inventory accounting method, as described in our Annual report on Form 10-K filed with the SEC on May 28, 2021.

(1) For more information regarding our recent acquisitions and divestitures refer to Note 2 titled, "Business Acquisitions" and to our Annual Report on Form 10-K for the year ended March 31, 2021, dated May 28, 2021.

(1) For more information regarding our recent acquisitions and divestitures refer to Note 2 titled, "Business Acquisitions and Divestitures" and to our Annual Report on Form 10-K for the year ended March 31, 2021, dated May 28, 2021.

(2) Acquisition and integration related charges include transaction costs and integration expenses associated with acquisitions.

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(5) For more information regarding our restructuring efforts refer to our Annual R eport on Form 10-K for the year ended March 31, 2021, dated May 28, 2021.

Healthcare revenues increased 58.0% to $744.1 million for the three months ended September 30, 2021, as compared to $470.9 million in the same prior year period.

This increase reflects growth in consumable, capital equipment and service revenues of 120.0%, 53.7% and 25.5%, respectively and reflects the impact of Cantel and our other recent acquisitions, organic growth and favorable fluctuations in foreign currencies.

Healthcare revenues increased 54.7% to $1,347.0 million for the six months ended September 30, 2021, as compared to $870.6 million in the same prior year period.

This increase reflects growth in consumable, capital equipment and service revenues of 130.8%, 36.0% and 27.8%, respectively and reflects the impact of Cantel and our other recent acquisitions, organic growth and favorable fluctuations in foreign currencies.

Excluding Cantel, the Healthcare segment’s backlog at September 30, 2021, amounted to $311.2 million, representing an increase of 74.8%, as compared to the backlog of $178.0 million at September 30, 2020.

The increase is primarily due to Customer demand but also reflects delays in shipments due to supply chain disruptions.

Applied Sterilization Technologies segment revenues increased 20.8% to $204.9 million for the three months ended September 30, 2021, as compared to $169.5 million for the same prior year period.

Applied Sterilization Technologies segment revenues increased 28.5% to $413.8 million for the six months ended September 30, 2021, as compared to $321.9 million for the same prior year period.

The fiscal 2022 increases are primarily due to organic growth.

Favorable fluctuations in currencie s and the impact of a fiscal 2021 acquisition also contributed to the increases.

Life Sciences revenues increased 14.4% to $132.3 million for the three months ended September 30, 2021, as compared to $115.7 million for the same prior year period.

This increase reflects growth in service, capital equipment and consumable revenues of 18.8%, 16.9% and 10.7%, respectively and reflects the impact of the Cantel acquisition, organic growth and favorable fluctuations in foreign currencies.

Life Sciences revenues increased 9.1% to $253.8 million for the six months ended September 30, 2021, as compared to $232.6 million for the same prior year period.

This increase reflects growth in service, capital equipment and consumable revenues of 17.7%, 12.2% and 3.2% respectively and reflects the impact of the Cantel acquisition, organic growth and favorable fluctuations in foreign currencies.

Excluding Cantel, the Life Sciences segme nt’s backlog at September 30, 2021 amounted to $98.3 million, representing an increase of 31.3%, as compared to the backlog of $74.8 million at September 30, 2020.

The increase is primarily due to Customer demand but also reflects delays in shipments due to supply chain disruptions.

Dental segment revenues for the three months ended September 30, 2021 were $115.6 million.

Dental segment revenues from the Cantel acquisition date of June 2, 2021 through September 30, 2021 were $150.9 million.

The Healthcare segment’s operating income increased 53.0% to $160.4 million for the three months ended September 30, 2021, as compared to $104.8 million in the same prior year period, primarily due to increased volume and our recent acquisitions.

The segment's operating margins were 21.6% and 22.3% for the second quarter of fiscal 2022 and 2021, respectively .

In the prior fiscal year period we benefited from lower operating costs, such as travel and meeting expenses as a result of the COVID-19 pandemic and measures taken in response to it.

The Healthcare segment’s operating income incre ased 56.9% to $296.6 million for the six months ended September 30, 2021, as compared to $189.0 million in the same prior year period, primarily due to increased volume and our recent acquisitions.

The segment's operating margins were 22.0% and 21.7% for the first half of fiscal 2022 and 2021, respectively.

The segment's operating income and margin improvements were primarily due to the higher volumes.

The Applied Sterilization Technologies segment's operating income increased 29.9% to $99.8 million for the three months ended September 30, 2021, as compared to $76.8 million during the same prior year period.

The Applied Sterilization Technologies segment's operating income increased 43.3% to $201.7 million for the six months ended September 30, 2021, as compared to $140.8 million during the same prior year period.

The segment's operating margins were 48.7% and 45.3% for the second quarter of fiscal 2022 and 2021 , respectively.

The segment's operating margins were 48.7% and 43.7% for the first half of fiscal 2022 and 2021, respectively.

Healthcare revenues increased 45.6% to $759.7 million for the three months ended December 31, 2021, as compared to $521.7 million in the same prior year period.

This increase reflects growth in consumables, capital equipment, and service revenues of 83.9%, 46.9% and 19.4%, respectively and reflects the impact of Cantel and our other recent acquisitions and organic growth.

Healthcare revenues increased 51.3% to $2,106.6 million for the nine months ended December 31, 2021, as compared to $1,392.2 million in the same prior year period.

This increase reflects growth in consumables, capital equipment, and service revenues and of 111.2%, 40.0% and 24.9%, respectively and reflects the impact of Cantel and our other recent acquisitions, organic growth and favorable fluctuations in foreign currencies.

Excluding Cantel, the Healthcare segment’s backlog at December 31, 2021, amounted to $381.6 million, representing an increase of 77.0%, as compared to the backlog of $215.5 million at December 31, 2020.

The increase is primarily due to Customer demand but also reflects some delays in shipments due to supply chain disruptions.

Applied Sterilization Technologies segment revenues increased 22.6% to $216.3 million for the three months ended December 31, 2021, as compared to $176.5 million for the same prior year period.

Applied Sterilization Technologies segment revenues increased 26.4% to $630.1 million for the nine months ended December 31, 2021, as compared to $498.4 million for the same prior year period.

The fiscal 2022 increases are primarily due to organic growth and favorable fluctuations in currencie s in the year-to-date period.

The impact of a fiscal 2021 acquisition also contributed to the increases.

Life Sciences revenues increased 15.4% to $127.9 million for the three months ended December 31, 2021, as compared to $110.8 million for the same prior year period.

This increase reflects growth in consumables, service and capital equipment revenues and of 23.1%, 13.1% and 4.9%, respectively and reflects the impact of the Cantel acquisition and organic growth.

Life Sciences revenues increased 11.2% to $381.7 million for the nine months ended December 31, 2021, as compared to $343.4 million for the same prior year period.

This increase reflects growth in service, capital equipment and consumables revenues and of 16.1%, 9.8% and 9.2%, respectively and reflects the impact of the Cantel acquisition, organic growth and favorable fluctuations in foreign currencies.

Excluding Cantel, the Life Sciences segme nt’s backlog at December 31, 2021 amounted to $117.2 million, representing an increase of 43.0%, as compared to the backlog of $82.0 million at December 31, 2020.

The increase is primarily due to Customer demand but also reflects some delays in shipments due to supply chain disruptions.

Dental segment revenues for the three months ended December 31, 2021 were $105.1 million.

Dental segment revenues from the Cantel acquisition date of June 2, 2021 through December 31, 2021 were $256.0 million.

The Healthcare segment’s operating income increased 46.7% to $169.3 million for the three months ended December 31, 2021, as compared to $115.4 million in the same prior year period.

The segment's operating margins were 22.3% and 22.1% for the third quarter of fiscal 2022 and 2021, respectively .

The Healthcare segment’s operating income incre ased 53.0% to $465.8 million for the nine months ended December 31, 2021, as compared to $304.4 million in the same prior year period, primarily due to increased volume and our recent acquisitions.

The segment's operating margins were 22.1% and 21.9% for the first nine months of fiscal 2022 and 2021, respectively.

The segment's operating income and margin improvements were primarily due to higher volumes.

The Applied Sterilization Technologies segment's operating income increased 24.2% to $101.3 million for the three months ended December 31, 2021, as compared to $81.6 million during the same prior year period.

The Applied Sterilization Technologies segment's operating income increased 36.3% to $303.1 million for the nine months ended December 31, 2021, as compared to $222.4 million during the same prior year period.

The segment's operating margins were 46.9% and 46.3% for the third quarter of fiscal 2022 and 2021 , respectively.

The segment's operating margins were 48.1% and 44.6% for the first nine months of fiscal 2022 and 2021, respectively.

The segment's operating income and operating margin improvements were primarily due to to higher volumes.

The Life Sciences segment’s operating income increased 23.9% to $57.5 million for the three months ended September 30, 2021, as compared to $46.4 million in the same prior year period.

The Life Sciences segment’s operating income increased 12.3% to $106.6 million for the six months ended September 30, 2021, as compared to $94.9 million in the same prior year period.

The segment's operating margins were 43.5% and 40.1% for the second quarter of fiscal 2022 and 2021, respectively.

The segment's operating margins were 42.0% and 40.8% for the first half of fiscal 2022 and 2021, respectively.

The Life Sciences segment’s operating income increased 25.3% to $52.0 million for the three months ended December 31, 2021, as compared to $41.5 million in the same prior year period.

The Life Sciences segment’s operating income increased 16.3% to $158.6 million for the nine months ended December 31, 2021, as compared to $136.4 million in the same prior year period.

The segment's operating margins were 40.7% and 37.5% for the third quarter of fiscal 2022 and 2021, respectively.

The segment's operating margins were 41.6% and 39.7% for the first nine months of fiscal 2022 and 2021, respectively.

The segment's operating income and operating margin improvements were primarily due to to higher volumes.

The Dental segment's operating income and operating margin were $32.4 million and 28.0%, respectively, for the three months ended September 30, 2021.

The Dental segment's operating income and operating margin were $42.5 million and 28.2%, respectively, for the six months ended September 30, 2021.

The Dental segment's operating income and operating margin were $23.1 million and 22.0%, respectively, for the three months ended December 31, 2021.

The Dental segment's operating income and operating margin were $65.6 million and 25.6%, respectively, for the nine months ended December 31, 2021.

Liquidity and Capital Resources

The following table summarizes significant components of our cash flows for the six months ended September 30, 2021 and 2020:

Six Months Ended September 30,

The following table summarizes significant components of our cash flows for the nine months ended December 31, 2021 and 2020:

Nine Months Ended December 31,

(dollars in thousands) 2021 2020

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Net cash (used in) investing activities $ (760,135) $ (1,035,903)

Net cash provided by (used in) financing activities $ 579,703 $ (199,319)

Net cash provided by financing activities $ 390,438 $ 442,533

Debt-to-total capital ratio 33.3 % 30.6 %

Free cash flow $ 300,298 $ 337,705

Net Cash Provided by Operating Activities – The net cash provided by our operating activities was $268.8 million for the first six months of fiscal 2022 and $296.1 million for the first six months of fiscal 2021.

The fiscal 2022 decrease in cash flows from operations was primarily due to anticipated costs associated with the acquisition and integration of Cantel.

Net Cash Used In Investing Activities – The net cash used in investing activities totaled $680.3 million for the first six months of fiscal 2022 and $112.9 million for the first six months of fiscal 2021.

The following discussion summarizes the significant changes in our investing cash flows for the first six months of fiscal 2022 and fiscal 2021:

• Purchases of property, plant, equipment, and intangibles, net – Capital expenditures were $133.4 million for the first six months of fiscal 2022 and $110.7 million during the same prior year period.

Net Cash Provided by Operating Activities – The net cash pr ovided by our operating activities was $513.1 million for the first nine months of fiscal 2022 and $501.8 million for the first nine months of fiscal 2021.

Higher cash provided by operating activities more than offset the acquisition and integration expenditures related to our acquisition of Cantel.

Net Cash Used In Investing Activities – The net cash used in investing activities totaled $760.1 million for the first nine months of fiscal 2022 and $1,035.9 million for the first nine months of fiscal 2021.

The following discussion summarizes the significant changes in our investing cash flows for the first nine months of fiscal 2022 and fiscal 2021:

• Purchases of property, plant, equipment, and intangibles, net – Capital expenditures were $214.5 million for the first nine months of fiscal 2022 and $164.5 million during the same prior year period.

The fiscal 2022 increase was primarily due to additional expenditures from Cantel and in our Applied Sterilization Technologies segment.

• Acquisitions of businesses, net of cash acquired – During the first six months of fiscal 2022, we used $547.4 million for the acquisition of Cantel.

• Acquisitions of businesses, net of cash acquired – During the first nine months of fiscal 2022 and 2021, we used $547.4 million and $869.4 million, respectively for the purchases of businesses.

For more information on our acquisitions, refer to our Note 2 to our consolidated financial statements, "Business Acquisitions and Divestitures."

Net Cash Used In Fi nancing Activities – The net cash provided by financing activities amounted to $579.7 million for the first six months of fiscal 2022 compared with net cash used in financing activities of $199.3 million for the first six months of fiscal 2021.

The following discussion summarizes the significant changes in our financing cash flows for the first six months of fiscal 2022 and fiscal 2021:

• Proceeds from issuance of senior notes – During the first six months of fiscal 2022, we received $1,350.0 million in proceeds from the issuance of our Senior Public Notes.

Net Cash Provided By Fi nancing Activities – The net cash provided by financing activities amounted to $390.4 million for the first nine months of fiscal 2022 and $442.5 million for the first nine months of fiscal 2021.

The following discussion summarizes the significant changes in our financing cash flows for the first nine months of fiscal 2022 and fiscal 2021:

• Proceeds from issuance of senior notes – During the first nine months of fiscal 2022, we received $1,350.0 million in proceeds from the issuance of our Senior Public Notes.

For more information on our Senior Public Notes, refer to Note 5 of our Consolidated Financial Statements titled, "Debt."

• Proceeds from term loan – During the first six months of fiscal 2022, we borrowed $650.0 million under our Delayed Draw Term Loan.

For more information on our Delayed Draw Term Loan, refer to our annual report on Form 10-K filed with the SEC on May 28, 2021.

• Payments on long-term obligations – During the first six months of fiscal 2022, we repaid $721.3 million of Cantel's outstanding debt in connection with the acquisition.

For more information on Cantel's debt refer to Note 2 of our Consolidated Financial Statements titled, "Business Acquisitions." During the first six months of fiscal 2021, we repaid $35.0 million of principal for private placement notes that matured in Aug ust 2020.

For more information on debt refer to Note 5 of our Consolidated Financial Statements titled, "Debt."

• Payments on convertible debt obligations – During the first six months of fiscal 2022, we paid $371.4 million to settle obligations associated with Cantel's convertible debt assumed at the time of acquisition.

For more information on Cantel's debt refer to Note 2 of our Consolidated Financial Statements titled, "Business Acquisitions."

• Payments on term loan – During the first six months of fiscal 2022, we repaid $125.0 million of our Term Loan.

• Proceeds from term loan – During the first nine months of fiscal 2022, we received proceeds of $650.0 million under our Delayed Draw Term Loan.

During the third quarter of fiscal 2021, we received proceeds of $550.0 million under a prior Term Loan.

Which was subsequently replaced by another Term Loan of like amount.

For more information on our term loans, refer to our annual report on Form 10-K filed with the SEC on May 28, 2021.

• Payments on term loan – During the first nine months of fiscal 2022, we repaid $125.0 million of our Term Loan.

For more information on our Term Loan, refer to our annual report on Form 10-K filed with the SEC on May 28, 2021.

• Payments under credit facilities, net – Net payments under credit facilities totaled $65.0 million in the first six months of fiscal 2022 compared to net payments under credit facilities of $107.2 million in the first six months of fiscal 2021.

• Deferred financing fees and debt issuance costs – During the first six months of fiscal 2022, we paid $17.3 million for financing fees and debt issuance costs primarily related to our Senior Public Notes and Delayed Draw Term Loan .

• Payments on long-term obligations – During the first nine months of fiscal 2022, we repaid $721.3 million of Cantel's outstanding debt in connection with the acquisition.

For more information on Cantel's debt refer to Note 2 of our Consolidated Financial Statements titled, "Business Acquisitions and Divestitures." During the first nine months of fiscal 2021, we repaid $35.0 million of principal for private placement notes that matured in Aug ust 2020.

For more information on our debt, refer to our annual report on Form 10-K filed with the SEC on May 28, 2021.

• Payments on convertible debt obligations – During the first nine months of fiscal 2022, we paid $371.4 million to settle obligations associated with Cantel's convertible debt assumed at the time of acquisition.

For more information on Cantel's debt refer to Note 2 of our Consolidated Financial Statements titled, "Business Acquisitions and Divestitures."

• Proceeds (payments) under credit facilities, net – Net payments under credit facilities totaled $203.8 million in the first nine months of fiscal 2022, compared to net proceeds under credit facilities of $23.8 million in the first nine months of fiscal 2021.

• Deferred financing fees and debt issuance costs – During the first nine months of fiscal 2022, we paid $17.2 million for financing fees and debt issuance costs primarily related to our Senior Public Notes and Delayed Draw Term Loan .

During the first nine months of fiscal 2021, we paid $3.1 million for financing fees and debt issuance costs in connection with our Term Loan .

For more information on our debt refer to Note 5 of our Consolidated Financial Statements titled, "Debt."

• Repurchases of ordinary shares – During the first six months of fiscal 2022, we obtained 130,678 of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of $24.8 million.

• Repurchases of ordinary shares – During the first nine months of fiscal 2022, we obtained 225,493 of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of $27.6 million.

From the start of fiscal 2021 through April 9, 2020, we purchased 35,000 of our ordinary shares in the aggregate amount of $5.0 million.

During the first six months of fiscal 2021, we obtained 76,286 of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of $9.4 million.

During the first nine months of fiscal 2021, we obtained 85,574 of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of $9.5 million.

Due to the uncertainty surrounding the COVID-19 pandemic, share repurchases were suspended on April 9, 202 0.

• Acquisition related deferred or contingent consideration – During the first six months of fiscal 2022, we paid $25.3 million in deferred and contingent consideration, the majority of which was associated with a pre-acquisition arrangement related to an acquisition made by Cantel prior to our purchase of the company.

• Cash dividends paid to ordinary shareholders – During the first six months of fiscal 2022, we paid total cash dividends of $77.1 million, or $0.83 per outstanding share.

During the first six months of fiscal 2021, we paid total cash dividends of $65.6 million, or $0.77 per outstanding share.

• Transactions with noncontrolling interest holders – During the first six months of fiscal 2022, we paid distributions to noncontrolling interest holders of $1.0 million.

During the first six months of fiscal 2021, we received contributions from noncontrolling interest holders of $2.3 million.

The suspension has been lifted effective February 10, 2022, enabling the Company to resume stock repurchases pursuant to the prior authorizations.

• Acqu isition related deferred or contingent consideration – During the first nine months of fiscal 2022, we paid $32.6 million in deferred and contingent consideration, the majority of which was associated with a pre-acquisition arrangement related to an acquisition made by Cantel prior to our purchase of the company.

During the first nine months of fiscal 2021, we paid $3.0 million in deferred and contingent consideration related to our recent acquisitions.

For more information on our acquisitions, refer to our Note 2 to our consolidated financial statements, "Business Acquisitions and Divestitures."

• Cash dividends paid to ordinary shareholders – During the first nine months of fiscal 2022, we paid total cash dividends of $120.1 million, or $1.26 per outstanding share.

During the first nine months of fiscal 2021, we paid total cash dividends of $99.7 million, or $1.17 per outstanding share.

• Transactions with noncontrolling interest holders – During the first nine months of fiscal 2022, we received contributions from noncontrolling interest hold ers of $3.7 million and paid $1.0 million in distributions to noncontrolling interest holders.

During the first nine months of fiscal 2021, we received contributions from noncontrolling interest holders of $2.3 million and paid $0.6 million in distributions to noncontrolling interest holders.

During the first nine months of fiscal 2021, we paid $3.6 million for the acquisition of a subsidiary's interest in a noncontrolling interest.

• Stock option and other equity transactions, net – We generally receive cash for issuing shares under our stock option programs.

During the first six months of fiscal 2022 and fiscal 2021, we received cash proceeds totaling $7.8 million and $20.6 million, respectively, under these programs.

During the first nine months of fiscal 2022 and fiscal 2021, we received cash proceeds totaling $6.8 million and $26.0 million, respectively, under these programs.

Cash Flow Measures.

Free cash flow was $135.8 million in the first six months of fiscal 2022 compared to $185.6 million in the first six months of fiscal 2020 (see the subsection above titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow).

The fiscal 2022 decreases in cash flows was primarily due to anticipated costs associated with the acquisition and integration of Cantel and higher capital expenditures in fiscal 2022.

Our debt-to-total capital ratio was 34.5% at September 30, 2021 and 21.8% at September 30, 2020.

Free cash flow was $300.3 million in the first nine months of fiscal 2022 compared to $337.7 million in the first nine months of fiscal 2021 (see the subsection above titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow).

The fiscal 2022 decrease in free cash flows was primarily due to anticipated costs associated with the acquisition and integration of Cantel and higher capital expenditures in fiscal 2022.

Our debt-to-total capital ratio was 33.3% at December 31, 2021 and 30.6% at December 31, 2020.

Sources of Credit and Contractual and Commercial Commitments.

Information related to our sources of credit and contractual and commercial commitments is included in our Annual Report on Form 10-K for the year ended March 31, 2021, dated May 28, 2021.

Our commercial commitments were approximately $86.1 million at September 30, 2021, reflecting a net increase of $6.9 million in surety bonds and other commercial commitments from March 31, 2021.

Outstanding borrowings under our Credit Agreement as of September 30, 2021 were $184.4 million.

We had $14.4 million of letters of credit outstanding under the Credit Agreement at September 30, 2021.

Our commercial commitments were approximately $100.7 million at December 31, 2021, reflecting a net increase of $21.6 million in surety bonds and other commercial commitments from March 31, 2021.

Outstanding borrowings under our Credit Agreement as of December 31, 2021 were $46.5 million.

We had $15.4 million of letters of credit outstanding under the Credit Agreement at December 31, 2021.

Cash Requirements.

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The Senior Public Notes are guaranteed, jointly and severally, on a senior unsecured basis.

The Senior Public Notes and the related guarantees are senior unsecured obligations of STERIS Irish FinCo and the Guarantors, respectively, and are equal in priority with all other unsecured and unsubordinated indebtedness of the Issuer and the Guarantors, respectively, from time to time outstanding, including, as applicable, under the Private Placement Senior Notes and borrowings under the credit facilities.

of the Issuer and the Guarantors, respectively, from time to time outstanding, including, as applicable, under the Private Placement Senior Notes and borrowings under the credit facilities.

All of the liabilities of non-guarantor direct and indirect subsidiaries of STERIS, other than STERIS Irish FinCo, STERIS Limited and STERIS Corporation, including any claims of trade creditors, are effectively senior to the Senior Public Notes.

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• in the case of a Subsidiary Guarantor, upon the sale, transfer or other disposition of all or substantially all the assets of such Subsidiary Guarantor, other than to the Parent or a subsidiary of the Parent and as permitted by the indenture;

• in the case of a Subsidiary Guarantor, at such time as such Subsidiary Guarantor is no longer a borrower under or no longer guarantees any Material Credit Facility (subject to restatement in specified circumstances);

• in the case of a Subsidiary Guarantor, at such time as such Subsidiary Guarantor is no longer a borrower under or no longer guarantees any Material Credit Facility (subject to reinstatement in specified circumstances);

• upon the legal defeasance or covenant defeasance of the Senior Public Notes or the discharge of the Issuer’s obligations under the indenture in accordance with the terms of the indenture;

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Each Guarantor that makes a payment under its guarantee will be entitled upon payment in full of all guaranteed obligations under the indenture to a contribution from each Guarantor in an amount equal to such other Guarantor’s pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP.

The following tables present summarized results of operations for the six months ended September 30, 2021 and summarized balance sheet information at March 31, 2021 for the obligor group of the Senior Notes.

The following tables present summarized results of operations for the nine months ended December 31, 2021 and summarized balance sheet information at March 31, 2021 for the obligor group of the Senior Notes.

The obligor group consists of the Parent Company Guarantor, Subsidiary Issuer, and Subsidiary Guarantors for the Senior Notes.

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Summarized Results of Operations

(in thousands) Six Months Ended

September 30,

(in thousands) Nine Months Ended

Revenues $ 1,272,089

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( in thousands)

September 30, March 31,

December 31, March 31,

Receivables due from non-issuers and non-guarantor subsidiaries $ 15,706,721 $ 14,102,215

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administration or Congress, or of any responses thereto, (p) the possibility that anticipated financial results or benefits of recent acquisitions, including the acquisition of Cantel Medical and Key Surgical, or of STERIS’s restructuring efforts, or of recent divestitures, including anticipated revenue, productivity improvement, cost savings,

growth synergies and other anticipated benefits, will not be realized or will be other than anticipated, (q) the increased level of STERIS’s indebtedness incurred in connection with the acquisition of Cantel Medical limiting financial flexibility or increasing future borrowing costs, (r) rating agency actions that could affect STERIS’s existing debt or future ability to borrow funds at rates favorable to STERIS or at all, (s) the potential impact of the acquisition of Cantel Medical on relationships, including with suppliers, Customers, employees and regulators, and (t) the effects of contractions in credit availability, as well as the ability of STERIS’s Customers and suppliers to adequately access the credit markets when needed.

growth synergies and other anticipated benefits, will not be realized or will be other than anticipated, (q) the increased level of STERIS’s indebtedness incurred in connection with the acquisition of Cantel Medical limiting financial flexibility or increasing future borrowing costs, (r) rating agency actions or other occurrences that could affect STERIS’s existing debt or future ability to borrow funds at rates favorable to STERIS or at all, (s) the potential impact of the acquisition of Cantel Medical on relationships, including with suppliers, Customers, employees and regulators, and (t) the effects of contractions in credit availability, as well as the ability of STERIS’s Customers and suppliers to adequately access the credit markets when needed.

Availability of Securities and Exchange Commission Filings

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis