What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-09 compared with 2022-08-08 · 251 added, 160 removed, 262 unchanged (61% of the section changed)

7 unchanged sentences

• what our expenditures for capital projects were;

• where cash will come from to fund future debt principal repayments, growth outside of core operations, repurchases of shares, pay cash dividends and fund 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 first quarter of fiscal 2023 and fiscal 2022.

It may also be helpful to refer to information in Item 1, "Business", Part I, Item 1A, "Risk Factors" and Note 10 of our consolidated financial statements titled, "Commitments and Contingencies" of our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022, and Part II, Item 1A.

of this quarterly report, for a discussion of some of the matters that can adversely affect our business and results of operations.

• 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 contained herein, which present the results of our operations for the second quarter and first half of fiscal 2023 and fiscal 2022.

It may also be helpful to refer to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission ("SEC") on May 31, 2022, including information in Item 1, "Business", Part I, Item 1A, "Risk Factors" and Note 10 of our consolidated financial statements titled, "Commitments and Contingencies," and Part II, Item 1A.

of the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, which was filed with the SEC on August 8, 2022, for a discussion of some of the matters that can adversely affect our business and results of operations.

In the MD&A, we analyze and explain the period-over-period changes in the specific line items in the Consolidated Statements of Income.

26 unchanged sentences

• 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 hospital sterilization 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, 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:

steam and gas sterilizers, low temperature liquid chemical sterilant processing systems, pure steam/water systems, surgical lights and tables, and integrated operating room ("OR").

• Consumable Revenues – We define consumable revenues as revenues generated from sales of the consumable family of products, which includes dedicated consumables including V-PRO, SYSTEM 1 and 1E consumables, gastrointestinal endoscopy accessories, sterility assurance products, barrier protection solutions, cleaning consumables, dental and surgical instruments.

• Recurring Revenues – We define recurring revenues as revenues generated from sales of consumable products and service revenues.

13 unchanged sentences

increased demand for medical procedures, including preventive screenings such as endoscopies and colonoscopies;

and a desire by our Customers to operate more efficiently, all which are driving increased demand for many of our products and services.

and a desire by our Customers to operate more efficiently, all of which are driving increased demand for many of our products and services.

Acquisitions .

During the second quarter of fiscal 2023, we completed a tuck-in acquisition, which continued to expand our product and service offerings in the Healthcare segment.

Total aggregate consideration was approximately $21.9 million, including contingent deferred consideration of $6.7 million.

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

3 unchanged sentences

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

Fiscal 2023 and 2022 first quarter acquisition and integration expenses totaled $9.8 million and $141.0 million, respectively and were primarily related to the acquisition and integration of Cantel.

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

Acquisition and integration expenses totaled $3.8 million and $13.7 million for the three and six months ended September 30, 2022 , respectively.

Acquisition and integration expenses totaled $17.4 million and $158.4 million for the three and six months ended September 30, 2021 , respectively.These costs were primarily related to the acquisition and integration of Cantel.

Acquisition and integration expenses are reported in the selling, general and administrative expenses line of our Consolidated Statements of Income.

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.

During the second quarter of fiscal 2023, in connection with the preparation of our quarterly consolidated financial statements, we identified and recognized a goodwill impairment loss of $490.6 million related to goodwill that arose with respect to assets acquired in the Cantel acquisition.

COVID-19 Pandemic and Macroeconomic Environment .

6 unchanged sentences

To date, we have been able to continue to operate our manufacturing facilities and meet the demand for essential products and services of our Customers.

Nonetheless, in calendar 2022, supply chain disruptions and

delays have limited and may continue to limit our ability to ship certain capital equipment, particularly in our Healthcare and Life Sciences business, negatively impacting capital equipment revenue growth.

Within the Healthcare and Life Sciences businesses, approximately $35 million in capital equipment shipments were delayed in the first quarter of fiscal 2023.

During the quarter we have seen recovery of elective procedures as the impact of the COVID-19 pandemic has subsided in many geographies.

However, diminished staffing a vailability at hospitals appears to be a key variable limiting further recovery of procedure volumes to pre-pandemic levels.

Nonetheless, in calendar 2022, supply chain disruptions and delays have limited and may continue to limit our ability to ship certain capital equipment, particularly in our Healthcare and Life Sciences business, negatively impacting capital equipment revenue growth.

Within the Healthcare and Life Sciences businesses, approximately $70 million in capital equipment shipments were delayed in the second quarter of fiscal 2023.

We continue to pursue all available avenues to address supply chain disruptions, including purchases from third parties and brokers, qualifying alternative parts and suppliers, and obtaining prioritization from governmental agencies.

W e do not believe that the COVID-19 pandemic will negatively impact our long-term ability to generate revenues or meet existing and future financial obligations.

For additional information and 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, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022, and within Item 1A.

of this 10-Q, Part II.

Revenues for th e first quarter of fiscal 2023 were $1,156.5 million, representing an increase of 19.4% over the first quarter of fiscal 2022 revenues of $968.4 million.

The increase reflects organic growth in all segments and added volume from Cantel, which was partially offset by unfavorable fluctuations in currencies, and the absence of revenue from our Renal care business, which was divested in January 2022.

Gross margin percentage for the first quarter of fiscal 2023 was 44.8%, compared to 44.0% for the first quarter of fiscal 2022.

Favorable impacts from pricing, the Cantel acquisition, fluctuations in currencies, our recent divestitures, and mix and other adjustments, were partially offset by unfavorable impact from inflation and productivity.

Income from operations during the first quarter of fiscal 2023 was $158.4 million, compared to $14.3 million for the first quarter of fiscal 2022.

In the fiscal 2022 period, we incurred $141.0 million in acquisition and integration expenses, which were primarily related to our acquisition of Cantel.

The fiscal 2023 reduction in such expenses was partially offset by an increase in amortization of purchased intangible assets in the fiscal 2023 period.

Cash flows from operations were $231.7 million and free cash flow was $117.1 million in the first three months of fiscal 2023 compared to cash flows from operations of $97.4 million and free cash flow of $41.2 million in the first three months of fiscal 2022 (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 2023 increases in cash flows from operations and free cash flows were primarily due to lower costs associated with the acquisition and integration of Cantel in the fiscal 2023 period, which was partially offset by higher capital expenditures in the fiscal 2023 period.

Our debt-to-total capital ratio was 31.9% at June 30, 2022 and 32.1% at March 31, 2022.

During the first three months of fiscal 2023, we declared and paid a quarterly cash dividend of $0.43 per ordinary share.

Additional information regarding our financial performance during the first quarter of fiscal 2023 is included in the subsection below titled “Results of Operations.”

of the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, which was filed with the SEC on August 8, 2022.

Revenues increased 0.3% to $1,200.5 million for the three months ended September 30, 2022, as compared to $1,197.0 million for the same period in the prior year.

Revenues increased 8.8% to $2,357.0 million for the six months ended September 30, 2022, as compared to $2,165.4 million in the same period in the prior year.

These increases reflect organic growth in the Healthcare, Applied Sterilization Technologies, and Life Sciences segments, and added volume from Cantel, offset by unfavorable fluctuations in currencies and divestiture activity.

Gross profit percentage for the second quarter of fiscal 2023 was 44.3% compared to the gross profit percentage for the second quarter of fiscal 2022 of 40.1%.

Gross profit percentage for the first half of fiscal 2023 was 44.6% compared to the gross profit percentage for the first half of fiscal 2022 of 41.9%.

Favorable impacts from mix, pricing, and other adjustments were partially offset by unfavorable impacts from inflation and productivity.

Operating loss for the second quarter of fiscal 2023 was $(306.4) million, compared to operating income of $116.5 million for second quarter of fiscal 2022.

Operating loss during the first half of fiscal 2023 was $(148.0) million, compared to operating income of $130.8 million for the first half of fiscal 2022.

In the fiscal 2022 periods, we incurred additional acquisition and integration expenses, which were primarily related to our acquisition of Cantel.

There were no material acquisition and integration expenses incurred during the first six months of fiscal 2023.

The fiscal 2023 reduction in such expenses was more than offset by a one time goodwill impairment charge of $490.6 million as well as an increase in amortization of purchased intangible assets in the fiscal 2023 periods.

Cash flows from operations were $335.6 million and free cash flow was $138.2 million in the first half of fiscal 2023 compared to cash flows from operations of $268.8 million and free cash flow of $135.8 million for first half of fiscal 2022 (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 2023 increases in cash flows from operations and free cash flows were primarily due to lower costs associated with the acquisition and integration of Cantel in the fiscal 2023 period, which was partially offset by increased capital spending in the fiscal 2023 period, mainly due to timing.

Our debt-to-total capital ratio was 34.3% at September 30, 2022 and 32.1% at March 31, 2022.

During the first half of fiscal 2023, we declared and paid cash dividends totaling $0.90 per ordinary share.

Additional information regarding our financial performance during the second quarter and first half of fiscal 2023 is included in the subsection below titled “Results of Operations.”

NON-GAAP FINANCIAL MEASURES

2 unchanged sentences

These non-GAAP financial measures are not intended to be, and should not be, considered separately from or as an alternative to the most directly comparable GAAP financial measures.

These non-GAAP financial measures are presented with the intent of providing greater transparency to supplemental financial information used by management and the Board of Directors in their financial analysis and operational decision-making.

These amounts are disclosed so that the reader has the same financial data that management uses with the belief that it will assist investors and other readers in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented.

3 unchanged sentences

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 three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

The following table summarizes the calculation of our free cash flow for the six months ended September 30, 2022 and 2021:

Six Months Ended September 30,

(dollars in thousands) 2022 2021

4 unchanged sentences

Results of Operations

In the following subsections, we discuss our earnings and the factors affecting them for the first quarter of fiscal 2023 compared with the same fiscal 2022 period.

In the following subsections, we discuss our earnings and the factors affecting them for the second quarter and first half of fiscal 2023 compared with the same fiscal 2022 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 months ended June 30, 2022 to the revenues for the three months ended June 30, 2021:

Three Months Ended June 30,

The following tables compare our revenues for the three and six months ended September 30, 2022 to the revenues for the three and six months ended September 30, 2021:

Three Months Ended September 30,

(dollars in thousands) 2022 2021 Change Percent Change

8 unchanged sentences

Other foreign revenues 311,541 324,442 (12,901) (4.0) %

Revenues increased 19.4% to $1,156.5 million for the three months ended June 30, 2022, as compared to $968.4 million for the same period in the fiscal 2022, with growth in all segments.

The increase reflects organic growth in all segments and added volume of $166.2 million from Cantel, which was partially offset by unfavorable fluctuations in currencies and the absence of revenue from our Renal care business, which was divested in January 2022.

Service revenues increased 8.4% for the first three months of fiscal 2023, as compared to the same period in fiscal 2022, reflecting organic growth in the Healthcare and the Applied Sterilization Technologies segments, as well as added volume from Cantel, which was partially offset by a slight decline in Life Sciences.

Consumable revenues increased by 39.5% for the first three months of fiscal 2023, as compared to the same period in fiscal 2022, reflecting the added volume from Cantel and organic growth in the Life Sciences segment.

Capital equipment revenues increased 15.7%, for the first three months of fiscal 2023, as compared to the same period in fiscal 2022, reflecting organic growth in the Healthcare and Life Sciences segments and added volume from Cantel.

Ireland revenues decreased 17.2% to $18.2 million for the three months ended June 30, 2022, as compared to $21.9 million for the same period in the prior year, reflecting declines in service, consumable and capital equipment revenues.

United States revenues increased 22.8% to $834.1 million for the three months ended June 30, 2022, as compared to $679.3 million for the same period in the prior year, reflecting growth in service, consumable and capital equipment revenues, primarily due to strong organic growth and the addition of Cantel.

Revenues from other foreign locations increased 13.8% to $304.2 million for the three months ended June 30, 2022, as compared to $267.2 million for the same period in the prior year, reflecting growth in Canada and in the Europe, Middle East & Africa ("EMEA"), Latin America and Asia Pacific regions.

Revenues increased 0.3% to $1,200.5 million for the three months ended September 30, 2022, as compared to $1,197.0 million for the same period in the prior year.

The increase was primarily related to organic growth in the Healthcare and Applied Sterilization Technologies segments , offset by unfavorable fluctuations in currencies and recent divestiture activity.

Service revenues increased 4.4% for the three months ended September 30, 2022, 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 decreased by 7.7% for the three months ended September 30, 2022, as compared to the same period in the prior year, reflecting declines in the Healthcare, Life Sciences and Dental segments.

Capital equipment revenues increased 6.5% for the three months ended September 30, 2022, as compared to the same period in the prior year, reflecting growth in the Healthcare segment, which was partially offset by a decline in the Life Sciences segment.

Ireland revenues decreased 15.2% to $17.0 million for the three months ended September 30, 2022, as compared to $20.0 million for the same period in the prior year, reflecting declines in service, consumable and capital equipment revenues.

United States revenues increased 2.3% to $872.0 million for the three months ended September 30, 2022, as compared to $852.5 million for the same period in the prior year, reflecting growth in service revenues, which was partially offset by declines in consumable and capital equipment revenues.

Revenues from other foreign locations, decreased 4.0% to $311.5 million for the three months ended September 30, 2022, as compared to $324.4 million for the same period in the prior year.

Declines in the Europe, Middle East & Africa ("EMEA") and Asia Pacific regions, where partially offset by growth within Canada and the Latin American region.

Six Months Ended September 30,

(dollars in thousands) 2022 2021 Change Percent Change

Total revenues $ 2,357,008 $ 2,165,407 $ 191,601 8.8 %

Revenues by type:

Service revenues 1,053,538 990,890 62,648 6.3 %

Consumable revenues 830,236 746,686 83,550 11.2 %

Capital equipment revenues 473,234 427,831 45,403 10.6 %

Revenues by geography:

Ireland revenues 35,171 41,991 (6,820) (16.2) %

United States revenues 1,706,082 1,531,747 174,335 11.4 %

Other foreign revenues 615,755 591,669 24,086 4.1 %

Revenues increased 8.8% to $2,357.0 million for the six months ended September 30, 2022, as compared to $2,165.4 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 Sciences segments, and added volume of $166.2 million from the Cantel acquisition, offset by unfavorable fluctuations in currencies and recent divestiture activity.

Service revenues increased 6.3% for the six months ended September 30, 2022, as compared to the same period in the prior year, reflecting growth in the Healthcare, Applied Sterilization Technologies, and Life Sciences segments.

Consumable revenues increased by 11.2% for the six months ended September 30, 2022, as compared to the same period in the prior year, reflecting growth in the Healthcare and Dental segments, which were partially offset by a slight decline in the Life Sciences segment.

Capital equipment revenues increased 10.6% for the six months ended September 30, 2022, reflecting growth in the Healthcare and Life Sciences segments.

Ireland revenues decreased 16.2% to $35.2 million for the six months ended September 30, 2022, as compared to $42.0 million for the same period in the prior year, reflecting declines in service, consumable, and capital equipment revenues.

United States revenues increased 11.4% to $1,706.1 million for the six months ended September 30, 2022, as compared to $1,531.7 million for the same period in the prior year, reflecting growth in service and capital equipment revenues, which were partially offset by a decline in consumable revenues.

Revenues from other foreign locations increased 4.1% to $615.8 million for the six months ended September 30, 2022, as compared to $591.7 million for the same period in the prior year.

The increase reflects growth within the EMEA and Latin American regions, which was partially offset by declines in Canada and the Asia Pacific region.

Gross Profit.

The following table compares our gross profit for the three months ended June 30, 2022 to the three months ended June 30, 2021:

Three Months Ended June 30, Change Percent

The following tables compare our gross profit for the three and six months ended September 30, 2022 to the three and six months ended September 30, 2021:

Three Months Ended September 30, Change Percent

(dollars in thousands) 2022 2021

7 unchanged sentences

Total gross profit percentage 44.3 % 40.1 %

Six Months Ended September 30, Change Percent

(dollars in thousands) 2022 2021

Gross profit:

Product $ 619,536 $ 475,627 $ 143,909 30.3 %

Service 430,597 430,999 (402) (0.1) %

Total gross profit $ 1,050,133 $ 906,626 $ 143,507 15.8 %

Gross profit percentage:

Product 47.5 % 40.5 %

Service 40.9 % 43.5 %

Total gross profit percentage 44.6 % 41.9 %

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 first three months of fiscal 2023 was 44.8% compared to the gross profit percentage for the first three months of fiscal 2022 of 44.0%.

Favorable impacts from pricing (130 basis points), the Cantel acquisition (50 basis points), fluctuations in currencies (30 basis points), our recent divestitures (20 basis points), and mix and other adjustments (320 basis points), were partially offset by unfavorable impact from inflation (420 basis points), and productivity (50 basis points).

Gross profit percentage for the second quarter of fiscal 2023 was 44.3% compared to the gross profit percentage for the sec ond quarter of fiscal 2022 of 40.1%.

Favorable impacts from pricing (160 basis points), divestiture activity (50 basis points), fluctuations in currencies (20 basis points), and mix and other adjustments (710 basis points) were partially offset by unfavorable impacts from inflation (400 basis points), productivity (100 basis points), and volume (40 basis points).

Gross profit percentage for the first half of fiscal 2023 was 44.6% compared to the gross profit percentage for the first half of fiscal 2022 of 41.9%.

Favorable impacts from mix and other adjustments (520 basis points), pricing (150 basis points), and acquisition and divestiture activity (80 basis points), were partially offset by unfavorable impacts from inflation (410 basis points) and productivity (80 basis points).

The gross profit percentages reported for the fiscal 2022 periods were negatively impacted by the step up to fair value of the inventory held by Cantel at the time of acquisition which is reflected in the improvement identified as mix and other adjustments above.

Operating Expenses.

The following table compares our operating expenses for the three months ended June 30, 2022 to the three months ended June 30, 2021:

Three Months Ended June 30, Change Percent

The following table compares our operating expenses for the three and six months ended September 30, 2022 to the three and six months ended September 30, 2021:

Three Months Ended September 30, Change Percent

(dollars in thousands) 2022 2021

1 unchanged sentence

Selling, general, and administrative $ 323,195 $ 344,799 $ (21,604) (6.3) %

Goodwill impairment loss 490,565 — 490,565 NM

Research and development 24,928 18,832 6,096 32.4 %

Restructuring expenses 26 14 12 NM

Restructuring expenses 62 210 (148) (70.5) %

Total operating expenses $ 838,750 $ 363,841 $ 474,909 130.5 %

Six Months Ended September 30, Change Percent

(dollars in thousands) 2022 2021

Operating expenses:

Selling, general, and administrative $ 657,821 $ 738,551 $ (80,730) (10.9) %

Goodwill impairment loss 490,565 — 490,565 NM

Research and development 49,679 37,024 12,655 34.2 %

Restructuring expenses 88 224 (136) (60.7) %

Total operating expenses $ 1,198,153 $ 775,799 $ 422,354 54.4 %

NM - Not meaningful.

1 unchanged sentence

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 decreased $59.1 million in the first three months of fiscal 2023, over the same period in fiscal 2022.

In the fiscal 2022 period, we incurred $141.0 million in acquisition and integration expenses, which were primarily related to our acquisition of Cantel.

The fiscal 2023 reduction in such expenses was partially offset by an increase in amortization of purchased intangible assets in the fiscal 2023 period.

SG&A decreased 6.3% and 10.9% in the second quarter and first half of fiscal 2023, respectively over the same prior year periods.

In the fiscal 2022 periods, we incurred additional acquisition and integration expenses, which were primarily related to our acquisition of Cantel.

The fiscal 2023 reduction in such expenses was partially offset by an increase in amortization of purchased intangible assets in the fiscal 2023 periods.

Goodwill impairment loss.

Goodwill impairment loss of $490.6 million was recorded during the second quarter of fiscal 2023 as the result of an interim assessment of the fair value of the Dental segment.

For more information regarding our goodwill impairment loss, see Note 17 to our consolidated financial statements titled, "Goodwill."

Research and Development.

For the three month period ended June 30, 2022, research and development expenses increased $6.6 million over the same period in fiscal 2022, largely due to the addition of Cantel.

Resea rch and development expenses increased 32.4% and 34.2% in the second quarter and first half of fiscal 2023, respectively over the same prior year periods, largely due to the addition of Cantel.

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.

Our research and development initiatives continue to emphasize new product development, product improvements, and the development of new technological platform innovations.

During the first quarter of fiscal 2023, our investments in research and development continued to be focused on, but were not limited to, enhancing capabilities of sterile processing combination technologies, procedural products and accessories, and devices and support accessories used in gastrointestinal endoscopy procedures.

During fiscal 2023, our investments in research and development have continued to be focused on, but were not limited to, enhancing capabilities of sterile processing combination technologies, procedural products and accessories, and devices and support accessories used in gastrointestinal endoscopy procedures.

Non-Operating Expenses, Net.

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

The following table compares our net non-operating expenses for the three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

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 tables compare our net non-operating expenses for the three and six months ended September 30, 2022 and 2021:

Three Months Ended September 30,

(dollars in thousands) 2022 2021 Change

4 unchanged sentences

Non-operating expenses, net $ 26,647 $ 26,896 $ (249)

Interest expense increased by $0.9 million during the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, primarily due to higher interest rates on floating rate debt partially offset by lower principal amount of debt outstanding.

During the first quarter of fiscal 2022, we recorded a fair value adjustment of $22.9 million related to the convertible debt assumed in the acquisition of Cantel.

For more information on the Cantel convertible debt refer to our Annual Report filed on Form 10-K, which was filed with the Securities and Exchange Commission on May 31, 2022.

Interest (income) and miscellaneous expense changed by $2.2 million during the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, primarily due to losses on our equity investments.

Six Months Ended September 30,

(dollars in thousands) 2022 2021 Change

Non-operating expenses, net:

Interest expense $ 48,797 $ 44,848 $ 3,949

Fair value adjustment related to convertible debt, premium liability — 27,806 (27,806)

Interest income and miscellaneous expense 1,294 (2,457) 3,751

Non-operating expenses, net $ 50,091 $ 70,197 $ (20,106)

Interest expense increased $3.1 million and $3.9 million during the second quarter and first half of fiscal 2023 as compared to the prior year periods, primarily due to higher interest rates on floating rate debt partially offset by lower principal amount of debt outstanding.

For more information, refer to Not e 5 of our consolidated financial statements titled, "Debt."

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.

For more information on the Cantel convertible debt, refer to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the SEC on May 31, 2022.

Interest (income) and miscellaneous expense increased by $1.5 million and $3.8 million during the first quarter and first half of fiscal 2023, respectively, as compared to the prior year periods, primarily due to losses recognized as a result of mark to market adjustments of our equity investments.

For more information, refer to Note 15 of our consolidated financial statements, titled "Fair Value Measurements".

Income Tax Expense.

T he following table compares our income tax expense and effective income tax rates for the three months ended June 30, 2022 and June 30, 2021:

Three Months Ended June 30, Change Percent

The following tables compare our income tax expense (benefit) and effective income tax rates for the three and six months ended September 30, 2022 and September 30, 2021:

Three Months Ended September 30, Change Percent

(dollars in thousands) 2022 2021

Income tax (credit) expense $ 24,196 $ (7,075) $ 31,271 NM

Income tax expense (benefit) $ (17,831) $ 19,982 $ (37,813) (189.2)%

Effective income tax rate 5.4 % 22.3 %

NM - Not meaningful.

We record income tax expense during interim periods based on our estimate of the annual effective income tax rate, adjusted each quarter for discrete items.

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 a lternatives.

The effective income tax rates for the three month periods ended June 30, 2022 and 2021 were 17.9% and 24.4%, respectively.

The fiscal 2023 effective tax rate decreased when compared to fiscal 2022, primarily due to nonrecurring unfavorable items reported in the prior fiscal year.

Six Months Ended September 30, Change Percent

(dollars in thousands) 2022 2021

Income tax expense $ 6,365 $ 12,907 $ (6,542) (50.7)%

Effective income tax rate (3.2) % 21.3 %

We record income tax expense (benefit) during interim periods based on our estimate of the annual effective income tax rate, adjusted each quarter for discrete items.

The effective income tax rates for the three month period ended September 30, 2022 and 2021 were 5.4% and 22.3%, respective ly.

The effective income tax rates for the six month period ended September 30, 2022 and 2021 were (3.2)% and 21.3%, respectively.

The fiscal 2023 effective tax rate for the six month period ended September 30, 2022 decreased when compared to the prior year period, primarily due to the tax impact of the goodwill impairment loss recognized on the Dental segment during the second quarter of fiscal 2023.

Business Segment Results of Operations.

We report our financial information in four reportable business segments:

Healthcare, Applied Sterilization Technologies, Life Sc iences and Dental.

Healthcare, Applied Sterilization Technologies, Life Sciences and Dental.

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

9 unchanged sentences

Our Dental segment provides a comprehensive offering for dental practitioners and dental schools, offering instruments, infection prevention consumables and instrument management systems.

We disclose a measure of segment income that is consistent with the way management operates and views the business.

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

We d isclose a measure of segment income that is consistent with the way management operates and views the business.

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

Certain prior period costs were reallocated from the Healthcare segment to Corporate to conform with current year presentation.

The prior period segment operating income measure has been recast for comparability.

For the three months e nded June 30, 2022, revenues from a single Customer did not represent ten percent or more of the Healthcare, Applied Sterilization Technologies or Life Sciences segment revenues.

For the three and six months e nded September 30, 2022 , revenues from a single Customer did not represent ten percent or more of the Healthcare, Applied Sterilization Technologies or Life Sciences segment revenues.

Three Customers collectively and consistently account for approximately 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 oxi mately 38.6% and 35.8% o f our Dental segment revenues for the three months ended June 30, 2022 and 2021, respectively.

Additional information regarding our segments is included in our consolidated financial statements included our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.

These three Customers collectively accounted for appr oxi mately 40.1% and 42.1% o f our Dental segment revenues for the three and six months ended September 30, 2022, respectively.

These three Customers collectively accounted for appr oxi mately 40.6% and 39.5% o f our Dental segment revenues for the three and six months ended September 30, 2021, respectively.

A dditional 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, 2022, which was filed with the SEC on May 31, 2022.

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

Three Months Ended June 30,

(dollars in thousands) 2022 2021

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

2022 2021 2022 2021

Healthcare $ 732,813 $ 744,134 $ 1,431,339 $ 1,346,951

15 unchanged sentences

Tax restructuring costs (3)

77 159 251 110

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

Net loss on divestiture of businesses (1)

— — (3,100) —

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

899 (15) 4,777 404

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

2,452 69,486 4,089 94,276

Restructuring charges (4)

62 210 89 224

Goodwill impairment loss (5)

490,565 — 490,565 —

Total income from operations $ (306,415) $ 116,503 $ (148,020) $ 130,827

(1) For more information regarding our recent acquisitions and divestitures refer to note 2 titled, "Business Acquisitions and Divestitures" of our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.

(1) For more information regarding our recent acquisitions and divestitures, refer to Note 2 titled, "Business Acquisitions and Divestitures" included in our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the SEC on May 31, 2022.

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

(3) Costs incurred in tax restructuring.

(4) For more information regarding our restructuring efforts refer to our Annual R eport on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.

Healthcare revenues increased 15.9% to $698.5 million for the three months ended June 30, 2022, as compared to $602.8 million for the same prior year period.

This increase reflects growth in consumable, capital equipment and service revenues of 21.9%, 18.7% and 9.0%, respectively.

The increase is attributable to organic growth and the addition of Cantel, which were partially offset by unfavorable fluctuations in foreign currencies and the fiscal 2022 divestiture of our Renal care business.

The Healthcare segment’s backlog was $521.7 million at June 30, 2022.

Excluding Cantel, the Healthcare segment's backlog was $254.3 million at June 30, 2021.

(4) For more information regarding our restructuring efforts, refer to our Annual R eport on Form 10-K for the year ended March 31, 2022, which was filed with the SEC on May 31, 2022.

(5) For more information regarding our goodwill impairment loss, see Note 17 to our consolidated financial statements titled, "Goodwill."

Healthcare revenues decreased 1.5% to $732.8 million for the three months ended September 30, 2022, as compared to $744.1 million in the same prior year period.

This decrease reflects a decline in consumable revenues of 8.9%, which was partially offset by growth in capital equipment and service revenues of 5.0%, and 1.0%, respectively, and reflects the impact of divestiture activity and unfavorable fluctuations in currencies.

Healthcare revenues increased 6.3% to $1,431.3 million for the six months ended September 30, 2022, as compared to $1,347.0 million in the same prior year period.

This increase reflects growth in capital equipment, service and consumable revenues of 10.9%, 4.8% and 4.5%, respectively and reflects the favorable impact of the Cantel acquisition and organic growth, partially offset by divestiture activity and unfavorable fluctuations in currencies.

The Healthcare segment’s backlog at September 30, 2022, was $533.1 million.

Excluding Cantel, the Healthcare segment's backlog was $311.2 million at September 30, 2021.

In addition to the added volume from Cantel, the increase is primarily due to built up demand and supply chain disruptions as a result of the COVID-19 pandemic.

Applied Sterilization Technologies segment reve nues increased 5.7% to $220.9 million for the quarter ended June 30, 2022, as compared to $208.9 million for the same prior year period.

The increase reflects organic growth, which was partially offset by unfavorable fluctuations in currencie s.

Life Sciences segment revenues increased 8.8% to $132.2 million for the first three months ended June 30, 2022, as compared to $121.5 million for the same prior year period.

This increase reflects growth in capital equipment and consumable revenues of 23.7% and 5.3% respectively.

Service revenues remained essentially flat between the fiscal 2023 and 2022 periods.

The increase also reflects organic growth and the impact of Cantel, which were partially offset by unfavorable fluctuations in foreign currencies.

The Life Sciences segme nt’s backlog amounted to $92.7 million at June 30, 2022 and $92.1 million at June 30, 2021.

Applied Sterilization Technologies segment revenues increased 13.4% to $232.4 million for the three months ended September 30, 2022, as compared to $204.9 million for the same prior year period.

Applied Sterilization Technologies segment revenues increased 9.5% to $453.3 million for the six months ended September 30, 2022, as compared to $413.8 million for the same prior year period.

The fiscal 2023 increases are primarily due to organic growth and pricing, partially offset by unfavorable fluctuations in currencies.

Life Sciences revenues decreased 5.0% to $125.8 million for the three months ended September 30, 2022, as compared to $132.3 million for the same prior year period.

This decrease reflects declines in capital equipment and consumable revenues of 12.2% and 7.0%, respectively, which were partially offset by a 5.3% increase in service revenues.

The decline was driven by unfavorable fluctuations in currencies, divestiture activity, and organic volume declines, which exceeded favorable impacts from pricing.

Life Sciences revenues increased 1.6% to $258.0 million for the six months ended September 30, 2022, as compared to $253.8 million for the same prior year period.

This increase reflects growth in capital equipment and service revenues of 5.4%, and 2.8% respectively, which were partially offset by a 1.1% decline in consumable revenue.

The increase was driven by favorable organic growth, pricing, and the Cantel acquisition, which exceeded the negative impacts of currency fluctuations and divestiture activity.

The Life Sciences segme nt’s backlog at September 30, 2022 amounted to $99.5 million, representing an increase of 1.2% as compared to the backlog of $98.3 million at September 30, 2021.

The increase is primarily due to built up demand and supply chain disruptions as a result of the COVID-19 pandemic.

Dental segment revenues for first three months of fiscal 2023 were $104.8 million.

Dental segment revenues for the month of June 2021 were $35.2 million.

Revenue was somewhat limited by supply chain challenges in the fiscal 2023 first quarter.

The Healthcare segment operating income increased $18.1 million to $156.5 million for the first three months of fiscal 2023, as compared to $138.4 million for the same prior year period.

The increase was primarily due to increased volume.

The segment's operating margins were 22.4% and 23.0% for the first three months of fiscal 2023 and 2022, respectively.

The decline is primarily due to increased supply chain and inflationary costs, and higher research and development, meeting and travel expenses in fiscal 2023.

The Applied Sterilization Technologies segment operating income increased $7.4 million to $109.3 million for the first three months of fiscal 2023, as compared to $101.9 million for the same prior year period.

The segment’s operating margins we re 49.5% and 48.8% for the first three months of fiscal 2023 and fiscal 2022, respectively.

The increase in segment operating income and operating margin were primarily due to increased volume, which was partially offset by higher energy costs in fiscal 2023.

The Life Sciences segment operating income increased $6.2 million to $55.3 million for the first three months of fiscal 2023, as compared to $49.1 million for the same prior year period.

The segment’s operating margins were 41.8% and 40.4% for the first three months of fiscal 2023 and fiscal 2022, re spectively.

The increase in segment operating income and operating margin were primarily due to increased volume and favorable mix within capital equipment shipments.

The Dental segment operating income and operating margin was $19.6 million and 18.7%, respectively for the first three months of fiscal 2023.

The Dental segment operating income and operating margin was $10.1 million and 28.7%, for the month of June 2021.

Segment operating income and operating margin were somewhat limited by supply chain challenges in the fiscal 2023 first quarter.

Dental segment revenues for the three months ended September 30, 2022 decreased to $109.6 million from $115.6 million for the same prior year period.

The decline was the result of lower volume and currency fluctuations, which exceeded the favorable impact of pricing.

Dental segment revenues for the six months ended September 30, 2022 and September 30, 2021 were $214.4 million and $150.9 million, respectively.

The increase was driven by the timing of the Cantel acquisition.

The Healthcare segment’s operating income decreased 1.8% to $165.3 million for the three months ended September 30, 2022, as compared to $168.3 million in the same prior year period.

The segment's operating margins were 22.6% and 22.6% for the second quarter of fiscal 2023 and 2022, respectively.

The decrease in operating income was primarily due to u nfavorable impacts from supply chain, inflation, and divestiture activity, which exceeded the benefit of improved volume and price.

The Healthcare segment’s operating income incre ased 4.9% to $321.8 million for the six months ended September 30, 2022, as compared to $306.7 million in the same prior year period, primarily due to increased volume and the Cantel acquisition.

The se gment's operating margins were 22.5% and 22.8% for the first half of fiscal 2023 and 2022, respectively.

The decline in operating margin is primarily due to increased supply chain and inflationary costs, higher research and development expenses, and higher meeting and travel expenses in fiscal 2023.

The Applied Sterilization Technologies segment's operating income increased 10.6% to $110.4 million for the three months ended September 30, 2022, as compared to $99.8 million during the same prior year period.

The Applied Sterilization Technologies segment's operating income increased 8.9% to $219.7 million for the six months ended September 30, 2022, as compared to $201.7 million during the same prior year period.

The segment's operating margins were 47.5% and 48.7% for the second quarter of fiscal 2023 and 2022 , respectively.

The segment's operating margins were 48.5% and 48.7% for the first half of fiscal 2023 and 2022, respectively.

The increase in segment operating income and decrease in operating margin were primarily due to increased volume, which was partially offset by higher energy costs in fiscal 2023.

The Life Sciences segment’s operating income decreased 15.5% to $48.6 million for the three months ended September 30, 2022, as compared to $57.5 million in the same prior year period.

The Life Sciences segment’s operating income decreased 2.5% to $103.9 million for the six months ended September 30, 2022, as compared to $106.6 million in the same prior year period.

The segment's operating margins were 38.7% and 43.5% for the second quarter of fiscal 2023 and 2022, respectively.

The segment's operating margins were 40.3% and 42.0% for the first half of fiscal 2023 and 2022, respectively.

The decrease in segment operating income and operating margin were primarily due to declines in volume as well as supply chain and inflationary cost increases.

The Dental segment operating income was $28.1 million and $32.4 million for the three months ended September 30, 2022 and September 30, 2021, respectively.

The decrease was primarily due to a reduction in volume.

The Dental segment operating income was $47.7 million and $42.5 million, for the first six months of fiscal 2023 and 2022.

The segment's operating margins were 25.6% and 28.0% for the second quarter of fiscal 2023 and 2022, respectively.

The segment's operating margins were 22.2% and 28.2% for the first half of fiscal 2023 and 2022, respectively.

Segment operating income and operating margin were somewhat limited by supply chain challenges in the fiscal 2023 periods as well as declines in volume.

Liquidity and Capital Resources

The following table summarizes significant components of our cash flows for the three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

The following table summarizes significant components of our cash flows for the six months ended September 30, 2022 and 2021:

Six Months Ended September 30,

(dollars in thousands) 2022 2021

1 unchanged sentence

Net cash (used in) investing activities $ (207,342) $ (680,335)

Net cash provided by (used in) financing activities $ (141,414) $ 818,810

Net cash (used in) provided by financing activities $ (186,362) $ 579,703

Debt-to-total capital ratio 34.3 % 34.5 %

Free cash flow $ 138,192 $ 135,784

Net Cash Provided by Operating Activities – The net cash provided by our operating activities was $231.7 million for the first three months of fiscal 2023 and $97.4 million for the first three months of fiscal 2022.

The increase in fiscal 2023 period was primarily due to higher net income attainment, largely due to a decline in costs associated with the acquisition and integration of Cantel in the fiscal 2023 period, as compared to the fiscal 2022 period.

Net Cash (Used In) Investing Activities – The net cash used in investing activities totaled $109.4 million for the first three months of fiscal 2023 and $603.5 million for the first three months of fiscal 2022.

The following discussion summarizes the significant changes in our investing cash flows for the first three months of fiscal 2023 and fiscal 2022:

• Purchases of property, plant, equipment, and intangibles, net – Capital expenditures were $115.9 million for the first three months of fiscal 2023 and $56.4 million during the same prior year period.

The fiscal 2023 increase was primarily due to additional expenditures in our Applied Sterilization Technologies segment.

• Proceeds from the sale of business – During the first three months of fiscal 2023, we sold the remaining component of the animal healthcare business for $5.2 million.

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

For more information refer to our note 2 of our Consolidated Financial Statements titled, "Business Acquisitions and Divestitures".

Net Cash Provided by (Used In) Financing Activities – The net cash provided by financing activities amounted to $141.4 million for the first three months of fiscal 2023 compared with net cash used in financing activities of $818.8 million for the first three months of fiscal 2022.

The following discussion summarizes the significant changes in our financing cash flows for the first three months of fiscal 2023 and fiscal 2022:

• Proceeds from Issuance of Senior Notes – During the first three 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 titled "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.

• Proceeds from Term Loan – During the first three 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 note 5 titled, "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.

• Payments on Term Loan – During the first three months of fiscal 2023, we repaid $111.9 million of our Term Loan.

During the first three months of fiscal 2022, we repaid $125.0 million of our Term Loan.

For more information on our Term Loan, refer to note 5 titled, "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.

• Payments on Long-term Obligations, net – During the first three 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" and to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.

• Proceeds (payments) under credit facilities, net – Net proceeds under credit facilities totaled $37.0 million in the first three months of fiscal 2023, compared to net payments under credit facilities of $249.4 million in the first three months of fiscal 2022.

For more information on our credit facilities, refer to note 5 titled, "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.

• Deferred financing fees and debt issuance costs – During the first three 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 .

For more information on our debt, refer to note 5 titled, "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.

• Repurchases of ordinary shares – During the first three months of fiscal 2023, we purchased 61,677 of our ordinary shares in the aggregate amount of $12.9 million.

During the first three months of fiscal 2023, we obtained 57,704 of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of $11.7 million.

During the first three months of fiscal 2022, we obtained 59,648 of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of $10.7 million.

• Acquisition related deferred or contingent consideration – During the first three months of fiscal 2023 and fiscal 2022, we paid approximately $0.1 million and $25.2 million, respectively, in deferred and contingent consideration.

The majority of the fiscal 2022 amount 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 three months of fiscal 2023, we paid total cash dividends of $43.0 million, or $0.43 per outstanding share.

During the first three months of fiscal 2022, we paid total cash dividends of $34.1 million, or $0.40 per outstanding share.

Net Cash Provided by Operating Activities – The net cash provided by our operating activities was $335.6 million for the first six months of fiscal 2023 and $268.8 million for the first six months of fiscal 2022.

The fiscal 2023 increase was primarily due to lower costs associated with the acquisition and integration of Cantel in the fiscal 2023 period.

Net Cash Used In Investing Activities – The net cash used in investing activities totaled $207.3 million for the first six months of fiscal 2023 and $680.3 million for the first six months of fiscal 2022.

The following discussion summarizes the significant changes in our investing cash flows for the first six months of fiscal 2023 and fiscal 2022:

• Purchases of property, plant, equipment, and intangibles, net – Capital expenditures were $198.7 million for the first six months of fiscal 2023 and $133.4 million during the same prior year period.The fiscal 2023 increase was primarily due to additional expenditures in our Applied Sterilization Technologies segment.

• Proceeds from the sale of business – During the first six months of fiscal 2023, we sold the remaining component of the animal healthcare business for $5.2 million.

• Acquisitions of businesses, net of cash acquired – During the first six months of fiscal 2023 we used $15.2 million for the acquisition of a business.

During the first six months of fiscal 2022, we used $547.4 million for the acquisition of Cantel.

For more information, refer to Note 2 titled, "Business Acquisitions," and to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the SEC on May 31, 2022.

Net Cash Used In Fi nancing Activities – The net cash used in financing activities amounted to $186.4 million for the first six months of fiscal 2023 compared with net cash provided by financing activities of $579.7 million for the first six months of fiscal 2022.

The following discussion summarizes the significant changes in our financing cash flows for the first six months of fiscal 2023 and fiscal 2022:

• 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.

For more information on our Senior Public Notes, refer to Note 5 titled, "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the SEC on May 31, 2022.

• 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 Note 5 titled, "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the SEC on May 31, 2022.

• 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 our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the SEC on May 31, 2022.

• Payments on Term Loans – During the first six months of fiscal 2023, we repaid $126.9 million of our Term Loans.

During the first six months of fiscal 2022, we repaid $125.0 million of our Term Loan.

For more information on our Term Loans, refer to Note 5 titled, "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the SEC on May 31, 2022.

• Payments on Long-term Obligations, net – 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" and to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the SEC on May 31, 2022.

• Payments under credit facilities, net – Net proceeds received under credit facilities totaled $99.1 million in the first six months of fiscal 2023, compared to net payments under credit facilities of $65.0 million in the first six months of fiscal 2022.

• 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 .

For more information on our debt, refer to Note 5 of our consolidated financial statements titled, "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the SEC on May 31, 2022.

• Repurchases of ordinary shares – During the first six months of fiscal 2023, we obtained 64,436 of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of $11.8 million .

During the first six months of fiscal 2023, we purchased 283,987 of our ordinary shares in the aggregate amount of $58.2 million .

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.

• 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 2023, we paid total cash dividends of $90.0 million, or $0.90 per outstanding share.

During the first six months of fiscal 2022, we paid total cash dividends of $77.1 million, or $0.83 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.

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

During the first three months of fiscal 2023 and fiscal 2022, we received cash proceeds totaling $1.2 million and $1.7 million, respectively, under these programs.

During the first six months of fiscal 2023 and fiscal 2022, we received cash proceeds totaling $1.5 million and $7.8 million, respectively, under these programs.

Cash Flow Measures.

Free cash flow was $117.1 million in the first three months of fiscal 2023 compared to $41.2 million in the first three months of fiscal 2022 (see the subsection above titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flo w).

The fiscal 2023 increase in free cash flow was primarily due to lower costs associated with the acquisition and integration of Cantel in the fiscal 2023 period, which was partially offset by higher capital expenditures in the fiscal 2023 period.

Our debt-to-total capital ratio was 31.9% at June 30, 2022 and 34.3% at June 30, 2021.

Free cash flow was $138.2 million in the first six months of fiscal 2023 compared to $135.8 million in the first six months of fiscal 2022 (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 2023 increase in free cash flow was primarily due to lower costs associated with the acquisition and integration of Cantel in the fiscal 2023 period, which was partially offset by increased capital spending in the fiscal 2023 period, mainly due to timing.

Our debt-to-total capital ratio was 34.3% at September 30, 2022 and 34.5% at September 30, 2021.

Material Future Cash Obligations and Commercial Commitments.

Information related to our material future cash obligations and commercial commitments is included in our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.

Our commercial commitments were approximately $100.9 million at June 30, 2022, reflecting a net increase of $2.2 million in surety bonds and other commercial commitments from March 31, 2022.

Outstanding borrowings under our Credit Agreement as of June 30, 2022 were $92.6 million .

We had $15.0 million of letters of credit outstanding under the Credit Agreement at June 30, 2022.

Our commercial commitments were approximately $107.9 million at September 30, 2022, reflecting a net increase of $9.3 million in surety bonds and other commercial commitments from March 31, 2022.

Outstanding borrowings under our Credit Agreement as of September 30, 2021 were $150.9 million.

We had $13.5 million of letters of credit outstanding under the Credit Agreement at September 30, 2022.

Cash Requirements.

We intend to use our existing cash and cash equivalent balances and cash generated from operations for short-term and long-term capital expenditures and our other liquidity needs.

Our capital requirements depend on many uncertain factors, including our rate of sales growth, our Customers’ acceptance of our products and services, the costs of obtaining adequate manufacturing capacities, the timing and extent of our research and development projects, changes in our operating expenses and other factors.

To the extent that existing and anticipated sources of cash are not sufficient to fund our future activities, we may need to raise additional funds through additional borrowings or the sale of equity securities.

Our capital requirements depend on many uncertain factors, including our r ate of sales growth, our Customers’ acceptance of our products and services, the costs of obtaining adequate manufacturing capacities, the timing and extent of our research and development projects, changes in our expenses and other factors.

To th e extent that existing and anticipated sources of cash are not sufficient to fund our future activities, we may need to raise additional funds through additional borrowings or the sale of equity securities.

There can be no assurance that our existing financing arrangements will provide us with sufficient funds or that we will be able to obtain any additional funds on terms favorable to us or at all.

23 unchanged sentences

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 three months ended June 30, 2022 and summarized balance sheet information at March 31, 2022 for the obligor group of the Senior Public Notes.

The following tables present summarized results of operations for the six months ended September 30, 2022 and summarized balance sheet information at March 31, 2022 for the obligor group of the Senior Public Notes.

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

2 unchanged sentences

Summarized Results of Operations

(in thousands) Three Months Ended

(in thousands) Six Months Ended

September 30,

Revenues $ 1,079,557

5 unchanged sentences

( in thousands)

June 30, March 31,

September 30, March 31,

Receivables due from non-issuers and non-guarantor subsidiaries $ 16,997,826 $ 16,033,719

14 unchanged sentences

Critical Accounting Estimates and Assumptions

Information related to our critical accounting estimates and assumptions is included in our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.

Information related to our critical accounting estimates and assumptions is included in our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the SEC on May 31, 2022.

Our critical accounting policies, estimates, and assumptions have not changed materially from March 31, 2022.

1 unchanged sentence

We are, and will likely continue to be, involved in a number of legal proceedings, government investigations, and claims, which we believe generally arise in the course of our business, given our size, history, complexity, and the nature of our business, products, Customers, regulatory environment, and industries in which we participate.

These legal proceedings, investigations and claims generally involve a variety of legal theories and allegations, including, without limitation, personal injury (e.g., slip and falls, burns, vehicle accidents), product liability or regulation (e.g., based on product operation or claimed malfunction, failure to warn, failure to meet specification, or failure to comply with regulatory requirements), product exposure (e.g., claimed exposure to chemicals, asbestos, contaminants, radiation), property damage (e.g., claimed damage due to leaking equipment, fire, vehicles, chemicals), commercial claims (e.g., breach of contract, economic loss, warranty, misrepresentation), financial (e.g., taxes, reporting), employment (e.g., wrongful termination, discrimination, benefits matters), and other claims for damage and relief.

These legal proceedings, investigations and claims generally involve a variety of legal theories and allegations, including, without limitation, personal

injury (e.g., slip and falls, burns, vehicle accidents), product liability or regulation (e.g., based on product operation or claimed malfunction, failure to warn, failure to meet specification, or failure to comply with regulatory requirements), product exposure (e.g., claimed exposure to chemicals, gases, asbestos, contaminants, radiation), property damage (e.g., claimed damage due to leaking equipment, fire, vehicles, chemicals), commercial claims (e.g., breach of contract, economic loss, warranty, misrepresentation), financial (e.g., taxes, reporting), employment (e.g., wrongful termination, discrimination, benefits matters), and other claims for damage and relief.

We record a liability for such contingencies to the extent we conclude that their occurrence is both probable and estimable.

19 unchanged sentences

Unless legally required, STERIS 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 impact of the COVID-19 pandemic or similar public health crises on STERIS’s operations, supply chain, material and labor costs, performance, results, prospects, or value, (b) STERIS's ability to achieve the expected benefits regarding the accounting and tax treatments of the redomiciliation to Ireland (“Redomiciliation”), (c) operating costs, Customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, Customers, clients or suppliers) being greater than expected, (d) STERIS’s ability to successfully integrate the businesses of Cantel Medical into our existing businesses, including unknown or inestimable liabilities, or increases in expected integration costs or difficulties in connection with the integration of Cantel Medical (e) STERIS’s ability to meet expectations regarding the accounting and tax treatment of the Tax Cuts and Jobs Act (“TCJA”) or the possibility that anticipated benefits resulting from the TCJA will be less than estimated, (f) changes in tax laws or interpretations that could increase our consolidated tax liabilities, including changes in tax laws that would result in STERIS being treated as a domestic corporation for United States federal tax purposes, (g) the potential for increased pressure on pricing or costs that leads to erosion of profit margins, (h) the possibility that market demand will not develop for new technologies, products or applications or services, or business initiatives will take longer, cost more or produce lower benefits than anticipated, (i) the possibility that application of or compliance with laws, court rulings, certifications, regulations, regulatory actions, including without limitation any of the same relating to FDA, EPA or other regulatory authorities, government investigations, the outcome of any pending or threatened FDA, EPA or other regulatory warning notices, actions, requests, inspections or submissions, or other requirements or standards may delay, limit or prevent new product or service introductions, affect the production, supply and/or marketing of existing products or services or otherwise affect STERIS’s performance, results, prospects or value, (j) the potential of international unrest, including the Russia-Ukraine military conflict, economic downturn or effects of currencies, tax assessments, tariffs and/or other trade barriers, adjustments or anticipated rates, material and labor costs or availability, benefit or retirement plan costs, or other regulatory compliance costs, (k) the possibility of reduced demand, or reductions in the rate of growth in demand, for STERIS’s products and services, (l) the possibility of delays in receipt of orders, order cancellations, or delays in the manufacture or shipment of ordered products, due to supply chain issues or otherwise , or in the provision of services, (m) the possibility that anticipated growth, cost savings, new product acceptance, performance or approvals, or other results may not be achieved, or that transition, labor, competition, timing, execution, regulatory, governmental, or other issues or risks associated with STERIS’s businesses, industry or initiatives may adversely impact STERIS’s performance, results, prospects or value, (n) the impact on STERIS and its operations, or tax liabilities, of Brexit or the exit of other member countries from the EU, and the Company’s ability to respond to such impacts, (o) the impact on STERIS and its operations of any legislation, regulations or orders, including but not limited to any new trade or tax legislation, regulations or orders, that may be implemented by the U.S.

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 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.

result in costs to STERIS that may not be covered by insurance, or otherwise affect STERIS’s performance, results, prospects or value, (j) the potential of international unrest, including the Russia-Ukraine military conflict, economic downturn or effects of currencies, tax assessments, tariffs and/or other trade barriers, adjustments or anticipated rates, material and labor costs or availability, benefit or retirement plan costs, or other regulatory compliance costs, (k) the possibility of reduced demand, or reductions in the rate of growth in demand, for STERIS’s products and services, (l) the possibility of delays in receipt of orders, order cancellations, or delays in the manufacture or shipment of ordered products, due to supply chain issues or otherwise , or in the provision of services, (m) the possibility that anticipated growth, cost savings, new product acceptance, performance or approvals, or other results may not be achieved, or that transition, labor, competition, timing, execution, regulatory, governmental, or other issues or risks associated with STERIS’s businesses, industry or initiatives may adversely impact STERIS’s performance, results, prospects or value, (n) the impact on STERIS and its operations, or tax liabilities, of Brexit or the exit of other member countries from the EU, and the Company’s ability to respond to such impacts, (o) the impact on STERIS and its operations of any legislation, regulations or orders, including but not limited to any new trade or tax legislation, regulations or orders, that may be implemented by the U.S.

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 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 changes in credit availability, as well as the ability of STERIS’s Customers and suppliers to adequately access the credit markets, on favorable terms or at all, when needed.

Availability of Securities and Exchange Commission Filings

We make available free of charge on or through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports as soon as reasonably practicable after we file such material with, or furnish such material to, the Securities Exchange Commission ("SEC.") You may access these documents on the Investor Relations page of our website at http://www.steris-ir.com .

You may access these documents on the Investor Relations page of our website at http://www.steris-ir.com .

The information on our website and the SEC's website is not incorporated by reference into this report.

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