What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-02-08 compared with 2022-11-09 · 125 added, 132 removed, 770 unchanged (25% of the section changed)

3 unchanged sentences

(in thousands)

September 30,

2022 March 31,

38 unchanged sentences

See notes to consolidated financial statements.

Table of Content s

STERIS PLC AND SUBSIDIARIES

1 unchanged sentence

(in thousands, except per share amounts)

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

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

2022 2021 2022 2021

13 unchanged sentences

Total operating expenses 330,694 335,181 1,528,847 1,110,980

Income (loss) from operations ( 306,415 ) 116,503 ( 148,020 ) 130,827

Income from operations 190,803 202,933 42,783 333,760

Non-operating expenses, net:

1 unchanged sentence

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

Interest (income) and miscellaneous expense 524 ( 1,023 ) 1,294 ( 2,457 )

Interest and miscellaneous expense (income) 1,906 ( 2,447 ) 3,200 ( 4,905 )

Total non-operating expenses, net 30,465 20,524 80,556 90,721

Income (loss) before income tax expense 160,338 182,409 ( 37,773 ) 243,039

Income tax expense (benefit) ( 17,831 ) 19,982 6,365 12,907

Income tax expense 37,013 39,315 43,378 52,222

Net income (loss) 123,325 143,094 ( 81,151 ) 190,817

Net income (loss) attributable to noncontrolling interests 54 ( 186 ) ( 453 ) ( 281 )

Net (loss) attributable to noncontrolling interests ( 503 ) ( 529 ) ( 956 ) ( 810 )

Net income (loss) attributable to shareholders $ 123,828 $ 143,623 $ ( 80,195 ) $ 191,627

4 unchanged sentences

See notes to consolidated financial statements.

Table of Content s

STERIS PLC AND SUBSIDIARIES

1 unchanged sentence

(in thousands)

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

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

2022 2021 2022 2021

Net income (loss) $ 123,325 $ 143,094 $ ( 81,151 ) $ 190,817

Net income (loss) attributable to noncontrolling

Net (loss) attributable to noncontrolling

interests ( 503 ) ( 529 ) ( 956 ) ( 810 )

7 unchanged sentences

See notes to consolidated financial statements.

Table of Content s

STERIS PLC AND SUBSIDIARIES

1 unchanged sentence

(in thousands)

Six Months Ended September 30,

Nine Months Ended December 31,

Operating activities:

Net income $ ( 204,476 ) $ 47,723

Net income (loss) $ ( 81,151 ) $ 190,817

Adjustments to reconcile net income to net cash provided by operating activities:

33 unchanged sentences

Distributions to noncontrolling interest ( 794 ) ( 997 )

Contributions from noncontrolling interest — 3,672

Stock option and other equity transactions, net 1,497 6,789

5 unchanged sentences

See notes to consolidated financial statements.

Table of Content s

STERIS PLC AND SUBSIDIARIES

1 unchanged sentence

(in thousands, except per share amounts)

Three Months Ended September 30, 2022

Three Months Ended December 31, 2022

Ordinary Shares Retained

4 unchanged sentences

Number Amount

Balance at June 30, 2022 100,090 $ 4,738,746 $ 2,057,175 $ ( 388,373 ) $ 11,580 $ 6,419,128

Balance at September 30, 2022 99,868 $ 4,705,118 $ 1,695,087 $ ( 598,148 ) $ 11,390 $ 5,813,447

Comprehensive income:

Net income (loss) — — 123,828 — ( 503 ) 123,325

Other comprehensive (loss) — — — ( 209,775 ) — ( 209,775 )

Other comprehensive income — — — 233,985 — 233,985

Repurchases of ordinary shares ( 493 ) ( 82,804 ) ( 1,226 ) — — ( 84,030 )

2 unchanged sentences

— — ( 46,917 ) — — ( 46,917 )

Distributions to noncontrolling interest — — — — ( 794 ) ( 794 )

Other changes in noncontrolling interest — — — — 115 115

Balance at September 30, 2022 99,868 $ 4,705,118 $ 1,695,087 $ ( 598,148 ) $ 11,390 $ 5,813,447

Six Months Ended September 30, 2022

Balance at December 31, 2022 99,400 $ 4,631,703 $ 1,770,772 $ ( 364,163 ) $ 10,208 $ 6,048,520

Nine Months Ended December 31, 2022

Ordinary Shares Retained

12 unchanged sentences

— — ( 136,898 ) — — ( 136,898 )

Distributions to noncontrolling interest — — — — ( 794 ) ( 794 )

Other changes in noncontrolling interest — — — — ( 323 ) ( 323 )

Balance at September 30, 2022 99,868 $ 4,705,118 $ 1,695,087 $ ( 598,148 ) $ 11,390 $ 5,813,447

Table of Content s

Balance at December 31, 2022 99,400 $ 4,631,703 $ 1,770,772 $ ( 364,163 ) $ 10,208 $ 6,048,520

STERIS PLC AND SUBSIDIARIES

1 unchanged sentence

(in thousands, except per share amounts)

Three Months Ended September 30, 2021

Three Months Ended December 31, 2021

Ordinary Shares Retained

4 unchanged sentences

Number Amount

Balance at June 30, 2021 99,746 $ 4,736,838 $ 1,874,559 $ ( 36,817 ) $ 10,435 $ 6,585,015

Balance at September 30, 2021 99,911 $ 4,748,181 $ 1,893,196 $ ( 105,733 ) $ 9,287 $ 6,544,931

Comprehensive income:

5 unchanged sentences

— — ( 43,011 ) — — ( 43,011 )

Distributions to noncontrolling interest — — — — ( 997 ) ( 997 )

Contributions from noncontrolling interest — — — — 3,672 3,672

Other changes in noncontrolling interest — — — — 48 48

Balance at September 30, 2021 99,911 $ 4,748,181 $ 1,893,196 $ ( 105,733 ) $ 9,287 $ 6,544,931

Six Months Ended September 30, 2021

Balance at December 31, 2021 100,111 $ 4,758,199 $ 1,989,870 $ ( 136,878 ) $ 12,478 $ 6,623,669

Nine Months Ended December 31, 2021

Ordinary Shares Retained

16 unchanged sentences

Reclassification to Cantel convertible debt, premium liability — ( 175,555 ) — — — ( 175,555 )

Contributions from noncontrolling interest — — — — 3,672 3,672

Distributions to noncontrolling interest — — — — ( 997 ) ( 997 )

Other changes in noncontrolling interest — — — — 135 135

Balance at September 30, 2021 99,911 $ 4,748,181 $ 1,893,196 $ ( 105,733 ) $ 9,287 $ 6,544,931

Balance at December 31, 2021 100,111 $ 4,758,199 $ 1,989,870 $ ( 136,878 ) $ 12,478 $ 6,623,669

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

31 unchanged sentences

We revise the estimates and assumptions as new information becomes available.

This means that operating results for the three and six month periods ended September 30, 2022 are not necessarily indicative of results that may be expected for future quarters or for the full fiscal year ending March 31, 2023.

This means that operating results for the three and nine month periods ended December 31, 2022 are not necessarily indicative of results that may be expected for future quarters or for the full fiscal year ending March 31, 2023.

Revenue Recognition and Associated Liabilities

7 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

16 unchanged sentences

Certain costs to fulfill a contract are capitalized and amortized over the term of the contract if they are recoverable, directly related to a contract and generate resources that we will use to fulfill the contract in the future.

At September 30, 2022, assets related to costs to fulfill a contract were not material to our consolidated financial statements.

At December 31, 2022, assets related to costs to fulfill a contract were not material to our consolidated financial statements.

Refer to Note 9 titled, "Business Segment Information" for disaggregation of revenue.

19 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

3 unchanged sentences

Deferred revenue is recognized as revenue upon completion of the performance obligation, which generally occurs within one year.

During the first six months of fiscal 2023, $ 67,218 of the March 31, 2022 deferred revenue balance was recorded as revenue.

During the first six months of fiscal 2022, $ 40,360 of the March 31, 2021 deferred revenue balance was recorded as revenue.

During the first nine months of fiscal 2023, $ 76,861 of the March 31, 2022 deferred revenue balance was recorded as revenue.

During the first nine months of fiscal 2022, $ 42,942 of the March 31, 2021 deferred revenue balance was recorded as revenue.

Refer to Note 6 titled, "Additional Consolidated Balance Sheet Information" for deferred revenue balances.

7 unchanged sentences

With regard to service, these remaining performance obligations primarily include installation, certification, and outsourced reprocessing services.

As of September 30, 2022, the transaction price allocated to remaining performance obligations was approximately $ 1,561,000 .

As of December 31, 2022, the transaction price allocated to remaining performance obligations was approximately $ 1,592,000 .

We expect to recognize approximately 63 % of the transaction price within one year and approximately 29 % beyond one year.

4 unchanged sentences

Standards that have been adopted in fiscal 2023

ASU 2021-08 "Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

October 2021 The standard provides guidance to improve the accounting for acquired revenue contracts with Customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer.

ASU 2021-08 "Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." October 2021 The standard provides guidance to improve the accounting for acquired revenue contracts with Customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer.

First Quarter Fiscal 2023 We adopted this standard effective April 1, 2022 with no material impact to our consolidated financial statements.

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

Business 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 $ 21,892 , including contingent deferred consideration of $ 6,700 .

Acquisition related costs are reported in the selling, general, and administrative expense line of the Consolidated Statements of Income and such amounts are not material.

Purchase price allocation will be finalized within a measurement period not to exceed one year from closing.

During the first nine months of fiscal 2023, we completed several tuck-in acquisitions which continued to expand our product and service offerings in the Applied Sterilization Technologies and Healthcare segments.

Total aggregate consideration was approximately $ 40,720 , including potential contingent consideration of $ 6,700 .

On June 2, 2021, we acquired all outstanding equity interests in Cantel Medical LLC ("Cantel") through a U.S.

22 unchanged sentences

Net assets acquired $ 3,599,471 $ — $ 3,599,471

Acquisition and integration expenses totaled $ 3,844 and $ 13,676 for the three and six months ended September 30, 2022 , respectively.

Acquisition and integration expenses totaled $ 17,404 and $ 158,400 for the three and six months ended September 30, 2021 , respectively.

Acquisition and integration expenses totaled $ 4,817 and $ 18,493 for the three and nine months ended December 31, 2022 , respectively.

Acquisition and integration expenses totaled $ 9,298 and $ 167,698 for the three and nine months ended December 31, 2021 , respectively.

These costs were primarily related to the acquisition and integration of Cantel.

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

3 unchanged sentences

Inventories, net consisted of the following:

September 30,

2022 March 31,

6 unchanged sentences

Information related to the major categories of our depreciable assets is as follows:

September 30,

2022 March 31,

14 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

Indebtedness was as follows:

September 30,

2022 March 31,

16 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

1 unchanged sentence

Additional information related to our Consolidated Balance Sheets is as follows:

September 30,

2022 March 31,

27 unchanged sentences

Income Tax Expense

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

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.

Income tax expense (benefit) is provided on an interim basis based upon our estimate of the annual effective income tax rate, adjusted each quarter for discrete items.

The effective income tax rates for the three month periods ended December 31, 2022 and 2021 were 23.1 % and 21.6 %, respectively.

The higher fiscal 2023 effective tax rate is the result of changes in geographic mix and favorable discrete items in the third quarter of fiscal 2022.

The effective income tax rates for the nine month periods ended December 31, 2022 and 2021 were ( 114.8 )% and 21.5 %, respectively.

The fiscal 2023 effective tax rate for the nine month period ended December 31, 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.

Income tax expense is provided on an interim basis based upon our estimate of the annual effective income tax rate, adjusted each quarter for discrete items.

In determining the estimated annual effective income tax rate, we analyze various factors, 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 carry forwards, and available tax planning alternatives.

We operate in numerous taxing jurisdictions and are subject to regular examinations by various United States federal, state and local, as well as foreign jurisdictions.

We are no longer subject to United States federal examinations for years before fiscal 2018 and, with limited exceptions, we are no longer subject to United States state and local, or non-United States, income tax

We are no longer subject to United States federal examinations for years before fiscal

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

examinations by tax authorities for years before fiscal 2016.

2018 and, with limited exceptions, we are no longer subject to United States state and local, or non-United States, income tax examinations by tax authorities for years before fiscal 2016.

We remain subject to tax authority audits in various jurisdictions wherever we do business.

2 unchanged sentences

An agreement was reached on final interest rates, which also impacts subsequent years through 2020.

We estimate the total federal, state, and local tax impact of the settlement to be approximately $ 12,000 for the fiscal years 2016 through 2020, of which approximately $ 7,500 has been paid through September 30, 2022.

In May 2021, we received two notices of proposed tax adjustment from the IRS regarding deemed dividend inclusions and associated withholding tax.

1 unchanged sentence

The IRS adjustments would result in a cumulative tax liability of approximately $ 50,000 .

We are contesting the IRS’s assertions, and intend to pursue available remedies such as appeals and litigation, if necessary.

We are contesting the IRS’s assertions.

We have not established reserves related to these notices.

17 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

13 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 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.

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.

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 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.

For the three and nine months e nded December 31, 2022 , revenues from a single Customer did not represent ten percent or more of the Healthcare, AST or Life Sciences segment revenues.

Three Customers collectively and 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 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.

These three Customers collectively accounted for appr oxi mately 47.2 % and 43.8 % o f our Dental segment revenues for the three and nine months ended December 31, 2022, respectively.

These three Customers collectively accounted for appr oxi mately 55.8 % and 46.1 % o f our Dental segment revenues for the three and nine months ended December 31, 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.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

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,

2022 2021 2022 2021

35 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

Additional information regarding our fiscal 2023 and fiscal 2022 revenue is disclosed in the following tables:

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

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

2022 2021 2022 2021

6 unchanged sentences

Capital equipment $ 28,581 $ 30,412 $ 99,095 $ 97,343

$ 30,015 $ 34,186 $ 70,514 $ 66,931

Consumables 55,610 61,096 172,587 179,380

3 unchanged sentences

Total Revenues $ 1,215,994 $ 1,208,971 $ 3,573,002 $ 3,374,378

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

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

2022 2021 2022 2021

9 unchanged sentences

The following is a summary of shares and share equivalents outstanding used in the calculations of basic and diluted earnings per share:

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

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

Denominator (shares in thousands):

2 unchanged sentences

Dilutive effect of share equivalents (1)

450 788 — 823

Weighted average shares outstanding and share equivalents—diluted 100,166 100,826 99,922 97,502

(1) The dilutive effect of share equivalents is excluded from the calculation of diluted earnings per share for the three and six months ended September 30, 2022 due to our net losses for those periods.

(1) The dilutive effect of share equivalents is excluded from the calculation of diluted earnings per share for the nine months ended December 31, 2022 due to our net loss for that period.

Options to purchase the following number of shares were outstanding but excluded from the computation of diluted earnings per share because the combined exercise prices, unamortized fair values, and assumed tax benefits upon exercise were greater than the average market price for the shares during the periods, so including these options would be anti-dilutive:

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

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

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

(shares in thousands) 2022 2021 2022 2021

5 unchanged sentences

On July 30, 2019, our Board of Directors approved an increase in the May 7, 2019 authorization of an additional amount of $ 300,000 (net of taxes, fees and commissions).

As of September 30, 2022, there was approximately $ 249,371 (net of taxes, fees and commissions) of remaining availability under the Board authorized share repurchase program.

As of December 31, 2022, there was approximately $ 160,626 (net of taxes, fees and commissions) of remaining availability under the Board authorized share repurchase program.

The share repurchase program has no specified expiration date.

3 unchanged sentences

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

During the first six months of fiscal 2023, we repurchased 292,487 of our ordinary shares for the aggregate amount of $ 59,561 (net of fees and commissions) pursuant to the authorizations.

During the first six months of fiscal 2023, we obtained 64,436 of our ordinary shares in the aggregate amount of $ 11,769 in connection with share based compensation award programs.

During the first six months of fiscal 2022, we obtained 130,678 of our ordinary shares in the aggregate amount of $ 24,751 in connection with share based compensation award programs.

During the first nine months of fiscal 2023, we repurchased 775,320 of our ordinary shares for the aggregate amount of $ 148,306 (net of fees and commissions) pursuant to the authorizations.

During the first nine months of fiscal 2023, we obtained 74,897 of our ordinary shares in the aggregate amount of $ 13,060 in connection with share-based compensation award programs.

During the first nine months of fiscal 2022, we obtained 225,493 of our ordinary shares in the aggregate amount of $ 27,628 in connection with share-based compensation award programs.

Share-Based Compensation

5 unchanged sentences

Restricted shares and restricted share units generally cliff vest after a four year period or vest in tranches of one-fourth of the number granted for each year of employment after the grant date.

As of September 30, 2022, 2,797,136 ordinary shares remained available for grant under the long-term incentive plan.

As of December 31, 2022, 2,798,121 ordinary shares remained available for grant under the long-term incentive plan.

The fair value of stock option awards was estimated at their grant date using the Black-Scholes-Merton option pricing model.

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

The following weighted-average assumptions were used for options granted during the first six months of fiscal 2023 and 2022:

The following weighted average assumptions were used for options granted during the first nine months of fiscal 2023 and 2022:

Fiscal 2023 Fiscal 2022

20 unchanged sentences

Forfeited ( 8,928 ) 205.25

Outstanding at September 30, 2022 1,763,053 $ 153.81 6.7 years $ 58,929

Exercisable at September 30, 2022 1,118,754 $ 119.95 5.6 years $ 57,462

We estimate that 626,912 of the non-vested stock options outstanding at September 30, 2022 will ultimately vest.

The aggregate intrinsic value in the table above represents the total pre-tax difference between the $ 166.28 closing price of our ordinary shares on September 30, 2022 over the exercise prices of the stock options, multiplied by the number of options outstanding or outstanding and exercisable, as applicable.

Outstanding at December 31, 2022 1,762,233 $ 153.85 6.4 years $ 77,486

Exercisable at December 31, 2022 1,137,168 $ 121.60 5.4 years $ 74,465

We estimate that 611,629 of the non-vested stock options outstanding at December 31, 2022 will ultimately vest.

The aggregate intrinsic value in the table above represents the total pre-tax difference between the $ 184.69 closing price of our ordinary shares on December 31, 2022 over the exercise prices of the stock options, multiplied by the number of options outstanding or outstanding and exercisable, as applicable.

The aggregate intrinsic value is not recorded for financial accounting purposes and the value changes daily based on the daily changes in the fair market value of ordinary shares.

The total intrinsic value of stock options exercised during the first six months of fiscal 2023 and fiscal 2022 was $ 4,553 and $ 16,076 , respectively.

Net cash proceeds from the exercise of stock options were $ 1,458 and $ 7,829 for the first six months of fiscal 2023 and fiscal 2022, respectively.

The weighted average grant date fair value of stock option grants was $ 50.72 and $ 37.34 for the first six months of fiscal 2023 and fiscal 2022, respectively.

The total intrinsic value of stock options exercised during the first nine months of fiscal 2023 and fiscal 2022 was $ 4,638 and $ 43,425 , respectively.

Net cash proceeds from the exercise of stock options were $ 1,497 and $ 6,789 for the first nine months of fiscal 2023 and fiscal 2022, respectively.

The weighted average grant date fair value of stock option grants was $ 50.72 and $ 37.52 for the first nine months of fiscal 2023 and fiscal 2022, respectively.

Stock appreciation rights (“SARS”) carry generally the same terms and vesting requirements as stock options except that they are settled in cash upon exercise and therefore, are classified as liabilities.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

5 unchanged sentences

Forfeited ( 15,681 ) ( 2,120 ) 181.75

Non-vested at September 30, 2022 459,219 32,360 $ 185.84

Non-vested at December 31, 2022 450,747 31,398 $ 186.24

Restricted shares and restricted share unit grants are valued based on the closing stock price at the grant date.

The value of restricted shares and units that vested during the first six months of fiscal 2023 at the time of grant was $ 18,989 .

As of September 30, 2022, there was a total of $ 80,182 in unrecognized compensation cost related to non-vested share-based compensation granted under our share-based compensation plan.

The value of restricted shares and units that vested during the first nine months of fiscal 2023 at the time of grant was $ 20,237 .

As of December 31, 2022, there was a total of $ 72,008 in unrecognized compensation cost related to non-vested share-based compensation granted under our share-based compensation plan.

We expect to recognize the cost over a weighted average period of 2.1 years.

10 unchanged sentences

As a result of the formal notices provided and the terms of the Cantel share based compensati on plans and Cantel Executive Severance and Change of Control Plan, the remaining service required under the awards became non-substantive requiri ng acceleration of the remaining related compensation cost.

As of September 30, 2022, there was a total of $ 3,178 in unrecognized compensation cost related to non-vested STERIS restricted shar e units awarded to replace Cantel restricted share units.

We expect to recognize the cost over a weighted average period of 1.0 year .

As of December 31, 2022, there was a total of $ 2,319 in unrecognized compensation cost related to non-vested STERIS restricted shar e units awarded to replace Cantel restricted share units.

We expect to recognize the cost over a weighted average period of 0.8 years .

A summary of the non-vested restricted share units activity associated with the Cantel share-based compensation plans is presented below:

3 unchanged sentences

Forfeited ( 4,507 ) 191.18

Non-vested at September 30, 2022 39,255 $ 191.18

Non-vested at December 31, 2022 16,440 $ 191.18

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

6 unchanged sentences

We periodically assess the adequacy of our recorded warranty liabilities and adjust the amounts as necessary.

Changes in our warranty liability during the first six months of fiscal 2023 were as follows:

Balance, March 31, 2022 $ 14,108

Changes in our warranty liability during the first nine months of fiscal 2023 were as follows:

Balance at March 31, 2022 $ 14,108

Warranties issued during the period 8,749

Settlements made during the period ( 9,415 )

Balance, September 30, 2022 $ 13,790

Balance at December 31, 2022 $ 13,442

Derivatives and Hedging

1 unchanged sentence

We may also enter into commodity swap contracts to hedge price changes in nickel that impact raw materials included in our cost of revenues.

During the second quarter of fiscal 2023, we also held forward foreign currency contracts to hedge a portion of our expected non-U.S.

During the third quarter of fiscal 2023, we also held forward foreign currency contracts to hedge a portion of our expected non-U.S.

dollar-denominated earnings against our reporting currency, the U.S.

5 unchanged sentences

therefore, changes in their fair value are not deferred but are recognized immediately in the Consolidated Statements of Income.

At September 30, 2022, we held foreign currency forward contracts to buy 28.5 million British pounds sterling;

At December 31, 2022, we held foreign currency forward contracts to buy 13.0 million British pounds sterling;

and to sell 150.0 million Mexican pesos, and 16.3 million euros.

At September 30, 2022, we held commodity swap contracts to buy 400.8 thousand pounds of nickel.

At December 31, 2022, we held commodity swap contracts to buy 200.4 thousand pounds of nickel.

Asset Derivatives Liability Derivatives

Fair Value at Fair Value at Fair Value at Fair Value at

Balance sheet location September 30, 2022 March 31, 2022 September 30, 2022 March 31, 2022

Balance sheet location December 31, 2022 March 31, 2022 December 31, 2022 March 31, 2022

Prepaid & other $ 842 $ 2,780 $ — $ —

3 unchanged sentences

recognized in income Amount of gain (loss) recognized in income

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

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

2022 2021 2022 2021

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

6 unchanged sentences

and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring the entity to develop its own assumptions.

The following table shows the fair value of our financial assets and liabilities at September 30, 2022 and March 31, 2022:

The following table shows the fair value of our financial assets and liabilities at December 31, 2022 and March 31, 2022:

Fair Value Measurements

4 unchanged sentences

Level 1 Level 2 Level 3

September 30, March 31, September 30, March 31, September 30, March 31, September 30, March 31,

December 31, March 31, December 31, March 31, December 31, March 31, December 31, March 31,

Cash and cash equivalents $ 259,371 $ 348,320 $ 259,371 $ 348,320 $ — $ — $ — $ —

17 unchanged sentences

We also hold an investment in the common stock of Servizi Italia, S.p.A, a leading provider of integrated linen washing and outsourced sterile processing services to hospital Customers.

Changes in the fair value of these investments are recorded in the "Interest income and miscellaneous expense line" of the Consolidated Statement of Income.

During the second quarter and first half of fiscal 2023, we recorded losses of $ 643 and $ 1,727 , respectively, related to these investments.

During the second quarter and first half of fiscal 2022, we recorded losses of $ 213 and $ 229 , respectively, related to these investments.

Changes in the fair value of these investments are recorded in the "Interest and miscellaneous expense (income) line" of the Consolidated Statement of Income.

During the third quarter and first nine months of fiscal 2023, we recorded gains (losses) of $( 342 ) and $ 1,385 , respectively, related to these investments.

During the third quarter and first nine months of fiscal 2022, we recorded gains (losses) of $ 28 and $( 200 ), respectively, related to these investments.

(3) We estimate the fair value of our debt using discounted cash flow analyses, based on estimated current incremental borrowing rates for similar types of borrowing arrangement s.

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis at September 30, 2022 are summarized as follows:

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis at December 31, 2022 are summarized as follows:

Contingent Consideration

4 unchanged sentences

Currency translation adjustments ( 20 )

Balance at September 30, 2022 $ 14,538

Balance at December 31, 2022 $ 14,820

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

2 unchanged sentences

Currency Translation is not adjusted for income taxes.

Changes in our Accumulated Other Comprehensive Income (Loss) balances, net of tax, for the three and six months ended September 30, 2022 and 2021 were as follows:

Changes in our Accumulated Other Comprehensive Income (Loss) balances, net of tax, for the three and nine months ended December 31, 2022 and 2021 were as follows:

Defined Benefit Plans (1)

1 unchanged sentence

Total Accumulated Other Comprehensive Income (Loss)

Three Months Six Months Three Months Six Months Three Months Six Months

Three Months Nine Months Three Months Nine Months Three Months Nine Months

Beginning Balance $ 1,332 $ 1,276 $ ( 599,480 ) $ ( 211,084 ) $ ( 598,148 ) $ ( 209,808 )

2 unchanged sentences

Net current-period Other Comprehensive (Loss) 27 83 233,958 ( 154,438 ) 233,985 ( 154,355 )

Balance at September 30, 2022 $ 1,332 $ 1,332 $ ( 599,480 ) $ ( 599,480 ) $ ( 598,148 ) $ ( 598,148 )

(1) The amortization (gain) of defined benefit pension items is reported in the Interest income and miscellaneous expense line of our Consolidated Statements of Income.

Balance at December 31, 2022 $ 1,359 $ 1,359 $ ( 365,522 ) $ ( 365,522 ) $ ( 364,163 ) $ ( 364,163 )

(1) The amortization (gain) of defined benefit pension items is reported in the Interest and miscellaneous expense (income) line of our Consolidated Statements of Income.

(2) The effective portion of gain or loss on net debt designated as non-derivative net investment hedging instruments is recognized in Accumulated Other Comprehensive Income and is reclassified to income in the same period when a gain or loss related to the net investment is included in income.

2 unchanged sentences

Total Accumulated Other Comprehensive Income (Loss)

Three Months Six Months Three Months Six Months Three Months Six Months

Three Months Nine Months Three Months Nine Months Three Months Nine Months

Beginning Balance $ ( 6,533 ) $ ( 5,519 ) $ ( 99,200 ) $ ( 55,724 ) $ ( 105,733 ) $ ( 61,243 )

2 unchanged sentences

Net current-period Other Comprehensive Income (Loss) ( 507 ) ( 1,521 ) ( 30,638 ) ( 74,114 ) ( 31,145 ) ( 75,635 )

Balance at September 30, 2021 $ ( 6,533 ) $ ( 6,533 ) $ ( 99,200 ) $ ( 99,200 ) $ ( 105,733 ) $ ( 105,733 )

1) The amortization (gain) of defined benefit pension items is reported in the Interest income and miscellaneous expense line of our Consolidated Statements of Income.

Balance at December 31, 2021 $ ( 7,040 ) $ ( 7,040 ) $ ( 129,838 ) $ ( 129,838 ) $ ( 136,878 ) $ ( 136,878 )

1) The amortization (gain) of defined benefit pension items is reported in the Interest and miscellaneous expense (income) line of our Consolidated Statements of Income.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

For the Three and Six Months Ended September 30, 2022 and 2021

For the Three and Nine Months Ended December 31, 2022 and 2021

(dollars in thousands, except as noted)

Changes to the carrying amount of goodwill for the six months ended September 30, 2022 are as follows:

Changes to the carrying amount of goodwill for the nine months ended December 31, 2022 are as follows:

Healthcare Segment Life Sciences Segment Applied Sterilization Technologies Segment Dental Segment Total

5 unchanged sentences

Foreign currency translation adjustments ( 18,157 ) ( 1,073 ) ( 56,655 ) ( 15,367 ) ( 91,252 )

Balance at September 30, 2022 $ 2,243,032 $ 179,986 $ 1,282,122 $ — $ 3,705,140

Balance at December 31, 2022 $ 2,295,444 $ 181,362 $ 1,376,203 $ — $ 3,853,009

We evaluate the recoverability of recorded goodwill annually at the reporting unit level during the third fiscal quarter, or when indicators of potential impairment exist.

The Company's reporting units are equivalent to the reportable operating segments.

In connection with the preparation of our quarterly consolidated financial statements, we considered the risk of impairment due to deteriorating macroeconomic conditions including rising interest rates and inflationary pressures on material and labor costs, as well as uncertainty regarding the impact such economic strains will have on patient and Customer behavior in the short-term.

In connection with the preparation of our second quarter consolidated financial statements, we considered the risk of impairment due to deteriorating macroeconomic conditions including rising interest rates and inflationary pressures on material and labor costs, as well as uncertainty regarding the impact such economic strains will have on patient and Customer behavior in the short-term.

Our conclusion, based on the qualitative assessment of these factors, was that it was more likely than not that the goodwill allocated to the Dental segment as of September 30, 2022 was impaired.

4 unchanged sentences

The macroeconomic factors that triggered the interim review are also the drivers of the increase in the weighted average cost of capital assumption.

In connection with the preparation of our quarterly consolidated financial statements, we identified and recognized, as of September 30, 2022, that the estimated fair value of the Dental segment is below the carrying value resulting in a non-cash goodwill impairment charge of $ 490,565 .

In connection with the preparation of our second quarter consolidated financial statements, we identified and recognized, as of September 30, 2022, that the estimated fair value of the Dental segment was below the carrying value resulting in a non-cash goodwill impairment charge of $ 490,565 .

The impairment charge was recorded within “Goodwill impairment loss” in the Consolidated Statements of Income during the three-month period ended September 30, 2022.

Our review as of September 30, 2022 did not indicate that impairment of goodwill was more likely than not for any of the remaining segments during the period.

The annual goodwill impairment review will be conducted in the third quarter of fiscal 2023 as planned.

The annual goodwill impairment review was conducted in the third quarter of fiscal 2023 as planned.

No additional goodwill impairment was identified during this review.

Report of Independent Registered Public Accounting Firm

1 unchanged sentence

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of STERIS plc and subsidiaries (the Company) as of September 30, 2022, the related consolidated statements of income, comprehensive income and shareholders’ equity for the three- and six-month periods ended September 30, 2022 and 2021 and the consolidated statement of cash flows for the six- month periods ended September 30, 2022 and 2021, and the related notes (collectively referred to as the “consolidated interim financial statements”).

We have reviewed the accompanying consolidated balance sheet of STERIS plc and subsidiaries (the Company) as of December 31, 2022, the related consolidated statements of income, comprehensive income and shareholders’ equity for the three- and nine-month periods ended December 31, 2022 and 2021 and the consolidated statement of cash flows for the nine- month periods ended December 31, 2022 and 2021, and the related notes (collectively referred to as the “consolidated interim financial statements”).

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S.

13 unchanged sentences

Cleveland, Ohio

November 9, 2022

February 8, 2023

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 1. Financial Statements