What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-08 · 247 added, 121 removed, 615 unchanged (37% of the section changed)

3 unchanged sentences

(in thousands)

September 30,

2023 March 31,

39 unchanged sentences

STERIS PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands, except per share amounts)

Three Months Ended June 30,

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

2023 2022 2023 2022

Product $ 762,336 $ 666,394 $ 1,476,194 $ 1,303,470

8 unchanged sentences

Selling, general, and administrative 380,651 323,195 739,709 657,821

Goodwill impairment loss — 490,565 — 490,565

Research and development 27,044 24,928 52,546 49,679

Restructuring expenses 19 26

Restructuring (credits) expenses

( 23 ) 62 ( 4 ) 88

Total operating expenses 407,672 838,750 792,251 1,198,153

Income from operations 188,882 158,395

Income (loss) from operations 185,857 ( 306,415 ) 374,739 ( 148,020 )

Non-operating expenses, net:

2 unchanged sentences

Total non-operating expenses, net 35,703 26,647 66,671 50,091

Income before income tax expense 157,914 134,951

Income tax expense 34,124 24,196

Net income 123,790 110,755

Income (loss) before income tax expense 150,154 ( 333,062 ) 308,068 ( 198,111 )

Income tax expense (benefit) 33,808 ( 17,831 ) 67,932 6,365

Net income (loss) 116,346 ( 315,231 ) 240,136 ( 204,476 )

Net income (loss) attributable to noncontrolling interests 1,027 54 1,263 ( 453 )

Net income attributable to shareholders $ 123,554 $ 111,262

Net income per share attributed to shareholders

Net income (loss) attributable to shareholders $ 115,319 $ ( 315,285 ) $ 238,873 $ ( 204,023 )

Net income (loss) per share attributed to shareholders

Basic $ 1.17 $ ( 3.15 ) $ 2.42 $ ( 2.04 )

5 unchanged sentences

(in thousands)

Three Months Ended June 30,

Net income $ 123,790 $ 110,755

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

2023 2022 2023 2022

Net income (loss) $ 116,346 $ ( 315,231 ) $ 240,136 $ ( 204,476 )

Net income (loss) attributable to noncontrolling

interests 1,027 54 1,263 ( 453 )

Net income attributable to shareholders 123,554 111,262

Net income (loss) attributable to shareholders 115,319 ( 315,285 ) 238,873 ( 204,023 )

Other comprehensive income (loss)

7 unchanged sentences

(in thousands)

Three Months Ended June 30,

Six Months Ended September 30,

Operating activities:

Net income $ 123,790 $ 110,755

Net income (loss) $ 240,136 $ ( 204,476 )

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

2 unchanged sentences

Share-based compensation expense 32,295 20,511

Loss (gain) on the disposal of property, plant, equipment, and intangibles, net 93 ( 972 )

Gain on the disposal of property, plant, equipment, and intangibles, net

( 1,103 ) ( 50 )

Loss on sale of businesses, net — 4,777

Amortization of inventory fair value adjustments — 2,477

Goodwill impairment loss — 490,565

Other items 113 8,840

8 unchanged sentences

Purchases of property, plant, equipment, and intangibles, net ( 149,893 ) ( 198,701 )

Proceeds from the sale of property, plant, equipment, and intangibles 5 1,288

Proceeds from the sale of property, plant, and equipment

Proceeds from the sale of businesses 9,458 5,228

Acquisition of businesses, net of cash acquired ( 539,758 ) ( 15,192 )

Net cash used in investing activities ( 672,833 ) ( 207,342 )

1 unchanged sentence

Payments on term loans ( 30,000 ) ( 126,875 )

(Payments) proceeds under credit facilities, net ( 144,651 ) 37,011

Acquisition related deferred or contingent consideration ( 89 ) ( 84 )

Proceeds under credit facilities, net

391,022 99,111

Payments on acquisition related deferred or contingent consideration

( 177 ) ( 153 )

Repurchases of ordinary shares ( 9,213 ) ( 69,922 )

1 unchanged sentence

Stock option and other equity transactions, net 2,740 1,458

Net cash used in financing activities ( 213,637 ) ( 141,414 )

Net cash provided by (used in) financing activities

256,577 ( 186,362 )

Effect of exchange rate changes on cash and cash equivalents ( 5,568 ) ( 31,927 )

6 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended September 30, 2023

Ordinary Shares Retained

1 unchanged sentence

Comprehensive

Income (Loss) Non-controlling

Non-controlling

Interest Total

Number Amount

Balance at June 30, 2023 98,781 $ 4,498,212 $ 1,980,933 $ ( 310,859 ) $ 10,086 $ 6,178,372

Comprehensive income:

Net income — — 115,319 — 1,027 116,346

Other comprehensive loss

— — — ( 75,876 ) — ( 75,876 )

Repurchases of ordinary shares ( 6 ) ( 1,502 ) 1,013 — — ( 489 )

Equity compensation programs and other 14 22,201 — — — 22,201

Cash dividends - $ 0.52 per ordinary share

— — ( 51,368 ) — — ( 51,368 )

Other changes in noncontrolling interest — — — — ( 18 ) ( 18 )

Balance at September 30, 2023 98,789 $ 4,518,911 $ 2,045,897 $ ( 386,735 ) $ 11,095 $ 6,189,168

Six Months Ended September 30, 2023

Ordinary Shares Retained

Earnings Accumulated

Comprehensive

Non-controlling

Interest Total

Number Amount

Balance at March 31, 2023 98,629 $ 4,486,375 $ 1,911,533 $ ( 320,710 ) $ 9,974 $ 6,087,172

1 unchanged sentence

Net income — — 238,873 — 1,263 240,136

Other comprehensive income — — — 9,851 — 9,851

Other comprehensive loss

— — — ( 66,025 ) — ( 66,025 )

Repurchases of ordinary shares ( 57 ) ( 2,499 ) ( 6,714 ) — — ( 9,213 )

3 unchanged sentences

Other changes in noncontrolling interest — — — — ( 142 ) ( 142 )

Balance at September 30, 2023 98,789 $ 4,518,911 $ 2,045,897 $ ( 386,735 ) $ 11,095 $ 6,189,168

STERIS PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except per share amounts)

Three Months Ended September 30, 2022

Ordinary Shares Retained

Earnings Accumulated

Comprehensive

Loss Non-controlling

Interest Total

Number Amount

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

Comprehensive income:

Net (loss) income — — ( 315,285 ) — 54 ( 315,231 )

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

Repurchases of ordinary shares ( 231 ) ( 45,413 ) 170 — — ( 45,243 )

Equity compensation programs and other 9 11,785 — — — 11,785

Cash dividends – $ 0.47 per ordinary share

— — ( 46,973 ) — — ( 46,973 )

Other changes in noncontrolling interest — — — — ( 244 ) ( 244 )

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

Ordinary Shares Retained

1 unchanged sentence

Comprehensive

Income (Loss) Non-controlling

Loss Non-controlling

Interest Total

2 unchanged sentences

Comprehensive income:

Net income (loss) — — 111,262 — ( 507 ) 110,755

Net loss — — ( 204,023 ) — ( 453 ) ( 204,476 )

Other comprehensive loss — — — ( 388,340 ) — ( 388,340 )

4 unchanged sentences

Other changes in noncontrolling interest — — — — ( 438 ) ( 438 )

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

See notes to consolidated financial statements.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(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 month period ended June 30, 2023 are not necessarily indicative of results that may be expected for future quarters or for the full fiscal year ending March 31, 2024.

This means that operating results for the three and six month periods ended September 30, 2023 are not necessarily indicative of results that may be expected for future quarters or for the full fiscal year ending March 31, 2024.

Revenue Recognition and Associated Liabilities

10 unchanged sentences

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

13 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 June 30, 2023, assets related to costs to fulfill a contract were not material to our consolidated financial statements.

At September 30, 2023, 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 Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(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 three months of fiscal 2024, $ 46,118 of the March 31, 2023 deferred revenue balance was recorded as revenue.

During the first three months of fiscal 2023, $ 57,528 of the March 31, 2022 deferred revenue balance was recorded as revenue.

During the first six months of fiscal 2024, $ 64,241 of the March 31, 2023 deferred revenue balance was recorded as revenue.

During the first six months of fiscal 2023, $ 67,218 of the March 31, 2022 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 June 30, 2023, the transaction price allocated to remaining performance obligations was approximately $ 1,649,862 .

As of September 30, 2023, the transaction price allocated to remaining performance obligations was approximately $ 1,579,938 .

We expect to recognize approximately 53 % of the transaction price within one year and approximately 38 % beyond one year.

6 unchanged sentences

NA We are in the process of evaluating the impact that the standard will have on our consolidated financial statements.

ASU 2023-05 "Business Combinations - Joint Venture Formations (Subtopic 805-60) Recognition and Initial Measurement."

The standard adds specific guidance to contributions made to a joint venture, upon formation, in a joint venture's separate financial statements.

Upon formation of a new joint venture, assets and liabilities will now be initially measure at fair value.

The amendments in this standard are effective for all joint ventures formed with a formation date on or after January 1, 2025.

Joint ventures formed prior to this date have the option to apply the amendments retrospectively if there is sufficient information.

We are in the process of evaluating the impact that the standard will have on our consolidated financial statements.

A detailed description of our significant and critical accounting policies, estimates, and assumptions is included in our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.

2 unchanged sentences

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

Business Acquisitions

On June 20, 2023, we entered into a definitive agreement to purchase the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from Becton, Dickinson and Company (NYSE:

The acquired assets from BD will be integrated into our Healthcare segment.

The transaction was completed on August 2, 2023.

The purchase price is $ 540,000 .

We anticipate that the acquisition will qualify for a tax benefit related to tax deductible goodwill, with a present value of approximately $ 60,000 .

We are not assuming any pre-existing debt and funded the entire purchase with additional debt.

As a result of limited access to the information required to prepare the initial accounting, we are unable to provide the amounts that will be recognized at the acquisition date for the major classes of assets acquired and liabilities assumed, pre-existing contingencies, goodwill or intangible assets at the time of this Form 10-Q filing.

On August 2, 2023, we purchased the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from BD (Becton, Dickinson and Company) (NYSE:

The acquired assets from BD are being integrated into our Healthcare segment.

The purchase price of the acquisition was $ 539,758 and remains subject to post-closing adjustments to inventory.

The acquisition also qualified for a tax benefit related to tax deductible goodwill, with a present value of approximately $ 60,000 .

The purchase price of the acquisition was financed with borrowings from our existing credit facility.

For more information, refer to Note 5 titled, " Debt."

The table below summarizes the preliminary allocation of the purchase price to the net assets acquired from BD based on fair values at the acquisition date.

Inventory 27,006

Property, plant, and equipment 6,755

Intangible assets

Goodwill 202,399

Total assets acquired 539,758

Net assets acquired $ 539,758

(1) Purchase price allocation is still preliminary as of September 30, 2023, as valuation has not been finalized.

During the first six months 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 and integration expenses totaled $ 16,013 and $ 18,722 for the three and six months ended September 30, 2023, respectively.

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

The increase in acquisition and integration expenses for the three and six months ended September 30, 2023 is primarily due to charges related to the acquisition of assets from BD and a fair value adjustment related to a building held for sale from a previous acquisition.

Acquisition and integration expenses are reported in the Selling, general and administrative expenses line of our Consolidated Statements of Income (Loss) and include but are not limited to investment banker, advisory, legal, other professional fees, and certain employee-related expenses.

STERIS PLC AND SUBSIDIARIES

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

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

Inventories, Net

2 unchanged sentences

Inventories, net consisted of the following:

September 30,

2023 March 31,

6 unchanged sentences

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

September 30,

2023 March 31,

14 unchanged sentences

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

Indebtedness was as follows:

September 30,

2023 March 31,

15 unchanged sentences

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

1 unchanged sentence

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

September 30,

2023 March 31,

26 unchanged sentences

Total other liabilities $ 76,547 $ 76,137

Income Tax Expense

The effective income tax rates for the three month periods ended June 30, 2023 and 2022 were 21.6 % and 17.9 %, respectively.

The higher fiscal 2024 effective tax rate is the result of changes in geographic mix of projected profits and a decrease in favorable discrete items when compared to the first 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.

The effective income tax rates for the three month periods ended September 30, 2023 and 2022 were 22.5 % and 5.4 %, respectively.

The effective income tax rates for the six month periods ended September 30, 2023 and 2022 were 22.1 % and ( 3.2 )%, respectively.

The fiscal 2024 effective tax rates increased when compared to fiscal 2023, 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.

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 examinations by tax authorities for years before fiscal 2017.

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

STERIS PLC AND SUBSIDIARIES

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

examinations by tax authorities for years before fiscal 2017.

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

In the fourth quarter of fiscal 2021, we completed an appeals process with the U.S.

1 unchanged sentence

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 June 30, 2023.

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 $ 11,600 has been paid through September 30, 2023.

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

17 unchanged sentences

Changes in applicable tax law or other events may also require us to revise past estimates.

We describe income taxes further in Note 7 to our consolidated financial statements titled, “Income Tax Expense” in this Quarterly Report on Form 10-Q.

We describe income taxes further in Note 7 to our consolidated financial statements titled, “Income Taxes” in this Quarterly Report on Form 10-Q.

STERIS PLC AND SUBSIDIARIES

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

7 unchanged sentences

to outsourced instrument reprocessing services.

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

In addition, our procedural products also include endoscopy accessories and capital equipment infrastructure used primarily in operating rooms, ambulatory surgery centers, endoscopy suites, and other procedural areas.

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

5 unchanged sentences

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

For the three months e nded June 30, 2023 and 2022 , revenues from a single Customer did not represent ten percent or more of the Healthcare, AST or Life Sciences segment revenues.

For the three and six months e nded September 30, 2023 and 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 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 42.2 % and 38.6 % o f our Dental segment revenues for the three months ended June 30, 2023 and 2022, respectively.

These three Customers collectively accounted for appr oxi mately 43.8 % and 43.1 % o f our Dental segment revenues for the three and six months ended September 30, 2023, respectively.

These three Customers collectively accounted for approximately 40.1 % and 42.1 % of our Dental segment revenues for the three and six months ended September 30, 2022, 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, 2023, which was filed with the SEC on May 26, 2023.

1 unchanged sentence

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

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

Three Months Ended June 30,

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

2023 2022 2023 2022

Healthcare $ 870,056 $ 732,813 $ 1,688,930 $ 1,431,339

13 unchanged sentences

Acquisition and integration related charges (2)

16,013 3,844 18,722 13,676

Tax restructuring costs (3)

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

— — — ( 3,100 )

Net loss on divestiture of businesses (1)

— 899 — 4,777

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

Restructuring charges (4)

Total income from operations $ 188,882 $ 158,395

1,138 2,452 2,981 4,089

Restructuring (credits) charges (4)

( 23 ) 62 ( 4 ) 89

Goodwill impairment loss (5)

— 490,565 — 490,565

Total income (loss) from operations $ 185,857 $ ( 306,415 ) $ 374,739 $ ( 148,020 )

(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, 2023, which was filed with the SEC on May 26, 2023.

2 unchanged sentences

(4) For more information regarding our restructuring efforts, refer to our Annual R eport on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.

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

STERIS PLC AND SUBSIDIARIES

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

Additional information regarding our fiscal 2024 and fiscal 2023 revenue is disclosed in the following tables:

Three Months Ended June 30,

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

2023 2022 2023 2022

Capital equipment $ 254,905 $ 212,484 $ 493,004 $ 391,618

12 unchanged sentences

Total Revenues $ 1,342,360 $ 1,200,517 $ 2,626,902 $ 2,357,008

Three Months Ended June 30,

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

2023 2022 2023 2022

Ireland $ 20,439 $ 16,995 $ 40,524 $ 35,171

8 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 June 30,

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

Denominator (shares in thousands):

2023 2022 2023 2022

Weighted average shares outstanding—basic 98,785 99,969 98,747 100,025

1 unchanged sentence

Weighted average shares outstanding and share equivalents—diluted 99,406 99,969 99,323 100,025

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) 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.

STERIS PLC AND SUBSIDIARIES

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

Three Months Ended June 30,

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

(shares in thousands) 2023 2022 2023 2022

4 unchanged sentences

On May 3, 2023 our Board of Directors terminated the previous share repurchase program and authorized a new share repurchase program for the purchase of up to $ 500,000 (net of taxes, fees and commissions).

As of June 30, 2023, we have not made any repurchases under this share repurchase program.

As of September 30, 2023, we have not made any repurchases under this share repurchase program.

This share repurchase program has no specified expiration date.

1 unchanged sentence

Any share repurchases may be activated, suspended or discontinued at any time.

During the first three months of fiscal 2024, we had no share repurchase activity pursuant to authorizations.

During the first three months of fiscal 2023, we repurchased 68,177 of our ordinary shares for the aggregate amount of $ 14,283 (net of fees and commissions) pursuant to the authorizations.

During the first three months of fiscal 2024, we obtained 51,494 of our ordinary shares in the aggregate amount of $ 8,724 in connection with share-based compensation award programs.

During the first three months of fiscal 2023, we obtained 57,704 of our ordinary shares in the aggregate amount of $ 11,737 in connection with share-based compensation award programs.

During the first six months of fiscal 2024, we had no share repurchase activity pursuant to 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 2024, we obtained 57,161 of our ordinary shares in the aggregate amount of $ 9,213 in connection with share-based compensation award programs.

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.

Share-Based Compensation

5 unchanged sentences

Restricted shares and restricted share units generally cliff vest after a three or four year period or vest in equal tranches for each year of employment after the grant date.

As of June 30, 2023, 2,386,686 ordinary shares remained available for grant under the long-term incentive plan.

As of September 30, 2023, 2,367,257 ordinary shares remained available for grant under the long-term incentive plan.

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

1 unchanged sentence

If the model permitted consideration of the unique characteristics of employee stock options, the resulting estimate of the fair value of the stock options could be different.

The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods, which may be impacted by retirement eligibility, in our Consolidated Statements of Income.

The expense is classified as Cost of revenues or Selling, general and administrative expenses in a manner consistent with the employee’s compensation and benefits.

1 unchanged sentence

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

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

The following weighted average assumptions were used for options granted during the first six months of fiscal 2024 and 2023:

Fiscal 2024 Fiscal 2023

20 unchanged sentences

Forfeited ( 2,128 ) 200.46

Outstanding at June 30, 2023 1,957,715 $ 164.17 6.5 years $ 124,831

Exercisable at June 30, 2023 1,336,601 $ 136.78 5.5 years $ 119,338

We estimate that 601,967 of the non-vested stock options outstanding at June 30, 2023 will ultimately vest.

The aggregate intrinsic value in the table above represents the total pre-tax difference between the $ 224.98 closing price of our ordinary shares on June 30, 2023 over the exercise prices of the stock options, multiplied by the number of options outstanding or outstanding and exercisable, as applicable.

Outstanding at September 30, 2023 1,959,950 $ 165.06 6.3 years $ 114,142

Exercisable at September 30, 2023 1,338,836 $ 138.12 5.3 years $ 110,765

We estimate that 606,045 of the non-vested stock options outstanding at September 30, 2023 will ultimately vest.

The aggregate intrinsic value in the table above represents the total pre-tax difference between the $ 219.42 closing price of our ordinary shares on September 30, 2023 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 our ordinary shares.

The total intrinsic value of stock options exercised during the first three months of fiscal 2024 and fiscal 2023 was $ 4,831 and $ 3,897 , respectively.

Net cash proceeds from the exercise of stock options were $ 1,254 and $ 1,221 for the first three months of fiscal 2024 and fiscal 2023, respectively.

The weighted average grant date fair value of stock option grants was $ 53.45 and $ 50.04 for the first three months of fiscal 2024 and fiscal 2023, respectively.

The total intrinsic value of stock options exercised during the first six months of fiscal 2024 and fiscal 2023 was $ 6,467 and $ 4,553 , respectively.

Net cash proceeds from the exercise of stock options were $ 2,740 and $ 1,458 for the first six months of fiscal 2024 and fiscal 2023, respectively.

The weighted average grant date fair value of stock option grants was $ 54.60 and $ 50.72 for the first six months of fiscal 2024 and fiscal 2023, respectively.

STERIS PLC AND SUBSIDIARIES

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

5 unchanged sentences

Forfeited ( 11,848 ) ( 1,171 ) 193.73

Non-vested at June 30, 2023 489,762 34,007 $ 198.34

Non-vested at September 30, 2023 482,729 32,928 $ 199.06

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 three months of fiscal 2024 at the time of grant was $ 19,455 .

As of June 30, 2023, there was a total of $ 99,504 in unrecognized compensation cost related to non-vested share-based compensation granted under our share-based compensation plans.

The value of restricted shares and units that vested during the first six months of fiscal 2024 at the time of grant was $ 22,194 .

As of September 30, 2023, there was a total of $ 83,007 in unrecognized compensation cost related to non-vested share-based compensation granted under our share-based compensation plans.

We expect to recognize the cost over a weighted average period of 1.9 years.

1 unchanged sentence

In connection with the acquisition of Cantel, outstanding, non-vested Cantel restricted share units were replaced with STERIS restricted share units.

As of June 30, 2023, there was a total of $ 805 in unrecognized compensation cost related to non-vested STERIS restricted shar e units awarded to replace Cantel restricted share units.

As of September 30, 2023, there was a total of $ 103 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 majority of the remaining cost by the third quarter of fiscal 2024.

4 unchanged sentences

Forfeited ( 762 ) 191.18

Non-vested at June 30, 2023 14,647 $ 191.18

Non-vested at September 30, 2023 14,305 $ 191.18

Financial and Other Guarantees

5 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 three months of fiscal 2024 were as follows:

Changes in our warranty liability during the first six months of fiscal 2024 were as follows:

Balance at March 31, 2023 $ 13,683

1 unchanged sentence

Settlements made during the period ( 7,850 )

Balance at June 30, 2023 $ 13,845

Balance at September 30, 2023 $ 14,038

STERIS PLC AND SUBSIDIARIES

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

2 unchanged sentences

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 first quarter of fiscal 2024, we also held forward foreign currency contracts to hedge a portion of our expected non-U.S.

During the second quarter of fiscal 2024, 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.

4 unchanged sentences

These contracts are not designated as hedging instruments and do not receive hedge accounting treatment;

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

At June 30, 2023, we held net foreign currency forward contracts to buy 29.0 million British pounds sterling and 95.5 million Mexican pesos;

and to sell 7.0 million Singapore dollars and 51.2 million euros.

At June 30, 2023, we held commodity swap contracts to buy 564.8 thousand pounds of nickel.

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

At September 30, 2023, we held net foreign currency forward contracts to buy 38.5 million British pounds sterling and 80.3 million Mexican pesos;

and to sell 17.0 million Australian dollars, 11.0 million Canadian dollars, and 31.1 million euros.

At September 30, 2023, we held commodity swap contracts to buy 376.5 thousand pounds of nickel.

Asset Derivatives Liability Derivatives

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

Balance sheet location June 30, 2023 March 31, 2023 June 30, 2023 March 31, 2023

Balance sheet location September 30, 2023 March 31, 2023 September 30, 2023 March 31, 2023

Prepaid & other $ 1,623 $ 378 $ — $ —

Accrued expenses and other $ — $ — $ 2,347 $ 2,054

The following table presents the impact of derivative instruments and their location within the Consolidated Statements of Income:

The following table presents the impact of derivative instruments and their location within the Consolidated Statements of Income (Loss):

Location of gain (loss)

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

Three Months Ended June 30,

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

2023 2022 2023 2022

Foreign currency forward contracts Selling, general and administrative $ 60 $ 2,279 $ 1,518 $ 4,629

2 unchanged sentences

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(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 June 30, 2023 and March 31, 2023:

The following table shows the fair value of our financial assets and liabilities at September 30, 2023 and March 31, 2023:

Fair Value Measurements

4 unchanged sentences

Level 1 Level 2 Level 3

June 30, March 31, June 30, March 31, June 30, March 31, June 30, March 31,

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

Cash and cash equivalents $ 213,757 $ 208,357 $ 213,757 $ 208,357 $ — $ — $ — $ —

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 and miscellaneous (income) expense" line of the Consolidated Statement of Income.

During the first quarter of fiscal 2024 and 2023, we recorded gains (losses) of $ 73 and $( 936 ),respectively, related to these investments.

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

During the second quarter and first six months of fiscal 2024, we recorded gains of $ 65 and $ 138 , respectively, related to these investments.

During the second quarter and first six months of fiscal 2023, we recorded losses of $ 643 and $ 1,727 ,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 Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis at June 30, 2023 are summarized as follows:

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis at September 30, 2023 are summarized as follows:

Contingent Consideration

3 unchanged sentences

Currency translation adjustments ( 54 )

Balance at June 30, 2023 $ 16,199

Balance at September 30, 2023 $ 16,445

STERIS PLC AND SUBSIDIARIES

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

For the Three Months Ended June 30, 2023 and 2022

For the Three and Six Months Ended September 30, 2023 and 2022

(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 months ended June 30, 2023 and 2022 were as follows:

Changes in our Accumulated Other Comprehensive Income (Loss) balances, net of tax, for the three and six months ended September 30, 2023 and 2022 were as follows:

Defined Benefit Plans (1)

Currency Translation (2)

Total Accumulated Other Comprehensive Income (Loss)

Balance at March 31, 2023 $ 12 $ ( 320,722 ) $ ( 320,710 )

Other Comprehensive Income before reclassifications 418 9,793 10,211

Total Accumulated Other Comprehensive Loss

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

Beginning Balance $ 70 $ 12 $ ( 310,929 ) $ ( 320,722 ) $ ( 310,859 ) $ ( 320,710 )

Other Comprehensive Income (Loss) before reclassifications

334 752 ( 75,935 ) ( 66,142 ) ( 75,601 ) ( 65,390 )

Amounts reclassified from Accumulated Other Comprehensive Loss ( 275 ) ( 635 ) — — ( 275 ) ( 635 )

Net current-period Other Comprehensive Income 58 9,793 9,851

Balance at June 30, 2023 $ 70 $ ( 310,929 ) $ ( 310,859 )

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

Net current-period Other Comprehensive Income (Loss)

59 117 ( 75,935 ) ( 66,142 ) ( 75,876 ) ( 66,025 )

Balance at September 30, 2023 $ 129 $ 129 $ ( 386,864 ) $ ( 386,864 ) $ ( 386,735 ) $ ( 386,735 )

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

(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.

1 unchanged sentence

Currency Translation (2)

Total Accumulated Other Comprehensive Income (Loss)

Balance at March 31, 2022 $ 1,276 $ ( 211,084 ) $ ( 209,808 )

Total Accumulated Other Comprehensive Loss

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

Beginning Balance $ 1,305 $ 1,276 $ ( 389,678 ) $ ( 211,084 ) $ ( 388,373 ) $ ( 209,808 )

Other Comprehensive Income (Loss) before reclassifications 149 303 ( 209,802 ) ( 388,396 ) ( 209,653 ) ( 388,093 )

1 unchanged sentence

Net current-period Other Comprehensive Income (Loss) 27 56 ( 209,802 ) ( 388,396 ) ( 209,775 ) ( 388,340 )

Balance at June 30, 2022 $ 1,305 $ ( 389,678 ) $ ( 388,373 )

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

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 and miscellaneous (income) expense line of our Consolidated Statements of Income (Loss).

STERIS PLC AND SUBSIDIARIES

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

For the Three and Six Months Ended September 30, 2023 and 2022

(dollars in thousands, except as noted)

Changes to the carrying amount of goodwill for the six months ended September 30, 2023 and 2022 are as follows:

Healthcare Segment Life Sciences Segment AST Segment Dental Segment Total

Balance at March 31, 2023 $ 2,301,273 $ 181,812 $ 1,396,134 $ — $ 3,879,219

Goodwill acquired 202,399 — — — 202,399

Measurement period adjustments to acquired goodwill ( 4,281 ) — — — ( 4,281 )

Foreign currency translation adjustments ( 7,751 ) 24 ( 29,365 ) — ( 37,092 )

Balance at September 30, 2023 $ 2,491,640 $ 181,836 $ 1,366,769 $ — $ 4,040,245

Healthcare Segment Life Sciences Segment AST Segment Dental Segment Total

Balance at March 31, 2022 $ 2,326,830 $ 179,288 $ 1,432,858 $ 465,367 $ 4,404,343

Goodwill acquired 1,286 — — — 1,286

Measurement period adjustments to acquired goodwill ( 21,624 ) 3,147 — 40,565 22,088

Impairment — — — ( 490,565 ) ( 490,565 )

Divestiture ( 2,358 ) — — — ( 2,358 )

Foreign currency translation adjustments ( 61,102 ) ( 2,449 ) ( 150,736 ) ( 15,367 ) ( 229,654 )

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

See Note 2, titled "Business Acquisitions," for additional information regarding our recent business acquisitions.

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.

As of the period ended September 30, 2023, there were no indicators that impairment of goodwill was more likely than not for any segment during the period.

In the prior year period, we recorded a goodwill impairment charge of $ 490,565 related to our Dental segment.

For more information regarding the goodwill impairment loss, refer to our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.

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 June 30, 2023, the related consolidated statements of income, comprehensive income (loss), shareholders’ equity and cash flows for the three-month periods ended June 30, 2023 and 2022, 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 September 30, 2023, the related consolidated statements of income (loss), comprehensive income (loss) and shareholders’ equity for the three- and six- month periods ended September 30, 2023 and 2022 and the consolidated statement of cash flows for the six month periods ended September 30, 2023 and 2022, 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

August 8, 2023

November 7, 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