Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

									Page
			Report of Independent Registered Public Accounting Firm (PCAOB ID:42)						53
			Consolidated Financial Statements:
			Consolidated Balance Sheets						56
			Consolidated Statements of Income						57
			Consolidated Statements of Comprehensive Income						58
			Consolidated Statements of Cash Flows						59
			Consolidated Statements of Shareholders’ Equity						60
			Notes to Consolidated Financial Statements						61
			Financial Statement Schedule:
			Schedule II – Valuation and Qualifying Accounts						102

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

STERIS plc

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of STERIS plc and subsidiaries (the Company) as of March 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended March 31, 2022, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated May 31, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Description of the Matter			Uncertain Tax Positions
			As discussed in Note 8 to the consolidated financial statements, the Company received two notices of proposed tax adjustments from the U.S. Internal Revenue Service (the “IRS”) regarding deemed dividend inclusions and associated withholding tax for fiscal year 2018. The IRS adjustments would result in a cumulative tax liability of approximately $50 million. The Company believes it is more-likely-than-not that they will be able to sustain the tax benefit recognized in the U.S. and has not recorded a liability for an uncertain tax position related to this matter.
			Auditing management’s analysis of tax positions related to the lack of deemed dividend inclusions and associated withholding tax was challenging as the analysis is highly judgmental due to complex interpretations of tax laws and legal rulings. This tax position must be evaluated, and there may be uncertainties around initial recognition and de-recognition of tax positions, including regulatory changes, litigation and examination activity.
How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting process for uncertain tax positions. For example, we tested controls over management’s identification of uncertain tax positions and its application of the recognition and measurement principles, including management’s review of the facts and circumstances and the corresponding tax laws relied upon to conclude that it is currently more-likely-than-not that they will realize the benefit recorded.
			Our audit procedures included, among others, involving income tax subject matter resources to assess the technical merits of the Company’s tax positions related to the deemed dividend inclusions and associated withholding tax. We assessed the Company’s correspondence with the relevant tax authorities and evaluated income tax opinions and other third-party advice obtained by the Company. We analyzed the Company’s assumptions and data used to determine the amount of tax benefit to recognize and we tested the accuracy of the calculations performed. We also evaluated the adequacy of the Company’s disclosures included in Note 8 to the consolidated financial statements in relation to these matters.

Description of the Matter			Valuation of the Dental and Healthcare customer relationships intangible assets related to the Cantel acquisition
			As discussed in Note 2 to the consolidated financial statements, on June 2, 2021, the Company acquired all of the outstanding units and equity of Cantel Medical Corp. (“Cantel”) for cash and ordinary shares equaling approximately $3.6 billion. The acquisition of Cantel has been accounted for using the acquisition method of accounting which requires, among other things, the assets acquired, liabilities assumed and noncontrolling interests be recognized at their respective fair values as of the acquisition date. The Company preliminarily allocated $2.3 billion of the purchase price to the fair value of the acquired Dental and Healthcare customer relationships intangible assets. The purchase price allocation for Cantel is preliminary. The finalization of the purchase accounting assessment may result in changes in the valuation of assets acquired and liabilities assumed.
			Auditing management’s preliminary valuation of the Dental and Healthcare customer relationships intangible assets in the Cantel acquisition was complex and judgmental due to the significant estimation uncertainty in the Company’s determination of the preliminary fair value of the customer relationships intangible assets under an income approach using discounted cash flows. The significant estimation uncertainty was primarily due to the sensitivity of the fair value to underlying assumptions including forecasted revenue growth rates, forecasted profit margins, and customer attrition rate. These significant assumptions are forward looking and could be affected by future economic and market conditions.
How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting process for the Dental and Healthcare customer relationships intangible assets, including controls over management’s review of the significant assumptions in the determination of fair value under the income approach.
			To test the estimated fair value of the acquired Dental and Healthcare customer relationships intangible assets, our audit procedures included, among others, evaluating the Company's selection of the valuation method, testing significant assumptions used by the Company and testing the completeness and accuracy of the underlying data. For example, we performed analyses to evaluate the sensitivity of changes in assumptions to the fair value of the customer relationships intangible assets and compared the significant assumptions to current industry, market, and economic trends, and historical results of the acquired business. In addition, we involved our valuation specialists to assist with our evaluation of the methodology and significant assumptions used by the Company to determine the preliminary fair value estimate of the Dental and Healthcare customer relationship intangible assets, including the forecasted revenue growth rates, forecasted profit margins, and customer attrition rates.

We have served as the Company’s auditor since 1989.

/s/ Ernst & Young LLP

Cleveland, Ohio

May 31, 2022

STERIS PLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

March 31,						2022						2021
Assets
Current assets:
Cash and cash equivalents						$	348,320					$	220,531
Accounts receivable (net of allowances of $24,371 and $11,355, respectively)						799,041						609,406
Inventories, net						574,999						315,067
Prepaid expenses and other current assets						156,637						66,750
Total current assets						1,878,997						1,211,754
Property, plant, and equipment, net						1,552,576						1,235,400
Lease right-of-use assets, net						188,480						150,142
Goodwill						4,404,343						3,026,049
Intangibles, net						3,328,537						898,406
Other assets						70,661						52,720
Total assets						$	11,423,594					$	6,574,471
Liabilities and equity
Current liabilities:
Accounts payable						$	225,737					$	156,950
Accrued income taxes						26,873						27,561
Accrued payroll and other related liabilities						183,721						150,078
Short-term lease obligations						36,472						22,774
Short term indebtedness						142,875						—
Accrued expenses and other						306,544						220,557
Total current liabilities						922,222						577,920
Long-term indebtedness						2,945,481						1,650,540
Deferred income taxes, net						780,619						236,860
Long-term lease obligations						155,056						129,673
Other liabilities						75,579						88,010
Total liabilities						$	4,878,957					$	2,683,003
Commitments and contingencies (see Note 10)
Ordinary shares, with $0.001 par value; 500,000 shares authorized; 100,067 and 85,353 ordinary shares issued and outstanding, respectively						4,742,920						2,002,825
Retained earnings						1,999,244						1,939,408
Accumulated other comprehensive (loss)						(209,808)						(61,243)
Total shareholders’ equity						6,532,356						3,880,990
Noncontrolling interests						12,281						10,478
Total equity						6,544,637						3,891,468
Total liabilities and equity						$	11,423,594					$	6,574,471

See notes to consolidated financial statements.

STERIS PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

Years Ended March 31,						2022						2021						2020
Revenues:
Product						$	2,556,281					$	1,443,540					$	1,402,788
Service						2,028,783						1,663,979						1,628,107
Total revenues						4,585,064						3,107,519						3,030,895
Cost of revenues:
Product						1,419,925						765,076						750,129
Service						1,148,777						999,343						960,770
Total cost of revenues						2,568,702						1,764,419						1,710,899
Gross profit						2,016,362						1,343,100						1,319,996
Operating expenses:
Selling, general, and administrative						1,502,752						731,320						716,731
Research and development						87,944						66,326						65,546
Restructuring expenses (credit)						48						(2,914)						673
Total operating expenses						1,590,744						794,732						782,950
Income from operations						425,618						548,368						537,046
Non-operating expenses, net:
Interest expense						89,593						37,180						40,279
Fair value adjustment related to convertible debt, premium liability						27,806						—						—
Interest income and miscellaneous expense						(6,284)						(6,345)						(1,987)
Total non-operating expenses, net						111,115						30,835						38,292
Income before income tax expense						314,503						517,533						498,754
Income tax expense						71,633						120,663						90,895
Net income						242,870						396,870						407,859
Less: Net (loss) income attributable to noncontrolling interests						(1,018)						(530)						200
Net income attributable to shareholders						$	243,888					$	397,400					$	407,659
Net income per share attributable to shareholders:
Basic						$	2.50					$	4.66					4.81
Diluted						$	2.48					$	4.63					4.76
Cash dividends declared per ordinary share outstanding						$	1.69					$	1.57					$	1.45

See notes to consolidated financial statements.

STERIS PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Years Ended March 31,						2022						2021						2020
Net income						$	242,870					$	396,870					$	407,859
Less: Net (loss) income attributable to noncontrolling interests						(1,018)						(530)						200
Net income attributable to shareholders						$	243,888					$	397,400					$	407,659
Other comprehensive (loss) income
Pension and postretirement benefit plan changes (net of taxes of $507 $667, and $295, respectively)						6,795						1,294						(2,609)
Change in cumulative foreign currency translation adjustment						(155,360)						172,926						(73,076)
Total other comprehensive (loss) income attributable to shareholders						(148,565)						174,220						(75,685)
Comprehensive income attributable to shareholders						$	95,323					$	571,620					$	331,974

See notes to consolidated financial statements.

STERIS PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years Ended March 31,						2022						2021						2020
Operating activities:
Net income						$	242,870					$	396,870					$	407,859
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization						553,104						219,237						197,235
Deferred income taxes						(106,620)						4,240						9,442
Share-based compensation expense						57,660						25,966						23,811
Loss (gain) on the disposal of property, plant, equipment, and intangibles, net						15,117						(1,982)						(174)
Loss (gain) on sale of businesses						(874)						2,030						1,770
Fair value adjustment related to convertible debt, premium liability						27,806						—						—
Amortization of inventory fair value adjustments						66,663						—						—
Other items						(21,639)						24,273						426
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net						(51,969)						12,076						(17,866)
Inventories, net						(102,922)						3,769						(39,140)
Other current assets						7,126						458						3,784
Accounts payable						14,887						(7,213)						(2,779)
Accruals and other, net						(16,398)						9,916						6,191
Net cash provided by operating activities						684,811						689,640						590,559
Investing activities:
Purchases of property, plant, equipment, and intangibles, net						(287,563)						(239,262)						(214,516)
Proceeds from the sale of property, plant, equipment, and intangibles						1,741						569						4,156
Proceeds from the sale of businesses						169,712						518						439
Purchases of investments						—						(4,400)						—
Acquisition of businesses, net of cash acquired						(550,449)						(909,192)						(109,814)
Other						—						(2,392)						—
Net cash used in investing activities						(666,559)						(1,154,159)						(319,735)
Financing activities:
Proceeds from issuance of senior public notes						1,350,000						—						—
Proceeds from term loans						650,000						550,000						—
Payments on term loans						(345,000)						—						—
Payments on long-term obligations						(721,284)						(35,000)						—
Payments on convertible debt						(371,361)						—						—
Payments under credit facilities, net						(190,174)						(30,461)						(26,500)
Deferred financing fees and debt issuance costs						(17,472)						(12,846)						(1,281)
Acquisition related deferred or contingent consideration						(32,679)						(2,395)						(626)
Repurchases of ordinary shares						(55,777)						(14,646)						(51,241)
Cash dividends paid to ordinary shareholders						(163,169)						(133,837)						(123,034)
Distributions to noncontrolling interest holders						(997)						(4,179)						(1,245)
Contributions from noncontrolling interest holders						3,672						2,258						6,050
Stock option and other equity transactions, net						10,071						26,726						34,731
Net cash provided by (used in) financing activities						115,830						345,620						(163,146)
Effect of exchange rate changes on cash and cash equivalents						(6,293)						19,849						(8,730)
Increase (decrease) in cash and cash equivalents						127,789						(99,050)						98,948
Cash and cash equivalents at beginning of period						220,531						319,581						220,633
Cash and cash equivalents at end of period						$	348,320					$	220,531					$	319,581

See notes to consolidated financial statements.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

STERIS PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except per share amounts)

			Ordinary Shares						Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non-controlling Interest			Total Equity
			Number			Amount
Balance at March 31, 2019			84,517			$	1,998,564		$	1,350,456		$	(159,778)		$	7,988		$	3,197,230
Comprehensive income:
Net income			—			—			407,659			—			200			407,859
Other comprehensive loss			—			—			—			(75,685)			—			(75,685)
Repurchases of ordinary shares			(396)			(74,821)			23,580			—			—			(51,241)
Equity compensation programs and other			803			58,421			—			—			—			58,421
Cash dividends – $1.45 per ordinary share			—			—			(123,034)			—			—			(123,034)
Distributions to noncontrolling interest holders			—			—			—			—			(1,245)			(1,245)
Contributions from noncontrolling interest holders			—			—			—			—			6,050			6,050
Other changes in noncontrolling interest			—			—			—			—			(145)			(145)
Balance at March 31, 2020			84,924			1,982,164			1,658,661			(235,463)			12,848			3,418,210
Comprehensive income:
Net income (loss)			—			—			397,400			—			(530)			396,870
Other comprehensive income			—			—			—			174,220			—			174,220
Repurchases of ordinary shares			(127)			(31,830)			17,184			—			—			(14,646)
Equity compensation programs and other			556			52,491			—			—			—			52,491
Cash dividends – $1.57 per ordinary share			—			—			(133,837)			—			—			(133,837)
Distributions to noncontrolling interest holders			—			—			—			—			(4,179)			(4,179)
Contributions from noncontrolling interest holders			—			—			—			—			2,258			2,258
Other changes in noncontrolling interest			—			—			—			—			81			81
Balance at March 31, 2021			85,353			$	2,002,825		$	1,939,408		$	(61,243)		$	10,478		$	3,891,468
Comprehensive income:
Net income (loss)			—			—			243,888			—			(1,018)			242,870
Other comprehensive loss			—			—			—			(148,565)			—			(148,565)
Repurchases of ordinary shares			(353)			(34,894)			(20,883)			—			—			(55,777)
Equity compensation programs and other			770			67,499			—			—			—			67,499
Cash dividends – $1.69 per ordinary share			—			—			(163,169)			—			—			(163,169)
Issuance of shares for acquisition of Cantel Medical LLC ("Cantel")			14,297			2,689,317			—			—			—			2,689,317
Consideration related to equity component of Cantel convertible debt			—			175,555			—			—			—			175,555
Consideration related to Cantel equity compensation programs			—			18,173			—			—			—			18,173
Reclassification to Cantel convertible debt, premium liability			—			(175,555)			—			—			—			(175,555)
Distributions to noncontrolling interest holders			—			—			—			—			(997)			(997)
Contributions from noncontrolling interest holders			—			—			—			—			3,672			3,672
Other changes in noncontrolling interest			—			—			—			—			146			146
Balance at March 31, 2022			100,067			$	4,742,920		$	1,999,244		$	(209,808)		$	12,281		$	6,544,637

See notes to consolidated financial statements.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations. STERIS is a leading global provider of products and services that support patient care with an emphasis on infection prevention. WE HELP OUR CUSTOMERS CREATE A HEALTHIER AND SAFER WORLD by providing innovative healthcare, life sciences and dental products and services. We offer our Customers a unique mix of innovative consumable products, such as detergents, gastrointestinal (“GI”) endoscopy accessories, barrier product solutions, and other products and services, including: equipment installation and maintenance, microbial reduction of medical devices, dental instruments and tools, instrument and scope repair, laboratory testing services, outsourced reprocessing, and capital equipment products, such as sterilizers and surgical tables, automated endoscope reprocessors, and connectivity solutions such as operating room (“OR”) integration.

We operate and report in four reportable business segments: Healthcare, Applied Sterilization Technologies, Life Sciences, and Dental. We describe our business segments in Note 11 to our consolidated financial statements titled, "Business Segment Information."

Our fiscal year ends on March 31. References in this Annual Report to a particular "year," "fiscal," "fiscal year," or "year-end" mean our fiscal year. The significant accounting policies applied in preparing the accompanying consolidated financial statements of the Company are summarized below.

Principles of Consolidation. We use the consolidation method to report our investment in our subsidiaries. Therefore, the accompanying consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. We eliminate inter-company accounts and transactions when we consolidate these accounts. Investments in equity of unconsolidated affiliates, over which the Company has significant influence, but not control, over the financial and operating polices, are accounted for primarily using the equity method. These investments are immaterial to the Company's Consolidated Financial Statements.

Use of Estimates. We make certain estimates and assumptions when preparing financial statements according to U.S. GAAP that affect the reported amounts of assets and liabilities at the financial statement dates and the reported amounts of revenues and expenses during the periods presented. These estimates and assumptions involve judgments with respect to many factors that are difficult to predict and are beyond our control. Actual results could be materially different from these estimates. We revise the estimates and assumptions as new information becomes available.

Cash Equivalents and Supplemental Cash Flow Information. Cash equivalents are all highly liquid investments with a maturity of three months or less when purchased. We invest our excess cash in short-term instruments including money market funds and time deposits with major banks and financial institutions. We select investments in accordance with the criteria established in our investment policy. Our investment policy specifies, among other things, maturity, credit quality and concentration restrictions with the objective of preserving capital and maintaining adequate liquidity.

Information supplementing our Consolidated Statements of Cash Flows is as follows:

Years Ended March 31,						2022						2021						2020
Cash paid during the year for:
Interest						$	84,696					$	36,257					$	38,021
Income taxes						138,382						109,646						92,462
Cash received during the year for income tax refunds						4,605						4,631						4,378

Revenue Recognition and Associated Liabilities. We adopted Accounting Standards Update ("ASU") 2014-09 “Revenue from Contracts with Customers” and the subsequently issued amendments on April 1, 2018. At the time of adoption, certain of our capital equipment contracts were comprised of a single integrated performance obligation, which resulted in the deferral of the corresponding capital equipment revenue and cost of revenues until installation was complete. Since the adoption of the standard, there have been changes made in our selling philosophy, product architecture, and manufacturing processes with respect to this product line, that impact whether the promises to transfer the individual goods or services to the Customer are separately identifiable from other promises in the contract. After review of these changes, we have concluded that these contracts consist of multiple performance obligations that are capable of being distinct and meet the criteria for revenue to be recognized when the Customer obtains control of the asset, which is upon delivery of each performance obligation. Revenues and costs of revenues related to these contracts totaling $14,609 and $7,560, respectively, that had previously been deferred were recognized in our fiscal 2021 first quarter.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Revenue is recognized when obligations under the terms of the contract are satisfied and control of the promised products or services have transferred to the Customer. Revenues are measured at the amount of consideration that we expect to be paid in exchange for the products or services. Product revenue is recognized when control passes to the Customer, which is generally based on contract or shipping terms. Service revenue is recognized when the Customer benefits from the service, which occurs either upon completion of the service or as it is provided to the Customer. Our Customers include end users as well as dealers and distributors who market and sell our products. Our revenue is not contingent upon resale by the dealer or distributor, and we have no further obligations related to bringing about resale. Our standard return and restocking fee policies are applied to sales of products. Shipping and handling costs charged to Customers are included in Product revenues. The associated expenses are treated as fulfillment costs and are included in Cost of revenues. Revenues are reported net of sales and value-added taxes collected from Customers.

We have individual Customer contracts that offer discounted pricing. Dealers and distributors may be offered sales incentives in the form of rebates. We reduce revenue for discounts and estimated returns, rebates, and other similar allowances in the same period the related revenues are recorded. The reduction in revenue for these items is estimated based on historical experience and trend analysis to the extent that it is probable that a significant reversal of revenue will not occur. Estimated returns are recorded gross on the Consolidated Balance Sheets.

In transactions that contain multiple performance obligations, such as when products, maintenance services, and other services are combined, we recognize revenue as each product is delivered or service is provided to the Customer. We allocate the total arrangement consideration to each performance obligation based on its relative standalone selling price, which is the price for the product or service when it is sold separately.

Payment terms vary by the type and location of the Customer and the products or services offered. Generally, the time between when revenue is recognized and when payment is due is not significant. We do not evaluate whether the selling price contains a financing component for contracts that have a duration of less than one year.

We do not capitalize sales commissions as substantially all of our sales commission programs have an amortization period of one year or less.

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 March 31, 2022, assets related to costs to fulfill a contract were not material to our Consolidated Financial Statements.

Refer to Note 11, titled "Business Segment Information" for disaggregation of revenue.

Product Revenues

Product revenues consist of revenues generated from sales of consumables and capital equipment. These contracts are primarily based on a Customer’s purchase order and may include a Distributor, Dealer or Group Purchasing Organization ("GPO") agreement. We recognize revenue for sales of product when control passes to the Customer, which generally occurs either when the products are shipped or when they are received by the Customer. Revenue related to capital equipment products is deferred until installation is complete if the capital equipment and installation are highly integrated and form a single performance obligation.

Service Revenues

Within our Healthcare and Life Sciences segments, service revenues include revenue generated from parts and labor associated with the maintenance, repair and installation of capital equipment. These contracts are primarily based on a Customer’s purchase order and may include a Distributor, Dealer, or Group Purchasing Organization ("GPO") agreement. For maintenance, repair and installation of capital equipment, revenue is recognized upon completion of the service. Healthcare service revenues also include outsourced reprocessing services and instrument repairs. Contracts for outsourced reprocessing services are primarily based on an agreement with a Customer, ranging in length from several months to 15 years. Outsourced reprocessing services revenue is recognized ratably over the contract term using a time-based input measure, adjusted for volume and other performance metrics, to the extent that it is probable that a significant reversal of revenue will not occur. Contracts for instrument repairs are primarily based on a Customer’s purchase order, and the associated revenue is recognized upon completion of the repair.

We also offer preventive maintenance and separately priced extended warranty agreements to our Customers, which require us to maintain and repair our products over the duration of the contract. Generally, these contract terms are cancellable

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

without penalty and range from one to five years. Amounts received under these Customer contracts are initially recorded as a service liability and are recognized as service revenue ratably over the contract term using a time-based input measure.

Within our Applied Sterilization Technologies segment, service revenues include contract sterilization and laboratory services. Sales contracts for contract sterilization and laboratory services are primarily based on a Customer’s purchase order and associated Customer agreement and revenues are generally recognized upon completion of the service.

Contract Liabilities

Payments received from Customers are based on invoices or billing schedules as established in contracts with Customers. Deferred revenue is recorded when payment is received in advance of performance under the contract. Deferred revenue is recognized as revenue upon completion of the performance obligation, which generally occurs within one year. During fiscal 2022, we recognized revenue of $46,760 that was included in our contract liability balance at the beginning of the period. During fiscal 2021, we recognized revenue of $42,618 that was included in our contract liability balance at the beginning of the period.

Refer to Note 7, titled "Additional Consolidated Balance Sheet Information" for Deferred revenue balances.

Service Liabilities

Payments received in advance of performance for cancellable preventive maintenance and separately priced extended warranty contracts are recorded as service liabilities. Service liabilities are recognized as revenue as performance is rendered under the contract.

Refer to Note 7, titled "Additional Consolidated Balance Sheet Information" for Service liability balances.

Remaining Performance Obligations

Remaining performance obligations reflect only the performance obligations related to agreements for which we have a firm commitment from a Customer to purchase, and exclude variable consideration related to unsatisfied performance obligations. With regard to products, these remaining performance obligations include capital equipment and consumable orders which have not shipped. With regard to service, these remaining performance obligations primarily include installation, certification, and outsourced reprocessing services. As of March 31, 2022, the transaction price allocated to remaining performance obligations was approximately $1,546,000. We expect to recognize approximately 54% of the transaction price within one year and approximately 37% beyond one year. The remainder has yet to be scheduled for delivery.

Accounts Receivable. Accounts receivable are presented at their face amount, less allowances for sales returns and uncollectible accounts. Accounts receivable consist of amounts billed and currently due from Customers and amounts earned but unbilled. We generally obtain and perfect security interest in products sold in the United States when we have a concern with the Customer's risk profile.

We maintain an allowance for uncollectible accounts receivable for estimated losses in the collection of amounts owed by Customers. We estimate the allowance based on analyzing a number of factors, including amounts written off historically, Customer payment practices, and general economic conditions. We also analyze significant Customer accounts on a regular basis and record a specific allowance when we become aware of a specific Customer’s inability to pay. As a result, the related accounts receivable are reduced to an amount that we reasonably believe is collectible.

We maintain an allowance for sales returns based upon known returns and estimated returns for both capital equipment and consumables. We estimate returns of capital equipment and consumables based upon recent historical experience.

Inventories, net. Inventories are stated at the lower of their cost and net realizable value determined by the first-in, first-out (“FIFO”) cost method. Inventory costs include material, labor, and overhead.

We review inventory on an ongoing basis, considering factors such as deterioration, obsolescence, and other items. We record an allowance for estimated losses when the facts and circumstances indicate that particular inventories will not be usable. If future market conditions vary from those projected, and our estimates prove to be inaccurate, we may be required to write-down inventory values and record an adjustment to cost of revenues.

Property, Plant, and Equipment. Our property, plant, and equipment consists of land and land improvements, buildings and leasehold improvements, machinery and equipment, information systems, radioisotope (cobalt-60), and construction in progress. Property, plant, and equipment are presented at cost less accumulated depreciation and depletion. We capitalize additions and improvements. Repairs and maintenance are charged to expense as they are incurred.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Land is not depreciated and construction in progress is not depreciated until placed in service. Depreciation of most assets is computed on the cost less the estimated salvage value by using the straight-line method over the estimated remaining useful lives. Depletion of radioisotope is computed using the annual decay factor of the material, which is similar to the sum-of-the-years-digits method.

We generally depreciate or deplete property, plant, and equipment over the useful lives presented in the following table:

Asset Type						Useful Life (years)
Land improvements						3-40
Buildings and leasehold improvements						2-50
Machinery and equipment						2-20
Information Systems						2-20
Radioisotope (cobalt-60)						20

When we sell, retire, or dispose of property, plant, and equipment, we remove the asset’s cost and accumulated depreciation from our Consolidated Balance Sheet. We recognize the net gain or loss on the sale or disposition in the Consolidated Statements of Income in the period when the transaction occurs.

Interest. We capitalize interest costs incurred during the construction of long-lived assets. We capitalized interest costs of $3,886 and $1,998 for the years ended March 31, 2022 and 2021, respectively. Total interest expense for the years ended March 31, 2022, 2021, and 2020 was $89,593, $37,180, and $40,279, respectively.

Identifiable Intangible Assets. Our identifiable intangible assets include product technology rights, trademarks, licenses, non-compete agreements, and Customer and vendor relationships. We record these assets at cost, or when acquired as part of a business acquisition, at estimated fair value. Determining the fair value of identifiable intangible requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to forecasted revenue growth rates, forecasted profit margins, and Customer attrition rates, among other items. We generally amortize identifiable intangible assets over periods ranging from 5 to 20 years using the straight-line method. Our intangible assets also include indefinite lived assets including certain trademarks and tradenames that were acquired in connection with business combinations. These assets are tested at least annually for impairment.

Investments. Investments in marketable securities are stated at fair value and are included in "Other assets" on the Consolidated Balance Sheets. Changes in the fair value of these investments are recorded in the "Interest income and miscellaneous expense line" of the Consolidated Statement of Income.

Asset Impairment Losses. Property, plant, equipment, and identifiable intangible assets are reviewed for impairment when indicators of impairment exist and circumstances indicate that the carrying value of such assets may not be recoverable. Impaired assets are recorded at the lower of carrying value or estimated fair value. We monitor for such indicators on an ongoing basis and if an impairment exists, we record the loss in the Consolidated Statements of Income during that period.

Asset Retirement Obligations. We incur retirement obligations for certain assets. We record initial liabilities for the asset retirement obligations ("ARO") at fair value. Recognition of ARO includes: estimating the present value of a liability and offsetting asset, the subsequent accretion of that liability and depletion of the asset, and a periodic review of the ARO liability estimates and discount rates used in the analysis. We provide additional information about our asset retirement obligations in Note 5 to our consolidated financial statements titled, “Property, Plant and Equipment.”

Acquisitions of Business. Assets acquired and liabilities assumed in a business combination are accounted for at fair value on the date of acquisition. Costs related to the acquisition are expensed as incurred.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Goodwill. We perform our annual impairment test for goodwill in the third quarter of each year. We may consider qualitative indicators of the fair value of a reporting unit when it is unlikely that a reporting unit has impaired goodwill. We may also utilize a discounted cash flow analysis that requires certain assumptions and estimates be made regarding market conditions and our future profitability. We review the book value compared to the fair value at the reporting unit level. We calculate the fair value of our reporting units based on the present value of estimated future cash flows. Management's judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate future cash flows to measure fair value. Assumptions used in our impairment evaluations, such as forecasted growth rates and cost of capital, are consistent with internal projections, strategic plans, and operating plans. We believe such assumptions and estimates are also comparable to those that would be used by other market place participants.

Self-Insurance Liabilities. We record a liability for self-insured risks that we retain for general and product liabilities, workers’ compensation, and automobile liabilities based on actuarial calculations. We use our historical loss experience and actuarial methods to calculate the liability. This liability includes estimates for both losses and incurred but not reported claims. We review the assumptions used to calculate the estimated liability at least annually to evaluate the adequacy of the amount recorded. We maintain insurance policies to cover losses greater than our estimated liability, which are subject to the terms and conditions of those policies. We are also self-insured for certain employee medical claims. We estimate a liability for incurred but not reported claims based upon recent claims experience.

Benefit Plans. We sponsor defined benefit pension plans. We also sponsor a post-retirement benefits plan for certain former employees. We determine our costs and obligations related to these plans by evaluating input from third-party professional advisers. These costs and obligations are affected by assumptions including the discount rate, expected long-term rate of return on plan assets, the annual rate of change in compensation for eligible employees, estimated changes in costs of healthcare benefits, and other factors. We review the assumptions used on an annual basis.

We recognize an asset for the overfunded status or a liability for the underfunded status of defined benefit pension and post-retirement benefits plans in our consolidated balance sheets. This amount is measured as the difference between the fair value of plan assets and the benefit obligation (the projected benefit obligation for pension plans and the accumulated post-retirement benefit obligation for other post-retirement benefit plans). Changes in the funded status of the plans are recorded in other comprehensive income in the year they occur. We measure plan assets and obligations as of the balance sheet date. We provide additional information about our pension and other post-retirement benefits plans in Note 9 to our consolidated financial statements titled, “Benefit Plans.”

Fair Value of Financial Instruments. Except for long-term debt, our financial instruments are highly liquid or have short-term maturities. We provide additional information about the fair value of our financial instruments in Note 17 titled, “Fair Value Measurements.”

Foreign Currency Translation. Most of our operations use their local currency as their functional currency. Financial statements of subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange rate for each period for revenues, expenses, gains and losses. Translation adjustments for subsidiaries whose local currency is their functional currency are recorded as a component of accumulated other comprehensive income (loss) within equity. Transaction gains and losses resulting from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized as incurred in the accompanying Consolidated Statement of Income, except for certain inter-company balances designated as long-term in nature.

Forward and Swap Contracts. We enter into foreign currency forward contracts to hedge assets and liabilities denominated in foreign currencies, including inter-company transactions.We may also enter into commodity swap contracts to hedge price changes in nickel that impact raw materials included in our cost of revenues. We may also hold forward foreign exchange contracts to hedge a portion of our expected non-U.S. dollar denominated earnings against our reporting currency, the U.S. dollar. We do not use derivative financial instruments for speculative purposes. These contracts are marked to market, with gains and losses recognized within “Selling, general, and administrative expenses” or "Cost of revenues" in the accompanying Consolidated Statements of Income.

Warranty. Warranties are provided on the sale of certain of our products and services and an accrual for estimated future claims is recorded at the time revenue is recognized. We estimate warranty expense based primarily on historical warranty claim experience.

Shipping and Handling. We record shipping and handling costs in costs of revenues. Shipping and handling costs charged to Customers are recorded as revenues in the period the product revenues are recognized.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Advertising Expenses. Costs incurred for communicating, advertising and promoting our products are generally expensed when incurred as a component of Selling, General and Administrative Expense. We incurred $15,599, $6,795, and $12,652 of advertising costs during the years ended March 31, 2022, 2021, and 2020, respectively.

Research and Development. We incur research and development costs associated with commercial products and expense these costs as incurred. If a Customer reimburses us for research and development costs, the costs are charged to the related contracts as costs of revenues.

Income Taxes. We defer income taxes for all temporary differences between pre-tax financial and taxable income and between the book and tax basis of assets and liabilities. We record valuation allowances to reduce net deferred tax assets to an amount that we expect will more-likely-than-not be realized. In making such a determination, we consider all available information, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and if applicable, any carryback claims that can be filed. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which would reduce the provision for income taxes and the effective tax rate.

We evaluate uncertain tax positions in accordance with a two-step process. The first step is recognition: The determination of whether or not it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, we presume that the position will be examined by the appropriate tax authority and that the tax authority will have full knowledge of all relevant information. The second step is measurement: A tax position that meets the more-likely-than-not threshold is measured to determine the amount of benefit to recognize in the financial statements. The measurement process requires the determination of the range of possible settlement amounts and the probability of achieving each of the possible settlements. The tax position is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. No tax benefits are recognized for positions that do not meet the more-likely-than-not threshold. Tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold are derecognized in the first subsequent financial reporting period in which the threshold is no longer met. We describe income taxes further in Note 8 to our consolidated financial statements titled, “Income Taxes.”

Share-Based Compensation. We describe share-based compensation in Note 14 to our consolidated financial statements titled, “Share-Based Compensation.” We measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. We record liability awards at fair value each reporting period and the change in fair value is reflected as share-based compensation expense in our Consolidated Statements of Income. The expense is classified as cost of goods sold, selling, general and administrative expenses or research and development expenses in a manner consistent with the employee’s compensation and benefits. These costs are recognized in the Consolidated Statement of Income over the period during which an employee is required to provide service in exchange for the award.

Restructuring. We recognize restructuring expenses as incurred. Asset impairment and accelerated depreciation expenses primarily relate to inventory write-downs for rationalized products and adjustments in the carrying value of the related facilities and machinery and equipment to their estimated fair value. In addition, the remaining useful lives of other property, plant, and equipment associated with the related operations are reevaluated based on the respective restructuring plan, which may result in the acceleration of depreciation and amortization of certain assets.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Recently Issued Accounting Standards Impacting the Company

Recently Issued Accounting Standards Impacting the Company are presented in the following table:

Standard						Date of Issuance						Description						Date of Adoption						Effect on the financial statements or other significant matters
Standards that have been adopted in fiscal 2022
ASU 2019-12 "Income Taxes (Topic 740)"						December 2019						The standard provides final guidance that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The guidance simplifies accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.						First Quarter Fiscal 2022						We adopted this standard effective April 1, 2021 with no material impact to our consolidated financial statements.
ASU 2020-06 "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)"						August 2020						This standard simplifies the accounting for convertible instruments and its application of the derivatives scope exception for contracts in an entity’s own equity. The standard reduces the number of accounting models that require separating embedded conversion features from convertible instruments. As a result, only conversion features accounted for under the substantial premium model and those that require bifurcation will be accounted for separately. For contracts in an entity’s own equity, the new standard eliminates some of the current requirements for equity classification. The standard also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity.						First Quarter Fiscal 2022						We adopted this standard effective April 1, 2021 and applied it to our accounting for the convertible debt assumed in the acquisition of Cantel Medical LLC ("Cantel").
Standards that have not yet been adopted.
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. The standard is effective for annual periods beginning after December 15, 2022 including interim periods within that year and early adoption is permitted.						NA						We are in the process of evaluating the impact that the standard will have on our consolidated financial statements.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

2. BUSINESS ACQUISITIONS AND DIVESTITURES

Fiscal 2022 Acquisition of Cantel Medical LLC

On June 2, 2021, we acquired all outstanding equity interests in Cantel Medical LLC ("Cantel") through a U.S. subsidiary. Cantel, formerly headquartered in Little Falls, New Jersey, with approximately 3,700 employees, is a global provider of infection prevention products and services primarily to endoscopy and dental Customers.

We believe that the acquisition will strengthen STERIS’s leadership in infection prevention by bringing together two complementary businesses able to offer a broader set of Customers a more diversified selection of infection prevention, endoscopy and sterilization products and services. Cantel’s Dental business extends our business into a new Customer segment where there is an increasing focus on infection prevention protocols and processes. This business is reported as the Dental segment. The rest of Cantel was integrated into our existing Healthcare and Life Sciences segments. Additionally, the acquisition is expected to result in cost savings from optimizing global back-office infrastructure, leveraging best-demonstrated practices across locations and eliminating redundant public company costs.

Total Purchase Consideration

The total consideration for Cantel Common Stock and stock equivalents was $3,599,471. The consideration was comprised of the following:

(shares in thousands)
Cash consideration $16.93 per Cantel share (42,816 shares)			$	716,412
Cash consideration for fractional shares			14
STERIS plc ordinary shares 14,297 shares at ($188.07 per share)			2,689,317
Consideration related to Cantel equity compensation programs			18,173
Consideration related to equity component of Cantel convertible debt			175,555
Total purchase consideration			$	3,599,471

In addition, STERIS assumed and repaid $721,284 of existing Cantel debt obligations and assumed Cantel's obligations associated with convertible senior notes issued on May 15, 2020, which is described in Note 6 titled, "Debt."

We funded the cash portion of the transaction consideration and repayment of a significant amount of Cantel’s existing debt obligations with a portion of the proceeds from new debt, which is described in Note 6 titled, "Debt".

Fair Value of Assets Acquired and Liabilities Assumed

The acquisition of Cantel has been accounted for using the acquisition method of accounting which requires, among other things, the assets acquired and liabilities assumed be recognized at their respective fair values as of the acquisition date. Acquisition accounting is dependent upon certain valuations and other studies. The process for estimating the fair values of identifiable intangible assets and certain tangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates.

The purchase price has been allocated based on the latest draft valuations and remains preliminary. As we finalize the fair value of assets acquired and liabilities assumed, additional purchase price adjustments and associated deferred taxes will be recorded during the remaining measurement period. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations. The finalization of the purchase accounting assessment in the first quarter of fiscal 2023 may result in additional changes in the valuation of assets acquired and liabilities assumed and that may impact our results of operations and financial position. Goodwill has been allocated to the Healthcare, Dental and Life Sciences segments. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. Goodwill recognized as a result of the acquisition is not deductible for tax purposes.

The table below presents the preliminary estimated fair values of assets acquired and liabilities assumed on the acquisition date. These preliminary estimates will be revised during the measurement period as third-party valuations are finalized, additional information becomes available and as additional analyses are performed, and these differences could have a material impact on our results of operations and financial position.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

			Cantel (1)
Cash			$	169,073
Accounts receivable			172,226
Inventory			249,221
Property, plant and equipment			267,360
Lease right-of-use assets			59,720
Other assets			72,864
Intangible assets			2,942,000
Goodwill			1,522,381
Total assets acquired			5,454,845
Convertible debt, par value			168,000
Other current liabilities			247,549
Long-term lease obligations			47,856
Deferred income taxes, net			670,685
Long-term indebtedness			721,284
Total liabilities assumed			1,855,374
Net assets acquired			$	3,599,471

(1) Purchase price allocation is preliminary as of March 31, 2022, as valuations have not been finalized.

Cantel Other Intangible Assets

The estimated fair values of identifiable intangible assets were prepared using income valuation methodologies, which require a forecast of expected future cash flows using either the relief-from-royalty method or the multi-period excess earnings method. The estimated useful lives are based on the historical experience of STERIS, available similar industry data and assumptions made by management.Values and useful lives are presented in the table below.

						Total						Useful Life
Customer relationships						$	2,278,000					9-10 years
Trade names						422,000						11 years
Developed technology						222,000						9 years
Non-compete agreements						20,000						2 years
Total intangible assets acquired						$	2,942,000

Contingent liabilities assumed totaled $25,000 and were related to contingent consideration associated with a prior acquisition completed by Cantel. Payment was made in June 2021.

Actual and Pro Forma Impact

Our consolidated financial statements include Cantel's results of operations from the date of acquisition on June 2, 2021 through March 31, 2022. Net sales and operating income attributable to Cantel from the date of acquisition and included in our consolidated financial statements for the fiscal year ended March 31, 2022 total $974,408 and $41,757, respectively.

The following unaudited pro forma information gives effect to our acquisition of Cantel as if the acquisition had occurred on April 1, 2020 and Cantel had been included in our consolidated results of operations for the fiscal years ended March 31, 2022 and 2021.

						Fiscal Year Ended March 31,
						(unaudited)
						2022						2021
Net revenues						$	4,790,161					$	4,190,244
Net income from continuing operations						449,382						5,849

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

The historical consolidated financial information of STERIS and Cantel has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the transaction and factually supportable. The unaudited pro forma results include adjustments to reflect the amortization of the inventory step-up and the incremental depreciation and amortization to be reported based on the latest draft of valuations of assets acquired. Adjustments to financing costs and income tax expense also were made to reflect the capital structure and anticipated effective tax rate of the combined entity. These pro forma amounts are not necessarily indicative of the results that would have been obtained if the acquisition had occurred as of the beginning of the period presented or that may occur in the future, and does not reflect future synergies, integration costs, or other such costs or savings.

Other Fiscal 2022 Acquisitions

In addition to the acquisition of Cantel, we completed three other tuck-in acquisitions during fiscal 2022, which continued to expand our product and service offerings in the Healthcare segment. Total aggregate consideration for these transactions was approximately $3,146, net of cash acquired and including deferred consideration of $50.

Fiscal 2021 Acquisitions

On January 4, 2021, we purchased the remaining outstanding shares of an entity in which we had initially made an equity investment in fiscal 2019. Total consideration was approximately $78,045, net of cash acquired and subject to any working capital adjustments. Total non-cash consideration for this transaction was $41,771, which consisted of the settlement of outstanding principal and interest on a loan receivable, the initial equity investment, and receivables related to capital equipment purchases that existed at the acquisition date. The business has been integrated into our Applied Sterilization Technologies business segment and we funded the transaction through a combination of cash on hand and credit facility borrowings.

On November 18, 2020, we acquired all of the outstanding units and equity of Key Surgical, LLC ("Key Surgical"). Key Surgical is a global provider of sterile processing, operating room and endoscopy consumable products serving hospitals and surgical facilities. Key Surgical has been integrated into our Healthcare segment. The total purchase price of the acquisition was $853,203, net of cash acquired and remains subject to customary working capital adjustments. The purchase price for the acquisition was financed with a combination of cash on hand, credit facility borrowings and proceeds from borrowings under a then new Term loan agreement. Please refer to Note 6 titled, "Debt" for more information.

We also completed two other tuck-in acquisitions during fiscal 2021, which continued to expand our product and service offerings in the Healthcare segment. Total aggregate consideration for these transactions was approximately $20,909, net of cash acquired and including deferred consideration of approximately $1,194.

Fiscal 2020 Acquisitions

During fiscal 2020, we completed several tuck-in acquisitions which continued to expand our product and service offerings in the Healthcare, Applied Sterilization Technologies and Life Sciences segments. The aggregate purchase price associated with these transactions was approximately $128,860, net of cash acquired and including contingent and deferred consideration.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Fair Value of Assets Acquired and Liabilities Assumed

The table below summarizes the allocation of the purchase price to the net assets acquired based on fair values at the acquisition dates for our fiscal 2022, 2021 and 2020 acquisitions.

			Fiscal Year 2022**(1)**						Fiscal Year 2021												Fiscal Year 2020
(dollars in thousands)			Other Acquisitions (Excluding Cantel)						Key Surgical						Other Acquisitions						All Acquisitions
Cash			$	—					$	12,615					$	9,159					$	8,811
Accounts receivable			—						13,967						9,621						10,331
Inventory			—						21,414						22,123						8,999
Property, plant and equipment			—						6,030						26,363						9,241
Lease right-of-use assets, net			—						4,907						4,420						4,462
Other assets			—						6,680						3,378						1,133
Intangible assets (2)			1,578						356,999						28,188						36,500
Goodwill			1,602						527,675						42,808						74,531
Total assets			3,180						950,287						146,060						154,008
Current liabilities			(34)						(21,599)						(28,245)						(20,659)
Non-current liabilities			—						(62,870)						(9,704)						(4,000)
Total liabilities			(34)						(84,469)						(37,949)						(24,659)
Net assets			$	3,146					$	865,818					$	108,111					$	129,349

(1) Purchase price allocation is still preliminary as of March 31, 2022, as valuations have not been finalized, pending further analyses of the significant drivers of fair value.

(2) Includes $315,575, related to the fair value of the Customer relationships intangible asset, obtained in the acquisition of Key Surgical. The estimation of fair value was determined under an income approach using discounted cash flows. The estimate requires assumptions including forecasted revenue growth rates, forecasted profit margins, and Customer attrition rates.

Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. The deductible portion of goodwill for tax purposes recognized as a result of the fiscal 2022 and fiscal 2021 acquisitions was $427,035 and $197,344, respectively.

Acquisition related transaction and integration costs totaled $205,788, $35,634, and $8,225 for the fiscal years ended March 31, 2022, 2021, and 2020, respectively. Fiscal 2022 acquisition and integration expenses were primarily related to the acquisition of Cantel. Fiscal 2021 acquisition and integration expenses were primarily related to the acquisitions of Key Surgical LLC and Cantel. These costs are included in Selling, general, and administrative expenses in the Consolidated Statements of Income.

Divestitures

Fiscal 2022

Divestitures. In December 2021, we entered into an Asset Purchase Agreement to sell our Renal Care business to Evoqua Water Technologies Corp., for cash consideration of approximately $196,000, subject to certain potential adjustments, including a customary working capital adjustment and contingent consideration of $12,300. We recognized a gain on the sale of $950. The transaction closed on January 3, 2022. We acquired the Renal Care business as part of the Cantel transaction, which closed on June 2, 2021, and had been integrated into STERIS's Healthcare segment. The Renal Care business generated annual revenues of approximately $180,000. The proceeds from the sale received at closing were used to repay outstanding debt.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Fiscal 2021

During fiscal 2021, we sold an Applied Sterilization Technologies laboratory that was located in the Netherlands. We recorded proceeds of $518, net of cash divested, and recognized a pre-tax loss on the sale of $2,024 in the selling, general and administrative expense line of the Consolidated Statements of Income. The business generated annual revenues of approximately $6,000.

Fiscal 2020

During fiscal 2020, we sold the operations of our Healthcare services business that were located in China. We recorded proceeds of $439, net of cash divested, and recognized a pre-tax loss on the sale of $2,365 in the selling, general and administrative expense line of the Consolidated Statements of Income. The business generated annual revenues of approximately $5,000.

Loans Receivable

In connection with an equity investment of $4,955, we agreed to provide a credit facility of up to approximately $11,606 for a term of up to seven years ending in 2025. The loan carried an interest rate of 4% compounded daily and interest was payable annually. Outstanding borrowings under the agreement totaled $7,084 at March 31, 2020. During fiscal 2021, we purchased the remaining shares of the equity investment. In addition to the purchase price, the acquisition agreement included the capitalization of the outstanding principal and accumulated interest under this credit facility in the amount of $11,708.

In connection with the fiscal 2017 divestiture of Synergy Health Netherlands Linen Management Services, we entered into a loan agreement to provide financing of up to €15,000 for a term of up to 15 years. The loan carried an interest rate of 4% for the first four years and 12% thereafter. The loan was renegotiated during the third quarter of fiscal 2020. According to the new terms of the loan agreement, the outstanding balance at October 31, 2019, of €7,300, will be repaid in six equal annual installments beginning on October 18, 2022. The loan carries an interest rate of 4% for the first four years and 8% thereafter. Outstanding principal borrowings under the agreement totaled $8,129 (or €7,300) at March 31, 2022, and $8,568 (or €7,300) at March 31, 2021.

Amounts for loan receivables as noted above are recorded in the "Other assets" line of our Consolidated balance sheets. Interest income is not material.

3. GOODWILL AND INTANGIBLE ASSETS

Changes to the carrying amount of goodwill for the years ended March 31, 2022 and 2021 were as follows:

						Healthcare Segment						Applied Sterilization Technologies Segment						Life Sciences Segment						Dental						Total
Balance at March 31, 2020						827,266						1,380,262						148,557						—						2,356,085
Goodwill acquired or allocated						536,713						33,770						—						—						570,483
Foreign currency translation adjustments and other						20,784						78,207						490						—						99,481
Balance at March 31, 2021						$	1,384,763					$	1,492,239					$	149,047					$	—					$	3,026,049
Cantel goodwill acquired (1)						1,019,332						—						30,356						472,693						1,522,381
Measurement period adjustments to acquired goodwill						(6,533)						(9,286)						—						—						(15,819)
Divestitures						(7,000)						—						—						—						(7,000)
Foreign currency translation adjustments and other						(63,732)						(50,095)						(115)						(7,326)						(121,268)
Balance at March 31, 2022						$	2,326,830					$	1,432,858					$	179,288					$	465,367					$	4,404,343

(1) Amounts are still preliminary, as Cantel acquisition valuations have not been finalized.

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

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

We evaluate the recoverability of recorded goodwill amounts annually during the third fiscal quarter, or when evidence of potential impairment exists. As a result of our annual impairment review of goodwill for fiscal years 2022, 2021 and 2020, no indicators of impairment were identified.

Information regarding our intangible assets is as follows:

						2022												2021
March 31,						Gross Carrying Amount (1)						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Customer relationships						$	3,117,314					$	539,845					$	968,040					$	291,802
Non-compete agreements						23,571						12,392						5,401						4,169
Patents and technology						518,714						211,822						318,424						171,952
Trademarks and tradenames						470,919						74,455						78,058						42,867
Supplier relationships						54,800						18,267						54,800						15,527
Total						$	4,185,318					$	856,781					$	1,424,723					$	526,317

(1) The increase in fiscal 2022 was primarily due to the Cantel acquisition. See Note 2, titled "Business Acquisitions and Divestitures", for additional information.

Certain trademarks and tradenames obtained as a result of business combinations are indefinite-lived assets. The approximate carrying value of these assets at March 31, 2022 and March 31, 2021 was $14,250. We evaluate our indefinite-lived intangible assets annually during the third quarter, or when evidence of potential impairment exists. No impairment was recognized for fiscal years 2022, 2021 or 2020.

Total amortization expense for intangible assets was $368,698, $86,512, and $74,528 for the years ended March 31, 2022, 2021, and 2020, respectively. Based upon the current amount of intangible assets subject to amortization, the amortization expense for each of the five succeeding fiscal years is estimated to be as follows:

						2023						2024						2025						2026						2027
Estimated amortization expense						$	384,258					$	370,549					$	364,488					$	355,475					$	349,116

The estimated annual amortization expense presented in the preceding table has been calculated based upon March 31, 2022 currency exchange rates.

4. INVENTORIES, NET

Components of our inventories are presented in the following table.

March 31,						2022						2021
Raw materials						$	195,035					$	103,939
Work in process						76,021						54,283
Finished goods						334,880						176,623
Reserve for excess and obsolete inventory						(30,937)						(19,778)
Inventories, net						$	574,999					$	315,067

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

5. PROPERTY, PLANT AND EQUIPMENT

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

March 31,						2022						2021
Land and land improvements (1)						$	84,015					$	69,477
Buildings and leasehold improvements						654,851						567,132
Machinery and equipment						903,649						779,044
Information systems						222,620						193,222
Radioisotope						597,641						565,681
Construction in progress (1)						356,013						211,381
Total property, plant, and equipment						2,818,789						2,385,937
Less: accumulated depreciation and depletion						(1,266,213)						(1,150,537)
Property, plant, and equipment, net						$	1,552,576					$	1,235,400

(1) Land is not depreciated. Construction in progress is not depreciated until placed in service.

Depreciation and depletion expense were $184,406, $132,725 and $122,707, for the years ended March 31, 2022, 2021, and 2020, respectively.

Asset Retirement Obligations

We provide contract sterilization services including Gamma irradiation which utilizes cobalt-60 in the form of cobalt pencils. We have incurred asset retirement obligations (ARO) associated with the future disposal of these assets once depleted. Recognition of ARO includes: the present value of a liability and offsetting asset, the subsequent accretion of that liability and depletion of the asset, and the periodic review of the ARO liability estimates and discount rates used in the analysis.

The following table summarizes the activity in the liability for asset retirement obligations.

			Asset Retirement Obligations
Balance at March 31, 2020			$	12,514
Liabilities incurred during the period			859
Liabilities settled during the period			(251)
Accretion expense and change in estimate			137
Foreign currency and other			71
Balance at March 31, 2021			$	13,330
Liabilities incurred during the period			86
Liabilities settled during the period			(3)
Accretion expense and change in estimate			146
Foreign currency and other			(16)
Balance at March 31, 2022			$	13,543

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

6. DEBT

Indebtedness as of March 31, 2022 and 2021 was as follows:

						March 31, 2022						March 31, 2021
Short-term debt
Term loan, current portion						$	27,500					$	—
Delayed draw term loan, current portion						24,375						—
Private Placement Senior Notes						91,000						—
Total short-term debt						$	142,875					$	—
Long-term debt
Private Placement Senior Notes						$	758,726					$	860,308
Revolving Credit Facility						58,908						247,423
Deferred financing costs						(25,278)						(7,191)
Term loan						177,500						550,000
Delayed draw term loan						625,625						—
Senior Public Notes						1,350,000						—
Total long-term debt						$	2,945,481					$	1,650,540
Total debt						$	3,088,356					$	1,650,540

On March 19, 2021, STERIS plc ("the Company"), STERIS Corporation, STERIS Limited (“Limited”), and STERIS Irish FinCo Unlimited Company ("FinCo", "STERIS Irish FinCo"), each as a borrower and guarantor, entered into a credit agreement with various financial institutions as lenders, and JPMorgan Chase Bank, N.A., as administrative agent (the “Revolving Credit Agreement”) providing for a $1,250,000 revolving credit facility (the “Revolver”), which replaced a prior revolving credit agreement.

The Revolver provides for revolving credit borrowings, swing line borrowings and letters of credit, with sublimits for swing line borrowings and letters of credit. The Revolver may be increased in specified circumstances by up to $625,000 in the discretion of the lenders. The Revolver matures on the date that is five years after March 19, 2021, and all unpaid borrowings, together with accrued and unpaid interest thereon, are repayable on that date. The Revolver bears interest from time to time, at either the Base Rate , Eurocurrency Rate, or the Adjusted Daily Simple RFR, as defined in and calculated under and as in effect from time to time under the Revolving Credit Agreement, plus the Applicable Margin, as defined in the Revolving Credit Agreement. The Applicable Margin is determined based on the Debt Rating of STERIS, as defined in the Credit Agreement. Interest on Base Rate Advances is payable quarterly in arrears, and interest on Eurocurrency Rate Advances is payable at the end of the relevant interest period therefor, but in no event less frequently than every three months, and interest on RFR Advances is payable monthly after the date of borrowing. Swingline borrowings bear interest at a rate to be agreed by the applicable swingline lender and the applicable borrower, subject to a cap in the case of swingline borrowings denominated in U.S. Dollars equal to the Base Rate plus the Applicable Margin for Base Rate Advances plus the Facility Fee. Advances may be extended in U.S. Dollars or in specified alternative currencies. In connection with the cessation of British Pound Sterling LIBOR and Swiss Franc LIBOR as of December 31, 2021, JPMorgan Chase Bank, N.A. as administrative agent, pursuant to authority contained in the Revolver, amended the Revolver on January 1, 2022 to make Benchmark Replacement Conforming Changes (as defined in the Revolver). The amendment concerns technical, administrative or operational changes related to borrowings in British Pounds Sterling and Swiss Francs.

As of March 31, 2022 a total of $58,908 of Credit Agreement and Swing Line Facility borrowings were outstanding under the Credit Agreement, based on currency exchange rates as of March 31, 2022.

On March 19, 2021, the Company, STERIS Corporation, Limited, and FinCo, each as a borrower and guarantor, entered into a term loan agreement with various financial institutions as lenders, and JPMorgan Chase Bank, N.A., as Administrative agent (the “Term Loan Agreement”) providing for a $550,000 term loan facility (the “Term Loan”), which replaced an existing term loan agreement, dated as of November 18, 2020 (the “Existing Term Loan Agreement”). The proceeds of the Term Loan were used to refinance the Existing Term Loan Agreement.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

The Term Loan matures on the date that is five years after March 19, 2021 (the “Term Loan Closing Date”). No principal payments are due on the Term Loan for the period beginning from the first full fiscal quarter ended after the Term Loan Closing Date to and including the fourth full fiscal quarter ended after the Term Loan Closing Date. For the period beginning from the fifth full fiscal quarter ended after the Term Loan Closing Date to and including the twelfth full fiscal quarter ended after the Term Loan Closing Date, quarterly principal payments, each in the amount of 1.25% of the original principal amount of the Term Loan, are due on the last business day of each fiscal quarter. For the period beginning from the thirteenth full fiscal quarter ended after the Term Loan Closing Date through the maturity of the loan, quarterly principal payments, each in the amount of 1.875% of the original principal amount of the Term Loan, are due on the last business day of each fiscal quarter. The remaining unpaid principal is due and payable on the maturity date.

The Term Loan bears interest from time to time, at either the Base Rate or the Eurocurrency Rate, as defined in and calculated under and as in effect from time to time under the Term Loan Agreement, plus the Applicable Margin, as defined in the Term Loan Agreement. The Applicable Margin is determined based on the Debt Rating of STERIS, as defined in the Term Loan Agreement. Base Rate Advances are payable quarterly in arrears and Eurocurrency Rate Advances are payable at the end of the relevant interest period therefor, but in no event less frequently than every three months.

Also on March 19, 2021, the Company, STERIS Corporation, Limited, and FinCo, each as a borrower and guarantor, entered into a delayed draw term loan agreement with various financial institutions as lenders, and JPMorgan Chase Bank, N.A., as administrative agent (the “Delayed Draw Term Loan Agreement”) providing for a delayed draw term loan facility of up to $750,000 (the “Delayed Draw Term Loan”) in connection with STERIS’s acquisition of Cantel. During the first quarter of fiscal 2022, we borrowed $650,000 under our Delayed Draw Term Loan Agreement. The Delayed Draw Term Loan was funded by the lenders upon consummation of the Cantel acquisition (the “Acquisition Closing Date”). The proceeds of the Delayed Draw Term Loan were used, together with the proceeds from other new indebtedness, to fund the cash consideration for the acquisition, as well as for various other items.

The Delayed Draw Term Loan matures on the date that is five years after the Acquisition Closing Date. No principal payments are due on the Delayed Draw Term Loan for the period beginning from the first full fiscal quarter ended after the Acquisition Closing Date to and including the fourth full fiscal quarter ended after the Acquisition Closing Date. For the period beginning from the fifth full fiscal quarter ended after the Acquisition Closing Date to and including the twelfth full fiscal quarter ended after the Acquisition Closing Date, quarterly principal payments, each in the amount of 1.25% of the original principal amount of the Delayed Draw Term Loan, are due on the last business day of each fiscal quarter. For the period beginning from the thirteenth full fiscal quarter ended after the Acquisition Closing Date through the maturity of the loan, quarterly principal payments, each in the amount of 1.875% of the original principal amount of the Delayed Draw Term Loan, are due on the last business day of each fiscal quarter. The remaining unpaid principal is due and payable on the maturity date.

The Delayed Draw Term Loan bears interest from time to time, at either the Base Rate or the Eurocurrency Rate, as defined in and calculated under and as in effect from time to time under the Delayed Draw Term Loan Agreement, plus the Applicable Margin, as defined in the Delayed Draw Term Loan Agreement. The Applicable Margin is determined based on the Debt Rating of STERIS, as defined in the Delayed Draw Term Loan Agreement. Interest on borrowings made at the Base Rate (“Base Rate Advances”) is payable quarterly in arrears and interest on borrowings made at the Eurocurrency Rate (“Eurocurrency Rate Advances”) is payable at the end of the relevant interest period therefor, but in no event less frequently than every three months. There is no premium or penalty for prepayment of Base Rate Advances, but prepayments of Eurocurrency Rate Advances are subject to a breakage fee.

Senior Public Notes

On April 1, 2021, STERIS Irish FinCo Unlimited Company ("FinCo," "STERIS Irish FinCo," the "Issuer") completed an offering of $1,350,000 in aggregate principal amount, of its senior notes in two separate tranches: (i) $675,000 aggregate principal amount of the Issuer’s 2.70% Senior Notes due 2031 (the “2031 Notes”) and (ii) $675,000 aggregate principal amount of the Issuer’s 3.750% Senior Notes due 2051 (the “2051 Notes” and, together with the 2031 Notes, the “Senior Public Notes”). The Senior Public Notes were issued pursuant to an Indenture, dated as of April 1, 2021 (the “Base Indenture”), among FinCo, and STERIS plc, STERIS Corporation and STERIS Limited (the “Guarantors”) and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated as of April 1, 2021, among FinCo, the Guarantors and the Trustee (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”). Each of the Guarantors guaranteed the Senior Public Notes jointly and severally on a senior unsecured basis (the “Guarantees”). The 2031 Notes will mature on March 15, 2031 and the 2051 Notes will mature on March 15, 2051. The Senior Public Notes will bear interest at the rates set forth above. Interest on the Senior Public Notes is payable on March 15 and September 15 of each year, beginning on September 15, 2021, until their respective maturities.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Cantel's Convertible Debt

On May 15, 2020, Cantel issued $168,000 aggregate principal amount of 3.25% convertible senior notes due 2025 (the “Notes”) in a private placement. The initial conversion price was $41.51 per share of Cantel common stock (based on an initial conversion rate of 24.0912 shares of Cantel common stock per one thousand dollars in principal amount of Notes) and was, along with the conversion rate, subject to adjustment if certain events occurred.

On June, 3, 2021, Cantel (a) delivered a notice to holders of its Notes pursuant to the indenture governing the Notes (as supplemented, the "Cantel Indenture”), notifying holders that, as a result of each of (i) the consummation of the series of mergers (the “Mergers”) contemplated by the Agreement and Plan of Merger, dated as of January 12, 2021 (as amended by Amendment to Agreement and Plan of Merger, dated as of March 1, 2021), among Cantel, STERIS plc (“Parent”), Solar New US Holding Co, LLC (now known as Solar New US Holding Corporation) (“US Holdco”), an indirect and wholly owned subsidiary of Parent, and Crystal Merger Sub 1, LLC, a direct and wholly owned subsidiary of US Holdco, and (ii) the delisting of Cantel common stock from the New York Stock Exchange (the “NYSE”), a “Fundamental Change” and a “Make-Whole Fundamental Change,” each as defined in the Cantel Indenture, had occurred effective as of June 2, 2021 and (b) commenced an offer to purchase any and all outstanding Notes as a result of the Fundamental Change.

A tender offer statement on Schedule TO (“Schedule TO”) was filed by Cantel with the U.S. Securities and Exchange Commission ("SEC") with respect to the right of each holder (each, a “Holder”) of the Notes to require Cantel to repurchase, at the Holder’s option, 100% of the principal amount of the Notes, plus accrued and unpaid interest thereon to, but excluding the settlement date of July 6, 2021 (as such date was amended by Amendment No. 1 to Schedule TO (“Amendment No. 1”), dated June 29, 2021).

The offer to purchase the Notes expired at 11:59 p.m. New York City time, on July 1, 2021 (the “Expiration Time,” as such date was amended by Amendment No. 1), and was not extended. Wells Fargo Bank, National Association, as paying agent and trustee under the Indenture (the “Cantel Trustee”), informed Cantel that as of the Expiration Time, none of the Notes had been validly tendered (and not properly withdrawn) for purchase.

Pursuant to the terms of the Cantel Indenture, in connection with the consummation of the Mergers, Cantel, Parent and the Cantel Trustee entered into a supplemental indenture providing that, following the Mergers, each holder’s right to convert each one thousand dollar principal amount of Notes into shares of Cantel common stock was changed into a right to convert such principal amount of Notes into the kind and amount of cash, stock, other securities, other property or assets, subject to settlement method election provisions of the Indenture, that a holder of Cantel common stock was entitled to receive upon consummation of the Mergers. At the consummation of the Mergers, holders of Cantel common stock received $16.93 in cash and 0.33787 ordinary shares, par value $0.001 per share, of the Parent (“Parent Shares”) for each share of Cantel common stock (each a “unit of Reference Property”).

Because each of the consummation of the Mergers and the delisting of Cantel common stock from the NYSE constituted a “Make-Whole Fundamental Change” under the Cantel Indenture, any Notes surrendered for conversion from and including June 2, 2021 until July 2, 2021 (the “Make-Whole Conversion Period”) were subject to conversion at the conversion rate of 25.0843 units of Reference Property (the “Make-Whole Conversion Rate”), which corresponded to 8.4752 Parent Shares and approximately $424.68 in cash per one thousand dollars in principal amount of Cantel Notes. The Make-Whole Conversion Rate was based on an increase in the Conversion Rate by 0.9931 Additional Shares (as defined in the Indenture) based on a Make-Whole Effective Date of June 2, 2021 and a Stock Price (each as defined in the Indenture) of $81.3520. Cantel settled all conversions of Notes in connection with the Make-Whole Fundamental Changes that constituted the Mergers and delisting of Cantel common stock from the NYSE pursuant to the Cash Settlement provisions of the Cantel Indenture.

The Cantel Trustee, acting as conversion agent, informed Cantel that holders of 100% of the outstanding Notes elected to convert their Notes during the Make-Whole Conversion Period.

The fair value of the Notes exceeded their aggregate par value of $168,000 at the date of consummation of the Mergers. The fair value was estimated utilizing the closing price of Parent Shares on June 2, 2021. A premium of approximately $175,555 in excess of the aggregate par value of the Notes represented purchase consideration and was initially classified in additional paid-in capital in accordance with ASC 2020-06, "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)."

Because all Holders elected to convert during the Make-Whole Conversion Period, the aggregate par value outstanding was reclassified to current liabilities in the balance sheet. The premium initially recorded as additional paid in capital at the effective time of the Mergers was reclassified to "Convertible debt, premium liability," also classified as a current liability, and was settled in cash.

The final total Cash Settlement value of the Notes was approximately $371,361, comprised of the aggregate par value of $168,000 and the fair value of the liability representing the premium over par of approximately $203,361.

The liability representing the premium over par value increased between the effective date of the Mergers and settlement because of the movement in trading prices of Parent Shares during the Observation Periods. The fluctuation in fair value during such Observation Periods is reported in the statement of income as a component of “Non-operating expense, net.”

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Our outstanding Private Placement Senior Notes at March 31, 2022 and 2021 were as follows:

						Applicable Note Purchase Agreement						Maturity Date						U.S. Dollar Value at March 31, 2022						U.S. Dollar Value at March 31, 2021
$91,000 Senior notes at 3.20%						2012 Private Placement						December 2022						91,000						91,000
$80,000 Senior notes at 3.35%						2012 Private Placement						December 2024						80,000						80,000
$25,000 Senior notes at 3.55%						2012 Private Placement						December 2027						25,000						25,000
$125,000 Senior notes at 3.45%						2015 Private Placement						May 2025						125,000						125,000
$125,000 Senior notes at 3.55%						2015 Private Placement						May 2027						125,000						125,000
$100,000 Senior notes at 3.70%						2015 Private Placement						May 2030						100,000						100,000
$50,000 Senior notes at 3.93%						2017 Private Placement						February 2027						50,000						50,000
€60,000 Senior notes at 1.86%						2017 Private Placement						February 2027						66,815						70,426
$45,000 Senior notes at 4.03%						2017 Private Placement						February 2029						45,000						45,000
€20,000 Senior notes at 2.04%						2017 Private Placement						February 2029						22,271						23,475
£45,000 Senior notes at 3.04%						2017 Private Placement						February 2029						59,089						61,863
€19,000 Senior notes at 2.30%						2017 Private Placement						February 2032						21,158						22,302
£30,000 Senior notes at 3.17%						2017 Private Placement						February 2032						39,393						41,242
Total Senior Notes																		$	849,726					$	860,308

On February 27, 2017, Limited issued and sold an aggregate principal amount of $95,000, €99,000, and £75,000, of senior notes in a private placement to certain institutional investors in an offering that was exempt from the registration requirements of the Securities Act of 1933. These notes have maturities of between 10 years and 15 years from the issue date. The agreement governing these notes contains leverage and interest coverage covenants.

On May 15, 2015, STERIS Corporation issued and sold $350,000 of senior notes, in a private placement to certain institutional investors in an offering that was exempt from the registration requirements of the Securities Act of 1933. These notes have maturities of 10 years to 15 years from the issue date. The agreement governing these notes contains leverage and interest coverage covenants.

In December 2012, and in February 2013 STERIS Corporation issued and sold $200,000 of senior notes, in a private placement to certain institutional investors in offerings that were exempt from the registration requirements of the Securities Act of 1933. The agreement governing the notes contains leverage and interest coverage covenants.

The private placement note purchase agreements specify increases to the coupon interest rates while the ratio of Consolidated Total Debt to Consolidated EBITDA, as defined in the note purchase agreements, exceeds certain thresholds. Beginning September 1, 2021 and through March 31, 2022 the coupon rates on the 2012 private placement notes were increased by 0.50%.

On March 19, 2021, STERIS Corporation as issuer, and the Company, Limited and FinCo, as guarantors, entered into (1) a First Amendment to Amended and Restated Note Purchase Agreement dated March 5, 2019 (which had amended and restated certain note purchase agreements originally dated December 4, 2012) per the 2012 and 2013 senior notes (the “2012 Amendment”), and (2) a First Amendment to Amended and Restated Note Purchase Agreement dated March 5, 2019 (which had amended and restated certain note purchase agreements originally dated March 31, 2015) for the 2015 senior notes (the “2015 Amendment”). Also on March 19, 2021, Limited, as Issuer, and the Company, STERIS Corporation and FinCo, as guarantors, entered into a First Amendment to Amended and Restated Note Purchase Agreement dated March 5, 2019 (which had amended and restated a certain note purchase agreement originally dated January 23, 2017) for the 2017 senior notes (together with the 2012 Amendment and the 2015 Amendment, the “NPA Amendments”). The NPA Amendments provided, among other things, for the waiver of certain repurchase rights of the note holders and increased the size of certain baskets to more closely align with other current credit agreement baskets.

At March 31, 2022, we were in compliance with all financial covenants associated with our indebtedness.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

The combined annual aggregate amount of maturities of our outstanding debt by fiscal year is as follows:

2023			$	142,875
2024			60,000
2025			165,937
2026			341,408
2027 and thereafter			2,403,414
Total			$	3,113,634

7. ADDITIONAL CONSOLIDATED BALANCE SHEET INFORMATION

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

March 31,						2022						2021
Accrued payroll and other related liabilities:
Compensation and related items						$	71,878					$	47,157
Accrued vacation/paid time off						13,669						12,389
Accrued bonuses						64,702						62,530
Accrued employee commissions						30,171						24,022
Other post-retirement benefits obligations-current portion						1,190						1,326
Other employee benefit plans' obligations-current portion						2,111						2,654
Total accrued payroll and other related liabilities						$	183,721					$	150,078
Accrued expenses and other:
Deferred revenues						$	110,791					$	62,492
Service liabilities						51,365						46,720
Self-insured and related risk reserves-current portion						8,995						8,095
Accrued dealer commissions						31,700						27,348
Accrued warranty						14,108						9,406
Asset retirement obligation-current portion						1,181						1,193
Other						88,404						65,303
Total accrued expenses and other						$	306,544					$	220,557
Other liabilities:
Self-insured risk reserves-long-term portion						$	19,213					$	17,295
Other post-retirement benefits obligations-long-term portion						7,335						8,690
Defined benefit pension plans obligations-long-term portion						1,772						3,748
Other employee benefit plans obligations-long-term portion						1,360						2,353
Accrued long-term income taxes						12,225						13,241
Asset retirement obligation-long-term portion						12,362						12,137
Other						21,312						30,546
Total other liabilities						$	75,579					$	88,010

8. INCOME TAXES

We consider the tax expense recorded for the Tax Cuts and Jobs Act ("TCJA") to be complete at this time. However, it is possible that additional legislation, regulations, interpretations and/or guidance may be issued in the future that may result in additional adjustments to the tax expense recorded related to the TCJA. We will continue to monitor and assess the impact of any new developments.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Income from continuing operations before income taxes was as follows:

Years Ended March 31,						2022						2021						2020
United States operations						$	79,662					$	326,991					$	325,595
Ireland operations						88,078						73,442						29,543
Other locations operations						146,763						117,100						143,616
						$	314,503					$	517,533					$	498,754

The components of the provision for income taxes related to income from continuing operations consisted of the following:

Years Ended March 31,						2022						2021						2020
Current:
United States federal						$	88,158					$	57,550					$	42,032
United States state and local						21,438						16,272						9,971
Ireland						12,002						9,244						5,036
Other locations						53,354						36,699						24,600
						174,952						119,765						81,639
Deferred:
United States federal						(73,833)						7,523						10,089
United States state and local						(17,124)						(550)						2,366
Ireland						(739)						(787)						(899)
Other locations						(11,623)						(5,288)						(2,300)
						(103,319)						898						9,256
Total Provision for Income Taxes						$	71,633					$	120,663					$	90,895

The total provision for income taxes can be reconciled to the tax computed at the Ireland statutory tax rate as follows:

Years Ended March 31,						2022						2021						2020
National statutory tax rate						12.5		%				12.5		%				12.5		%
Increase (decrease) in accruals for uncertain tax positions						0.2		%				(0.1)		%				(0.3)		%
U.S. state and local taxes, net of federal income tax benefit						1.4		%				2.4		%				2.0		%
Increase in valuation allowances						0.9		%				0.3		%				0.5		%
U.S. research and development credit						(0.8)		%				(0.5)		%				(0.5)		%
U.S. foreign income tax credit						(1.1)		%				(0.3)		%				(0.6)		%
Difference in non-Ireland tax rates						12.6		%				8.3		%				6.9		%
U.S. federal audit adjustments						—		%				2.1		%				—		%
Excess tax benefit for equity compensation						(5.1)		%				(1.9)		%				(2.8)		%
Tax rate changes on deferred tax assets and liabilities						2.3		%				0.4		%				0.1		%
U.S. tax reform impact, GILTI and FDII						(0.9)		%				(0.6)		%				0.1		%
Capitalized acquisition, redomiciliation costs						1.8		%				0.6		%				0.1		%
All other, net						(1.0)		%				0.1		%				0.2		%
Total Provision for Income Taxes						22.8		%				23.3		%				18.2		%

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Unrecognized Tax Benefits. We classify uncertain tax positions and related interest and penalties as long-term liabilities within “Other liabilities” in our accompanying Consolidated Balance Sheets, unless they are expected to be paid within 12 months, in which case, the uncertain tax positions would be classified as current liabilities within “Accrued income taxes.” We recognize interest and penalties related to unrecognized tax benefits within “Income tax expense” in our accompanying Consolidated Statements of Income.

A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows:

						2022						2021
Unrecognized Tax Benefits Balance at April 1						$	2,295					$	875
Increases for tax provisions of current year						—						655
Decreases for tax provisions of prior year						(135)						(896)
Balances related to acquired/disposed businesses						746						1,640
Other, including currency translation						—						21
Unrecognized Tax Benefits Balance at March 31						$	2,906					$	2,295

We recognized interest and penalties related to uncertain tax positions in the provision for income taxes. As of March 31, 2022 and 2021, we had $152 and $106 accrued for interest and penalties, respectively. If all unrecognized tax benefits were recognized, the net impact on the provision for income tax expense would be $3,058. The increase in unrecognized tax benefits from prior year is due to the additions of new positions. It is reasonably possible that during the next 12 months, there will be no material reductions in unrecognized tax benefits as a result of the expiration of various statutes of limitations or other matters.

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 2016. 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. Internal Revenue Service (the “IRS”) regarding proposed audit adjustments related to deductibility of interest paid on intercompany debt for fiscal years 2016 through 2017. 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 $7,300 has been paid through March 31, 2022.

In May 2021, we received two notices of proposed tax adjustment from the IRS regarding deemed dividend inclusions and associated withholding tax. The notices relate to the fiscal and calendar year 2018. 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 have not established reserves related to these notices. An unfavorable outcome is not expected to have a material adverse impact on our consolidated financial position but could be material to our consolidated results of operations and cash flows for any one period.

We estimate that the tax benefit from our Costa Rican Tax Holiday is $2,600 (or $0.03 per fully diluted share), annually. The Tax Holiday runs fully exempt, from income tax, through 2025 and partially exempt through 2029.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Deferred Taxes. The significant components of the deferred tax assets and liabilities recorded in our accompanying balance sheets at March 31, 2022 and 2021 were as follows:

March 31,						2022						2021
Deferred Tax Assets:
Post-retirement benefit accrual						$	2,086					$	2,422
Compensation						14,340						13,208
Net operating loss carryforwards						25,550						15,151
Accrued expenses						12,092						6,360
Insurance						2,561						3,348
Deferred income						20,688						10,281
Bad debt						2,187						1,661
Pension						—						1,574
Operating leases (1)						44,401						34,020
Foreign tax credit carryforwards						36,036						—
Other						8,579						8,603
Deferred Tax Assets						168,520						96,628
Less: Valuation allowance						24,691						14,143
Total Deferred Tax Assets						143,829						82,485
Deferred Tax Liabilities:
Depreciation and depletion						110,951						73,344
Operating leases (1)						43,593						33,401
Intangibles						755,980						199,242
Pension						2,004						—
Other						3,473						3,833
Total Deferred Tax Liabilities						916,001						309,820
Net Deferred Tax Assets (Liabilities)						$	(772,172)					$	(227,335)

(1) For more information regarding our operating leases, see Note 10 titled, "Commitments and Contingencies."

At March 31, 2022, we had U.S. federal operating loss carryforwards of $9,694, which remain subject to a 20 year carryforward period. Additionally, we had non-U.S. operating loss carry forwards of $71,171. Although the majority of the non-U.S. carryforwards have indefinite expiration periods, those carryforwards that have definite expiration periods will expire if unused between fiscal years 2023 and 2043. In addition, we have recorded pre-valuation allowance tax benefits of $4,199 related to state operating loss carryforwards. If unused, these state operating loss carryforwards will expire between fiscal years 2023 and 2043. At March 31, 2022, we had $37,501 of pre-valuation allowance tax credit carryforwards of which $28,749 relates to offsets of deferred tax liabilities related to German branches of a U.S. subsidiary. These credit carryforwards can be used through fiscal 2032.

We review the need for a valuation allowance against our deferred tax assets. A valuation allowance of $24,691 has been applied to a portion of the net deferred tax assets because we do not believe it is more-likely-than-not that we will receive future benefit. The valuation allowance increased during fiscal 2022 by $10,548.

Other than the tax expense previously recorded for the one-time transition tax on unremitted earnings of non-US subsidiaries, no additional provision has been made for income taxes on undistributed earnings of foreign subsidiaries as the Company’s position is that these amounts continue to be indefinitely reinvested. The amount of undistributed earnings of subsidiaries was approximately $2,000,000 at March 31, 2022. It is not practicable to estimate the additional income taxes and applicable withholding taxes that would be payable on the remittance of such undistributed earnings.

In October 2015, the Organization for Economic Cooperation and Development (OECD), in conjunction with the G20, finalized broad-based international tax policy guidelines that involve transfer pricing and other international tax subjects. While

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

some member jurisdictions automatically adopt the new OECD guidelines, most member countries can adopt the guidelines only by new law or regulations. We are currently adopting processes to comply with the reporting requirements specified by the guidelines and are evaluating the other parts of the guidelines.

9. BENEFIT PLANS

In the United States, we sponsor an unfunded post-retirement welfare benefits plan for two groups of United States retirees. Benefits under this plan include retiree life insurance and retiree medical insurance, including prescription drug coverage.

During the second quarter of fiscal 2009, we amended our United States post-retirement welfare benefits plan, reducing the benefits to be provided to retirees under the plan and increasing their share of the costs. The amendments resulted in a decrease of $46,001 in the accumulated post-retirement benefit obligation. The impact of this change was recognized in our Consolidated Balance Sheets in fiscal 2009 and is being amortized as a component of the annual net periodic benefit cost over a period of approximately thirteen years.

We sponsor several defined benefit pension schemes outside the United States: two in the UK, one in the Netherlands, two in Germany, and one in Switzerland. The Synergy Health plc Retirement Benefit Scheme is a defined benefit (final salary) funded pension scheme. In previous years, Synergy sponsored a funded defined benefit arrangement in the Netherlands. This was a separate fund holding the pension scheme assets to meet long-term pension liabilities for past and present employees. Accrual of benefits ceased under the scheme effective January 1, 2013. The Synergy Radeberg and Synergy Allershausen Schemes are unfunded defined pension schemes and are closed to new entrants. The Synergy Daniken Scheme is a defined benefit funded pension scheme. As a result of our fiscal 2018 acquisition of Harwell Dosimeters Ltd, we also sponsor in the Harwell Dosimeters Ltd Retirement Benefits Scheme which is a defined benefit funded pension scheme.

We recognize the funded status of our defined benefit pension and post-retirement benefit plans in our Consolidated Balance Sheets, with a corresponding adjustment to accumulated other comprehensive income, net of tax. The funded status is measured as of March 31 each year and is calculated as the difference between the fair value of plan assets and the benefit obligation (which is the projected benefit obligation for pension plans and the accumulated post-retirement benefit obligation for post-retirement benefit plans). Accumulated comprehensive income (loss) represents the net unrecognized actuarial losses and unrecognized prior service cost. These amounts will be recognized in net periodic benefit cost as they are amortized. We will recognize future changes to the funded status of these plans in the year the change occurs, through other comprehensive income.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Obligations and Funded Status. The following table reconciles the funded status of the defined benefit pension plans and the other post-retirement benefits plan to the amounts recorded on our Consolidated Balance Sheets at March 31, 2022 and 2021, respectively. Benefit obligation balances presented in the following table reflect the projected benefit obligations for our defined benefit pension plans and the accumulated other post-retirement benefit obligation for our post-retirement benefits plan. The measurement date of our defined benefit pension plans and other post-retirement benefits plan is March 31, for both periods presented.

			Defined Benefit Pension Plans												Other Post-Retirement Benefits Plan
			2022						2021						2022						2021
Change in Benefit Obligations:
Benefit Obligations at Beginning of Year			$	149,200					$	123,190					$	10,016					$	11,368
Service cost			1,616						1,357						—						—
Interest cost			2,820						2,816						232						317
Actuarial loss (gain)			(12,177)						12,622						(640)						(114)
Benefits and expenses			(5,375)						(4,714)						(1,083)						(1,555)
Employee contributions			897						1,031						—						—
Curtailments/settlements			(1,334)						—						—						—
Impact of foreign currency exchange rate changes			(5,875)						12,898						—						—
Benefit Obligations at End of Year			129,772						149,200						8,525						10,016
Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Year			145,452						112,203						—						—
Actual return on plan assets			3,421						19,252						—						—
Employer contributions			5,533						5,329						1,083						1,555
Employee contributions			897						1,031						—						—
Benefits and expenses paid			(5,325)						(4,714)						(1,083)						(1,555)
Curtailments/settlements			(1,334)						—						—						—
Impact of foreign currency exchange rate changes			(6,472)						12,351						—						—
Fair Value of Plan Assets at End of Year			142,172						145,452						—						—
Funded Status of the Plans			$	12,400					$	(3,748)					$	(8,525)					$	(10,016)

Amounts recognized in the consolidated balance sheets consist of the following:

						Defined Benefit Pension Plans												Other Post-Retirement Benefits Plan
						2022						2021						2022						2021
Non-current assets						$	14,172					$	—					$	—					$	—
Current liabilities						—						—						(1,190)						(1,326)
Non-current liabilities						(1,772)						(3,748)						(7,335)						(8,690)
Net assets (liabilities)						$	12,400					$	(3,748)					$	(8,525)					$	(10,016)

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

The pre-tax amount of unrecognized actuarial net loss and unamortized prior service cost included in accumulated other comprehensive (loss) at March 31, 2022, was approximately $(2,914) and $(6,767), respectively.

Defined benefit plans with an accumulated benefit obligation and projected benefit obligation exceeding the fair value of plan assets had the following plan assets and obligations at March 31, 2022 and 2021:

												Defined Benefit Pension Plans
																		2022						2021
Aggregate fair value of plan assets																		$	142,172					$	145,452
Aggregate accumulated benefit obligations																		129,772						149,200
Aggregate projected benefit obligations																		129,772						149,200

Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income. Components of the annual net periodic benefit cost of our defined benefit pension plans and our other post-retirement benefits plan were as follows:

						Defined Benefit Pension Plans																		Other Post-Retirement Benefits Plan
						2022						2021						2020						2022						2021						2020
Service cost						$	1,616					$	1,357					$	1,380					$	—					$	—					$	—
Interest cost						2,699						2,628						2,876						232						317						409
Expected return on plan assets						(4,412)						(3,463)						(4,735)						—						—						—
Prior service cost recognition						61						71						69						(267)						(3,263)						(3,263)
Net amortization and deferral						18						21						9						444						439						482
Curtailments/settlements						(31)						—						—
Net periodic benefit (credit) cost						$	(49)					$	614					$	(401)					$	409					$	(2,507)					$	(2,372)
Recognized in other comprehensive loss (income) before tax:
Net loss (gain) occurring during year						$	(11,028)					$	(1,635)					$	890					$	640					$	114					$	(181)
Amortization of prior service credit						(222)						(85)						(78)						267						3,263						3,263
Amortization of net loss						—						7						—						(444)						(439)						(482)
Total recognized in other comprehensive loss (income)						(11,250)						(1,713)						812						463						2,938						2,600
Total recognized in total benefits cost and other comprehensive loss (income)						$	(11,299)					$	(1,099)					$	411					$	872					$	431					$	228

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Assumptions Used in Calculating Benefit Obligations and Net Periodic Benefit Cost. The following table presents significant assumptions used to determine the projected benefit obligations at March 31:

						2022						2021
Discount Rate:
Synergy Health plc Retirement Benefits Scheme						2.80		%				2.10		%
Isotron BV Pension Plan						1.80		%				0.90		%
Synergy Health Daniken AG						0.90		%				0.35		%
Synergy Health Radeberg						1.60		%				1.60		%
Synergy Health Allershausen						1.50		%				0.80		%
Harwell Dosimeters Ltd Retirement Benefits Scheme						2.85		%				2.15		%
Other post-retirement plan						3.25		%				2.50		%

The following table presents significant assumptions used to determine the net periodic benefit costs for the years ended March 31:

						2022						2021						2020
Discount Rate:
Synergy Health plc Retirement Benefits Scheme						2.10		%				2.40		%				2.50		%
Isotron BV Pension Plan						0.90		%				1.60		%				1.20		%
Synergy Health Daniken AG						1.00		%				0.70		%				0.20		%
Synergy Health Radeberg						1.50		%				1.50		%				1.60		%
Synergy Health Allershausen						2.00		%				1.75		%				1.75		%
Harwell Dosimeters Ltd Retirement Benefits Scheme						2.85		%				2.15		%				2.45		%
Other post-retirement plan						2.50		%				3.00		%				3.50		%
Expected Return on Plan Assets:
Synergy Health plc Retirement Benefits Scheme						3.60		%				3.50		%				4.80		%
Isotron BV Pension Plan						0.90		%				1.60		%				1.20		%
Synergy Health Daniken AG						1.00		%				0.70		%				0.65		%

The net periodic benefit cost and the actuarial present value of projected benefit obligations are based upon assumptions that we review on an annual basis. These assumptions may be revised annually based upon an evaluation of long-term trends, as well as market conditions that may have an impact on the cost of providing benefits.

We develop our expected long-term rate of return on plan assets assumptions by evaluating input from third-party professional advisers, taking into consideration the asset allocation of the portfolios and the long-term asset class return expectations.

We develop our discount rate assumptions by evaluating input from third-party professional advisers, taking into consideration the current yield on country specific investment grade long-term bonds which provide for similar cash flow streams as our projected obligations.

We have made assumptions regarding healthcare costs in computing our other post-retirement benefit obligation. The assumed rates of increase generally decline ratably over a five-year period from the assumed current year healthcare cost trend rate to the assumed long-term healthcare cost trend rate noted below.

						2022						2021						2020
Healthcare cost trend rate – medical						7.00		%				7.00		%				6.75		%
Healthcare cost trend rate – prescription drug						7.00		%				7.00		%				6.75		%
Long-term healthcare cost trend rate						4.50		%				4.50		%				4.50		%

To determine the healthcare cost trend rates, we evaluate a combination of information, including ongoing claims cost monitoring, annual statistical analyses of claims data, reconciliation of forecasted claims against actual claims, review of trend

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

assumptions of other plan sponsors and national health trends, and adjustments for plan design changes, workforce changes, and changes in plan participant behavior.

Plan Assets. The investment policies for our plans are generally established by the local pension plan trustees and seek to maintain the plans' ability to meet liabilities and to comply with local minimum funding requirements. Plan assets are invested in diversified portfolios that provide adequate levels of return at an acceptable level of risk. The investment policies are reviewed at least annually and revised, as deemed appropriate to ensure that the objectives are being met. At March 31, 2022, the targeted allocation for the plans were approximately 75% equity investments and 25% fixed income investments.

Financial instruments included in pension plan assets are categorized into three tiers. These tiers include a fair value hierarchy of three levels, based on the degree of subjectivity inherent in the valuation methodology as follows:

Level 1 - Quoted prices for identical assets in active markets.

Level 2 - Quoted prices for similar assets in active markets with inputs that are observable, either directly or indirectly.

Level 3 - Unobservable prices or inputs in which little or no market data exists.

The fair value of our pension benefits plan assets at March 31, 2022 and 2021 by asset category is as follows:

						Fair Value Measurements at March 31, 2022
(In thousands)						Total						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Other Unobservable Inputs (Level 3)
Cash						$	559					$	559											$	—
Insured annuities						14,231						—						14,231						—
Insurance contracts						5,383						—						—						5,383
Common and collective trusts valued at net asset value:
Equity security trusts						66,416						—						—						—
Debt security trusts						55,583						—						—						—
Total Plan Assets						$	142,172					$	559					$	14,231					$	5,383

						Fair Value Measurements at March 31, 2021
(In thousands)						Total						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Other Unobservable Inputs (Level 3)
Cash						$	657					$	657					$	—					$	—
Insured annuities						17,950						—						17,950						—
Insurance contracts						5,555						—						—						5,555
Common and collective trusts valued at net asset value:
Equity security trusts						60,960						—						—						—
Debt security trusts						60,330						—						—						—
Total Plan Assets						$	145,452					$	657					$	17,950					$	5,555

Collective investment trusts are measured at fair value using the net asset value per share practical expedient. These trusts have not been categorized in the fair value hierarchy and are being presented in the tables above to permit a reconciliation of the fair value hierarchy to the total plan assets.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed during fiscal year 2022 due to the following:

						Insurance contracts
Balance at March 31, 2020						$	4,345
Gains (losses) related to assets still held at year-end						197
Transfers out of Level 3						853
Foreign currency						160
Balance at March 31, 2021						$	5,555
Gains (losses) related to assets still held at year-end						(115)
Transfers out of Level 3						(210)
Foreign currency						153
Balance at March 31, 2022						$	5,383

Cash Flows. We contribute amounts to our defined benefit pension plans at least equal to the minimum amounts required by applicable employee benefit laws and local tax laws. We expect to make contributions of approximately $4,103 during fiscal 2023.

Based upon the actuarial assumptions utilized to develop our benefit obligations at March 31, 2022, the following benefit payments are expected to be made to plan participants:

						Other Defined Benefit Pension Plans						Other Post-Retirement Benefits Plan
2023						$	5,560					$	1,190
2024						5,542						1,067
2025						5,721						966
2026						5,882						880
2027						6,060						788
2028-2033						33,250						2,871

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) provides a prescription drug benefit for Medicare beneficiaries, a benefit we provide to Medicare eligible retirees covered by our post-retirement benefits plan. We have concluded that the prescription drug benefit provided in our post-retirement benefit plan is considered to be actuarially equivalent to the benefit provided under the Act and thus qualifies for the subsidy under the Act. Benefits are subject to a per capita per month cost cap and any costs above the cap become the responsibility of the retiree. Under the plan, the subsidy is applied to reduce the retiree responsibility. As a result, the expected future subsidy no longer reduces our accumulated post-retirement benefit obligation and net periodic benefit cost. We collected subsidies totaling approximately $660 and $899, during fiscal 2022 and fiscal 2021, respectively, which reduced the retiree responsibility for costs in excess of the caps established in the post-retirement benefit plan.

Defined Contribution Plans. We maintain 401(k) defined contribution plans for eligible U.S. employees, a 401(k) defined contribution plan for eligible Puerto Rico employees and similar savings plans for certain employees in Canada, United Kingdom, Ireland, and Finland. We provide a match on a specified portion of an employee’s contribution. The U.S. plan assets are held in trust and invested as directed by the plan participants. The Canadian plan assets are held by insurance companies. The aggregate fair value of the U.S. plan assets was $1,271,941 at March 31, 2022. At March 31, 2022, the U.S. plan held 496,661 STERIS ordinary shares with a fair value of $120,078. We paid dividends of $852, $839, and $855 to the plan and participants on STERIS shares held by the plan for the years ended March 31, 2022, 2021, and 2020, respectively. We contributed approximately $38,600, $29,853, and $27,818, to the defined contribution plans for the years ended March 31, 2022, 2021, and 2020, respectively.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

We also maintain a domestic non-qualified deferred compensation plan covering certain employees, which formerly allowed for the deferral of compensation for an employee-specified term or until retirement or termination. There have been no employee contributions made to this plan since fiscal 2012. The Plan was amended in fiscal 2012 to disallow deferrals of salary payable in 2012 and subsequent calendar years and of commissions and other incentive compensation payable in respect of the 2013 and subsequent fiscal years. We hold investments in mutual funds to satisfy future obligations of the plan. We account for these assets as available-for-sale securities and they are included in “Other assets” on our accompanying Consolidated Balance Sheets, with a corresponding liability for the plan’s obligation recorded in “Accrued expenses and other.” The aggregate value of the assets was $1,061 and $1,682 at March 31, 2022 and March 31, 2021, respectively. Realized gains and losses on these investments are recorded in “Interest and miscellaneous income” within “Non-operating expenses” on our accompanying Consolidated Statements of Income. Changes in the fair value of the assets are recorded in other comprehensive income on our accompanying balance sheets.

10. COMMITMENTS AND CONTINGENCIES

We are, and will likely continue to be, involved in a number of legal proceedings, government investigations, and claims, which we believe generally arise in the course of our business, given our size, history, complexity, and the nature of our business, products, Customers, regulatory environment, and industries in which we participate. These legal proceedings, investigations and claims generally involve a variety of legal theories and allegations, including, without limitation, personal injury (e.g., slip and falls, burns, vehicle accidents), product liability or regulation (e.g., based on product operation or claimed malfunction, failure to warn, failure to meet specification, or failure to comply with regulatory requirements), product exposure (e.g., claimed exposure to chemicals, asbestos, contaminants, radiation), property damage (e.g., claimed damage due to leaking equipment, fire, vehicles, chemicals), commercial claims (e.g., breach of contract, economic loss, warranty, misrepresentation), financial (e.g., taxes, reporting), employment (e.g., wrongful termination, discrimination, benefits matters), and other claims for damage and relief.

We believe we have adequately reserved for our current litigation and claims that are probable and estimable, and further believe that the ultimate outcome of these pending lawsuits and claims will not have a material adverse effect on our consolidated financial position or results of operations taken as a whole. Due to their inherent uncertainty, however, there can be no assurance of the ultimate outcome or effect of current or future litigation, investigations, claims or other proceedings (including without limitation the matters discussed below). For certain types of claims, we presently maintain insurance coverage for personal injury and property damage and other liability coverages in amounts and with deductibles that we believe are prudent, but there can be no assurance that these coverages will be applicable or adequate to cover adverse outcomes of claims or legal proceedings against us.

Civil, criminal, regulatory or other proceedings involving our products or services could possibly result in judgments, settlements or administrative or judicial decrees requiring us, among other actions, to pay damages or fines or effect recalls, or be subject to other governmental, Customer or other third party claims or remedies, which could materially effect our business, performance, prospects, value, financial condition, and results of operations.

For additional information regarding these matters, see the risks and uncertainties described under the title "product and service related regulations and claims" in Item 1A. of this Annual Report on Form 10-K.

From time to time, STERIS is also involved in legal proceedings as a plaintiff involving contract, patent protection, and other claims asserted by us. Gains, if any, from these proceedings are recognized when they are realized.

We are subject to taxation from United States federal, state and local, and foreign jurisdictions. Tax positions are settled primarily through the completion of audits within each individual jurisdiction or the closing of statutes of limitation. Changes in applicable tax law or other events may also require us to revise past estimates. We describe income taxes further in Note 8 to our consolidated financial statements titled, “Income Taxes” in this Annual Report on Form 10-K.

As of March 31, 2022 and 2021, our commercial commitments totaled $98,675 and $79,122, respectively. Commercial commitments include standby letters of credit, letters of credit required as security under our self-insured risk retention policies, and other potential cash outflows resulting from an event that requires payment by us. Approximately $13,900 and $11,807 of the March 31, 2022 and 2021 totals, respectively, relate to letters of credit required as security under our self-insured risk retention policies.

As of March 31, 2022, we had minimum purchase commitments with suppliers for raw material purchases totaling $59,869. As of March 31, 2022, we also had commitments of $171,619 for long term construction contracts.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Leases

We lease manufacturing, warehouse and office space, service facilities, vehicles, equipment and communication systems. Certain leases contain options that provide us with the ability to extend the lease term. Such options are included in the lease term when it is reasonably certain that the option will be exercised. We made an accounting policy election to not recognize lease assets or lease liabilities for leases with a lease term of twelve months or less.

We determine if an agreement contains a lease and classify our leases as operating or finance at the lease commencement date. Finance leases are generally those leases for which we will pay substantially all the underlying asset’s fair value or will use the asset for all or a major part of its economic life, including circumstances in which we will ultimately own the asset. Lease assets arising from finance leases are included in property, plant and equipment, net and the liabilities are included in other liabilities. For finance leases, we recognize interest expense using the effective interest method and we recognize amortization expense on the lease asset over the shorter of the lease term or the useful life of the asset. Our finance leases are not material as of March 31, 2022 and for the twelve month period then ended.

Operating lease assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Lease assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. As most leases do not provide an implicit interest rate, we estimate an incremental borrowing rate to determine the present value of lease payments. Our estimated incremental borrowing rate reflects a secured rate based on recent debt issuances, our estimated credit rating, lease term, as well as publicly available data for instruments with similar characteristics. For operating leases, we recognize lease cost on a straight-line basis over the term of the lease. When accounting for leases, we combine payments for leased assets, related services and other components of a lease.

The components of operating lease expense are as follows:

			Year Ended March 31, 2022						Year Ended March 31, 2021
Fixed operating lease expense			$	45,158					$	31,087
Variable operating lease expense			12,659						9,326
Total operating lease expense			$	57,817					$	40,413

Supplemental cash flow information related to operating leases is as follows:

			Year Ended March 31, 2022						Year Ended March 31, 2021
Cash paid for amounts included in the measurement of operating lease liabilities			$	45,144					$	29,808
Right-of-use assets obtained in exchange for operating lease obligations, net			$	79,241					$	30,574

Maturities of lease liabilities at March 31, 2022 are as follows:

			March 31, 2022
2023			$	42,099
2024			34,669
2025			26,914
2026			21,419
2027 and thereafter			104,769
Total operating lease payments			229,870
Less imputed interest			38,342
Total operating lease liabilities			$	191,528

In the preceding table, the future minimum annual rentals payable under noncancelable leases denominated in foreign currencies have been calculated using March 31, 2022 foreign currency exchange rates.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Supplemental information related to operating leases is as follows:

			March 31,						March 31,
			2022						2021
Weighted-average remaining lease term of operating leases			9.6 years						11.6 years
Weighted-average discount rate of operating leases			3.4		%				4.1		%

11. BUSINESS SEGMENT INFORMATION

As a result of the acquisition of Cantel, we have reassessed the organization of our business and have added a new segment called Dental. We now operate and report our financial information in four reportable business segments: Healthcare, Applied Sterilization Technologies, Life Sciences and Dental. Non-allocated operating costs that support the entire Company and items not indicative of operating trends are excluded from segment operating income.

Our Healthcare segment provides a comprehensive offering for healthcare providers worldwide, focused on sterile processing departments and procedural centers, such as operating rooms and endoscopy suites. Our products and services range from infection prevention consumables and capital equipment, as well as services to maintain that equipment; to the repair of re-usable procedural instruments; to outsourced instrument reprocessing services. In addition, our procedural solutions also include single-use devices and capital equipment infrastructure used primarily in operating rooms, ambulatory surgery centers, endoscopy suites, and other procedural areas.

Our Applied Sterilization Technologies ("AST") segment is a third-party service provider for contract sterilization, as well as testing services needed to validate sterility services for medical device and pharmaceutical manufacturers. Our technology-neutral offering supports Customers every step of the way, from testing through sterilization.

Our Life Sciences segment provides a comprehensive offering of products and services that support pharmaceutical manufacturing, primarily for vaccine and other biopharma Customers focused on aseptic manufacturing. These solutions include a full suite of consumable products, equipment maintenance and specialty services, and capital equipment.

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

We disclose a measure of segment income that is consistent with the way management operates and views the business. The accounting policies for reportable segments are the same as those for the consolidated Company.

For the year ended March 31, 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 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 approximately 45.1% of our Dental segment revenues for the year ended March 31, 2022.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Information regarding our segments is presented in the following tables.

Years Ended March 31,						2022						2021						2020
Revenues:
Healthcare						$	2,845,467					$	1,954,055					$	1,986,809
Applied Sterilization Technologies						852,972						685,912						627,147
Life Sciences						524,964						467,552						416,939
Dental						361,661						—						—
Total revenues						$	4,585,064					$	3,107,519					$	3,030,895
Operating income (loss):
Healthcare						626,098						427,089						420,709
Applied Sterilization Technologies						410,101						310,648						270,917
Life Sciences						216,188						180,796						144,088
Dental						84,441						—						—
Corporate						(260,059)						(219,153)						(207,015)
Total operating income before adjustments						$	1,076,769					$	699,380					$	628,699
Less: Adjustments
Amortization of acquired intangible assets (1)						366,434						83,892						71,675
Acquisition and integration related charges (2)						205,788						35,634						8,225
Redomiciliation and tax restructuring costs (3)						301						1,592						3,699
(Gain) on fair value adjustment of acquisition related contingent consideration (1)						(2,350)						(500)						—
Net (gain) loss on divestiture of businesses (1)						(874)						2,030						1,770
Amortization of inventory and property "step up" to fair value (1)						81,804						5,600						2,392
COVID-19 incremental costs (4)						—						25,793						749
Restructuring charges (credit) (5)						48						(3,029)						3,143
Total operating income						$	425,618					$	548,368					$	537,046

(1) For more information regarding our recent acquisitions and divestitures refer to Note 2 titled, "Business Acquisitions and Divestitures."

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

(3) Costs incurred in tax restructuring.

(4) COVID-19 incremental costs includes the additional costs attributable to COVID-19 such as enhanced cleaning protocols, personal protective equipment for our employees, event cancellation fees, and payroll costs associated with our response to COVID-19, net of any government subsidies available.

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

Assets include the current and long-lived assets directly attributable to the segment based on the management of the location or on utilization. Certain corporate assets were allocated to the reportable segments based on revenues. Assets attributed to sales and distribution locations are only allocated to the Healthcare Products and Life Sciences segments.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Individual facilities, equipment, and intellectual properties are utilized for production by both the Healthcare Products and Life Sciences segments at varying levels over time. As a result, an allocation of total assets, capital expenditures, and depreciation and amortization is not meaningful to the individual performance of the Healthcare Products and Life Sciences segments. Therefore, their respective amounts are reported together.

March 31,						2022						2021
Assets (1)
Healthcare and Life Sciences						$	6,604,893					$	3,600,182
Applied Sterilization Technologies						3,053,116						2,974,289
Dental						1,765,585						—
Total assets						$	11,423,594					$	6,574,471

Years Ended March 31,						2022						2021						2020
Capital Expenditures
Healthcare and Life Sciences						$	84,487					$	74,446					$	84,648
Applied Sterilization Technologies						198,350						164,816						129,868
Dental						4,726						—						—
Total Capital Expenditures						$	287,563					$	239,262					$	214,516
Depreciation, Depletion, and Amortization (2)
Healthcare and Life Sciences						$	316,222					$	106,266					$	92,193
Applied Sterilization Technologies						115,925						112,971						105,042
Dental						120,957						—						—
Total Depreciation, Depletion, and Amortization						$	553,104					$	219,237					$	197,235

(1) Amounts are still preliminary, as Cantel acquisition valuations have not been finalized.

(2) Fiscal 2022 totals include approximately $229,052, $35,531 and $113,099 for Healthcare and Life Sciences, Applied Sterilization Technologies, and Dental, respectively, of amortization of acquired intangible assets and amortization of property "step-up" to fair value. For more information regarding our recent acquisitions and divestitures see Note 2 titled, "Business Acquisitions and Divestitures."

Financial information for each of our United States and international geographic areas is presented in the following table. Revenues are based on the location of these operations and their Customers. Property, plant and equipment, net are those assets that are identified within the operations in each geographic area.

March 31,						2022						2021
Property, Plant, and Equipment, Net (1)
Ireland						$	60,275					$	52,140
United States						881,057						673,784
Other locations						611,244						509,476
Property, Plant, and Equipment, Net						$	1,552,576					$	1,235,400

(1) Amounts are still preliminary, as Cantel acquisition valuations have not been finalized.

Years Ended March 31,						2022						2021						2020
Revenues:
Ireland						$	82,011					$	71,905					$	63,821
United States						3,228,864						2,227,038						2,211,722
Other locations						1,274,189						808,576						755,352
Total Revenues						$	4,585,064					$	3,107,519					$	3,030,895

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Years Ended March 31,						2022						2021						2020
Healthcare:
Capital equipment						$	782,505					$	588,864					$	617,712
Consumables						1,004,605						510,946						486,425
Service						1,058,357						854,245						882,672
Total Healthcare Revenues						$	2,845,467					$	1,954,055					$	1,986,809
Total Applied Sterilization Technologies Service Revenues						$	852,972					$	685,912					$	627,147
Life Sciences:
Capital equipment						$	142,281					$	128,356					$	112,747
Consumables						239,365						215,005						185,904
Service						143,318						124,191						118,288
Total Life Sciences Revenues						$	524,964					467,552						416,939
Dental Revenues						$	361,661					$	—					$	—
Total Revenues						$	4,585,064					$	3,107,519					$	3,030,895

12. SHARES AND PREFERRED SHARES

Ordinary Shares

We calculate basic earnings per share based upon the weighted average number of shares outstanding. We calculate diluted earnings per share based upon the weighted average number of shares outstanding plus the dilutive effect of share equivalents calculated using the treasury stock method. The following is a summary of shares and share equivalents outstanding used in the calculations of basic and diluted earnings per share:

Years ended March 31,						2022						2021						2020
Denominator (shares in thousands):
Weighted average shares outstanding—basic						97,535						85,203						84,778
Dilutive effect of share equivalents						791						695						863
Weighted average shares outstanding and share equivalents—diluted						98,326						85,898						85,641

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:

Years ended March 31,						2022						2021						2020
Number of ordinary share options (shares in thousands)						243						348						285

Additional Authorized Shares

The Company has an additional authorized share capital of 50,000,000 preferred shares of $0.001 par value each, plus 25,000 deferred ordinary shares of €1.00 par value each, in order to satisfy minimum statutory capital requirements for all Irish public limited companies.

13. REPURCHASES OF ORDINARY SHARES

On May 7, 2019, our Board of Directors authorized a share repurchase program resulting in a share repurchase authorization of approximately $78,979 (net of taxes, fees and commissions). 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 March 31, 2022, there was approximately $308,932 (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.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Under the authorization, the Company may repurchase its shares from time to time through open market purchases, including 10b5-1 plans. Any share repurchases may be activated, suspended or discontinued at any time. Due to the uncertainty surrounding the COVID-19 pandemic, share repurchases were suspended on April 9, 2020. The suspension was lifted effective February 10, 2022, enabling the Company to resume stock repurchases pursuant to the prior authorizations.

From February 14, 2022, through March 31, 2022, we repurchased 108,368 of our ordinary shares for the aggregate amount of $25,000 (net of fees and commissions) pursuant to the authorizations. During fiscal 2021, we repurchased 35,000 of our ordinary shares for the aggregate amount of $5,047 (net of fees and commissions) pursuant to the authorizations. During fiscal 2020, we repurchased 273,259 of our ordinary shares for the aggregate amount of $40,000 (net of fees and commissions) pursuant to the authorizations.

During fiscal 2022, we obtained 244,395 of our ordinary shares in the aggregate amount of $30,775 in connection with share based compensation award programs. During fiscal 2021, we obtained 91,567 of our ordinary shares in the aggregate amount of $9,599 in connection with share based compensation award programs. During fiscal 2020, we obtained 122,884 of our ordinary shares in the aggregate amount of $11,235 in connection with share based compensation award programs.

14. SHARE-BASED COMPENSATION

We maintain a long-term incentive plan that makes available shares for grants, at the discretion of the Board of Directors or Compensation and Organizational Development Committee of the Board of Directors, to officers, directors, and key employees in the form of stock options, restricted shares, restricted share units, stock appreciation rights and share grants. We satisfy share award incentives through the issuance of new ordinary shares.

Stock options provide the right to purchase our shares at the market price on the date of grant, or for options granted to employees in fiscal 2019 and thereafter, 110% of the market price on the date of grant, subject to the terms of the plan and agreements. Generally, one-fourth of the stock options granted to employees become exercisable for each full year of employment following the grant date. Stock options granted generally expire 10 years after the grant date, or in some cases earlier if the option holder is no longer employed by us. 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 March 31, 2022, 3,146,465 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. This model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable, characteristics that are not present in our option grants. If the model permitted consideration of the unique characteristics of employee stock options, the resulting estimate of the fair value of the stock options could be different. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our Consolidated Statements of Income. The expense is classified as cost of goods sold or selling, general and administrative expenses in a manner consistent with the employee’s compensation and benefits.

The following weighted-average assumptions were used for options granted during fiscal 2022, fiscal 2021 and fiscal 2020:

						Fiscal 2022						Fiscal 2021						Fiscal 2020
Risk-free interest rate						1.10		%				0.46		%				2.26		%
Expected life of options						5.9 years						6.0 years						6.2 years
Expected dividend yield of stock						0.95		%				0.96		%				1.22		%
Expected volatility of stock						24.27		%				23.04		%				20.27		%

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

The risk-free interest rate is based upon the U.S. Treasury yield curve. The expected life of options is reflective of historical experience, vesting schedules and contractual terms. The expected dividend yield of stock represents our best estimate of the expected future dividend yield. The expected volatility of stock is derived by referring to our historical stock prices over a time frame similar to that of the expected life of the grant. An estimated forfeiture rate of 2.85%, 2.78% and 2.77% was applied in fiscal 2022, 2021 and 2020 respectively. This rate is calculated based upon historical activity and represents an estimate of the granted options not expected to vest. If actual forfeitures differ from this calculated rate, we may be required to make additional adjustments to compensation expense in future periods. The assumptions used above are reviewed at the time of each significant option grant, or at least annually.

A summary of share option activity is as follows:

						Number of Options						Weighted Average Exercise Price						Average Remaining Contractual Term						Aggregate Intrinsic Value
Outstanding at March 31, 2021						1,637,047						$	112.03
Granted						284,566						215.10
Exercised						(354,252)						77.79
Forfeited						(6,407)						165.10
Outstanding at March 31, 2022						1,560,954						$	138.37					6.7 years						$	161,397
Exercisable at March 31, 2022						854,998						$	104.64					5.5 years						$	117,243

We estimate that 692,204 of the non-vested stock options outstanding at March 31, 2022 will ultimately vest.

The aggregate intrinsic value in the table above represents the total pre-tax difference between the $241.77 closing price of our ordinary shares on March 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 our ordinary shares.

The total intrinsic value of stock options exercised during the years ended March 31, 2022, 2021 and 2020 was $52,952, $39,055 and $57,683, respectively. Net cash proceeds from the exercise of stock options were $10,071, $26,726 and $34,731 for the years ended March 31, 2022, 2021 and 2020, respectively. The tax benefit from stock option exercises was $18,143, $11,559 and $16,440 for the years ended March 31, 2022, 2021 and 2020, respectively.

The weighted average grant date fair value of stock option grants was $37.52, $27.66 and $23.52 for the years ended March 31, 2022, 2021 and 2020, 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. As of May 24, 2021, we no longer have outstanding SARS. The fair value of the outstanding SARS as of March 31, 2021 and 2020 was $494, and $544, respectively. The fair value of outstanding SARS is revalued at each reporting date and the related liability and expense were adjusted appropriately.

A summary of the non-vested restricted share and restricted share unit activity is presented below:

						Number of Restricted Shares						Number of Restricted Share Units						Weighted-Average Grant Date Fair Value
Non-vested at March 31, 2021						533,323						29,500						$	121.35
Granted						165,376						21,759						198.14
Vested						(192,633)						(15,621)						95.71
Forfeited						(20,556)						(1,961)						167.88
Non-vested at March 31, 2022						485,510						33,677						$	157.37

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 fiscal 2022 was $19,890.

As of March 31, 2022, there was a total of $59,392 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 2.1 years.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

Cantel Share Based Compensation Plan

In connection with the June 2, 2021 acquisition of Cantel, outstanding, non-vested Cantel restricted share units were replaced with STERIS restricted share units.

A total 280,402 STERIS restricted share units replaced Cantel awards based on a ratio of one Cantel restricted share unit to 0.4262 STERIS restricted share units. These Cantel awards consisted of time and performance based awards. Cantel time based restricted share units were replaced with STERIS restricted share units with the same three-year pro-rata vesting terms based on the original award date. Performance based Cantel restricted share units were replaced with time based STERIS restricted share units that vest pro rata over the remaining one, two or three anniversaries from the original Cantel award date. The number of performance restricted share units was replaced based on the original target achievement level. All replacement restricted share units retained dividend accumulation rights.

The fair value of each STERIS restricted share unit awarded on June 2, 2021 to replace outstanding non-vested Cantel restricted share units was $191.18 based on the closing price of STERIS ordinary shares on June 2, 2021. Approximately $18,173 of the total $53,607 grant date fair value was attributable to pre-acquisition services provided and was recorded as a component of purchase consideration in connection with the acquisition of Cantel.

During fiscal 2022, recognition of unamortized share-based compensation expense totaling $20,200 was accelerated in connection with the termination of certain Cantel employees in fiscal 2022. As a result of the formal notices provided and the terms of the Cantel share based compensation plans and Cantel Executive Severance and Change of Control Plan, the restricted share units vested requiring acceleration of the remaining related compensation cost.

As of March 31, 2022, there was a total of $6,101 in unrecognized compensation cost related to non-vested STERIS restricted share units awarded to replace Cantel restricted share units. We expect to recognize the cost over a weighted average period of 1.1 years.

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

												Number of Restricted Share Units						Weighted-Average Grant Date Fair Value
Non-vested at March 31, 2021												—						$	—
Granted												280,402						191.18
Vested												(223,267)						191.18
Forfeited												(11,413)						191.18
Non-vested at March 31, 2022												45,722						$	191.18

15. FINANCIAL AND OTHER GUARANTEES

We generally offer a limited parts and labor warranty on capital equipment. The specific terms and conditions of those warranties vary depending on the product sold and the countries where we conduct business. We record a liability for the estimated cost of product warranties at the time product revenues are recognized. The amounts we expect to incur on behalf of our Customers for the future estimated cost of these warranties are recorded as a current liability on the accompanying Consolidated Balance Sheets. Factors that affect the amount of our warranty liability include the number and type of installed units, historical and anticipated rates of product failures, and material and service costs per claim. We periodically assess the adequacy of our recorded warranty liabilities and adjust the amounts as necessary.

Changes in our warranty liability during the periods presented are as follows:

Years Ended March 31,						2022						2021						2020
Balance, Beginning of Year						$	9,406					$	7,381					$	7,194
Liabilities assumed in acquisition of Cantel						4,769						—						—
Warranties issued during the period						12,571						10,574						12,311
Settlements made during the period						(12,638)						(8,549)						(12,124)
Balance, End of Year						$	14,108					$	9,406					$	7,381

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

16. DERIVATIVES AND HEDGING

From time to time, we enter into forward contracts to hedge potential foreign currency gains and losses that arise from transactions denominated in foreign currencies, including inter-company transactions. We may also enter into commodity swap contracts to hedge price changes in nickel that impact raw materials included in our cost of revenues. Further, we may hold forward foreign exchange contracts to hedge a portion of our expected non-U.S. dollar denominated earnings against our reporting currency, the U.S dollar. We do not use derivative financial instruments for speculative purposes. 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 March 31, 2022, we held a foreign currency forward contract to sell 11.0 million euros. At March 31, 2022, we held commodity swap contracts to buy 801.6 thousand pounds of nickel.

						Asset Derivatives												Liability Derivatives
						Fair Value at						Fair Value at						Fair Value at						Fair Value at
Balance Sheet Location						March 31, 2022						March 31, 2021						March 31, 2022						March 31, 2021
Prepaid & Other						$	2,780					$	57					$	—					$	—
Accrued expenses and other						—						—						198						367

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

						Location of (loss) gain recognized in income						Amount of (loss) gain recognized in income
Years Ended March 31,
2022						2021						2020
Foreign currency forward contracts						Selling, general and administrative						$	4,379					$	1,178					$	798
Commodity swap contracts						Cost of revenues						3,921						771						(660)

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

17. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. We estimate the fair value of financial assets and liabilities using available market information and generally accepted valuation methodologies. The inputs used to measure fair value are classified into three tiers. These tiers include Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; 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 March 31, 2022 and March 31, 2021:

																								Fair Value Measurements
At March 31,						Carrying Value															Quoted Prices in Active Markets for Identical Assets									Significant Other Observable Inputs									Significant Unobservable Inputs
																					Level 1									Level 2									Level 3
			2022			2021															2022			2021						2022			2021						2022			2021
Assets:
Cash and cash equivalents						$	348,320		$	220,531														$	348,320		$	220,531					$	—		$	—					$	—		$	—
Forward and swap contracts (1)						2,780			57															—			—						2,780			57						—			—
Equity investments (2)						8,520			10,301															8,520			10,301						—			—						—			—
Other investments						2,272			2,665															2,272			2,665						—			—						—			—
Liabilities:
Forward and swap contracts (1)						$	198		$	367														$	—		$	—					$	198		$	367					$	—		$	—
Deferred compensation plans (2)						1,240			1,715															1,240			1,715						—			—						—			—
Total debt (3)						3,088,356			1,650,540															—			—						2,991,680			1,722,459						—			—
Contingent consideration obligations (4)						10,550			19,642															—			—						—			—						10,550			19,642

(1) The fair values of forward and swap contracts are based on period-end forward rates and reflect the value of the amount that we would pay or receive for the contracts involving the same notional amounts and maturity dates.

(2) We maintain a frozen domestic non-qualified deferred compensation plan covering certain employees, which allowed for the deferral of payment of previously earned compensation for an employee-specified term or until retirement or termination. Amounts deferred can be allocated to various hypothetical investment options (compensation deferrals have been frozen under the plan). We hold investments to satisfy the future obligations of the plan. Employees who made deferrals are entitled to receive distributions of their hypothetical account balances (amounts deferred, together with earnings (losses)). 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 fiscal 2022 and fiscal 2021, we recorded (losses) gains of $(775) and $594, respectively, related to these investments.

(3) We estimate the fair value of our debt using discounted cash flow analyses, based on our current incremental borrowing rates for similar types of borrowing arrangements. The fair values of our Senior Public Notes are estimated using quoted market prices for the publicly registered Senior Notes.

(4) Contingent consideration obligations arise from prior business acquisitions. The fair values are based on discounted cash flow analyses reflecting the possible achievement of specified performance measures or events and captures the contractual nature of the contingencies, commercial risk, and the time value of money. Contingent consideration obligations are classified in the consolidated balance sheets as accrued expense (short-term) and other liabilities (long-term), as appropriate based on the contractual payment dates.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

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

						Contingent Consideration
Balance at March 31, 2020						$	15,988
Additions						3,486
Payments						(984)
Reductions and adjustments						1,175
Foreign currency translation adjustments						(23)
Balance at March 31, 2021						$	19,642
Liabilities assumed in acquisition of Cantel						25,000
Additions						601
Payments						(32,336)
Adjustments						(2,350)
Foreign currency translation adjustments						(7)
Balance at March 31, 2022						$	10,550

Additions and payments of contingent consideration obligations during fiscal year 2022 and 2021 were primarily related to our fiscal year 2022 and 2021 acquisitions. Adjustments are recorded in the selling, general and administrative line of the Consolidated Statements of Income. Refer to Note 2, "Business Acquisitions and Divestitures" for more information.

18. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Amounts in Accumulated Other Comprehensive Income (Loss) are presented net of the related tax. Foreign Currency Translation is not adjusted for income taxes. Accumulated other comprehensive income (loss) shown in our Consolidated Statements of Shareholders' Equity and changes in our balances, net of tax, for the years ended March 31, 2022, 2021 and 2020 were as follows:

			Defined Benefit Plans (1)									Foreign Currency Translation (2)									Total Accumulated Other Comprehensive Income (Loss)
			2022			2021			2020			2022			2021			2020			2022			2021			2020
Beginning Balance			$	(5,519)		$	(6,813)		$	(4,204)		$	(55,724)		$	(228,650)		$	(155,574)		$	(61,243)		$	(235,463)		$	(159,778)
Other Comprehensive Income (Loss) before reclassifications			11,148			4,622			1,505			(155,360)			172,926			(73,076)			(144,212)			177,548			(71,571)
Reclassified from Accumulated Other Comprehensive Income (Loss)			(4,353)			(3,328)			(4,114)			—			—			—			(4,353)			(3,328)			(4,114)
Net current-period Other Comprehensive Income (Loss)			6,795			1,294			(2,609)			(155,360)			172,926			(73,076)			(148,565)			174,220			(75,685)
Ending Balance			$	1,276		$	(5,519)		$	(6,813)		$	(211,084)		$	(55,724)		$	(228,650)		$	(209,808)		$	(61,243)		$	(235,463)

(1) Amortization (gain) of defined benefit plan items are reported in the Interest income and miscellaneous expense 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.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts and as noted)

19. QUARTERLY RESULTS (UNAUDITED)

Quarters Ended			March 31,						December 31,						September 30,						June 30,
Fiscal 2022
Revenues:
Product			$	684,508					$	697,256					$	685,238					$	489,279
Service			526,178						511,715						511,747						479,143
Total Revenues			1,210,686						1,208,971						1,196,985						968,422
Cost of Revenues:
Product			347,242						373,793						427,484						271,406
Service			291,822						297,064						289,157						270,734
Total Cost of Revenues			639,064						670,857						716,641						542,140
Gross Profit			571,622						538,114						480,344						426,282
Percentage of Revenues			47.2		%				44.5		%				40.1		%				44.0		%
Net Income Attributable to Shareholders			$	52,261					$	143,623					$	69,811					$	(21,807)
Basic Income Per Ordinary Share Attributable to Shareholders:
Net income			$	0.52					$	1.44					$	0.70					$	(0.24)
Diluted Income Per Ordinary Share Attributable to Shareholders:
Net income			$	0.52					$	1.42					$	0.69					$	(0.24)
Fiscal 2021
Revenues:
Product			$	427,614					$	375,314					$	339,504					$	301,108
Service			445,917						433,610						416,628						367,824
Total Revenues			873,531						808,924						756,132						668,932
Cost of Revenues:
Product			231,658						202,881						175,798						154,739
Service			262,055						260,182						250,297						226,809
Total Cost of Revenues			493,713						463,063						426,095						381,548
Gross Profit			379,818						345,861						330,037						287,384
Percentage of Revenues			43.5		%				42.8		%				43.6		%				43.0		%
Net Income Attributable to Shareholders			$	87,443					$	114,501					$	105,858					$	89,598
Basic Income Per Ordinary Share Attributable to Shareholders:
Net income			$	1.02					$	1.34					$	1.24					$	1.05
Diluted Income Per Ordinary Share Attributable to Shareholders:
Net income			$	1.02					$	1.33					$	1.23					$	1.05

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

Description						Balance at Beginning of Period						Charges to Costs and Expenses									Charges to Other Accounts									Deductions									Balance at End of Period
(in thousands)
Year ended March 31, 2022
Deducted from asset accounts:
Allowance for trade accounts receivable (1)						$	11,355					$	16,442								$	1,840		(3)						$	(5,266)		(4)						$	24,371
Inventory valuation reserve						19,778						10,931			(2)						228			(3)						—									30,937
Deferred tax asset valuation allowance						14,143						2,888									8,906			(3)						(1,246)									24,691
Recorded within liabilities:
Casualty loss reserves						$	23,283					$	7,069								$	44								$	(4,270)								$	26,126
Year ended March 31, 2021
Deducted from asset accounts:
Allowance for trade accounts receivable (1)						$	12,051					$	3,097								$	349		(3)						$	(4,142)		(4)						$	11,355
Inventory valuation reserve						16,149						4,423			(2)						(794)			(3)						—									19,778
Deferred tax asset valuation allowance						13,891						2,684									277			(3)						(2,709)									14,143
Recorded within liabilities:
Casualty loss reserves						$	23,228					$	5,550								$	2,542								$	(8,037)								$	23,283
Year ended March 31, 2020
Deducted from asset accounts:
Allowance for trade accounts receivable (1)						$	9,645					$	6,760								$	(247)		(3)						$	(4,107)		(4)						$	12,051
Inventory valuation reserve						19,754						(4,105)			(2)						500			(3)						—									16,149
Deferred tax asset valuation allowance						13,478						3,327									(1,927)			(3)						(987)									13,891
Recorded within liabilities:
Casualty loss reserves						$	19,742					$	6,000								$	3,007								$	(5,521)								$	23,228

(1) Net allowance for doubtful accounts and allowance for sales and returns.

(2) Provision for excess and obsolete inventory, net of inventory written off.

(3) Change in foreign currency exchange rates and acquired reserves.

(4) Uncollectible accounts written off, net of recoveries.