Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

STERIS PLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)


	December 31, 2023		March 31, 2023
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	195,585	$	208,357
Accounts receivable (net of allowances of $27,951 and $23,427, respectively)	964,022		928,315
Inventories, net	855,617		695,493
Prepaid expenses and other current assets	203,729		179,277
Total current assets	2,218,953		2,011,442
Property, plant, and equipment, net	1,844,484		1,705,512
Lease right-of-use assets, net	195,413		191,741
Goodwill	4,111,683		3,879,219
Intangibles, net	2,987,287		2,955,780
Other assets	77,335		78,145
Total assets	$	11,435,155	$	10,821,839
Liabilities and equity
Current liabilities:
Accounts payable	$	276,730	$	279,620
Accrued income taxes	24,880		43,804
Accrued payroll and other related liabilities	178,838		125,642
Short-term lease obligations	36,711		34,961
Short-term indebtedness	78,438		60,000
Accrued expenses and other	318,097		317,817
Total current liabilities	913,694		861,844
Long-term indebtedness	3,231,075		3,018,655
Deferred income taxes, net	621,071		617,538
Long-term lease obligations	162,827		160,493
Other liabilities	78,389		76,137
Total liabilities	$	5,007,056	$	4,734,667
Commitments and contingencies (see Note 8)
Ordinary shares, with $0.001 par value; 500,000 shares authorized; 98,808 and 98,629 ordinary shares issued and outstanding, respectively	4,534,259		4,486,375
Retained earnings	2,133,766		1,911,533
Accumulated other comprehensive loss	(252,629)		(320,710)
Total shareholders’ equity	6,415,396		6,077,198
Noncontrolling interests	12,703		9,974
Total equity	6,428,099		6,087,172
Total liabilities and equity	$	11,435,155	$	10,821,839

See notes to consolidated financial statements.

STERIS PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Revenues:
Product	$	804,756	$	679,042	$	2,280,950	$	1,982,512
Service	590,889		536,952		1,741,597		1,590,490
Total revenues	1,395,645		1,215,994		4,022,547		3,573,002
Cost of revenues:
Product	439,005		374,729		1,223,415		1,058,663
Service	354,047		319,768		1,029,549		942,709
Total cost of revenues	793,052		694,497		2,252,964		2,001,372
Gross profit	602,593		521,497		1,769,583		1,571,630
Operating expenses:
Selling, general, and administrative	360,518		305,141		1,100,227		962,962
Goodwill impairment loss	—		—		—		490,565
Research and development	25,913		25,514		78,459		75,193
Restructuring expenses	6		39		2		127
Total operating expenses	386,437		330,694		1,178,688		1,528,847
Income from operations	216,156		190,803		590,895		42,783
Non-operating expenses, net:
Interest expense	38,947		28,559		108,248		77,356

Interest and miscellaneous (income) expense	(2,080)		1,906		(4,710)		3,200
Total non-operating expenses, net	36,867		30,465		103,538		80,556
Income (loss) before income tax expense	179,289		160,338		487,357		(37,773)
Income tax expense	38,344		37,013		106,276		43,378
Net income (loss)	140,945		123,325		381,081		(81,151)
Less: Net income (loss) attributable to noncontrolling interests	202		(503)		1,465		(956)
Net income (loss) attributable to shareholders	$	140,743	$	123,828	$	379,616	$	(80,195)

Net income (loss) per share attributed to shareholders
Basic	$	1.42	$	1.24	$	3.84	$	(0.80)
Diluted	$	1.42	$	1.24	$	3.82	$	(0.80)
Cash dividends declared per share ordinary outstanding	$	0.52	$	0.47	$	1.51	$	1.37

See notes to consolidated financial statements.

STERIS PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(Unaudited)


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022

Net income (loss)	$	140,945	$	123,325	$	381,081	$	(81,151)
Less: Net income (loss) attributable to noncontrolling interests	202		(503)		1,465		(956)
Net income (loss) attributable to shareholders	140,743		123,828		379,616		(80,195)

Other comprehensive income (loss)
Defined benefit plan changes (net of taxes of $17, $8, $52 and $24, respectively)	58		27		175		83
Change in cumulative currency translation adjustment	134,048		233,958		67,906		(154,438)
Total other comprehensive income (loss)	134,106		233,985		68,081		(154,355)
Comprehensive income (loss)	$	274,849	$	357,813	$	447,697	$	(234,550)

See notes to consolidated financial statements.

STERIS PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Nine Months Ended December 31,
	2023		2022
Operating activities:
Net income (loss)	$	381,081	$	(81,151)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization	430,806		410,693
Deferred income taxes	(506)		(62,797)
Share-based compensation expense	47,588		29,857
(Gain) loss on the disposal of property, plant, equipment, and intangibles, net	(971)		653
Loss on sale of businesses, net	—		3,939

Amortization of inventory fair value adjustments	4,722		2,477
Goodwill impairment loss	—		490,565
Other items	4,536		4,433
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net	(18,252)		(32,878)
Inventories, net	(123,349)		(130,434)
Other current assets	(22,841)		(46,116)
Accounts payable	(6,097)		18,819
Accruals and other, net	21,750		(66,912)
Net cash provided by operating activities	718,467		541,148
Investing activities:
Purchases of property, plant, equipment, and intangibles, net	(268,829)		(290,520)
Proceeds from the sale of property, plant, and equipment	7,375		12,164
Proceeds from the sale of businesses	9,458		6,624

Acquisition of businesses, net of cash acquired	(539,758)		(34,020)

Net cash used in investing activities	(791,754)		(305,752)
Financing activities:



Payments on Private Placement Senior Notes	—		(91,000)

Payments on term loans	(45,000)		(141,875)
Proceeds under credit facilities, net	265,501		216,561

Payments on acquisition related deferred or contingent consideration	(6,153)		(310)
Repurchases of ordinary shares	(11,440)		(153,952)
Cash dividends paid to ordinary shareholders	(149,173)		(136,898)
Distributions to noncontrolling interest	(1,561)		(794)
Contributions from noncontrolling interest	2,883		—
Stock option and other equity transactions, net	3,526		1,497
Net cash provided by (used in) financing activities	58,583		(306,771)
Effect of exchange rate changes on cash and cash equivalents	1,932		(17,574)
Decrease in cash and cash equivalents	(12,772)		(88,949)
Cash and cash equivalents at beginning of period	208,357		348,320
Cash and cash equivalents at end of period	$	195,585	$	259,371

See notes to consolidated financial statements.

STERIS PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended December 31, 2023
	Ordinary Shares			Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Equity
	Number	Amount
Balance at September 30, 2023	98,789	$	4,518,911	$	2,045,897	$	(386,735)	$	11,095	$	6,189,168
Comprehensive income:
Net income	—	—		140,743		—		202		140,945
Other comprehensive income	—	—		—		134,106		—		134,106
Repurchases of ordinary shares	(12)	(731)		(1,497)		—		—		(2,228)
Equity compensation programs and other	31	16,079		—		—		—		16,079
Cash dividends - $0.52 per ordinary share	—	—		(51,377)		—		—		(51,377)
Contributions from noncontrolling interest	—	—		—		—		2,883		2,883
Distributions to noncontrolling interest	—	—		—		—		(1,561)		(1,561)
Other changes in noncontrolling interest	—	—		—		—		84		84
Balance at December 31, 2023	98,808	$	4,534,259	$	2,133,766	$	(252,629)	$	12,703	$	6,428,099


	Nine Months Ended December 31, 2023
	Ordinary Shares			Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Equity
	Number	Amount
Balance at March 31, 2023	98,629	$	4,486,375	$	1,911,533	$	(320,710)	$	9,974	$	6,087,172
Comprehensive income:
Net income	—	—		379,616		—		1,465		381,081
Other comprehensive income	—	—		—		68,081		—		68,081
Repurchases of ordinary shares	(69)	(3,230)		(8,210)		—		—		(11,440)
Equity compensation programs and other	248	51,114		—		—		—		51,114
Cash dividends – $1.51 per ordinary share	—	—		(149,173)		—		—		(149,173)
Contributions from noncontrolling interest	—	—		—		—		2,883		2,883
Distributions to noncontrolling interest	—	—		—		—		(1,561)		(1,561)
Other changes in noncontrolling interest	—	—		—		—		(58)		(58)
Balance at December 31, 2023	98,808	$	4,534,259	$	2,133,766	$	(252,629)	$	12,703	$	6,428,099

STERIS PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended December 31, 2022
	Ordinary Shares			Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Equity
	Number	Amount
Balance at September 30, 2022	99,868	$	4,705,118	$	1,695,087	$	(598,148)	$	11,390	$	5,813,447
Comprehensive income:
Net income (loss)	—	—		123,828		—		(503)		123,325
Other comprehensive income	—	—		—		233,985		—		233,985
Repurchases of ordinary shares	(493)	(82,804)		(1,226)		—		—		(84,030)
Equity compensation programs and other	25	9,389		—		—		—		9,389
Cash dividends – $0.47 per ordinary share	—	—		(46,917)		—		—		(46,917)

Distributions to noncontrolling interest	—	—		—		—		(794)		(794)
Other changes in noncontrolling interest	—	—		—		—		115		115
Balance at December 31, 2022	99,400	$	4,631,703	$	1,770,772	$	(364,163)	$	10,208	$	6,048,520


	Nine Months Ended December 31, 2022
	Ordinary Shares			Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Equity
	Number	Amount
Balance at March 31, 2022	100,067	$	4,742,920	$	1,999,244	$	(209,808)	$	12,281	$	6,544,637
Comprehensive income:
Net loss	—	—		(80,195)		—		(956)		(81,151)
Other comprehensive loss	—	—		—		(154,355)		—		(154,355)
Repurchases of ordinary shares	(850)	(142,573)		(11,379)		—		—		(153,952)
Equity compensation programs and other	183	31,356		—		—		—		31,356
Cash dividends – $1.37 per ordinary share	—	—		(136,898)		—		—		(136,898)





Distributions to noncontrolling interest	—	—		—		—		(794)		(794)
Other changes in noncontrolling interest	—	—		—		—		(323)		(323)
Balance at December 31, 2022	99,400	$	4,631,703	$	1,770,772	$	(364,163)	$	10,208	$	6,048,520

See notes to consolidated financial statements.

STERIS PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

1. Nature of Operations and Summary of Significant Accounting Policies

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, endoscopy accessories, barrier products, 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 ("AST"), Life Sciences, and Dental. We describe our business segments in Note 9 titled "Business Segment Information."

Our fiscal year ends on March 31. References in this Quarterly Report to a particular “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:

Interim Financial Statements

We prepared the accompanying unaudited consolidated financial statements of the Company according to accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. This means that they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Our unaudited interim consolidated financial statements contain all material adjustments (including normal recurring accruals and adjustments) management believes are necessary to fairly state our financial condition, results of operations, and cash flows for the periods presented.

These interim consolidated financial statements should be read together with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the Securities and Exchange Commission ("SEC") on May 26, 2023. The Consolidated Balance Sheet at March 31, 2023 was derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

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

Revenue Recognition and Associated Liabilities

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

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

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 December 31, 2023, assets related to costs to fulfill a contract were not material to our consolidated financial statements.

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

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 products 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 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 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 AST 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.

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

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 the first nine months of fiscal 2024, $70,181 of the March 31, 2023 deferred revenue balance was recorded as revenue. During the first nine months of fiscal 2023, $76,861 of the March 31, 2022 deferred revenue balance was recorded as revenue.

Refer to Note 6 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 6 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 orders for capital equipment and consumables where control of the product has not passed to the Customer. With regard to service, these remaining performance obligations primarily include installation, certification, and outsourced reprocessing services. As of December 31, 2023, the transaction price allocated to remaining performance obligations was approximately $1,555,119. We expect to recognize approximately 56% of the transaction price within one year and approximately 32% beyond one year. The remainder has yet to be scheduled for delivery.

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except 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 2024

ASU 2022-04 "Liabilities - Supplier Finance Programs (Subtopic 405-50) Disclosure of Supplier Finance Program Obligations."	September 2022	The standard provides guidance to enhance the transparency of disclosures for entities that utilize supplier finance programs to include information about the key terms of the programs and present a rollforward of any obligations under the program where those obligations are presented in the balance sheet.	Fiscal 2024	We adopted this standard in fiscal 2024 with no material impact to our consolidated financial statements.
Standards that have not yet been adopted

ASU 2023-07 "Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures."	November 2023	The standard provides guidance to enhance disclosures related to reportable segment expenses, including requirements to disclose significant segment expenses that are regularly provided to the Chief Operating Decision Maker ("CODM"), the title and position of the CODM and a description of how the CODM uses the information to make decisions regarding the allocation of resources. The standard also requires disclosure of certain segment information currently required annually to be reported on an interim basis. The amendments in this standard are effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.	NA	We are in the process of evaluating the impact that the standard will have on our consolidated financial statements.
ASU 2023-09 "Income Taxes (Topic 740) Improvements to Income Tax Disclosures."	December 2023	The standard provides guidance to enhance disclosures related to income taxes paid (net of refunds), requiring disaggregation by federal, state, and foreign, and disclosure of income taxes paid (net of refunds received) by individual jurisdictions that represent greater than 5 percent of the total. The standard also requires disclosure of income (loss) from continuing operations before income taxes, disaggregated between domestic and foreign, and income tax expense (or benefit) disaggregated by federal, state, and foreign. Finally, the standard removes the requirement for certain disclosures related to changes in unrecognized tax benefits and certain amounts of temporary differences. The amendments in this standard are effective for annual periods beginning after December 15, 2024.	NA	We are in the process of evaluating the impact that the standard will have on our consolidated financial statements.

A detailed description of our significant and critical accounting policies, estimates, and assumptions is included in our consolidated financial statements in our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023. Our significant and critical accounting policies, estimates, and assumptions have not changed materially from March 31, 2023.

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

2. Business Acquisitions

On August 2, 2023, we purchased the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from BD (Becton, Dickinson and Company) (NYSE: BDX). The acquired assets from BD are being integrated into our Healthcare segment.

The purchase price of the acquisition was $539,758. The acquisition also qualified for a tax benefit related to tax deductible goodwill, with a present value of approximately $60,000. The purchase price of the acquisition was financed with borrowings from our existing credit facility. For more information, refer to Note 5 titled, "Debt."

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



	September 30, 2023 (As Previously Reported)		Adjustments		December 31, 2023(1)


Inventory	27,006		4,721		31,727
Property, plant, and equipment	6,755		1,109		7,864


Intangible assets	303,598		(598)		303,000
Goodwill	202,399		(5,232)		197,167
Total assets acquired	539,758		—		539,758



Net assets acquired	$	539,758	$	—	$	539,758

(1) Purchase price allocation is preliminary as of December 31, 2023, as valuations have not been finalized.

During the first nine months of fiscal 2023, we completed several tuck-in acquisitions, which continued to expand our product and service offerings in the AST and Healthcare segments. Total aggregate consideration was approximately $40,720, including contingent deferred consideration of $6,700.

Acquisition and integration expenses totaled $5,722 and $24,444 for the three and nine months ended December 31, 2023, respectively. Acquisition and integration expenses totaled $4,817 and $18,493 for the three and nine months ended December 31, 2022, respectively. The increase in acquisition and integration expenses for the three and nine months ended December 31, 2023 is primarily due to charges related to the acquisition of assets from BD and a fair value adjustment in the second quarter of fiscal 2024 related to a building held for sale from a previous acquisition. Acquisition and integration expenses are reported in the Selling, general and administrative expenses line of our Consolidated Statements of Income (Loss) and include, but are not limited to, investment banker, advisory, legal and other professional fees, and certain employee-related expenses.

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

3. 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. Inventories, net consisted of the following:


	December 31, 2023		March 31, 2023

Raw materials	$	303,691	$	239,081
Work in process	117,882		97,756
Finished goods	492,005		404,238
Reserve for excess and obsolete inventory	(57,961)		(45,582)
Inventories, net	$	855,617	$	695,493

4. Property, Plant, and Equipment

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


	December 31, 2023		March 31, 2023
Land and land improvements (1)	$	97,381	$	84,313
Buildings and leasehold improvements	756,059		691,933
Machinery and equipment	1,100,273		994,188
Information systems	260,639		247,873
Radioisotope	679,436		637,920
Construction in progress (1)	512,370		478,316
Total property, plant, and equipment	3,406,158		3,134,543
Less: accumulated depreciation and depletion	(1,561,674)		(1,429,031)
Property, plant, and equipment, net	$	1,844,484	$	1,705,512

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

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

5. Debt

Indebtedness was as follows:


	December 31, 2023		March 31, 2023

Short-term debt
Term Loan, current portion	$	37,813	$	27,500
Delayed Draw Term Loan, current portion	40,625		32,500

Total short-term debt	$	78,438	$	60,000


Long-term debt
Private Placement Senior Notes	$	755,020	$	750,302
Revolving Credit Facility	569,974		301,672
Deferred financing costs	(18,607)		(21,444)
Term Loan	14,063		45,000
Delayed Draw Term Loan	560,625		593,125
Senior Public Notes	1,350,000		1,350,000
Total long-term debt	$	3,231,075	$	3,018,655
Total debt	$	3,309,513	$	3,078,655

Additional information regarding our indebtedness is included in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

6. Additional Consolidated Balance Sheet Information

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


	December 31, 2023		March 31, 2023
Accrued payroll and other related liabilities:
Compensation and related items	$	68,083	$	48,565
Accrued vacation/paid time off	16,798		11,080
Accrued bonuses	59,161		33,605
Accrued employee commissions	31,569		29,257

Other postretirement benefit obligations-current portion	1,121		1,121
Other employee benefit plans obligations-current portion	2,106		2,014
Total accrued payroll and other related liabilities	$	178,838	$	125,642
Accrued expenses and other:
Deferred revenues	$	90,373	$	92,283
Service liabilities	80,620		72,033
Self-insured risk reserves-current portion	12,549		11,325
Accrued dealer commissions	36,386		31,096
Accrued warranty	14,951		13,683
Asset retirement obligation-current portion	535		543
Accrued interest	20,464		9,243
Other	62,219		87,611
Total accrued expenses and other	$	318,097	$	317,817
Other liabilities:
Self-insured risk reserves-long-term portion	$	22,171	$	22,171
Other postretirement benefit obligations-long-term portion	5,778		6,070
Defined benefit pension plans obligations-long-term portion	3,214		2,876
Other employee benefit plans obligations-long-term portion	1,206		1,153
Accrued long-term income taxes	10,129		10,082
Asset retirement obligation-long-term portion	13,182		12,588
Other	22,709		21,197
Total other liabilities	$	78,389	$	76,137

7. Income Taxes

The effective income tax rates for the three month periods ended December 31, 2023 and 2022 were 21.4% and 23.1%, respectively. The fiscal 2024 effective tax rate for the three months ended December 31, 2023 decreased when compared to the prior year period, primarily due to favorable discrete items recognized during fiscal 2024. The effective income tax rates for the nine month periods ended December 31, 2023 and 2022 were 21.8% and (114.8)%, respectively. The fiscal 2024 effective tax rate for the nine months ended December 31, 2023 increased when compared to the prior year period, primarily due to the tax impact of the goodwill impairment loss recognized on the Dental segment during fiscal 2023.

Income tax expense (benefit) is provided on an interim basis based upon our estimate of the annual effective income tax rate, adjusted each quarter for discrete items. In determining the estimated annual effective income tax rate, we analyze various factors, including projections of our annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, our ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives.

We operate in numerous taxing jurisdictions and are subject to regular examinations by various United States federal, state and local, as well as foreign jurisdictions. We are no longer subject to United States federal examinations for years before fiscal

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

2018 and, with limited exceptions, we are no longer subject to United States state and local, or non-United States, income tax examinations by tax authorities for years before fiscal 2017. We remain subject to tax authority audits in various jurisdictions wherever we do business.

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 $11,600 has been paid through December 31, 2023.

In November 2023, we received two Notices of Deficiency from the IRS regarding the previously disclosed deemed dividend inclusions and associated withholding tax matter. 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 have filed petitions with the U.S. Tax Court. 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.

8. 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, gases, asbestos, contaminants, radiation), property damage (e.g., claimed damage due to leaking equipment, fire, vehicles, chemicals), commercial claims (e.g., breach of contract, economic loss, warranty, misrepresentation), financial (e.g., taxes, reporting), employment (e.g., wrongful termination, discrimination, benefits matters), and other claims for damage and relief.

We 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 affect recalls, or be subject to other governmental, Customer or other third party claims or remedies, which could materially affect our business, performance, prospects, value, financial condition, and results of operations.

For additional information regarding these matters, see the following portions of our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023, Item 1 titled "Business - Information with respect to our Business in General - Government Regulation" and the "Risk Factors" in Item 1A titled "Product and service related regulations and claims."

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 7 to our consolidated financial statements titled, “Income Taxes” in this Quarterly Report on Form 10-Q.

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

9. Business Segment Information

We operate and report our financial information in four reportable business segments: Healthcare, AST, 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 products also include endoscopy accessories, instruments, and capital equipment infrastructure used primarily in operating rooms, ambulatory surgery centers, endoscopy suites, and other procedural areas.

Our AST segment is a third-party service provider for contract sterilization as well as testing services needed to validate sterility services for medical device and pharmaceutical manufacturers. 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 three and nine months ended December 31, 2023 and 2022, revenues from a single Customer did not represent ten percent or more of the Healthcare, AST or Life Sciences segment revenues. Three Customers collectively and consistently account for 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 47.5% and 44.5% of our Dental segment revenues for the three and nine months ended December 31, 2023, respectively. These three Customers collectively accounted for approximately 47.2% and 43.8% of our Dental segment revenues for the three and nine months ended December 31, 2022, respectively.

Additional information regarding our segments is included in our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

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


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Revenues:
Healthcare	$	916,227	$	769,144	$	2,605,157	$	2,200,483
AST	234,931		222,014		703,083		675,283
Life Sciences	146,566		121,273		411,074		379,248
Dental	97,921		103,563		303,233		317,988
Total revenues	$	1,395,645	$	1,215,994	$	4,022,547	$	3,573,002
Operating income (loss):
Healthcare	$	223,898	$	175,399	$	626,134	$	497,233
AST	105,156		103,539		325,529		323,238
Life Sciences	56,738		45,249		156,863		149,173
Dental	18,292		20,337		64,847		67,992
Corporate	(81,359)		(53,873)		(261,265)		(196,872)
Total operating income	$	322,725	$	290,651	$	912,108	$	840,764
Less: Adjustments
Amortization of acquired intangible assets (1)	$	93,850	$	93,941	$	286,786	$	281,727
Acquisition and integration related charges (2)	5,722		4,817		24,444		18,493
Tax restructuring costs (3)	643		282		652		533
Gain on fair value adjustment of acquisition related contingent consideration (1)	—		—		—		(3,100)
Net (gain) loss on divestiture of businesses (1)	—		(838)		—		3,939
Amortization of inventory and property "step up" to fair value (1)	6,348		1,608		9,329		5,697
Restructuring charges (4)	6		38		2		127
Goodwill impairment loss (5)	—		—		—		490,565
Total income from operations	$	216,156	$	190,803	$	590,895	$	42,783

(1) For more information regarding our recent acquisitions and divestitures, refer to Note 2 titled, "Business Acquisitions and Divestitures" included in our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.

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

(3) Costs incurred in tax restructuring.

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

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

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

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


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Healthcare:
Capital equipment	$	266,838	$	227,226	$	759,842	$	618,844
Consumables	329,435		259,810		915,741		757,892
Service	319,954		282,108		929,574		823,747
Total Healthcare Revenues	$	916,227	$	769,144	$	2,605,157	$	2,200,483
AST:
Capital equipment	$	5,241	$	3,679	$	7,869	$	14,783
Service	229,690		218,335		695,214		660,500
Total AST Revenues	$	234,931	$	222,014	$	703,083	$	675,283
Life Sciences:
Capital equipment	$	44,836	$	28,581	$	111,265	$	99,095
Consumables	60,072		55,610		181,179		172,587
Service	41,658		37,082		118,630		107,566
Total Life Sciences Revenues	$	146,566	$	121,273	$	411,074	$	379,248
Dental Revenues	$	97,921	$	103,563	$	303,233	$	317,988
Total Revenues	$	1,395,645	$	1,215,994	$	4,022,547	$	3,573,002


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Revenues:
Ireland	$	19,651	$	17,959	$	60,175	$	53,130
United States	1,025,458		883,390		2,948,878		2,589,472
Other locations	350,536		314,645		1,013,494		930,400
Total Revenues	$	1,395,645	$	1,215,994	$	4,022,547	$	3,573,002

10. 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:


	Three Months Ended December 31,		Nine Months Ended December 31,
Denominator (shares in thousands):	2023	2022	2023	2022
Weighted average shares outstanding—basic	98,802	99,716	98,765	99,922
Dilutive effect of share equivalents(1)	552	450	568	—
Weighted average shares outstanding and share equivalents—diluted	99,354	100,166	99,333	99,922

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

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

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:


	Three Months Ended December 31,		Nine Months Ended December 31,
(shares in thousands)	2023	2022	2023	2022
Number of share options	654	797	649	577

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.

11. Repurchases of Ordinary Shares

On May 3, 2023 our Board of Directors terminated the previous share repurchase program and authorized a new share repurchase program for the purchase of up to $500,000 (net of taxes, fees and commissions). This share repurchase program has no specified expiration date.

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.

During the first nine months of fiscal 2024, we had no share repurchase activity pursuant to authorizations under the share repurchase program. During the first nine months of fiscal 2023, we repurchased 775,320 of our ordinary shares for the aggregate amount of $148,306 (net of fees and commissions) pursuant to the authorizations under the share repurchase program.

During the first nine months of fiscal 2024, we obtained 69,276 of our ordinary shares in the aggregate amount of $11,440 in connection with share-based compensation award programs. During the first nine months of fiscal 2023, we obtained 74,897 of our ordinary shares in the aggregate amount of $13,060 in connection with share-based compensation award programs.

12. 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 the 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 three or four year period or vest in equal tranches for each year of employment after the grant date. As of December 31, 2023, 2,368,027 ordinary shares remained available for grant under the long-term incentive plan.

The fair value of share-based stock option compensation awards was estimated at their grant date using the Black-Scholes-Merton option pricing model. 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, which may be impacted by retirement eligibility, in our Consolidated Statements of Income (Loss). The expense is classified as Cost of revenues or Selling, general and administrative expenses in a manner consistent with the employee’s compensation and benefits.

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

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


	Fiscal 2024		Fiscal 2023
Risk-free interest rate	3.59	%	2.44	%
Expected life of options	6.0 years		5.9 years
Expected dividend yield of stock	1.08	%	0.80	%
Expected volatility of stock	27.92	%	24.49	%

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 2.22% and 2.54% was applied in fiscal 2024 and 2023, 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 Per Share		Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at March 31, 2023	1,749,729	$	154.60
Granted	253,946	220.24
Exercised	(53,881)	60.54
Forfeited	(3,415)	199.26

Outstanding at December 31, 2023	1,946,379	$	165.69	6.1 years	$	112,785
Exercisable at December 31, 2023	1,343,419	$	139.95	5.1 years	$	109,367

We estimate that 591,310 of the non-vested stock options outstanding at December 31, 2023 will ultimately vest.

The aggregate intrinsic value in the table above represents the total pre-tax difference between the $219.85 closing price of our ordinary shares on December 31, 2023 over the exercise prices of the stock options, multiplied by the number of options outstanding or outstanding and exercisable, as applicable. The aggregate intrinsic value is not recorded for financial accounting purposes, and the value changes daily based on the daily changes in the fair market value of our ordinary shares.

The total intrinsic value of stock options exercised during the first nine months of fiscal 2024 and fiscal 2023 was $8,350 and $4,638, respectively. Net cash proceeds from the exercise of stock options were $3,526 and $1,497 for the first nine months of fiscal 2024 and fiscal 2023, respectively.

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

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

A summary of the non-vested restricted share and 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, 2023	450,793	28,542	$	186.60
Granted	173,074	18,344	201.48
Vested	(146,912)	(15,408)	163.81
Forfeited	(13,714)	(1,419)	194.71
Non-vested at December 31, 2023	463,241	30,059	$	199.57

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 at the time of grant that vested during the first nine months of fiscal 2024 was $26,487.

As of December 31, 2023, there was a total of $68,670 in unrecognized compensation cost related to non-vested share-based compensation granted under our share-based compensation plans. We expect to recognize the cost over a weighted average period of 1.8 years.

Cantel Share Based Compensation Plan

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

As of December 31, 2023, there was a total of $16 in unrecognized compensation cost related to non-vested STERIS restricted share units awarded to replace Cantel restricted share units. We expect to recognize the remaining cost by the fourth quarter of fiscal 2024.

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, 2023	15,670	$	191.18

Vested	(14,358)	191.18
Forfeited	(762)	191.18


Non-vested at December 31, 2023	550	$	191.18

13. 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 first nine months of fiscal 2024 were as follows:


	Warranties
Balance at March 31, 2023	$	13,683
Warranties issued during the period	12,519
Settlements made during the period	(11,251)
Balance at December 31, 2023	$	14,951

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

14. 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 intercompany 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. During the third quarter of fiscal 2024, we also held forward foreign currency contracts to hedge a portion of our expected non-U.S. dollar-denominated earnings against our reporting currency, the U.S. dollar. These foreign currency exchange contracts will mature in fiscal 2024. We did not elect hedge accounting for these forward foreign currency contracts; however, we may seek to apply hedge accounting in future scenarios. 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 (Loss). At December 31, 2023, we held net foreign currency forward contracts to buy 42.0 million British pounds sterling; and to sell 49.9 million Mexican pesos, 24.0 million Australian dollars, and 18.1 million euros. At December 31, 2023, we held commodity swap contracts to buy 188.3 thousand pounds of nickel.


	Asset Derivatives				Liability Derivatives
	Fair Value at		Fair Value at		Fair Value at		Fair Value at
Balance sheet location	December 31, 2023		March 31, 2023		December 31, 2023		March 31, 2023
Prepaid & other	$	742	$	378	$	—	$	—
Accrued expenses and other	$	—	$	—	$	1,701	$	2,054

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


	Location of gain (loss) recognized in income	Amount of gain (loss) recognized in income
Three Months Ended December 31,		Nine Months Ended December 31,
2023	2022	2023		2022
Foreign currency forward contracts	Selling, general and administrative	$	(292)	$	952	$	1,226	$	5,581
Commodity swap contracts	Cost of revenues	$	(316)	$	1,189	$	(1,708)	$	(1,994)

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

15. 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 December 31, 2023 and March 31, 2023:


								Fair Value Measurements
		Carrying Value						Quoted Prices in Active Markets for Identical Assets					Significant Other Observable Inputs					Significant Unobservable Inputs
						Level 1				Level 2					Level 3
December 31,	March 31,					December 31,	March 31,			December 31,		March 31,			December 31,		March 31,
Assets:
Cash and cash equivalents		$	195,585	$	208,357			$	195,585	$	208,357		$	—	$	—		$	—	$	—
Forward and swap contracts (1)		742		378				—		—			742		378			—		—
Equity investments(2)		8,099		7,069				8,099		7,069			—		—			—		—
Other investments		2,919		2,066				2,919		2,066			—		—			—		—

Liabilities:
Forward and swap contracts (1)		$	1,701	$	2,054			$	—	$	—		$	1,701	$	2,054		$	—	$	—
Deferred compensation plans (2)		1,082		1,022				1,082		1,022			—		—			—		—
Debt (3)		3,309,513		3,078,655				—		—			3,039,581		2,754,218			—		—
Contingent consideration obligations (4)		10,801		15,678				—		—			—		—			10,801		15,678

(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 and miscellaneous (income) expense" line of the Consolidated Statements of Income (Loss). During the third quarter and first nine months of fiscal 2024, we recorded gains of $881 and $1,019, respectively, related to these investments. During the third quarter and first nine months of fiscal 2023, we recorded (losses) gains of $(342) and $1,385,respectively, related to these investments.

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

(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 (Unaudited)—(Continued)

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis at December 31, 2023 are summarized as follows:


	Contingent Consideration
Balance at March 31, 2023	$	15,678
Additions	1,087
Payments	(5,947)

Currency translation adjustments	(17)

Balance at December 31, 2023	$	10,801

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

16. Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

Amounts in Accumulated Other Comprehensive Income (Loss) are presented net of the related tax. Currency Translation is not adjusted for income taxes. Changes in our Accumulated Other Comprehensive Income (Loss) balances, net of tax, for the three and nine months ended December 31, 2023 and 2022 were as follows:


	Defined Benefit Plans (1)				Currency Translation (2)				Total Accumulated Other Comprehensive Loss
	Three Months		Nine Months		Three Months		Nine Months		Three Months		Nine Months
Beginning Balance	$	129	$	12	$	(386,864)	$	(320,722)	$	(386,735)	$	(320,710)
Other Comprehensive Income (Loss) before reclassifications	408		1,160		134,048		67,906		134,456		69,066
Amounts reclassified from Accumulated Other Comprehensive Loss	(350)		(985)		—		—		(350)		(985)
Net current-period Other Comprehensive Income (Loss)	58		175		134,048		67,906		134,106		68,081
Balance at December 31, 2023	$	187	$	187	$	(252,816)	$	(252,816)	$	(252,629)	$	(252,629)

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

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


	Defined Benefit Plans (1)				Currency Translation (2)				Total Accumulated Other Comprehensive Loss
	Three Months		Nine Months		Three Months		Nine Months		Three Months		Nine Months
Beginning Balance	$	1,332	$	1,276	$	(599,480)	$	(211,084)	$	(598,148)	$	(209,808)
Other Comprehensive Income (Loss) before reclassifications	138		431		233,958		(154,438)		234,096		(154,007)
Amounts reclassified from Accumulated Other Comprehensive Loss	(111)		(348)		—		—		(111)		(348)
Net current-period Other Comprehensive Income (Loss)	27		83		233,958		(154,438)		233,985		(154,355)
Balance at December 31, 2022	$	1,359	$	1,359	$	(365,522)	$	(365,522)	$	(364,163)	$	(364,163)

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

STERIS PLC AND SUBSIDIARIES

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

For the Three and Nine Months Ended December 31, 2023 and 2022

(dollars in thousands, except as noted)

17. Goodwill and Intangible Assets

Changes to the carrying amount of goodwill for the nine months ended December 31, 2023 and 2022 are as follows:


	Healthcare Segment		Life Sciences Segment		AST Segment		Dental Segment		Total
Balance at March 31, 2023	$	2,301,273	$	181,812	$	1,396,134	$	—	$	3,879,219
Goodwill acquired	202,399		—		—		—		202,399
Measurement period adjustments to acquired goodwill (1)	(7,805)		—		—		—		(7,805)


Foreign currency translation adjustments	12,244		2,135		23,491		—		37,870
Balance at December 31, 2023	$	2,508,111	$	183,947	$	1,419,625	$	—	$	4,111,683


	Healthcare Segment		Life Sciences Segment		AST Segment		Dental Segment		Total
Balance at March 31, 2022	$	2,326,830	$	179,288	$	1,432,858	$	465,367	$	4,404,343
Goodwill acquired	10,753		—		—		—		10,753
Measurement period adjustments to acquired goodwill (1)	(21,624)		3,147		—		40,565		22,088
Impairment	—		—		—		(490,565)		(490,565)
Divestiture	(2,358)		—		—		—		(2,358)
Foreign currency translation adjustments	(18,157)		(1,073)		(56,655)		(15,367)		(91,252)
Balance at December 31, 2022	$	2,295,444	$	181,362	$	1,376,203	$	—	$	3,853,009

Measurement period adjustments represent adjustments to the purchase price allocations for recent acquisitions whose allocations had been considered preliminary.

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

We evaluate the recoverability of recorded goodwill and indefinite-lived intangible assets annually during the third fiscal quarter, or when indicators of potential impairment exist. Our goodwill is assessed at the reporting unit level which is equivalent to the Company's reportable operating segments.

As of the period ended December 31, 2023, there were no indicators that impairment of goodwill or indefinite-lived intangible assets was more likely than not. In the prior year period, we recorded a goodwill impairment charge of $490,565 related to our Dental segment. For more information regarding the goodwill impairment loss, refer to our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.

Identifiable intangible assets are reviewed for impairment when events 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 conduct this review on an ongoing basis, and, if impairment exists, we record the loss in the Consolidated Statements of Income during that period.

When we evaluate these assets for impairment, we make certain judgments and estimates, including interpreting current economic indicators and market valuations, evaluating our strategic plans with regards to operations, historical and anticipated performance of operations, and other factors. It is possible that unfavorable developments related to these factors in the near term could result in an impairment loss relative to intangible assets. Such an impairment loss may be material to our results of operations in the period recorded.

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of STERIS plc

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of STERIS plc and subsidiaries (the Company) as of December 31, 2023, the related consolidated statements of income (loss), comprehensive income (loss) and shareholders’ equity for the three- and nine- month periods ended December 31, 2023 and 2022 and the consolidated statement of cash flows for the nine- month periods ended December 31, 2023 and 2022, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of March 31, 2023, the related consolidated statements of income, comprehensive income (loss), shareholders' equity and cash flows for the year then ended, and the related notes and schedule (not presented herein); and in our report dated May 26, 2023, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of March 31, 2023, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company's management. 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 SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Ernst & Young LLP

Cleveland, Ohio

February 8, 2024

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