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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to
Commission file number   001-39729
soterahealth_v_clr_rgb_RegisteredMark.jpg
SOTERA HEALTH COMPANY
(Exact name of registrant as specified in its charter)
Delaware47-3531161
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
9100 South Hills Blvd, Suite 300
Broadview Heights, Ohio
44147
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code
(440)
262-1410
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareSHCThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No
As of April 25, 2024, there were 283,070,826 shares of the registrant’s common stock, $0.01 par value per share, outstanding.


SOTERA HEALTH COMPANY
- TABLE OF CONTENTS -


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often characterized by the use of words such as “believes,” “estimates,” “expects,” “projects,” “may,” “intends,” “plans” or “anticipates,” or by discussions of strategy, plans or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance, achievements, or industry results, to differ materially from historical results or any future results, performance or achievements expressed, suggested or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to:
a disruption in the availability or supply of, or increases in the price of, ethylene oxide (“EO”), Cobalt-60 (“Co-60”) or our other direct materials, services and supplies, including as a result of geopolitical instability and/or sanctions against Russia by the United States, Canada, United Kingdom and/or the European Union;
fluctuations in foreign currency exchange rates;
changes in environmental, health and safety regulations or preferences, and general economic, social and business conditions;
health and safety risks associated with the use, storage, transportation and disposal of potentially hazardous materials such as EO and Co-60;
the impact and outcome of current and future legal proceedings and liability claims, including litigation related to the use, emissions and releases of EO from our facilities in California, Georgia, Illinois and New Mexico and the possibility that additional claims will be made in the future relating to these or other facilities;
allegations of our failure to properly perform services and potential product liability claims, recalls, penalties and reputational harm;
compliance with the extensive regulatory requirements to which we are subject, the related costs, and any failures to receive or maintain, or delays in receiving, required clearances or approvals;
adverse changes in industry trends;
competition we face;
market changes, including inflationary trends, that impact our long-term supply contracts with variable price clauses and increase our cost of revenues;
business continuity hazards, including supply chain disruptions and other risks associated with our operations;
the risks of doing business internationally, including global and regional economic and political instability and compliance with numerous laws and sometimes inconsistent laws and regulations in multiple jurisdictions;
our ability to increase capacity at existing facilities, build new facilities in a timely and cost-effective manner and renew leases for our leased facilities;
our ability to attract and retain qualified employees;
severe health events or environmental events;
cybersecurity breaches, unauthorized data disclosures, and our dependence on information technology systems;
an inability to pursue strategic transactions, find suitable acquisition targets, or integrate strategic acquisitions into our business successfully;
our ability to maintain effective internal controls over financial reporting;
our reliance on intellectual property to maintain our competitive position and the risk of claims from third parties that we have infringed or misappropriated, or are infringing or misappropriating, their intellectual property rights;
our ability to comply with rapidly evolving data privacy and security laws and regulations in various jurisdictions and any ineffective compliance efforts with such laws and regulations;
our ability to maintain profitability in the future;
impairment charges on our goodwill and other intangible assets with indefinite lives, as well as other long-lived assets and intangible assets with definite lives;
the effects of unionization efforts and labor regulations in countries in which we operate;
adverse changes to our tax positions in U.S. or non-U.S. jurisdictions or the interpretation and application of recent U.S. tax legislation or other changes in U.S. or non-U.S. taxation of our operations; and
our significant leverage and how this significant leverage could adversely affect our ability to raise additional capital, limit our ability to react to challenges confronting our Company or broader changes in our industry or the economy, limit our flexibility in operating our business through restrictions contained in our debt agreements and/or prevent us from meeting our obligations under our existing and future indebtedness.
3

These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them publicly in light of new information or future events, except as required by law. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved.
You should carefully consider the above factors, as well as the factors discussed elsewhere in this Quarterly Report on Form 10-Q, including under Part II, Item 1A, “Risk Factors,” as well as Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 10-K”). If any of these trends, risks or uncertainties actually occur or continue, our business, financial condition or operating results could be materially adversely affected, the trading prices of our securities could decline and you could lose all or part of your investment. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.
Unless expressly indicated or the context requires otherwise, the terms “Sotera Health,” “Company,” “we,” “us,” and “our” in this document refer to Sotera Health Company, a Delaware corporation, and, where appropriate, its subsidiaries on a consolidated basis.
4

Part I—FINANCIAL INFORMATION
Item 1. Financial Statements
Sotera Health Company
Consolidated Balance Sheets
(in thousands, except per share amounts)
As of
March 31, 2024December 31, 2023
Assets(Unaudited)
Current assets:
Cash and cash equivalents$261,133 $296,407 
Restricted cash short-term1,687 5,247 
Accounts receivable, net of allowance for uncollectible accounts of $3,925 and $4,689, respectively
111,069 147,696 
Inventories, net51,342 48,316 
Prepaid expenses and other current assets53,663 53,846 
Income taxes receivable8,285 5,732 
Total current assets487,179 557,244 
Property, plant, and equipment, net979,422 946,914 
Operating lease assets22,517 24,037 
Deferred income taxes4,883 4,993 
Post-retirement assets29,502 28,482 
Other assets42,881 41,242 
Other intangible assets, net390,457 416,318 
Goodwill1,102,851 1,111,190 
Total assets$3,059,692 $3,130,420 
Liabilities and equity
Current liabilities:
Accounts payable$61,576 $71,039 
Accrued liabilities61,774 122,471 
Deferred revenue12,882 13,492 
Current portion of long-term debt4,808 4,797 
Current portion of finance lease obligations1,490 8,771 
Current portion of operating lease obligations5,303 5,934 
Income taxes payable4,507 4,150 
Total current liabilities152,340 230,654 
Long-term debt, less current portion2,224,611 2,223,674 
Finance lease obligations, less current portion90,858 63,793 
Operating lease obligations, less current portion19,132 20,087 
Noncurrent asset retirement obligations48,021 47,944 
Deferred lease income18,223 18,762 
Post-retirement obligations8,235 8,439 
Noncurrent liabilities8,728 8,879 
Deferred income taxes60,152 64,454 
Total liabilities2,630,300 2,686,686 
See Commitments and contingencies note
Equity:
Common stock, with $0.01 par value, 1,200,000 shares authorized; 286,037 shares issued at March 31, 2024 and December 31, 2023
2,860 2,860 
Preferred stock, with $0.01 par value, 120,000 authorized; no shares issued at March 31, 2024 and
December 31, 2023
  
Treasury stock, at cost (2,966 and 3,207 shares at March 31, 2024 and December 31, 2023, respectively)
(26,042)(27,182)
Additional paid-in capital1,220,547 1,215,178 
Retained deficit(648,117)(654,440)
Accumulated other comprehensive loss(119,856)(92,682)
Total equity429,392 443,734 
Total liabilities and equity$3,059,692 $3,130,420 
See notes to consolidated financial statements.
5

Sotera Health Company
Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per share amounts)
Three Months Ended March 31,
20242023
(Unaudited)
Revenues:
Service$226,481 $214,510 
Product21,695 6,080 
Total net revenues248,176 220,590 
Cost of revenues:
Service110,852 104,210 
Product10,209 4,877 
Total cost of revenues121,061 109,087 
Gross profit127,115 111,503 
Operating expenses:
Selling, general and administrative expenses58,209 61,910 
Amortization of intangible assets15,732 16,227 
Total operating expenses73,941 78,137 
Operating income53,174 33,366 
Interest expense, net41,771 28,870 
Foreign exchange (gain) loss
(572)347 
Other expense (income), net961 (1,253)
Income before income taxes11,014 5,402 
Provision for income taxes4,691 2,560 
Net income6,323 2,842 
Other comprehensive income (loss) net of tax:
Pension and post-retirement benefits (net of taxes of $37 and $(17), respectively)
113 (51)
Interest rate derivatives (net of taxes of $146 and $(3,396), respectively)
419 (9,251)
Foreign currency translation(27,706)11,257 
Comprehensive (loss) income$(20,851)$4,797 
Earnings per share:
Basic$0.02 $0.01 
Diluted0.02 0.01 
Weighted average number of shares outstanding:
Basic281,913 280,691 
Diluted284,062 282,977 
See notes to consolidated financial statements.
6

Sotera Health Company
Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended March 31,
20242023
(Unaudited)
Operating activities:
Net income$6,323 $2,842 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation20,306 18,931 
Amortization of intangible assets20,124 20,607 
Deferred income taxes(3,441)(1,770)
Share-based compensation expense8,663 7,288 
Accretion of asset retirement obligations642 572 
Unrealized foreign exchange (gain) loss
(5,061)802 
Unrealized loss on derivatives not designated as hedging instruments
1,833 227 
Amortization of debt issuance costs2,535 1,910 
Other(998)(1,328)
Changes in operating assets and liabilities:
Accounts receivable40,569 10,223 
Inventories(4,052)(9,512)
Other current assets(250)(6,318)
Accounts payable(7,280)(9,610)
Accrued liabilities(31,006)8,826 
Georgia EO litigation settlement
(35,000) 
Income taxes payable / receivable, net(1,808)(9,551)
Other liabilities(176)(372)
Other long-term assets(2,224)104 
Net cash provided by operating activities9,699 33,871 
Investing activities:
Purchases of property, plant and equipment(34,890)(45,000)
Other investing activities37 32 
Net cash used in investing activities(34,853)(44,968)
Financing activities:
Proceeds from long-term borrowings 500,000 
Payment on long-term borrowings(1,250) 
Payment on revolving credit facility (200,000)
Payments of debt issuance costs(1,291)(24,457)
Buyout of leased facilities(6,736) 
Other financing activities(2,664)(1,627)
Net cash (used in) provided by financing activities(11,941)273,916 
Effect of exchange rate changes on cash and cash equivalents(1,739)1,067 
Net (decrease) increase in cash and cash equivalents, including restricted cash
(38,834)263,886 
Cash and cash equivalents, including restricted cash, at beginning of period301,654 396,294 
Cash and cash equivalents, including restricted cash, at end of period$262,820 $660,180 
Supplemental disclosures of cash flow information:
Cash paid during the period for interest$69,735 $35,456 
Cash paid during the period for income taxes, net of tax refunds received9,837 14,014 
Purchases of property, plant and equipment included in accounts payable15,454 13,061 
See notes to consolidated financial statements.
7

Sotera Health Company
Consolidated Statements of Equity
(in thousands)
(Unaudited)
Shares
Amount
Amount
Additional
Paid-In
Capital
Retained
Earnings /
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
(Loss) Income
Total
Equity
Common
Stock
Common
Stock
Treasury
Stock
Balance at December 31, 2022282,421 $2,860 $(29,775)$1,189,622 $(705,816)$(106,653)$350,238 
Share-based compensation plans95 — 355 5,735 — — 6,090 
Comprehensive income (loss):
Pension and post-retirement plan adjustments, net of tax— — — — — (51)(51)
Foreign currency translation— — — — — 11,257 11,257 
Interest rate derivatives, net of tax— — — — — (9,251)(9,251)
Net income— — — — 2,842 — 2,842
Balance at March 31, 2023282,516 $2,860 $(29,420)$1,195,357 $(702,974)$(104,698)$361,125 
Shares
Amount
Amount
Additional
Paid-In
Capital
Retained
Earnings /
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
(Loss) Income
Total
Equity
Common
Stock
Common
Stock
Treasury
Stock
Balance at December 31, 2023282,830 $2,860 $(27,182)$1,215,178 $(654,440)$(92,682)$443,734 
Share-based compensation plans241 — 1,140 5,369 — — 6,509 
Comprehensive income (loss):
Pension and post-retirement plan adjustments, net of tax— — — — — 113 113 
Foreign currency translation— — — — — (27,706)(27,706)
Interest rate derivatives, net of tax— — — — — 419 419 
Net income— — — — 6,323 — 6,323
Balance at March 31, 2024283,071 $2,860 $(26,042)$1,220,547 $(648,117)$(119,856)$429,392 
See notes to consolidated financial statements.
8

Sotera Health Company
Notes to Consolidated Financial Statements

1.Basis of Presentation
Principles of Consolidation – Sotera Health Company (also referred to herein as the “Company,” “we,” “our,” “us” or “its”), is a leading global provider of mission-critical end-to-end sterilization solutions, lab testing and advisory services for the healthcare industry with operations primarily in the Americas, Europe and Asia.
We operate and report in three segments: Sterigenics, Nordion and Nelson Labs. We describe our reportable segments in Note 16, “Segment Information”. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates – In preparing our consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”), we make estimates and assumptions that affect the amounts reported and the accompanying notes. We regularly evaluate the estimates and assumptions used and revise them as new information becomes available. Actual results may vary from those estimates.
Interim Financial Statements – The accompanying consolidated financial statements include the assets, liabilities, operating results, and cash flows of the Company and its wholly owned subsidiaries. These financial statements are prepared in accordance with 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. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These unaudited interim financial statements should be read in conjunction with the Company's annual consolidated financial statements and accompanying notes in our 2023 10-K.
2.Recent Accounting Standards
Accounting Standards Updates (“ASU”) Issued But Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07-Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in ASU 2023-07 require an entity to provide enhanced disclosures about significant segment expenses. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is in the process of evaluating the impact of this standard on our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09-Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU require entities to disclose, on an annual basis, specific categories in the reconciliation of the provision (benefit) for income taxes to the statutory rate and provide additional information for reconciling items that meet a quantitative threshold. Additionally, the update requires entities to disclose a disaggregation of taxes paid by category (federal, state and foreign taxes) as well as individual jurisdictions. For public business entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2024. The Company is in the process of evaluating the impact of this standard on our consolidated financial statements and disclosures.
3.Revenue Recognition
The following table shows disaggregated net revenues from contracts with external customers by timing of revenue and by segment for the three months ended March 31, 2024 and 2023:
(thousands of U.S. dollars)Three Months Ended March 31, 2024
SterigenicsNordionNelson LabsConsolidated
Point in time$166,497 $23,051 $ $189,548 
Over time 956 57,672 58,628 
Total$166,497 $24,007 $57,672 $248,176 
9

Sotera Health Company
Notes to Consolidated Financial Statements
(thousands of U.S. dollars)Three Months Ended March 31, 2023
SterigenicsNordionNelson LabsConsolidated
Point in time$159,997 $7,588 $ $167,585 
Over time 963 52,042 53,005 
Total$159,997 $8,551 $52,042 $220,590 
When we receive consideration from a customer prior to transferring goods or services under the terms of a sales contract, we record deferred revenue, which represents a contract liability. Deferred revenue totaled $12.9 million and $13.5 million at March 31, 2024 and December 31, 2023, respectively. We recognize deferred revenue after we have transferred control of the goods or services to the customer and all revenue recognition criteria are met.
4.Inventories
Inventories consisted of the following:
(thousands of U.S. dollars)
March 31, 2024December 31, 2023
Raw materials and supplies$41,436 $43,411 
Work-in-process3,008 471 
Finished goods7,129 4,670 
51,573 48,552 
Reserve for excess and obsolete inventory(231)(236)
Inventories, net$51,342 $48,316 
5.Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
(thousands of U.S. dollars)
March 31, 2024December 31, 2023
Prepaid taxes$3,717 $4,129 
Prepaid business insurance6,261 7,174 
Prepaid rent1,193 1,150 
Customer contract assets18,550 17,785 
Current deposits416 715 
Prepaid maintenance contracts448 422 
Value added tax receivable3,549 4,306 
Prepaid software licensing2,265 2,503 
Stock supplies3,754 3,669 
Embedded derivative assets1,667 1,225 
Other11,843 10,768 
Prepaid expenses and other current assets$53,663 $53,846 
6.Goodwill and Other Intangible Assets
Changes to goodwill during the three months ended March 31, 2024 were as follows:
10

Sotera Health Company
Notes to Consolidated Financial Statements
(thousands of U.S. dollars)SterigenicsNordionNelson LabsTotal
Goodwill at December 31, 2023$659,888 $276,929 $174,373 $1,111,190 
Changes due to foreign currency exchange rates(1,682)(5,903)(754)(8,339)
Goodwill at March 31, 2024$658,206 $271,026 $173,619 $1,102,851 
Other intangible assets consisted of the following:
(thousands of U.S. dollars)
Gross Carrying
Amount
Accumulated
Amortization
As of March 31, 2024
Finite-lived intangible assets
Customer relationships$654,734 $498,395 
Proprietary technology83,975 58,095 
Trade names2,562 1,321 
Land-use rights8,583 1,871 
Sealed source and supply agreements204,435 108,302 
Other4,470 3,096 
Total finite-lived intangible assets958,759 671,080 
Indefinite-lived intangible assets
Regulatory licenses and other(a)
76,995 — 
Trade names / trademarks25,783 — 
Total indefinite-lived intangible assets102,778 — 
Total$1,061,537 $671,080 
As of December 31, 2023
Gross Carrying
Amount
Accumulated
Amortization
Finite-lived intangible assets
Customer relationships$657,673 $485,188 
Proprietary technology84,918 56,846 
Trade names2,567 1,207 
Land-use rights8,756 1,855 
Sealed source and supply agreements208,919 107,561 
Other4,517 2,905 
Total finite-lived intangible assets967,350 655,562 
Indefinite-lived intangible assets
Regulatory licenses and other(a)
78,684 — 
Trade names / trademarks25,846 — 
Total indefinite-lived intangible assets104,530 — 
Total$1,071,880 $655,562 
(a)Includes certain transportation certifications, a class 1B nuclear license and other intangibles related to obtaining such licensure. These assets are considered indefinite-lived as the decision for renewal by the Canadian Nuclear Safety Commission is highly based on a licensee’s previous assessments, reported incidents, and annual compliance and inspection results. New applications for license can take a significant amount of time and cost; whereas an existing licensee with a historical record of compliance and current operating conditions more than likely ensures renewal for another 10-year license period as Nordion has demonstrated over its 75 years of history.
11

Sotera Health Company
Notes to Consolidated Financial Statements
Amounts include the impact of foreign currency translation. Fully amortized amounts are written off.
Amortization expense for finite-lived intangible assets was $20.1 million and $20.6 million for the three months ended March 31, 2024 and 2023, respectively. $15.7 million and $16.2 million was included in “Amortization of intangible assets” in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2024 and 2023, respectively, whereas the remainder was included in “Cost of revenues.”
The estimated aggregate amortization expense for finite-lived intangible assets for each of the next five years and thereafter is as follows:
(thousands of U.S. dollars)
For the remainder of 2024$59,479 
202542,349 
202622,197 
202721,120 
202820,572 
Thereafter121,962 
Total$287,679 
The weighted-average remaining useful life of the finite-lived intangible assets was approximately 9 years as of March 31, 2024.
7.Accrued Liabilities
Accrued liabilities consisted of the following:
(thousands of U.S. dollars)
March 31, 2024December 31, 2023
Accrued employee compensation$26,450 $35,037 
Georgia EO litigation settlement reserve 35,000 
Illinois EO litigation settlement reserve 288 
Other legal reserves460 1,480 
Accrued interest expense2,624 26,681 
Embedded derivatives2,698 414 
Professional fees18,143 12,691 
Accrued utilities2,208 2,056 
Insurance accrual3,336 2,922 
Accrued taxes2,605 2,407 
Other3,250 3,495 
Accrued liabilities$61,774 $122,471 
12

Sotera Health Company
Notes to Consolidated Financial Statements
8.Long-Term Debt
Long-term debt consisted of the following:
(thousands of U.S. dollars)
As of March 31, 2024Gross AmountUnamortized Debt Issuance CostsUnamortized Debt DiscountNet Amount
Term loan, due 2026$1,763,100 $(1,472)$(9,439)$1,752,189 
Term loan B, due 2026496,250 (7,197)(11,823)477,230 
2,259,350 (8,669)(21,262)2,229,419 
Less current portion5,000 (73)(119)4,808 
Long-term debt$2,254,350 $(8,596)$(21,143)$2,224,611 
(thousands of U.S. dollars)
As of December 31, 2023Gross AmountUnamortized Debt Issuance CostsUnamortized Debt DiscountNet Amount
Term loan, due 2026$1,763,100 $(1,606)$(10,298)$1,751,196 
Term loan B, due 2026497,500 (7,616)(12,609)477,275 
2,260,600 (9,222)(22,907)2,228,471 
Less current portion5,000 (76)(127)4,797 
Long-term debt$2,255,600 $(9,146)$(22,780)$2,223,674 
Debt Facilities
Senior Secured Credit Facilities
On December 13, 2019, Sotera Health Holdings, LLC (“SHH”), our wholly-owned subsidiary, entered into senior secured first lien credit facilities (the “Senior Secured Credit Facilities”), consisting of both a prepayable senior secured first lien term loan (the “Term Loan”) and a senior secured first lien revolving credit facility (the “Revolving Credit Facility”) pursuant to a first lien credit agreement (the “Credit Agreement”). The Term Loan matures on June 13, 2026. The total borrowing capacity under the Revolving Credit Facility is $423.8 million. The Senior Secured Credit Facilities also provide SHH the right at any time and under certain conditions to request incremental term loans or incremental revolving credit commitments based on a formula defined in the Senior Secured Credit Facilities. As of March 31, 2024 and December 31, 2023, total borrowings under the Term Loan were $1,763.1 million. The weighted average interest rate on borrowings under the Term Loan for the three months ended March 31, 2024 and March 31, 2023 was 8.26% and 7.44%, respectively.
On March 1, 2024, the Company and SHH entered into Amendment No. 3 (“Amendment No. 3”) to the Revolving Credit Facility. Among other changes, the Amendment provides (i) for new commitments under the existing Revolving Credit Facility to replace existing revolving commitments in an aggregate principal amount of $83.0 million, (ii) that certain of the lenders providing revolving credit commitments shall also provide additional commitments for the issuance of letters of credit under the Revolving Credit Facility in an aggregate principal amount of $37.5 million and (iii) for the extension of the maturity date of the Revolving Credit Facility to the earlier of (a) March 1, 2029, and (b) the date that is 91 days prior to the maturity date of the Company’s existing term loans.
Amendment No. 3 does not give effect to any other material changes to the terms and conditions of the Credit Agreement, including with respect to the amount of commitments under the Revolving Credit Facility, which remains $423.8 million, the representations and warranties, events of default, affirmative or negative covenants.
On February 23, 2023, we entered into the First Lien Credit Agreement (the “2023 Credit Agreement”), which provides for, among other things, a new Term Loan B facility (the “2023 Term Loan”) in an aggregate principal amount of $500.0 million and bears interest, at the Company’s option, at a variable rate per annum equal to either (x) the Term Secured Overnight Financing Rate (“Term SOFR”) (as defined in the 2023 Credit Agreement) plus an applicable margin of 3.75% or (y) an alternative base rate (“ABR”) plus an applicable margin of 2.75%. The 2023 Credit Agreement is secured on a first priority basis by substantially all of our assets and is guaranteed by certain of our subsidiaries. It is prepayable without premium or
13

Sotera Health Company
Notes to Consolidated Financial Statements
penalty at any time six months after the closing date. The principal balance shall be paid at 1% of the aggregate principal amount ($5.0 million) per year, with the balance due at the end of 2026. The Company used the proceeds of the 2023 Term Loan to fund a previously announced $408.0 million EO litigation settlement in Cook County, Illinois and pay down the $200.0 million of existing borrowings under the Revolving Credit Facility concurrent with the funding of the 2023 Term Loan on February 23, 2023. The Company utilized the remaining proceeds to further enhance liquidity and for general corporate purposes. The weighted average interest rate on borrowings under the 2023 Term Loan for the three months ended March 31, 2024 and the three months ended March 31, 2023 was 9.09% and 8.82%, respectively.
On March 21, 2023, the Company entered into an Incremental Facility Amendment to the First Lien Credit Agreement (“Revolving Credit Facility Amendment”), which provides for an increase in the commitments under the existing Revolving Credit Facility in an aggregate principal amount of $76.3 million. In addition, certain of the lenders providing revolving credit commitments provided additional commitments for the issuance of the letters of credit under the Revolving Credit Facility in an aggregate principal amount of $165.1 million. The Revolving Credit Facility Amendment also provides for the replacement of the reference interest rate option for Revolving Loans from London Interbank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”) plus an applicable credit spread adjustment of 0.10% (subject to a minimum floor of 0%). After giving effect to the Revolving Credit Facility Amendment, the aggregate amount of the lenders' revolving commitments is $423.8 million. As of March 31, 2024 there were no borrowings outstanding under the Revolving Credit Facility.
The Senior Secured Credit Facilities and 2023 Credit Agreement contain additional covenants that, among other things, restrict, subject to certain exceptions, our ability and the ability of our restricted subsidiaries to engage in certain activities, such as incur indebtedness or permit to exist any lien on any property or asset now owned or hereafter acquired, as specified in the Senior Secured Credit Facilities and 2023 Credit Agreement. The Senior Secured Credit Facilities and 2023 Credit Agreement also contain certain customary affirmative covenants and events of default, including upon a change of control. An event of default under the Senior Secured Credit Facilities and 2023 Credit Agreement would occur if the Company or certain of its subsidiaries received one or more enforceable judgments for payment in an aggregate amount in excess of $100.0 million and the judgments were not stayed or remained undischarged for a period of sixty consecutive days or if, to enforce such judgments, a judgment creditor were to attach liens upon assets that are material to the business and operations of the Company and certain of its subsidiaries as a whole. As of March 31, 2024, we were in compliance with all of the Senior Secured Credit Facilities and 2023 Credit Agreement covenants.

All of SHH’s obligations under the Senior Secured Credit Facilities and 2023 Credit Agreement are unconditionally guaranteed by the Company and each existing and subsequently acquired or organized direct or indirect wholly-owned domestic restricted subsidiary of the Company, with customary exceptions including, among other things, where providing such guarantees is not permitted by law, regulation or contract or would result in material adverse tax consequences. All obligations under the Senior Secured Credit Facilities and 2023 Credit Agreement, and the guarantees of such obligations, are secured by substantially all assets of the borrower and guarantors, subject to permitted liens and other exceptions and exclusions, as outlined in the Senior Secured Credit Facilities and 2023 Credit Agreement.
Outstanding letters of credit are collateralized by encumbrances against the Revolving Credit Facility and the collateral pledged thereunder, or by cash placed on deposit with the issuing bank. As of March 31, 2024, the Company had $23.7 million of letters of credit issued against the Revolving Credit Facility, resulting in total availability under the Revolving Credit Facility of $400.1 million.
Term Loan Interest Rate Risk Management
The Company utilizes interest rate derivatives to reduce the variability of cash flows in the interest payments associated with our variable rate debt due to changes in SOFR. For additional information on the derivative instruments described above, refer to Note 15, “Financial Instruments and Financial Risk”, “Derivative Instruments.”
14

Sotera Health Company
Notes to Consolidated Financial Statements
Aggregate Maturities
Aggregate maturities of the Company’s long-term debt, excluding debt discounts, as of March 31, 2024, are as follows:

(thousands of U.S. dollars)
20243,750 
20255,000 
20262,250,600 
2027 
2028
 
Thereafter 
Total$2,259,350 
9.Income Taxes
Income tax expense is provided on an interim basis based upon our estimate of the annual effective income tax rate. In determining the estimated annual effective income tax rate, we analyze various factors, including projections of our annual earnings and the taxing jurisdictions where the earnings will occur, the impact of state and local taxes, our ability to utilize tax credits and net operating loss carryforwards and available tax planning alternatives.

Our effective tax rate was 42.6% and 47.4% for the three months ended March 31, 2024 and 2023, respectively. Income tax expense for the three months ended March 31, 2024 differed from the statutory rate primarily due to a net increase in the valuation allowance attributable to the limitation on the deductibility of interest expense and the impact of the foreign rate differential, partially offset by a benefit for state income taxes. Income tax expense for the three months ended March 31, 2023 differed from the statutory rate primarily due to a net increase in the valuation allowance attributable to the limitation on the deductibility of interest expense, the impact of the foreign rate differential and non-deductible compensation.
10.Employee Benefits
The Company sponsors various post-employment benefit plans including, in certain countries outside the U.S., defined benefit and defined contribution pension plans, retirement compensation arrangements, and plans that provide extended health care coverage to retired employees, the majority of which relate to Nordion.
Defined benefit pension plan
The following defined benefit pension plan disclosure relates to Nordion. Certain immaterial foreign defined benefit pension plans have been excluded from the table below. The interest cost, expected return on plan assets and amortization of net actuarial gain are recorded in “Other expense (income), net” and the service cost component is included in the same financial statement line item as the applicable employee’s wages in the Consolidated Statements of Operations and Comprehensive Income (Loss). The components of net periodic pension benefit for the defined benefit plans for the three months ended March 31, 2024 and 2023 were as follows:
Three Months Ended
(thousands of U.S. dollars)March 31,
2024
March 31,
2023
Service cost$145 $131 
Interest cost2,651 2,724 
Expected return on plan assets(4,019)(4,019)
Net periodic benefit$(1,223)$(1,164)
15

Sotera Health Company
Notes to Consolidated Financial Statements
Other benefit plans
Other benefit plans disclosed below relate to Nordion and include a supplemental retirement arrangement, a retirement and termination allowance, and post-retirement benefit plans, which include contributory health and dental care benefits and contributory life insurance coverage. Certain immaterial other foreign benefit plans have been excluded from the table below. All non-pension post-employment benefit plans are unfunded. The components of net periodic pension cost for the other benefit plans for the three months ended March 31, 2024 and 2023 were as follows:
Three Months Ended
(thousands of U.S. dollars)March 31,
2024
March 31,
2023
Service cost$3 $2 
Interest cost86 90 
Amortization of net actuarial gain(33)(44)
Net periodic benefit cost$56 $48 
The Company currently has no funding requirements as the Nordion pension plan has a going concern surplus as defined by Canadian federal regulation, which requires solvency testing on defined benefit pension plans on an annual basis.
The Company may obtain a qualifying letter of credit for solvency payments, up to 15% of the market value of solvency liabilities as determined on the valuation date, instead of paying cash into the pension fund. As of March 31, 2024 and December 31, 2023, we had letters of credit outstanding relating to the defined benefit plans totaling $16.0 million. The actual funding requirements over the five-year period will be dependent on subsequent annual actuarial valuations. These amounts are estimates, which may change with actual investment performance, changes in interest rates, any pertinent changes in Canadian government regulations and any voluntary contributions.
11.Other Comprehensive Income (Loss)
Amounts in accumulated other comprehensive income (loss) are presented net of the related tax. Foreign currency translation is not adjusted for income taxes.
Changes in our accumulated other comprehensive income (loss) balances, net of applicable tax, were as follows:
(thousands of U.S. dollars)
Defined
Benefit
Plans
Foreign
Currency
Translation
Interest
Rate
Derivatives
Total
Beginning balance – January 1, 2024$(7,297)$(91,031)$5,646 $(92,682)
Other comprehensive income (loss) before
reclassifications
146 (27,706)4,051 (23,509)
Amounts reclassified from accumulated other
comprehensive income (loss)
(33)
(a)
 (3,632)
(b)
(3,665)
Net current-period other comprehensive income (loss)113 (27,706)419 (27,174)
Ending balance – March 31, 2024$(7,184)$(118,737)$6,065 $(119,856)
Beginning balance – January 1, 2023$3,209 $(131,205)$21,343 $(106,653)
Other comprehensive income (loss) before
reclassifications
(7)11,257 (2,493)8,757 
Amounts reclassified from accumulated other
comprehensive income (loss)
(44)
(a)
 (6,758)
(b)
(6,802)
Net current-period other comprehensive income (loss)(51)11,257 (9,251)1,955 
Ending balance – March 31, 2023$3,158 $(119,948)$12,092 $(104,698)
16

Sotera Health Company
Notes to Consolidated Financial Statements
(a)For defined benefit pension plans, amounts reclassified from accumulated other comprehensive income (loss) are recorded to “Other expense (income), net” within the Consolidated Statements of Operations and Comprehensive Income (Loss).
(b)For interest rate derivatives, amounts reclassified from accumulated other comprehensive income (loss) are recorded to “Interest expense, net” within the Consolidated Statements of Operations and Comprehensive Income (Loss).
12.Share-Based Compensation
Pre-IPO Awards

Restricted stock distributed in respect of pre-IPO Class B-1 time vesting units vests on a daily basis pro rata over a five-year vesting period (20% per year) beginning on the original vesting commencement date of the corresponding Class B-1 time vesting units, subject to the grantee’s continued services through each vesting date. Upon the occurrence of a change in control of the Company, all then-outstanding unvested shares of our common stock distributed in respect of Class B-1 Units will vest as of the date of consummation of such change in control, subject to the grantee’s continued services through the consummation of the change in control.
Restricted stock distributed in respect of pre-IPO Class B-2 Units were considered performance vesting units. The required performance threshold for the vesting of B-2 restricted stock is the first date on which (i) our Sponsors have received actual cash proceeds in an amount equal to or in excess of at least two and one-half times their invested capital in Sotera Health Topco Parent, L.P. (of which the Company was a direct wholly owned subsidiary prior to the IPO) and (ii) the Sponsors’ internal rate of return exceeds 20%, subject to such grantee’s continued services through such date. Both performance thresholds were satisfied on March 4, 2024 and, as a result, all outstanding B-2 Units fully vested as of that date. Stock based compensation expense attributed to the pre-IPO Class B-2 awards was recorded in the fourth quarter of 2020 as the related performance conditions were considered probable of achievement and the implied service conditions were met.
We recognized $0.4 million and $0.5 million of share-based compensation expense related to the pre-IPO Class B-1 Units for the three months ended March 31, 2024 and 2023, respectively.
A summary of the activity for the three months ended March 31, 2024 related to the restricted stock awards distributed in respect of the pre-IPO awards (Class B-1 and B-2 Units) is presented below:
Number of shares
Restricted Stock
Pre-IPO B-1
Restricted Stock - Pre-IPO B-2
Unvested at December 31, 2023352,447 987,111 
Vested(74,335)(987,111)
Unvested at March 31, 2024278,112  
2020 Omnibus Incentive Plan
We maintain a long-term incentive plan (the “2020 Omnibus Incentive Plan” or the “2020 Plan”) that allows for grants of incentive stock options to employees (including employees of any of our subsidiaries), nonstatutory stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and other cash-based, equity-based or equity-related awards to employees, directors, and consultants, including employees or consultants of our subsidiaries.

We recognized $8.2 million ($3.9 million for stock options and $4.3 million for RSUs) and $6.8 million ($3.1 million for stock options and $3.7 million for RSUs) of share-based compensation expense for these awards in our Consolidated Statements of Operations and Comprehensive Income (Loss), in “Selling, general and administrative expenses,” for the three months ended March 31, 2024 and 2023, respectively.
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Sotera Health Company
Notes to Consolidated Financial Statements
Stock Options
Stock options generally vest ratably over a period of two to four years. They have an exercise price equal to the fair market value of a share of common stock on the date of grant, and a contractual term of 10 years. The following table summarizes our stock option activity for the three months ended March 31, 2024:
Number of
Shares
Weighted-
average
Exercise Price
Outstanding stock options at December 31, 20236,972,661 $15.17 
Granted1,570,336 14.59 
Forfeited(43,652)20.77 
Outstanding stock options at March 31, 20248,499,345 $15.04 
As of March 31, 2024, there were 3.5 million vested and exercisable stock options.

RSUs
RSUs generally vest ratably over a period of one to four years and are valued based on our market price on the date of grant. The following table summarizes our unvested RSUs activity for the three months ended March 31, 2024:
Number of
Shares
Weighted-
average Grant
Date Fair
Value
Unvested at December 31, 20232,298,836 $13.81 
Granted971,342 14.59 
Forfeited(20,944)16.44 
Vested(390,805)18.74 
Unvested at March 31, 20242,858,429 $13.38 
13.Earnings Per Share
Basic earnings per share represents the amount of income attributable to each common share outstanding. Diluted earnings per share represents the amount of income attributable to each common share outstanding adjusted for the effects of potentially dilutive common shares. Potentially dilutive common shares include stock options and other stock-based awards. In the periods where the effect would be antidilutive, potentially dilutive common shares are excluded from the calculation of diluted earnings per share.
In periods in which the Company has net income, earnings per share is calculated using the two-class method. This method is required as unvested restricted stock distributed in respect of pre-IPO Class B-1 and B-2 awards have the right to receive non-forfeitable dividends or dividend equivalents if the Company were to declare dividends on its common stock. Pursuant to the two-class method, earnings for each period are allocated on a pro-rata basis to common stockholders and unvested pre-IPO Class B-1 and B-2 restricted stock awards. As of March 4, 2024, the performance threshold applicable to all Class B-2 restricted stock awards were fully satisfied, thereby releasing the vesting and forfeiture restrictions on these common shares. Beginning on that date, B-2 restricted stock was not included in the earnings allocation. Diluted earnings per share is computed using the more dilutive of (a) the two-class method, or (b) treasury stock method, as applicable, to the potentially dilutive instruments.
Our basic and diluted earnings per common share are calculated as follows:
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Sotera Health Company
Notes to Consolidated Financial Statements
Three Months Ended
in thousands of U.S. dollars and share amounts (except per share amounts)March 31,
2024
March 31,
2023
Earnings:
Net income$6,323 $2,842 
Less: Allocation to participating securities22 18 
Net income attributable to Sotera Health Company common shareholders$6,301 $2,824 
Weighted Average Common Shares:
Weighted-average common shares outstanding - basic
281,913 280,691 
Dilutive effect of potential common shares2,149 2,286 
Weighted-average common shares outstanding - diluted
284,062 282,977 
Earnings per Common Share:
Net income attributable to Sotera Health Company common shareholders - basic$0.02 $0.01 
Net income attributable to Sotera Health Company common shareholders - diluted0.02 0.01 
Diluted earnings per share does not consider the following potential common shares as the effect would be anti-dilutive:
Three Months Ended
in thousands of share amountsMarch 31,
2024
March 31,
2023
Stock options 4,7203,570
RSUs150492
Total anti-dilutive securities4,8704,062
14.Commitments and Contingencies
From time to time, we may be subject to various lawsuits and other claims, as well as gain contingencies, in the ordinary course of our business. In addition, from time to time, we receive communications from government or regulatory agencies concerning investigations or allegations of noncompliance with laws or regulations in jurisdictions in which we operate. We assess these regulatory and legal actions to determine if a contingent liability should be recorded. In making these determinations, we may, depending on the nature of the matter, consult with internal and external legal counsel and technical experts.
We establish reserves for specific liabilities in connection with regulatory and legal actions that we determine to be both probable and reasonably estimable. The outcomes of regulatory and legal actions can be difficult to predict and are often resolved over long periods of time, making our probability and estimability determinations highly judgmental. Probability determinations require the analysis of various possible outcomes, assessments of potential damages and the impact of multiple factors beyond our control, including potential actions by others, interpretations of the law, and changes and developments in relevant facts, circumstances, regulations and other laws. If a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability is disclosed, together with an estimate of the range of possible loss if the range is determinable and material. In certain of the matters described below, we are not able to estimate potential liability because of the uncertainties related to the outcome(s) and/or the amount(s) or range(s) of loss. The ultimate resolution of pending regulatory and legal matters in future periods, including the matters described below, may have a material adverse effect on our financial condition, results of operations and/or liquidity. The Company may also incur material defense and settlement costs, diversion of management resources and other adverse effects on our business, financial condition, and/or results of operations.
Ethylene Oxide Tort Litigation
Sterigenics U.S., LLC (“Sterigenics”) and other medical supply sterilization companies have been subjected to tort lawsuits alleging various injuries caused by low-level environmental exposure to EO used at or emitted from sterilization facilities. Those lawsuits, as detailed further below, are individual claims, as opposed to class actions.
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Sotera Health Company
Notes to Consolidated Financial Statements
Illinois
Subsidiaries of the Company and other parties are defendants in approximately 25 lawsuits in Illinois in which plaintiffs allege personal injuries or wrongful death resulting from purported use, emissions and releases of EO from or at Sterigenics’ former Willowbrook facility (the “Willowbrook Cases”). The Willowbrook Cases are pending in the Circuit Court of Cook County and have been assigned to a single judge for coordinated discovery and pretrial proceedings. We intend to vigorously defend the Willowbrook Cases.
Georgia
Sterigenics, Sotera Health, LLC and other parties are defendants in lawsuits in Georgia in which plaintiffs allege personal injuries, wrongful death and property devaluation resulting from use, emissions and releases of EO from or at Sterigenics’ Atlanta facility (the “Atlanta Cases”).
Approximately 255 personal injury and wrongful death claims are pending in the State Court of Cobb County and have been consolidated for pretrial purposes (the “Consolidated Personal Injury Cases”). The Consolidated Personal Injury Cases are proceeding under a case management order pursuant to which a “pool” of eight cases will proceed to judicial determination of general causation issues in Phase 1 and specific causation issues in Phase 2; the first trial of any “pool” case that survives Phases 1 and 2 is not expected to begin before September 2025. The remaining Consolidated Personal Injury Cases (including nine cases that include both personal injury and property claims) are stayed. Two additional personal injury lawsuits pending in Cobb County have not been consolidated. The parties have jointly asked the court to stay one of these cases along with the stayed cases in the Consolidated Personal Injury Cases. In the other case, employees of a sterilization customer of Sterigenics allege they were injured by exposure while working at the customer’s distribution facility to residual EO allegedly emanating from products of the customer that had been sterilized at Sterigenics’ Atlanta facility; discovery is underway and, pursuant to the customer’s contract with Sterigenics, the customer is indemnifying Sterigenics against this lawsuit.
Sterigenics and Sotera Health LLC are also defendants in approximately 365 property devaluation lawsuits pending in the State Court of Cobb County that have been consolidated for pretrial purposes (the “Consolidated Property Cases”). Ten of the Consolidated Property Cases are proceeding under case management orders while the remaining cases are stayed. Discovery in five of the cases is underway; dispositive motions remain pending in the other five.
We intend to vigorously defend the Atlanta Cases.
California
In March 2024 and April 2024, two lawsuits were filed against the Company, Sterigenics, other subsidiaries of the Company and other parties in Los Angeles County Superior Court for personal injuries and wrongful death allegedly resulting from emissions and releases of EO from Sterigenics’ Vernon facilities (the “Vernon Cases”). Plaintiffs in these cases allege that 18 cases of cancer and other illnesses were caused by exposure to EO at locations in close proximity to the Vernon facilities, including residences located in Maywood, California, and a commercial facility located next door to Sterigenics’ Vernon facilities. The lawsuits remain in preliminary stages and case management orders have yet to be entered.
We intend to vigorously defend the Vernon Cases.
New Mexico
The Company and certain subsidiaries are defendants in a lawsuit in the Third Judicial District Court, Doña Ana County, New Mexico in which the New Mexico Attorney General ( “NMAG”) alleges that emissions and releases of EO from Sterigenics’ facility in Santa Teresa have deteriorated the air quality in surrounding communities and materially contributed to increased health risks for residents of those communities. In April 2024, the Court of Appeals of the State of New Mexico denied the NMAG’s petition for leave to file an interlocutory appeal of the August 2023 order granting Sterigenics’ motion for summary judgment on strict liability, the Unfair Practices Act claim, and the claims for decreased property values, increased healthcare costs and medical monitoring costs. The case has been remanded to the District Court of Doña Ana County for further
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Sotera Health Company
Notes to Consolidated Financial Statements
proceedings on the remaining claims. A defense motion challenging the Court’s jurisdiction over Sotera Health Company and another defendant also remains pending.
The Company, Sterigenics and certain other subsidiaries are also defendants in a lawsuit pending in the United States District Court for the District of New Mexico alleging wrongful death resulting from purported exposure to EO used, emitted and released from Sterigenics’ facility in Santa Teresa, New Mexico while the decedent was working at a different company’s facility approximately one mile away. The case is set for trial in October 2025.
We intend to vigorously defend the lawsuits relating to the Santa Teresa facility.
* * *
Additional EO tort lawsuits may be filed in the future against the Company and/or its subsidiaries relating to Sterigenics’ Willowbrook, Atlanta, Santa Teresa, Vernon or other EO facilities. Based on our view of the strength of the science and related evidence that emissions of EO from Sterigenics’ operations have not caused and could not have caused the harms alleged in such lawsuits, we believe that losses in the remaining or future EO cases are not probable. Although the Company intends to defend itself vigorously on the merits, future settlements of EO tort lawsuits are reasonably possible. The Willowbrook and Atlanta Settlements (as previously defined in Note 20, Commitments and Contingencies of our 2023 10-K) were driven by dynamics unique to the cases that were settled and thus should not give rise to presumptions that the Company will settle additional EO tort lawsuits and/or that any such settlements will be for comparable amounts.
Potential trial and settlement outcomes can vary widely based a host of factors. EO tort lawsuits will be presided over by different judges, tried by different counsel presenting different evidence and decided by different juries. The substantive and procedural laws of jurisdictions vary and can meaningfully impact the litigation process and outcome of a case. Each plaintiff’s claim involves unique facts and evidence including the circumstances of the plaintiff’s alleged exposure, the type and severity of the plaintiff’s disease, the plaintiff’s medical history and course of treatment, the location of and other factors related to the plaintiff’s real property, and other circumstances. The outcomes of trials before juries are rarely certain and a judgment rendered or settlement reached in one case is not necessarily representative of potential outcomes of other seemingly comparable cases. As a result, it is not possible to estimate a reasonably possible loss or range of loss with respect to any future EO tort lawsuit, trial or settlement.
Insurance Coverage for Environmental Liabilities
An environmental liability insurance policy under which we have received coverage for the EO tort lawsuits in Illinois, Georgia and New Mexico described above had limits of $10.0 million per occurrence and $20.0 million in the aggregate. Those per occurrence and aggregate limits were fully utilized in the defense of the Illinois, Georgia and New Mexico litigation. Our insurance for future alleged environmental liabilities excludes coverage for EO claims.
We are pursuing additional insurance coverage for our legal expenses related to EO tort lawsuits like the Illinois, Georgia and New Mexico matters described above. In 2021, Sterigenics filed an insurance coverage lawsuit in the U.S. District Court for the Northern District of Illinois relating to two commercial general liability policies issued in the 1980s (the “Northern District of Illinois Coverage Lawsuit”). The court issued an order declaring that the defendant insurer owes Sterigenics and another insured party a duty to defend the Willowbrook Cases (the “Duty to Defend Order”) and entered judgment for Sterigenics in January 2024 in the amount of $110.2 million for certain defense costs incurred in the Willowbrook Cases as of August 2022 (the “Defense Costs Judgment”). The defendant insurer has appealed the Duty to Defend Order and Defense Costs Judgment. Sterigenics is also a party in insurance coverage lawsuits pending in the Circuit Court of Cook County, Illinois and the Delaware Superior Court relating to insurance coverage from various historical commercial general liability policies for certain EO litigation settlement amounts and defense costs that the insurer in the Northern District of Illinois Coverage Lawsuit may fail to fund. The Delaware Superior Court has granted Sterigenics’ motion to stay the case pending resolution of the same and similar issues in the coverage lawsuit pending in the Circuit Court of Cook County, Illinois. It is not possible to predict how much, if any, of the insurance proceeds sought will ultimately be recovered.
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Sotera Health Company
Notes to Consolidated Financial Statements
Sotera Health Company Securities Litigation & Related Matters
In January 2023, a stockholder class action was filed in the U.S. District Court for the Northern District of Ohio against the Company, certain past and present directors and senior executives, the Company’s private equity stockholders and the underwriters of the Company’s initial public offering (“IPO”) in November 2020 and the Company’s secondary public offering (“SPO”) in March 2021 (the “Michigan Funds Litigation”). In April 2023, the court appointed the Oakland County Employees’ Retirement System, Oakland County Voluntary Employees’ Beneficiary Association, and Wayne County Employees’ Retirement System (the “Michigan Funds”) to serve as lead plaintiff to prosecute claims on behalf of a proposed class of stockholders who acquired shares of the Company in connection with our IPO or SPO or between November 20, 2020 and September 19, 2022 (the “Proposed Class”). The Michigan Funds allege that statements made regarding the safety of the Company’s use of EO and/or its EO tort lawsuits and other risks of its EO operations violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (when made in the registration statements for the IPO and SPO) and Sections 10(b), Section 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 (when made in subsequent securities filings and other contexts). Defendants have moved to dismiss the Amended Complaint and that motion remains pending.
In May 2023, July 2023 and April 2024, the Company received demands pursuant to 8 Del. C. §220 for inspections of its books and records from shareholders purporting to be investigating the Company’s internal operations, disclosure practices and other matters alleged and at issue in the Michigan Funds Litigation and related to the Company’s March 2024 Secondary Public Offering. The Company is producing documents in response to the 220 Demands.
The Company believes that the allegations and claims in the Michigan Funds Litigation and 220 Demands are without merit and plans to vigorously defend the Michigan Funds Litigation.
15.Financial Instruments and Financial Risk
Derivative Instruments
We do not use derivatives for trading or speculative purposes and are not a party to leveraged derivatives.
Derivatives Designated in Hedge Relationships
From time to time, the Company utilizes interest rate derivatives designated in hedge relationships to manage interest rate risk associated with our variable rate borrowings. These instruments are measured at fair value with changes in fair value recorded as a component of “Accumulated other comprehensive income (loss)” on our Consolidated Balance Sheets.
In March 2023, we entered into an interest rate swap agreement with a notional amount of $400.0 million. The interest rate swap was effective on August 23, 2023 and expires on August 23, 2025. We have designated the interest swap as a cash flow hedge designed to hedge the variability of cash flows attributable to changes in the SOFR benchmark interest rate of our 2023 Term Loan (or any successor thereto). We receive interest at the one-month Term SOFR rate and pay a fixed interest rate under the terms of the swap agreement.
In May 2022, we entered into two interest rate cap agreements with a combined notional amount of $1,000.0 million for a total option premium of $4.1 million. The interest rate caps became effective as of July 31, 2023 and expire on July 31, 2024. We have designated these interest rate caps as cash flow hedges designed to hedge the variability of cash flows attributable to changes in the benchmark interest rate of our Term Loan (or any successor thereto). Under the current terms of the loan agreement, the benchmark interest rate index transitioned from LIBOR to Term SOFR on June 30, 2023. Accordingly, the interest rate cap agreements hedge the variability of cash flows attributable to changes in SOFR by limiting our cash flow exposure related to Term SOFR under a portion of our variable rate borrowings to 3.5%.

In October 2021, we entered into two interest rate cap agreements with a combined notional amount of $1,000.0 million for a total option premium of $1.8 million. Both interest rate caps were effective on December 31, 2022 and expired on July 31, 2023. These interest rate caps were designated as cash flow hedges designed to hedge the variability of cash flows attributable to changes in LIBOR (or its successor), the benchmark interest rate being hedged, by limiting our cash flow exposure related to the LIBOR base rate under a portion of our variable rate borrowings to 1.0%.
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Sotera Health Company
Notes to Consolidated Financial Statements
Derivatives Not Designated in Hedge Relationships
Additionally, from time to time, the Company enters into interest rate derivatives to manage economic risks associated with our variable rate borrowings that are not designated in hedge relationships. These instruments are recorded at fair value on the Consolidated Balance Sheets, with any changes in value recorded in “Interest expense, net” in the Consolidated Statements of Operations and Comprehensive Income (Loss).
The Company also routinely enters into foreign currency forward contracts to manage foreign currency exchange rate risk of our intercompany loans in certain of our international subsidiaries and non-functional currency assets and liabilities. The foreign currency forward contracts expire on a monthly basis.
Embedded Derivatives
We have embedded derivatives in certain of our customer and supply contracts as a result of the currency of the contract being different from the functional currency of the parties involved. Changes in the fair value of the embedded derivatives are recognized in “Other expense (income), net” in the Consolidated Statements of Operations and Comprehensive Income (Loss).
The following table provides a summary of the notional and fair values of our derivative instruments:
March 31, 2024December 31, 2023
(in U.S. Dollars; notional in millions, fair value in thousands)Fair ValueFair Value
Notional
Amount
Derivative
Assets
Derivative
Liabilities
Notional
Amount
Derivative
Assets
Derivative
Liabilities
Derivatives designated as hedging instruments
Interest rate caps$1,000.0 $5,828  $1,000.0 $8,763  
Interest rate swaps400.0 3,940  400.0 1,487  
Derivatives not designated as hedging instruments
Foreign currency forward contracts198.7 719  171.0 149 9 
Embedded derivatives142.7 
(a)
1,667 2,698 150.1 1,225 405 
Total$1,741.4 $12,154 $2,698 $1,721.1 $11,624 $414 
(a)Represents the total notional amounts for certain of the Company’s supply and sales contracts accounted for as embedded derivatives.
Embedded derivative assets/liabilities and foreign currency forward contracts are included in “Prepaid expenses and other current assets” and “Accrued Liabilities” on our Consolidated Balance Sheets depending upon their position at period end. Interest rate swaps and interest rate caps are included in “Other assets” and “Noncurrent liabilities”, respectively, on the Consolidated Balance Sheets depending upon their position at period end.
The following table summarizes the activities of our derivative instruments for the periods presented, and the line item in which they are recorded in the Consolidated Statements of Operations and Comprehensive Income (Loss):
(thousands of U.S. dollars)
Three Months Ended March 31,20242023
Realized gain on interest rate derivatives recorded in interest expense, net(a)
(4,897)(9,648)
Unrealized loss on embedded derivatives recorded in other expense (income), net1,833 227 
Realized loss on foreign currency forward contracts recorded in foreign exchange (gain) loss4,008 449 
Unrealized gain on foreign currency forward contracts recorded in foreign exchange (gain) loss(580) 
(a)For the three months ended March 31, 2024, amounts represent quarterly settlement of interest rate caps and swaps.
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Sotera Health Company
Notes to Consolidated Financial Statements
We expect to reclassify approximately $8.0 million of pre-tax net gains on derivative instruments from accumulated other comprehensive income (loss) to income during the next 12 months associated with our cash flow hedges. Refer to Note 11, “Other Comprehensive Income (Loss)” for unrealized gains on interest rate derivatives, net of applicable tax, recorded in other comprehensive income (loss) and amounts reclassified from accumulated other comprehensive income to interest expense, net of applicable tax, during the three months ended March 31, 2024.
Credit Risk
Certain of our financial assets, including cash and cash equivalents, are exposed to credit risk.
We are also exposed, in our normal course of business, to credit risk from our customers. As of March 31, 2024 and December 31, 2023, accounts receivable was net of an allowance for uncollectible accounts of $3.9 million and $4.7 million, respectively.
Credit risk on financial instruments arises from the potential for counterparties to default on their contractual obligations to us. We are exposed to credit risk in the event of non-performance, but do not anticipate non-performance by any of the counterparties to our financial instruments. We limit our credit risk by dealing with counterparties that are considered to be of high credit quality. In the event of non-performance by counterparties, the carrying value of our financial instruments represents the maximum amount of loss that would be incurred.
Our credit team evaluates and regularly monitors changes in the credit risk of our customers. We routinely assess the collectability of accounts receivable and maintain an adequate allowance for uncollectible accounts to address potential credit losses. The process includes a review of customer financial information and credit ratings, current market conditions as well as the expected future economic conditions that may impact the collection of trade receivables. We regularly review our customers’ past due amounts through an analysis of aged accounts receivables, specific customer past due aging amounts, and the history of trade receivables written off. Upon concluding that a receivable balance is not collectible, the balance is written off against the allowance for uncollectible accounts.
Fair Value Hierarchy
The fair value of our financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation techniques we would use to determine such fair values are described as follows: Level 1—fair values determined by inputs utilizing quoted prices in active markets for identical assets or liabilities; Level 2—fair values based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable; Level 3—fair values determined by unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants.
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Sotera Health Company
Notes to Consolidated Financial Statements
The following table discloses the fair value of our financial assets and liabilities:
As of March 31, 2024Fair Value
(thousands of U.S. dollars)Carrying
Amount
Level 1
Level 2
Level 3
Derivatives designated as hedging instruments(a)
Interest rate caps$5,828 $ $5,828 $ 
Interest rate swaps3,940  3,940  
Derivatives not designated as hedging instruments(b)
Foreign currency forward contract assets719  719  
Embedded derivative assets1,667  1,667  
Embedded derivative liabilities2,698  2,698  
Current portion of long-term debt(c)
Term loan B, due 20264,808  4,975  
Long-Term Debt(c)
Term loan, due 20261,752,189  1,747,761  
Term loan B, due 2026472,422  488,794  
Finance Lease Obligations (with current portion)(d)
92,348  92,348  
As of December 31, 2023Fair Value
(thousands of U.S. dollars)Carrying
Amount
Level 1
Level 2
Level 3
Derivatives designated as hedging instruments(a)
Interest rate caps$8,763 $ $8,763 $ 
Interest rate swaps
1,487  1,487  
Derivatives not designated as hedging instruments(b)
Foreign currency forward contracts assets
149  149  
Foreign currency forward contracts liabilities
9  9  
Embedded derivative assets1,225  1,225  
Embedded derivative liabilities405  405  
Current portion of long-term debt(c)
Term loan B, due 2026
4,797  $5,000  
Long-Term Debt(c)
Term loan, due 20261,751,197  1,758,163  
Term loan B, due 2026
472,477  492,500  
Finance Lease Obligations (with current portion)(d)
72,564  72,564  
(a)Derivatives designated as hedging instruments are measured at fair value with changes in fair value recorded as a component of accumulated other comprehensive income (loss). Interest rate caps and swaps are valued using pricing models that incorporate observable market inputs, including interest rate and yield curves.
(b)Derivatives that are not designated as hedging instruments are measured at fair value with gains or losses recognized immediately in the Consolidated Statements of Operations and Comprehensive Income (Loss). Embedded derivatives are valued using internally developed models that rely on observable market inputs, including foreign currency forward curves. Foreign currency forward contracts are valued by reference to changes in the foreign currency exchange rate over the life of the contract.
(c)Carrying amounts of current portion of long-term debt and long-term debt instruments are reported net of discounts and debt issuance costs. The estimated fair values of these instruments are based upon quoted prices for the term loans due in 2026 in inactive markets as provided by an independent fixed income security pricing service.
(d)Fair value approximates carrying value.
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Sotera Health Company
Notes to Consolidated Financial Statements
16.Segment Information
We identify our operating segments based on the way we manage, evaluate and internally report our business activities for purposes of allocating resources and assessing performance. We have three reportable segments: Sterigenics, Nordion and Nelson Labs. We have determined our reportable segments based upon an assessment of organizational structure, service types, and internally prepared financial statements. Our chief operating decision-maker evaluates performance and allocates resources based on net revenues and segment income after the elimination of intercompany activities. The accounting policies of our reportable segments are the same as those described in Note 1, “Significant Accounting Policies” of the Company's annual consolidated financial statements and accompanying notes in our 2023 10-K.
Sterigenics
Sterigenics provides outsourced terminal sterilization and irradiation services for the medical device, pharmaceutical, food safety and advanced applications markets using three major technologies: gamma irradiation, EO processing and E-beam irradiation.
Nordion
Nordion is a leading global provider of Co-60 used in the sterilization and irradiation processes for the medical device, pharmaceutical, food safety, and high-performance materials industries, as well as in the treatment of cancer. In addition, Nordion is a leading global provider of gamma irradiation systems.
Nelson Labs
Nelson Labs provides outsourced microbiological and analytical chemistry testing and advisory services for the medical device and pharmaceutical industries.
For the three months ended March 31, 2024, four customers reported within the Nordion segment individually represented 10% or more of the segment’s total net revenues. These customers represented 18.9%, 18.8%, 16.7% and 10.7% of the total segment’s external net revenues for the three months ended March 31, 2024. For the three months ended March 31, 2023, two customers reported within the Nordion segment individually represented 10% or more of the segment's total net revenues. These customers represented 54.6% and 11.3% of the total segment's external net revenues for the three months ended March 31, 2023. The high concentration of revenues from these customers in the three months ended March 31, 2023 mainly stemmed from the low sales volume pattern during that period.
(thousands of U.S. dollars)Three Months Ended March 31,
20242023
Segment revenues(a)
Sterigenics$166,497 $159,997 
Nordion24,007 8,551 
Nelson Labs57,672 52,042 
Total net revenues$248,176 $220,590 
Segment income(b)
Sterigenics$85,818 $82,840 
Nordion10,785 1,526 
Nelson Labs15,341 14,102 
Total segment income$111,944 $98,468 
(a)Revenues are reported net of intersegment sales. Our Nordion segment recognized $10.0 million and $2.9 million in revenues from sales to our Sterigenics segment for the three months ended March 31, 2024 and 2023, respectively, that is not reflected in net revenues in the table above. Intersegment sales for Sterigenics and Nelson Labs are immaterial for both periods presented.
(b)Segment income is only provided on a net basis to the chief operating decision-maker and is reported net of intersegment profits.
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Sotera Health Company
Notes to Consolidated Financial Statements
Corporate operating expenses for executive management, accounting, information technology, legal, human resources, treasury, investor relations, corporate development, tax, purchasing, and marketing not directly incurred by a segment are allocated to the segments based on total net revenue. Corporate operating expenses that are directly incurred by a segment are reflected in each segment’s income.
Capital expenditures by segment for the three months ended March 31, 2024 and 2023 were as follows:
(thousands of U.S. dollars)Three Months Ended March 31,
20242023
Sterigenics$22,274 $30,877 
Nordion10,736 10,545 
Nelson Labs1,880 3,578 
Total capital expenditures$34,890 $45,000 
Total assets and depreciation and amortization expense by segment are not readily available and are not reported separately to the chief operating decision-maker.
A reconciliation of segment income to consolidated income before taxes is as follows:
(thousands of U.S. dollars)Three Months Ended March 31,
20242023
Segment income$111,944 $98,468 
Less adjustments:
Interest expense, net(a)
41,771 28,870 
Depreciation and amortization(b)
40,430 39,538 
Share-based compensation(c)
8,657 7,348 
Loss on foreign currency and derivatives not designated as hedging instruments, net(d)
1,230 535 
Business optimization expenses(e)
54 2,231 
Refinancing and secondary offering costs(f)
1,807  
Professional services relating to EO sterilization facilities(g)
6,339 13,972 
Accretion of asset retirement obligation(h)