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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 December 31, 2023

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 001-38848
STERIS plc
(Exact name of registrant as specified in its charter)
Ireland 98-1455064
(State or other jurisdiction of
incorporation or organization)
 (IRS Employer
Identification No.)
70 Sir John Rogerson's Quay,Dublin 2,Ireland D02 R296
(Address of principal executive offices) (Zip code)
353 1 232 2000
(Registrant’s telephone number, including area code)
_______________________________________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each classTrading symbol(s)Name of Exchange on Which Registered
Ordinary Shares, $0.001 par valueSTENew York Stock Exchange
2.700% Senior Notes due 2031STE/31New York Stock Exchange
3.750% Senior Notes due 2051STE/51New York Stock Exchange
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  x    No  o
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  x    No  o
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 Filer  Accelerated Filer
Non-Accelerated Filer   Smaller 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.  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
The number of ordinary shares outstanding as of February 5, 2024: 98,814,035
1

STERIS plc and Subsidiaries
Form 10-Q
Index
 

2

PART 1—FINANCIAL INFORMATION
As used in this Quarterly Report on Form 10-Q, STERIS plc and its consolidated subsidiaries together are called “STERIS,” the “Company,” “we,” “us,” or “our,” unless otherwise noted.
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, net855,617 695,493 
Prepaid expenses and other current assets203,729 179,277 
Total current assets2,218,953 2,011,442 
Property, plant, and equipment, net1,844,484 1,705,512 
Lease right-of-use assets, net195,413 191,741 
Goodwill4,111,683 3,879,219 
Intangibles, net2,987,287 2,955,780 
Other assets77,335 78,145 
Total assets$11,435,155 $10,821,839 
Liabilities and equity
Current liabilities:
Accounts payable$276,730 $279,620 
Accrued income taxes24,880 43,804 
Accrued payroll and other related liabilities178,838 125,642 
Short-term lease obligations36,711 34,961 
Short-term indebtedness78,438 60,000 
Accrued expenses and other318,097 317,817 
Total current liabilities913,694 861,844 
Long-term indebtedness3,231,075 3,018,655 
Deferred income taxes, net621,071 617,538 
Long-term lease obligations162,827 160,493 
Other liabilities78,389 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 earnings2,133,766 1,911,533 
Accumulated other comprehensive loss(252,629)(320,710)
Total shareholders’ equity6,415,396 6,077,198 
Noncontrolling interests12,703 9,974 
Total equity6,428,099 6,087,172 
Total liabilities and equity$11,435,155 $10,821,839 

See notes to consolidated financial statements.
3

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,
 2023202220232022
Revenues:
Product$804,756 $679,042 $2,280,950 $1,982,512 
Service590,889 536,952 1,741,597 1,590,490 
Total revenues1,395,645 1,215,994 4,022,547 3,573,002 
Cost of revenues:
Product439,005 374,729 1,223,415 1,058,663 
Service354,047 319,768 1,029,549 942,709 
Total cost of revenues793,052 694,497 2,252,964 2,001,372 
Gross profit602,593 521,497 1,769,583 1,571,630 
Operating expenses:
Selling, general, and administrative360,518 305,141 1,100,227 962,962 
Goodwill impairment loss   490,565 
Research and development25,913 25,514 78,459 75,193 
Restructuring expenses6 39 2 127 
Total operating expenses386,437 330,694 1,178,688 1,528,847 
Income from operations216,156 190,803 590,895 42,783 
Non-operating expenses, net:
Interest expense38,947 28,559 108,248 77,356 
Interest and miscellaneous (income) expense(2,080)1,906 (4,710)3,200 
Total non-operating expenses, net36,867 30,465 103,538 80,556 
Income (loss) before income tax expense179,289 160,338 487,357 (37,773)
Income tax expense38,344 37,013 106,276 43,378 
Net income (loss)140,945 123,325 381,081 (81,151)
Less: Net income (loss) attributable to noncontrolling interests202 (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.

4

STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(Unaudited)


Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
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 shareholders140,743 123,828 379,616 (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 adjustment134,048 233,958 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.



5

STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 Nine Months Ended December 31,
 20232022
Operating activities:
Net income (loss)$381,081 $(81,151)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization430,806 410,693 
Deferred income taxes(506)(62,797)
Share-based compensation expense47,588 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 adjustments4,722 2,477 
Goodwill impairment loss 490,565 
Other items4,536 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, net21,750 (66,912)
Net cash provided by operating activities718,467 541,148 
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 businesses9,458 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 interest2,883  
Stock option and other equity transactions, net3,526 1,497 
Net cash provided by (used in) financing activities
58,583 (306,771)
Effect of exchange rate changes on cash and cash equivalents1,932 (17,574)
Decrease in cash and cash equivalents(12,772)(88,949)
Cash and cash equivalents at beginning of period208,357 348,320 
Cash and cash equivalents at end of period$195,585 $259,371 
See notes to consolidated financial statements.






6


STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except per share amounts)
(Unaudited)

Three Months Ended December 31, 2023
Ordinary SharesRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interest
Total
Equity
  NumberAmount 
Balance at September 30, 202398,789 $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 other31 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, 202398,808 $4,534,259 $2,133,766 $(252,629)$12,703 $6,428,099 


Nine Months Ended December 31, 2023
Ordinary SharesRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interest
Total
Equity
  NumberAmount 
Balance at March 31, 202398,629 $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 other248 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, 202398,808 $4,534,259 $2,133,766 $(252,629)$12,703 $6,428,099 










7


STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except per share amounts)
(Unaudited)

Three Months Ended December 31, 2022
Ordinary SharesRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interest
Total
Equity
  NumberAmount 
Balance at September 30, 202299,868 $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 other25 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, 202299,400 $4,631,703 $1,770,772 $(364,163)$10,208 $6,048,520 


Nine Months Ended December 31, 2022
Ordinary SharesRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interest
Total
Equity
  NumberAmount 
Balance at March 31, 2022100,067 $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 other183 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, 202299,400 $4,631,703 $1,770,772 $(364,163)$10,208 $6,048,520 

See notes to consolidated financial statements.













8

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
9

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.
10

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.




















11

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:
StandardDate of IssuanceDescriptionDate of AdoptionEffect 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 2022The 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.
NAWe 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.




12

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)
Inventory27,006 4,721 31,727 
Property, plant, and equipment6,755 1,109 7,864 
Intangible assets
303,598 (598)303,000 
Goodwill202,399 (5,232)197,167 
Total assets acquired539,758  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.








13

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 process117,882 97,756 
Finished goods492,005 404,238 
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 improvements756,059 691,933 
Machinery and equipment1,100,273 994,188 
Information systems260,639 247,873 
Radioisotope679,436 637,920 
Construction in progress (1)
512,370 478,316 
Total property, plant, and equipment3,406,158 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.

14

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 portion40,625 32,500 
Total short-term debt$78,438 $60,000 
Long-term debt
Private Placement Senior Notes$755,020 $750,302 
Revolving Credit Facility569,974 301,672 
Deferred financing costs(18,607)(21,444)
Term Loan14,063 45,000 
Delayed Draw Term Loan560,625 593,125 
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.
15

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 off16,798 11,080 
Accrued bonuses59,161 33,605 
Accrued employee commissions31,569 29,257 
Other postretirement benefit obligations-current portion1,121 1,121 
Other employee benefit plans obligations-current portion2,106 2,014 
Total accrued payroll and other related liabilities$178,838 $125,642 
Accrued expenses and other:
Deferred revenues$90,373 $92,283 
Service liabilities80,620 72,033 
Self-insured risk reserves-current portion12,549 11,325 
Accrued dealer commissions36,386 31,096 
Accrued warranty14,951 13,683 
Asset retirement obligation-current portion535 543 
Accrued interest20,464 9,243 
Other62,219 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 portion5,778 6,070 
Defined benefit pension plans obligations-long-term portion3,214 2,876 
Other employee benefit plans obligations-long-term portion1,206 1,153 
Accrued long-term income taxes10,129 10,082 
Asset retirement obligation-long-term portion13,182 12,588 
Other22,709 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
16

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.


17

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.


18

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,
 2023202220232022
Revenues:
Healthcare $916,227 $769,144 $2,605,157 $2,200,483 
AST234,931 222,014 703,083 675,283 
Life Sciences146,566 121,273 411,074 379,248 
Dental97,921 103,563 303,233 317,988 
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 
AST105,156 103,539 325,529 323,238 
Life Sciences56,738 45,249 156,863 149,173 
Dental18,292 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."


19

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,
 2023202220232022
Healthcare:
Capital equipment$266,838 $227,226 $759,842 $618,844 
Consumables329,435 259,810 915,741 757,892
Service319,954 282,108 929,574 823,747 
Total Healthcare Revenues $916,227 $769,144 $2,605,157 $2,200,483 
AST:
Capital equipment$5,241 $3,679 $7,869 $14,783 
Service229,690 218,335 695,214 660,500 
Total AST Revenues$234,931 $222,014 $703,083 $675,283 
Life Sciences:
Capital equipment$44,836 $28,581 $111,265 $99,095 
Consumables60,072 55,610 181,179 172,587 
Service41,658 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,
2023202220232022
Revenues:
Ireland$19,651 $17,959 $60,175 $53,130 
United States1,025,458 883,390 2,948,878 2,589,472 
Other locations350,536 314,645 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):2023202220232022
Weighted average shares outstanding—basic98,802 99,716 98,765 99,922 
Dilutive effect of share equivalents(1)
552 450 568  
Weighted average shares outstanding and share equivalents—diluted99,354 100,166 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.
20

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)2023202220232022
Number of share options654 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.


21

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 2024Fiscal 2023
Risk-free interest rate3.59 %2.44 %
Expected life of options6.0 years5.9 years
Expected dividend yield of stock1.08 %0.80 %
Expected volatility of stock27.92 %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, 20231,749,729 $154.60 
Granted253,946 220.24 
Exercised(53,881)60.54 
Forfeited(3,415)199.26 
Outstanding at December 31, 20231,946,379 $165.69 6.1 years$112,785 
Exercisable at December 31, 20231,343,419 $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.







22

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 UnitsWeighted Average
Grant Date
Fair Value
Non-vested at March 31, 2023450,793 28,542 $186.60 
Granted173,074 18,344 201.48 
Vested(146,912)(15,408)163.81 
Forfeited(13,714)(1,419)194.71 
Non-vested at December 31, 2023463,241 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 UnitsWeighted Average
Grant Date
Fair Value
Non-vested at March 31, 202315,670 $191.18 
Vested(14,358)191.18 
Forfeited(762)191.18 
Non-vested at December 31, 2023550 $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 period12,519 
Settlements made during the period(11,251)
Balance at December 31, 2023$14,951 

23

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 DerivativesLiability Derivatives
Fair Value atFair Value atFair Value atFair Value at
Balance sheet locationDecember 31, 2023March 31, 2023December 31, 2023March 31, 2023
Prepaid & other$742 $378 $ $ 
Accrued expenses and other$ $ $1,701 $2,054 
The following table presents the impact of derivative instruments and their location within the Consolidated Statements of Income (Loss):
 Location of gain (loss)
recognized in income
Amount of gain (loss) recognized in income
Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Foreign currency forward contractsSelling, general and administrative$(292)$952 $1,226 $5,581 
Commodity swap contractsCost of revenues$(316)$1,189 $(1,708)$(1,994)

24

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 ValueQuoted Prices
in Active Markets
for Identical Assets
Significant Other
Observable Inputs
Significant
Unobservable
Inputs