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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 June 30, 2022
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 August 4, 2022: 100,014,639
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)
 June 30,
2022
March 31,
2022
 (Unaudited) 
Assets
Current assets:
Cash and cash equivalents$316,327 $348,320 
Accounts receivable (net of allowances of $23,121 and $24,371, respectively)
763,788 799,041 
Inventories, net620,404 574,999 
Prepaid expenses and other current assets147,428 156,637 
Total current assets1,847,947 1,878,997 
Property, plant, and equipment, net1,573,337 1,552,576 
Lease right-of-use assets, net182,357 188,480 
Goodwill4,321,176 4,404,343 
Intangibles, net3,193,032 3,328,537 
Other assets70,157 70,661 
Total assets$11,188,006 $11,423,594 
Liabilities and equity
Current liabilities:
Accounts payable$228,987 $225,737 
Accrued income taxes37,553 26,873 
Accrued payroll and other related liabilities137,580 183,721 
Short-term lease obligations 35,560 36,472 
Short-term indebtedness151,000 142,875 
Accrued expenses and other317,643 306,544 
Total current liabilities908,323 922,222 
Long-term indebtedness2,846,446 2,945,481 
Deferred income taxes, net790,819 780,619 
Long-term lease obligations150,215 155,056 
Other liabilities73,075 75,579 
Total liabilities$4,768,878 $4,878,957 
Commitments and contingencies (see Note 8)
Ordinary shares, with $0.001 par value; 500,000 shares authorized; 100,090 and 100,067 ordinary shares issued and outstanding, respectively
4,738,746 4,742,920 
Retained earnings2,057,175 1,999,244 
Accumulated other comprehensive (loss)(388,373)(209,808)
Total shareholders’ equity6,407,548 6,532,356 
Noncontrolling interests11,580 12,281 
Total equity6,419,128 6,544,637 
Total liabilities and equity$11,188,006 $11,423,594 

See notes to consolidated financial statements.
3

STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
 
 Three Months Ended June 30,
 20222021
Revenues:
Product$637,076 $489,279 
Service519,415 479,143 
Total revenues1,156,491 968,422 
Cost of revenues:
Product332,855 271,406 
Service305,838 270,734 
Total cost of revenues638,693 542,140 
Gross profit517,798 426,282 
Operating expenses:
Selling, general, and administrative334,626 393,752 
Research and development24,751 18,192 
Restructuring expenses26 14 
Total operating expenses359,403 411,958 
Income from operations158,395 14,324 
Non-operating expenses, net:
Interest expense22,674 21,812 
 Fair value adjustment related to convertible debt, premium liability 22,923 
Interest (income) and miscellaneous expense770 (1,434)
Total non-operating expenses, net23,444 43,301 
Income (loss) before income tax expense134,951 (28,977)
Income tax expense (credit)24,196 (7,075)
Net income (loss)110,755 (21,902)
Less: Net (loss) attributable to noncontrolling interests(507)(95)
Net income (loss) attributable to shareholders$111,262 $(21,807)
Net income (loss) per share attributed to shareholders
Basic$1.11 $(0.24)
Diluted$1.10 $(0.24)
Cash dividends declared per share ordinary outstanding$0.43 $0.40 



See notes to consolidated financial statements.

4

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

Three Months Ended June 30,
20222021
Net income (loss)$110,755 $(21,902)
  Less: Net income (loss) attributable to noncontrolling
  interests
(507)(95)
Net income (loss) attributable to shareholders111,262 (21,807)
Other comprehensive income (loss)
Amortization of pension and postretirement benefit plans cost, (net of taxes of $(6) and $174, respectively)
29 (507)
Change in cumulative currency translation adjustment(178,594)24,933 
Total other comprehensive income (loss)(178,565)24,426 
Comprehensive income (loss)$(67,303)$2,619 




See notes to consolidated financial statements.



5

STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 Three Months Ended June 30,
 20222021
Operating activities:
Net income (loss)$110,755 $(21,902)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization138,863 83,621 
Deferred income taxes5,304 456 
Share-based compensation expense8,963 26,600 
Loss on the disposal of property, plant, equipment, and intangibles, net(972)824 
Loss on sale of businesses, net3,878 419 
Fair value adjustment related to convertible debt, premium liability 22,923 
Other items10,412 (2,334)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net26,335 41,732 
Inventories, net(58,076)(1,660)
Other current assets6,755 (6,747)
Accounts payable6,492 (4,614)
Accruals and other, net(26,963)(41,892)
Net cash provided by operating activities231,746 97,426 
Investing activities:
Purchases of property, plant, equipment, and intangibles, net(115,933)(56,396)
Proceeds from the sale of property, plant, and equipment1,288 217 
Proceeds from the sale of businesses5,228  
Acquisition of businesses, net of cash acquired (547,353)
Net cash used in investing activities(109,417)(603,532)
Financing activities:
Proceeds from issuance of senior public notes 1,350,000 
Proceeds from term loan 650,000 
Payments on term loan(111,875)(125,000)
Payments on long-term obligations
 (721,284)
Proceeds (payments) under credit facilities, net37,011 (249,421)
Deferred financing fees and debt issuance costs
 (17,227)
Acquisition related deferred or contingent consideration
(84)(25,150)
Repurchases of ordinary shares
(24,679)(10,670)
Cash dividends paid to ordinary shareholders
(43,008)(34,148)
Stock option and other equity transactions, net
1,221 1,710 
Net cash (provided by) used in financing activities(141,414)818,810 
Effect of exchange rate changes on cash and cash equivalents(12,908)1,539 
Increase (decrease) in cash and cash equivalents(31,993)314,243 
Cash and cash equivalents at beginning of period348,320 220,531 
Cash and cash equivalents at end of period$316,327 $534,774 


See notes to consolidated financial statements.
6

STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except per share amounts)
(Unaudited)
Ordinary SharesRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Non-controlling
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 income (loss)  111,262  (507)110,755 
Other comprehensive income (loss)   (178,565) (178,565)
Repurchases of ordinary shares(126)(14,356)(10,323)  (24,679)
Equity compensation programs and other149 10,182    10,182 
Cash dividends – $0.43 per ordinary share
  (43,008)  (43,008)
Other changes in noncontrolling interest    (194)(194)
Balance at June 30, 2022100,090 $4,738,746 $2,057,175 $(388,373)$11,580 $6,419,128 
Ordinary SharesRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Non-controlling
Interest
Total
Equity
  NumberAmount 
Balance at March 31, 202185,353 2,002,825 $1,939,408 $(61,243)$10,478 $3,891,468 
Comprehensive income:
Net income (loss)— — (21,807)— (95)(21,902)
Other comprehensive income— — — 24,426 — 24,426 
Repurchases of ordinary shares(60)(1,776)(8,894)— — (10,670)
Equity compensation programs and other156 28,299 — — 28,299 
Cash dividends –$0.40 per ordinary share
— — (34,148)— — (34,148)
Issuance of shares for acquisition of Cantel Medical LLC ("Cantel")14,297 2,689,317 — — — 2,689,317 
Consideration related to equity component of Cantel convertible debt— 175,555 — — — 175,555 
Consideration related to Cantel equity compensation programs— 18,173 — — — 18,173 
Reclassification to Cantel convertible debt, premium liability— (175,555)— — — (175,555)
Other changes in noncontrolling interest— — — — 52 52 
Balance at June 30, 202199,746 $4,736,838 $1,874,559 $(36,817)$10,435 $6,585,015 



See notes to consolidated financial statements.

7

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the Three Months Ended June 30, 2022 and 2021
(dollars in thousands, unless noted and except per share amounts)
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
STERIS is a leading global provider of products and services that support patient care with an emphasis on infection prevention. WE HELP OUR CUSTOMERS CREATE A HEALTHIER AND SAFER WORLD by providing innovative healthcare, life sciences and dental products and services. We offer our Customers a unique mix of innovative consumable products, such as detergents, gastrointestinal (“GI”) endoscopy accessories, barrier product solutions, and other products and services, including: equipment installation and maintenance, microbial reduction of medical devices, dental instruments and tools, instrument and scope repair, laboratory testing services, outsourced reprocessing, and capital equipment products, such as sterilizers and surgical tables, automated endoscope reprocessors, and connectivity solutions such as operating room (“OR”) integration.
We operate and report in four reportable business segments: Healthcare, Applied Sterilization Technologies, Life Sciences, and Dental. We describe our business segments in Note 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, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022. The Consolidated Balance Sheet at March 31, 2022 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 inter-company accounts and transactions when we consolidate these accounts. Investments in equity of unconsolidated affiliates, over which the Company has significant influence, but not control, over the financial and operating polices, are accounted for primarily using the equity method. These investments are immaterial to the Company's Consolidated Financial Statements.
Use of Estimates
We make certain estimates and assumptions when preparing financial statements according to U.S. GAAP that affect the reported amounts of assets and liabilities at the financial statement dates and the reported amounts of revenues and expenses during the periods presented. These estimates and assumptions involve judgments with respect to many factors that are difficult to predict and are beyond our control. Actual results could be materially different from these estimates. We revise the estimates and assumptions as new information becomes available. This means that operating results for the three month period ended June 30, 2022 are not necessarily indicative of results that may be expected for future quarters or for the full fiscal year ending March 31, 2023.

8

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three Months Ended June 30, 2022 and 2021
(dollars in thousands, except as noted)


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 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 June 30, 2022, 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 Revenue
Product revenues consist of revenues generated from sales of consumables and capital equipment. These contracts are primarily based on a Customer’s purchase order and may include a Distributor, Dealer or Group Purchasing Organization ("GPO") agreement. We recognize revenue for sales of product when control passes to the Customer, which generally occurs either when the products are shipped or when they are received by the Customer. Revenue related to capital equipment products is deferred until installation is complete if the capital equipment and installation are highly integrated and form a single performance obligation.
Service Revenue
Within our Healthcare and Life Sciences segments, service revenues include revenue generated from parts and labor associated with the maintenance, repair and installation of capital equipment. These contracts are primarily based on a Customer’s purchase order and may include a Distributor, Dealer, or Group Purchasing Organization ("GPO") agreement. For maintenance, repair and installation of capital equipment, revenue is recognized upon completion of the service. Healthcare service revenues also include outsourced reprocessing services and instrument repairs. Contracts for outsourced reprocessing services are primarily based on an agreement with a Customer, ranging in length from several months to 15 years. Outsourced reprocessing services revenue is recognized ratably over the contract term using a time-based input measure, adjusted for volume and other performance metrics, to the extent that it is probable that a significant reversal of revenue will not occur. Contracts for instrument repairs are primarily based on a Customer’s purchase order, and the associated revenue is recognized upon completion of the repair.
We also offer preventive maintenance and separately priced extended warranty agreements to our Customers, which require us to maintain and repair our products over the duration of the contract. Generally, these contract terms are cancellable
9

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three Months Ended June 30, 2022 and 2021
(dollars in thousands, except as noted)


without penalty and range from one to five years. Amounts received under these Customer contracts are initially recorded as a service liability and are recognized as service revenue ratably over the contract term using a time-based input measure.
Within our Applied Sterilization Technologies segment, service revenues include contract sterilization and laboratory services. Sales contracts for contract sterilization and laboratory services are primarily based on a Customer’s purchase order and associated Customer agreement and revenues are generally recognized upon completion of the service.
Contract Liabilities
Payments received from Customers are based on invoices or billing schedules as established in contracts with Customers. Deferred revenue is recorded when payment is received in advance of performance under the contract. Deferred revenue is recognized as revenue upon completion of the performance obligation, which generally occurs within one year. During the first three months of fiscal 2023, $57,528 of the March 31, 2022 deferred revenue balance was recorded as revenue. During the first three months of fiscal 2022, $35,722 of the March 31, 2021 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 capital equipment and consumable orders which have not shipped. With regard to service, these remaining performance obligations primarily include installation, certification, and outsourced reprocessing services. As of June 30, 2022, the transaction price allocated to remaining performance obligations was approximately $1,574,000. We expect to recognize approximately 62% of the transaction price within one year and approximately 31% beyond one year. The remainder has yet to be scheduled for delivery.
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 2023
ASU 2021-08 "Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.October 2021The standard provides guidance to improve the accounting for acquired revenue contracts with Customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. First Quarter Fiscal 2023We adopted this standard effective April 1, 2022 with no material impact to our consolidated financial statements.
A detailed description of our significant and critical accounting policies, estimates, and assumptions is included in our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022. Our significant and critical accounting policies, estimates, and assumptions have not changed materially from March 31, 2022.
2. Business Acquisitions and Divestitures
Acquisitions
10

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three Months Ended June 30, 2022 and 2021
(dollars in thousands, except as noted)


On June 2, 2021, we acquired all outstanding equity interests in Cantel Medical LLC ("Cantel") through a U.S. subsidiary.The total consideration for Cantel common stock and stock equivalents was $3,599,471. We funded the cash portion of the transaction consideration and repayment of a significant amount of Cantel’s existing debt obligations with a portion of the proceeds from new debt, which is described in our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.
In addition to the total purchase consideration, STERIS assumed and repaid $721,284 of existing Cantel debt obligations and assumed Cantel's obligations associated with convertible senior notes issued on May 15, 2020, which is described our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.
Fair Value of Assets Acquired and Liabilities Assumed
The table below presents the allocation of fair values of assets acquired and liabilities assumed on the acquisition date.
March 31, 2022
(As previously reported)AdjustmentsFinal
Cash$169,073 $ $169,073 
Accounts receivable172,226  172,226 
Inventory249,221  249,221 
Property, plant and equipment267,360 (1,282)266,078 
Lease right-of-use assets, net59,720  59,720 
Other assets72,864  72,864 
Intangible assets2,942,000  2,942,000 
Goodwill1,522,381 22,088 1,544,469 
Total assets acquired5,454,845 20,806 5,475,651 
Convertible debt, par value168,000  168,000 
Other current liabilities247,549 5,595 253,144 
Long-term lease obligations47,856  47,856 
Deferred income taxes, net670,685 15,211 685,896 
Long-term indebtedness 721,284  721,284 
Total liabilities assumed1,855,374 20,806 1,876,180 
Net assets acquired $3,599,471 $ $3,599,471 

Fiscal 2023 and 2022 first quarter acquisition and integration expenses totaled $9,832 and $140,996, respectively and were primarily related to the acquisition and integration of Cantel. Acquisition and integration expenses are reported in the selling, general and administrative expenses line of our Consolidated Statements of Income and include but are not limited to investment banker, advisory, legal, other professional fees, and certain employee-related expenses.
For more information on the acquisition of Cantel, refer to our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.

11

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three Months Ended June 30, 2022 and 2021
(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. Inventory costs include material, labor, and overhead. Inventories, net consisted of the following:
 June 30,
2022
March 31,
2022
Raw materials$211,453 $195,035 
Work in process107,267 76,021 
Finished goods341,109 334,880 
Reserve for excess and obsolete inventory(39,425)(30,937)
Inventories, net$620,404 $574,999 

4. Property, Plant and Equipment
Information related to the major categories of our depreciable assets is as follows:
 June 30,
2022
March 31,
2022
Land and land improvements (1)
$82,795 $84,015 
Buildings and leasehold improvements651,071 654,851 
Machinery and equipment899,970 903,649 
Information systems223,455 222,620 
Radioisotope603,761 597,641 
Construction in progress (1)
402,795 356,013 
Total property, plant, and equipment2,863,847 2,818,789 
Less: accumulated depreciation and depletion(1,290,510)(1,266,213)
Property, plant, and equipment, net$1,573,337 $1,552,576 
(1)Land is not depreciated. Construction in progress is not depreciated until placed in service.

12

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three Months Ended June 30, 2022 and 2021
(dollars in thousands, except as noted)


5. Debt
Indebtedness was as follows:
 June 30,
2022
March 31,
2022
Short-term debt
Term Loan, current portion$27,500 $27,500 
Delayed Draw Term Loan, current portion32,500 24,375 
Private Placement Senior Notes91,000 91,000 
Total short-term debt$151,000 $142,875 
Long-term debt
Private Placement Senior Notes$745,032 $758,726 
Revolving Credit Facility92,642 58,908 
Deferred financing costs(24,353)(25,278)
Term Loan65,625 177,500 
Delayed Draw Term Loan617,500 625,625 
Senior Public Notes 1,350,000 1,350,000 
Total long-term debt$2,846,446 $2,945,481 
Total debt$2,997,446 $3,088,356 
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, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.




13

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three Months Ended June 30, 2022 and 2021
(dollars in thousands, except as noted)


6. Additional Consolidated Balance Sheet Information
Additional information related to our Consolidated Balance Sheets is as follows:
 June 30,
2022
March 31,
2022
Accrued payroll and other related liabilities:
Compensation and related items$83,416 $71,878 
Accrued vacation/paid time off14,108 13,669 
Accrued bonuses23,174 64,702 
Accrued employee commissions13,598 30,171 
Other postretirement benefit obligations-current portion1,190 1,190 
Other employee benefit plans obligations-current portion2,094 2,111 
Total accrued payroll and other related liabilities$137,580 $183,721 
Accrued expenses and other:
Deferred revenues$100,617 $110,791 
Service liabilities47,737 51,365 
Self-insured risk reserves-current portion11,421 8,995 
Accrued dealer commissions34,450 31,700 
Accrued warranty13,443 14,108 
Asset retirement obligation-current portion517 1,181 
Accrued interest18,073 10,014 
Other91,385 78,390 
Total accrued expenses and other$317,643 $306,544 
Other liabilities:
Self-insured risk reserves-long-term portion$19,213 $19,213 
Other postretirement benefit obligations-long-term portion7,070 7,335 
Defined benefit pension plans obligations-long-term portion3,601 1,772 
Other employee benefit plans obligations-long-term portion1,183 1,360 
Accrued long-term income taxes12,502 12,225 
Asset retirement obligation-long-term portion11,897 12,362 
Other17,609 21,312 
Total other liabilities$73,075 $75,579 

7. Income Tax Expense
The effective income tax rates for the three-month periods ended June 30, 2022 and 2021 were 17.9% and 24.4%, respectively. The fiscal 2023 effective tax rate decreased when compared to fiscal 2022, primarily due to nonrecurring unfavorable items reported in the prior fiscal year.
Income tax expense is provided on an interim basis based upon our estimate of the annual effective income tax rate, adjusted each quarter for discrete items. 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. With the exception of formal acceptance of the settlement noted below, we are no longer subject to United States federal examinations for years before fiscal 2016 and, with limited exceptions, we are no longer subject to United States state and local, or non-United States, income tax examinations by tax authorities for years before fiscal 2016. We remain subject to tax authority audits in various jurisdictions wherever we do business.
14

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three Months Ended June 30, 2022 and 2021
(dollars in thousands, except as noted)


In the fourth quarter of fiscal 2021, we completed an appeals process with the U.S. Internal Revenue Service (the “IRS”) regarding proposed audit adjustments related to deductibility of interest paid on intercompany debt for fiscal years 2016 through 2017. An agreement was reached on final interest rates, which also impacts subsequent years through 2020. We estimate the total federal, state, and local tax impact of the settlement to be approximately $12,000, for the fiscal years 2016 through 2020, of which approximately $7,500 has been paid through June 30, 2022.
In May 2021, we received two notices of proposed tax adjustment from the IRS regarding deemed dividend inclusions and associated withholding tax. The notices relate to the fiscal and calendar year 2018. The IRS adjustments would result in a cumulative tax liability of approximately $50,000. We are contesting the IRS’s assertions, and intend to pursue available remedies such as appeals and litigation, if necessary. We have not established reserves related to these notices. An unfavorable outcome is not expected to have a material adverse impact on our consolidated financial position but could be material to our consolidated results of operations and cash flows for any one period.
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, asbestos, contaminants, radiation), property damage (e.g., claimed damage due to leaking equipment, fire, vehicles, chemicals), commercial claims (e.g., breach of contract, economic loss, warranty, misrepresentation), financial (e.g., taxes, reporting), employment (e.g., wrongful termination, discrimination, benefits matters), and other claims for damage and relief.
We believe we have adequately reserved for our current litigation and claims that are probable and estimable, and further believe that the ultimate outcome of these pending lawsuits and claims will not have a material adverse effect on our consolidated financial position or results of operations taken as a whole. Due to their inherent uncertainty, however, there can be no assurance of the ultimate outcome or effect of current or future litigation, investigations, claims or other proceedings (including without limitation the matters discussed below). For certain types of claims, we presently maintain insurance coverage for personal injury and property damage and other liability coverages in amounts and with deductibles that we believe are prudent, but there can be no assurance that these coverages will be applicable or adequate to cover adverse outcomes of claims or legal proceedings against us.
Civil, criminal, regulatory or other proceedings involving our products or services could possibly result in judgments, settlements or administrative or judicial decrees requiring us, among other actions, to pay damages or fines or effect recalls, or be subject to other governmental, Customer or other third party claims or remedies, which could materially effect our business, performance, prospects, value, financial condition, and results of operations.
For additional information regarding these matters, see the following portions of our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022, Item 1 titled "Business - Information with respect to our Business in General - Government Regulation" and "- Environmental Matters", 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 non-U.S. 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 Tax Expense” in this Quarterly Report on Form 10-Q.
9. Business Segment Information
We report our financial information in four reportable business segments: Healthcare, Applied Sterilization Technologies, Life Sciences and Dental. Non-allocated operating costs that support the entire Company and items not indicative of operating trends are excluded from segment operating income.
Our Healthcare segment provides a comprehensive offering for healthcare providers worldwide, focused on sterile processing departments and procedural centers, such as operating rooms and endoscopy suites. Our products and services range
15

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three Months Ended June 30, 2022 and 2021
(dollars in thousands, except as noted)


from infection prevention consumables and capital equipment, as well as services to maintain that equipment; to the repair of re-usable procedural instruments; to outsourced instrument reprocessing services. In addition, our procedural solutions also include single-use devices and capital equipment infrastructure used primarily in operating rooms, ambulatory surgery centers, endoscopy suites, and other procedural areas.
Our Applied Sterilization Technologies ("AST") segment is a third-party service provider for contract sterilization, as well as testing services needed to validate sterility services for medical device and pharmaceutical manufacturers. Our technology-neutral offering supports Customers every step of the way, from testing through sterilization.
Our Life Sciences segment provides a comprehensive offering of products and services that support pharmaceutical manufacturing, primarily for vaccine and other biopharma Customers focused on aseptic manufacturing. These solutions include a full suite of consumable products, equipment maintenance and specialty services, and capital equipment.
Our Dental segment provides a comprehensive offering for dental practitioners and dental schools, offering instruments, infection prevention consumables and instrument management systems.
We disclose a measure of segment income that is consistent with the way management operates and views the business. The accounting policies for reportable segments are the same as those for the consolidated Company. Certain prior period costs were reallocated from the Healthcare segment to corporate to conform with current year presentation. The prior period segment operating income measure has been recast for comparability.
For the three months ended June 30, 2022, revenues from a single Customer did not represent ten percent or more of the Healthcare, Applied Sterilization Technologies or Life Sciences segment revenues. Three Customers collectively and consistently account for approximately 40.0% of our Dental segment revenue. The percentage associated with these three Customers collectively in any one period may vary due to the buying patterns of these three Customers as well as other Dental Customers. These three Customers collectively accounted for approximately 38.6% and 35.8% of our Dental segment revenues for the three months ended June 30, 2022 and 2021, 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, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.
16

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three Months Ended June 30, 2022 and 2021
(dollars in thousands, except as noted)


Financial information for each of our segments is presented in the following table:
 Three Months Ended June 30,
 20222021
Revenues:
Healthcare $698,526 $602,817 
Applied Sterilization Technologies220,911 208,902 
Life Sciences132,207 121,471 
Dental104,847 35,232 
Total revenues$1,156,491 $968,422 
Segment operating income (loss):
Healthcare $156,497 $138,373 
Applied Sterilization Technologies109,315 101,927 
Life Sciences55,305 49,088 
Dental19,596 10,119 
Corporate(75,943)(77,273)
Total segment operating income $264,770 $222,234 
Less: Adjustments
Amortization of acquired intangible assets (1)
$93,929 $41,741 
Acquisition and integration related charges (2)
9,832 140,996 
Tax restructuring costs (3)
173 (49)
(Gain) on fair value adjustment of acquisition related contingent consideration (1)
(3,100) 
Net loss on divestiture of businesses (1)
3,878 419 
Amortization of inventory and property "step up" to fair value (1)
1,637 24,789 
Restructuring charges (4)
26 14 
Total income from operations$158,395 $14,324 
(1) For more information regarding our recent acquisitions and divestitures refer to note 2 titled, "Business Acquisitions and Divestitures" of our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.
(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, 2022, which was filed with the Securities and Exchange Commission on May 31, 2022.
17

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three Months Ended June 30, 2022 and 2021
(dollars in thousands, except as noted)



Additional information regarding our fiscal 2023 and fiscal 2022 first quarter revenue is disclosed in the following tables:
 Three Months Ended June 30,
 20222021
Healthcare:
Consumables$252,032 $206,692 
Capital equipment179,134 150,890 
Service267,360 245,235 
Total Healthcare Revenues
$698,526 $602,817 
Total Applied Sterilization Technologies Revenues$220,911 $208,902 
Life Sciences:
Consumables$59,557 $56,536 
Capital equipment
40,499 32,745 
Service32,151 32,190
Total Life Sciences Revenues
$132,207 $121,471 
Dental Revenues$104,847 $35,232 
Total Revenues$1,156,491 $968,422 
Additional geographic information regarding our revenues and property, plant and equipment, net is presented in the following tables:
Three Months Ended June 30,
20222021
Revenues:
Ireland$18,176 $21,945 
United States834,101 679,250 
Other locations304,214 267,227 
Total Revenues
$1,156,491 $968,422 

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.
18

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three Months Ended June 30, 2022 and 2021
(dollars in thousands, except as noted)


The following is a summary of shares and share equivalents outstanding used in the calculations of basic and diluted earnings per share:
 Three Months Ended June 30,
Denominator (shares in thousands):20222021
Weighted average shares outstanding—basic100,082 90,152 
Dilutive effect of share equivalents640 840 
Weighted average shares outstanding and share equivalents—diluted100,722 90,992 
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 June 30,
(shares in thousands)20222021
Number of share options291 273 
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 7, 2019, our Board of Directors authorized a share repurchase program resulting in a share repurchase authorization of approximately $78,979 (net of taxes, fees and commissions). On July 30, 2019, our Board of Directors approved an increase in the May 7, 2019 authorization of an additional amount of $300,000 (net of taxes, fees and commissions). As of June 30, 2022, there was approximately $294,649 (net of taxes, fees and commissions) of remaining availability under a Board authorized share repurchase program. The 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. Due to the uncertainty surrounding the COVID-19 pandemic, share repurchases were suspended on April 9, 2020. The suspension was lifted effective February 10, 2022, enabling the Company to resume stock repurchases pursuant to the prior authorizations.
During the first three months of fiscal 2023, we repurchased 68,177 of our ordinary shares for the aggregate amount of $14,283 (net of fees and commissions) pursuant to the authorizations.
During the first three months of fiscal 2023, we obtained 57,704 of our ordinary shares in the aggregate amount of $11,737 in connection with share based compensation award programs. During the first three months of fiscal 2022, we obtained 59,648 of our ordinary shares in the aggregate amount of $10,670 in connection with share based compensation award programs.
19

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three Months Ended June 30, 2022 and 2021
(dollars in thousands, except as noted)


12. Share-Based Compensation
We maintain a long-term incentive plan that makes available shares for grants, at the discretion of 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 option plan and agreements. Generally, one-fourth of the stock options granted to employees become exercisable for each full year of employment following the grant date. Stock options granted generally expire 10 years after the grant date, or in some cases earlier if the option holder is no longer employed by us. Restricted shares and restricted share units generally cliff vest after a four year period or vest in tranches of one-fourth of the number granted for each year of employment after the grant date. As of June 30, 2022, 2,812,252 ordinary shares remained available for grant under the long-term incentive plan.
The fair value of stock option awards was estimated at their grant date using the Black-Scholes-Merton option pricing model. This model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable, characteristics that are not present in our option grants. If the model permitted consideration of the unique characteristics of employee stock options, the resulting estimate of the fair value of the stock options could be different. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our Consolidated Statements of Income. The expense is classified as cost of goods sold or selling, general and administrative expenses in a manner consistent with the employee’s compensation and benefits.
The following weighted-average assumptions were used for options granted during the first three months of fiscal 2023 and 2022:
 Fiscal 2023Fiscal 2022
Risk-free interest rate2.41 %1.16 %
Expected life of options5.8 years5.8 years
Expected dividend yield of stock0.80 %0.97 %
Expected volatility of stock24.45 %24.41 %
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 2.54% and 2.85% was applied in fiscal 2023 and 2022, respectively. This rate is calculated based upon historical activity and represents an estimate of the granted options not expected to vest. If actual forfeitures differ from this calculated rate, we may be required to make additional adjustments to compensation expense in future periods. The assumptions used above are reviewed at the time of each significant option grant, or at least annually.
A summary of share option activity is as follows:
 Number of
Options
Weighted
Average
Exercise
Price
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Outstanding at March 31, 20221,560,954 $138.37 
Granted222,384 250.06 
Exercised(20,640)53.20 
Forfeited(6,326)200.62 
Outstanding at June 30, 20221,756,372 $153.29 6.9 years$105,081 
Exercisable at June 30, 20221,109,471 $118.70 5.8 years$97,397 
We estimate that 624,686 of the non-vested stock options outstanding at June 30, 2022 will ultimately vest.
20

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three Months Ended June 30, 2022 and 2021
(dollars in thousands, except as noted)


The aggregate intrinsic value in the table above represents the total pre-tax difference between the $206.15 closing price of our ordinary shares on June 30, 2022 over the exercise prices of the stock options, multiplied by the number of options outstanding or outstanding and exercisable, as applicable. The aggregate intrinsic value is not recorded for financial accounting purposes and the value changes daily based on the daily changes in the fair market value of ordinary shares.
The total intrinsic value of stock options exercised during the first three months of fiscal 2023 and fiscal 2022 was $3,897 and $5,469, respectively. Net cash proceeds from the exercise of stock options were $1,221 and $1,710 for the first three months of fiscal 2023 and fiscal 2022, respectively.
The weighted average grant date fair value of stock option grants was $50.04 and $36.24 for the first three months of fiscal 2023 and fiscal 2022, respectively.
Stock appreciation rights (“SARS”) carry generally the same terms and vesting requirements as stock options except that they are settled in cash upon exercise and therefore, are classified as liabilities. As of May 24, 2021, we no longer have
outstanding SARS.
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, 2022485,510 33,677 $157.37 
Granted119,588 5,824