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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 September 30, 2021

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 emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company,” and 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 November 4, 2021: 100,023,002
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)
 September 30,
2021
March 31,
2021
 (Unaudited) 
Assets
Current assets:
Cash and cash equivalents$383,494 $220,531 
Accounts receivable (net of allowances of $18,410 and $11,355 respectively)
762,003 609,406 
Inventories, net564,532 315,067 
Prepaid expenses and other current assets194,598 66,750 
Total current assets1,904,627 1,211,754 
Property, plant, and equipment, net1,511,255 1,235,400 
Lease right-of-use assets, net199,332 150,142 
Goodwill5,132,697 3,026,049 
Intangibles, net2,954,417 898,406 
Other assets50,120 52,720 
Total assets$11,752,448 $6,574,471 
Liabilities and equity
Current liabilities:
Accounts payable$219,255 $156,950 
Accrued income taxes11,222 27,561 
Accrued payroll and other related liabilities187,473 150,078 
Lease obligations due within one year36,939 22,774 
Short-term indebtedness21,875  
Accrued expenses and other308,937 220,557 
Total current liabilities785,701 577,920 
Long-term indebtedness3,421,506 1,650,540 
Deferred income taxes, net752,881 236,860 
Long-term lease obligations163,836 129,673 
Other liabilities83,593 88,010 
Total liabilities$5,207,517 $2,683,003 
Commitments and contingencies (see note 8)
Ordinary shares, with $0.001 par value; 500,000 shares authorized; 99,911 and 85,353 ordinary shares issued and outstanding, respectively
4,748,181 2,002,825 
Retained earnings1,893,196 1,939,408 
Accumulated other comprehensive loss(105,733)(61,243)
Total shareholders’ equity6,535,644 3,880,990 
Noncontrolling interests9,287 10,478 
Total equity6,544,931 3,891,468 
Total liabilities and equity$11,752,448 $6,574,471 

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 September 30, Six Months Ended September 30,
 2021202020212020
Revenues:(*as adjusted)(*as adjusted)
Product$685,238 $339,504 $1,174,517 $640,612 
Service511,747 416,628 990,890 784,452 
Total revenues1,196,985 756,132 2,165,407 1,425,064 
Cost of revenues:
Product427,484 175,798 698,890 330,537 
Service289,157 250,297 559,891 477,106 
Total cost of revenues716,641 426,095 1,258,781 807,643 
Gross profit480,344 330,037 906,626 617,421 
Operating expenses:
Selling, general, and administrative344,799 172,707 738,551 327,878 
Research and development18,832 16,143 37,024 32,374 
Restructuring expenses210 (76)224 90 
Total operating expenses363,841 188,774 775,799 360,342 
Income from operations116,503 141,263 130,827 257,079 
Non-operating expenses, net:
Interest expense23,036 8,665 44,848 18,157 
Fair value adjustment related to convertible debt, premium liability4,883  27,806  
Interest (income) and miscellaneous expense(1,023)(1,188)(2,457)(3,477)
Total non-operating expenses, net26,896 7,477 70,197 14,680 
Income before income tax expense89,607 133,786 60,630 242,399 
Income tax expense19,982 27,778 12,907 46,860 
Net income69,625 106,008 47,723 195,539 
Less: Net income (loss) attributable to noncontrolling interests(186)150 (281)84 
Net income attributable to shareholders$69,811 $105,858 $48,004 $195,455 
Net income per share attributed to shareholders
Basic$0.70 $1.24 $0.51 $2.30 
Diluted$0.69 $1.23 $0.50 $2.28 
Cash dividends declared per share ordinary outstanding$0.43 $0.40 $0.83 $0.77 
*Certain amounts have been adjusted to reflect the change in inventory accounting method, as described in our Annual Report on Form 10-K filed with the SEC on May 28, 2021.



See notes to consolidated financial statements.

4

STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)
(Unaudited)
Three Months Ended September 30, Six Months Ended September 30,
2021202020212020
(*as adjusted)(*as adjusted)
Net income$69,625 $106,008 $47,723 $195,539 
  Less: Net income attributable to noncontrolling
  interests
(186)150 (281)84 
Net income attributable to shareholders69,811 105,858 48,004 195,455 
Other comprehensive income (loss)
Amortization of pension and postretirement benefit plan costs, (net of taxes of $174, $173, $348 and $347, respectively)
(507)(510)(1,014)(1,020)
Change in cumulative currency translation adjustment(68,409)78,251 (43,476)105,870 
Total other comprehensive income (loss)(68,916)77,741 (44,490)104,850 
Comprehensive income $895 $183,599 $3,514 $300,305 
*Certain amounts have been adjusted to reflect the change in inventory accounting method, as described in our Annual Report on Form 10-K filed with the SEC on May 28, 2021.



See notes to consolidated financial statements.



5

STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 Six Months Ended September 30,
 20212020
Operating activities:(*as adjusted)
Net income$47,723 $195,539 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization201,663 103,372 
Deferred income taxes3,129 (524)
Share-based compensation expense37,910 13,901 
Loss on the disposal of property, plant, equipment, and intangibles, net537 178 
Loss on sale of businesses, net404 5 
Fair value adjustment related to convertible debt, premium liability27,806  
Amortization of inventory fair value adjustments85,154  
Other items7,986 5,460 
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net15,932 88,134 
Inventories, net(57,897)(27,080)
Other current assets(66,337)(355)
Accounts payable(260)(27,545)
Accruals and other, net(34,984)(55,012)
Net cash provided by operating activities268,766 296,073 
Investing activities:
Purchases of property, plant, equipment, and intangibles, net(133,369)(110,746)
Proceeds from the sale of property, plant, equipment and intangibles387 275 
Acquisition of businesses, net of cash acquired(547,353) 
Other (2,392)
Net cash used in investing activities(680,335)(112,863)
Financing activities:
Proceeds from issuance of senior public notes1,350,000  
Proceeds from term loan650,000  
Payments on long-term obligations(721,284)(35,000)
Payments on convertible debt(371,361) 
Payments on term loan(125,000) 
Payments under credit facilities, net(65,021)(107,162)
Deferred financing fees and debt issuance costs(17,343) 
Acquisition related deferred or contingent consideration(25,262)(42)
Repurchases of ordinary shares(24,751)(14,434)
Cash dividends paid to ordinary shareholders(77,107)(65,560)
Distributions to noncontrolling interest(997) 
Contributions from noncontrolling interest 2,258 
Stock option and other equity transactions, net7,829 20,621 
Net cash provided by (used in) financing activities579,703 (199,319)
Effect of exchange rate changes on cash and cash equivalents(5,171)8,556 
Increase (decrease) in cash and cash equivalents162,963 (7,553)
Cash and cash equivalents at beginning of period220,531 319,581 
Cash and cash equivalents at end of period$383,494 $312,028 
*Certain amounts have been adjusted to reflect the change in inventory accounting method, as described in our Annual Report on Form 10-K filed with the SEC on May 28, 2021.
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 September 30, 2021
Ordinary SharesRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Non-controlling
Interest
Total
Equity
  NumberAmount 
Balance at June 30, 202199,746 $4,736,838 $1,874,559 $(36,817)$10,435 $6,585,015 
Comprehensive income:
Net income
  69,811  (186)69,625 
Other comprehensive income
   (68,916) (68,916)
Repurchases of ordinary shares(71)(5,866)(8,215)  (14,081)
Equity compensation programs and other236 17,209    17,209 
Cash dividends – $0.43 per ordinary share
  (42,959)  (42,959)
Distributions to noncontrolling interest    (997)(997)
Other changes in noncontrolling interest    35 35 
Balance at September 30, 202199,911 $4,748,181 $1,893,196 $(105,733)$9,287 $6,544,931 

Six Months Ended September 30, 2021
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
  48,004  (281)47,723 
Other comprehensive income
   (44,490) (44,490)
Repurchases of ordinary shares(131)(7,642)(17,109)  (24,751)
Equity compensation programs and other392 45,508    45,508 
Cash dividends – $0.83 per ordinary share
  (77,107)  (77,107)
Issuance of shares for acquisition of Cantel Medical Corp. ("Cantel")14,297 2,689,317    2,689,317 
Consideration related to equity component of Cantel convertible debt  175,555    175,555 
Consideration related to Cantel equity compensation programs  18,173    18,173 
Reclassification to Cantel convertible debt, premium liability  (175,555)   (175,555)
Distributions to noncontrolling interest     (997)(997)
Other changes in noncontrolling interest    87 87 
Balance at September 30, 202199,911 $4,748,181 $1,893,196 $(105,733)$9,287 $6,544,931 











7

STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued)
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended September 30, 2020
Ordinary SharesRetained
Earnings (as adjusted *)
Accumulated
Other
Comprehensive
Income (Loss)
Non-controlling
Interest
Total
Equity
  NumberAmount 
Balance at June 30, 202085,060 $1,983,047 $1,712,864 $(208,354)$15,049 $3,502,606 
Comprehensive income:
Net income
— — 105,858 — 150 106,008 
Other comprehensive income
— — — 77,741 — 77,741 
Repurchases of ordinary shares(13)(15,276)15,138 — — (138)
Equity compensation programs and other204 23,109 — — — 23,109 
Cash dividends $0.40 per ordinary share
— — (34,089)— — (34,089)
Other changes in noncontrolling interest— — — — 111 111 
Balance at September 30, 202085,251 $1,990,880 $1,799,771 $(130,613)$15,310 $3,675,348 
*Certain amounts have been adjusted to reflect the change in inventory accounting method, as described in our Annual Report on Form 10-K filed with the SEC on May 28, 2021.

Six Months Ended September 30, 2020
Ordinary SharesRetained
Earnings (as adjusted *)
Accumulated
Other
Comprehensive
Income (Loss)
Non-controlling
Interest
Total
Equity
  NumberAmount 
Balance at March 31, 202084,924 $1,982,164 $1,658,661 $(235,463)$12,848 $3,418,210 
Comprehensive income:
Net income
— — 195,455 — 84 195,539 
Other comprehensive income
— — — 104,850 — 104,850 
Repurchases of ordinary shares(111)(25,649)11,215 — — (14,434)
Equity compensation programs and other438 34,365 — — — 34,365 
Cash dividends – $0.77 per ordinary share
— — (65,560)— — (65,560)
Contributions from noncontrolling interest— — — — 2,258 2,258 
Other changes in noncontrolling interest— — — — 120 120 
Balance at September 30, 202085,251 $1,990,880 $1,799,771 $(130,613)$15,310 $3,675,348 
*Certain amounts have been adjusted to reflect the change in inventory accounting method, as described in our Annual Report on Form 10-K filed with the SEC on May 28, 2021.







8


STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the Three and Six Months Ended September 30, 2021 and 2020
(dollars in thousands, except as noted)
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
STERIS is a leading global provider of products and services that support patient care with an emphasis on infection prevention. Our MISSION IS TO HELP OUR CUSTOMERS CREATE A HEALTHIER AND SAFER WORLD by providing innovative healthcare and life science product and service solutions around the globe. 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 solutions, 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.
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, 2021 dated May 28, 2021. The Consolidated Balance Sheet at March 31, 2021 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 and six month periods ended September 30, 2021 are not necessarily indicative of results that may be expected for future quarters or for the full fiscal year ending March 31, 2022.
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 Six Months Ended September 30, 2021 and 2020
(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 September 30, 2021, 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 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.
10

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2021 and 2020
(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 six months of fiscal 2022, $40,360 of the March 31, 2021 deferred revenue balance was recorded as revenue. During the first six months of fiscal 2021, $36,768 of the March 31, 2020 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 September 30, 2021, the transaction price allocated to remaining performance obligations was approximately $1,374,000. We expect to recognize approximately 55% of the transaction price within one year and approximately 36% 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 Six Months Ended September 30, 2021 and 2020
(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 2022
ASU 2019-12 "Income Taxes (Topic 740)"December 2019The standard provides final guidance that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The guidance simplifies accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.First Quarter Fiscal 2022We adopted this standard effective April 1, 2021 with no material impact to our consolidated financial statements.
ASU 2020-06 "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)"August 2020    
This standard simplifies the accounting for convertible instruments and its application of the derivatives scope exception for contracts in an entity’s own equity. The standard reduces the number of accounting models that require separating embedded conversion features from convertible instruments. As a result, only conversion features accounted for under the substantial premium model and those that require bifurcation will be accounted for separately. For contracts in an entity’s own equity, the new standard eliminates some of the current requirements for equity classification. The standard also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity.
First Quarter Fiscal 2022We adopted this standard effective April 1, 2021 and applied it to our accounting for the convertible debt assumed in the acquisition of Cantel Medical Corp. ("Cantel").

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, 2021 dated May 28, 2021. Our significant and critical accounting policies, estimates, and assumptions have not changed materially from March 31, 2021.
2. Business Acquisitions
On June 2, 2021, we acquired all outstanding equity interests of Cantel Medical LLC. ("Cantel") through a U.S. subsidiary. Cantel, headquartered in Little Falls, New Jersey, with approximately 3,700 employees, is a global provider of infection prevention products and services primarily to endoscopy and dental Customers.
We believe that the acquisition will strengthen STERIS’s leadership in infection prevention by bringing together two complementary businesses able to offer a broader set of Customers a more diversified selection of infection prevention, endoscopy and sterilization products and services. Cantel is being integrated into our existing Healthcare and Life Sciences segments. Cantel’s Dental business extends our business into a new Customer segment where there is an increasing focus on infection prevention protocols and processes. This business will be reported as the Dental segment. Additionally, the acquisition is expected to result in cost savings from optimizing global back-office infrastructure, leveraging best-demonstrated practices across locations and eliminating redundant public company costs.
12

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2021 and 2020
(dollars in thousands, except as noted)


Acquisition and integration expenses which were primarily related to the Cantel acquisition totaled $17,404 and $158,400 for the second quarter and first half of fiscal 2022, respectively, and are reported in the selling, general and administrative expenses line of our Consolidated Statements of Income. Acquisition and integration expenses include but are not limited to investment banker, advisory, legal, other professional fees, and certain employee-related expenses.
Total Purchase Consideration
The total consideration for Cantel Common Stock and stock equivalents was $3,599,471. The consideration was comprised of the following:
(shares in thousands)
Cash consideration $16.93 per Cantel share (42,816 shares)
$716,412 
Cash consideration for fractional shares 14 
 STERIS plc ordinary shares (14,297 shares at 188.07 per share)
2,689,317 
Consideration related to Cantel equity compensation programs18,173 
Consideration related to equity component of Cantel convertible debt175,555 
Total purchase consideration$3,599,471 
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 in note 5 titled, "Debt."
We funded the cash portion of the transaction consideration and repayment of a significant amount of Cantel’s existing debt obligations with a portion of the proceeds from new debt, which is described in Note 5 titled, "Debt" and in our Annual Report on Form 10-K for the year ended March 31, 2021, filed with the SEC on May 28, 2021.
Fair Value of Assets Acquired and Liabilities Assumed
The acquisition of Cantel has been accounted for using the acquisition method of accounting which requires, among other things, the assets acquired and liabilities assumed be recognized at their respective fair values as of the acquisition date. Acquisition accounting is dependent upon certain valuations and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. The process for estimating the fair values of identifiable intangible assets and certain tangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates.
The entire purchase price allocation for Cantel is preliminary. As we finalize the fair value of assets acquired and liabilities assumed, additional purchase price adjustments will be recorded during the measurement period. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations. The finalization of the purchase accounting assessment will result in changes in the valuation of assets acquired and liabilities assumed and may have a material impact on the our results of operations and financial position. Goodwill will be allocated to the Healthcare, Life Sciences and Dental segments. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. Goodwill recognized as a result of the acquisition is not deductible for tax purposes.
The table below presents the preliminary estimated fair values of assets acquired and liabilities assumed on the acquisition date. These preliminary estimates will be revised during the measurement period as third-party valuations are finalized, additional information becomes available and as additional analyzes are performed, and these differences could have a material impact on our results of operations and financial position.

13

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2021 and 2020
(dollars in thousands, except as noted)


Cantel (1)
Cash$169,073 
Accounts receivable172,226 
Inventory271,132 
Property, plant and equipment227,783 
Lease right-of-use assets, net48,504 
Other assets65,837 
Intangible assets2,190,000 
Goodwill2,149,827 
Total assets acquired5,294,382 
Convertible debt, par value168,000 
Other current liabilities243,331 
Long-term lease obligations40,768 
Deferred income taxes, net521,528 
Long-term indebtedness 721,284 
Total liabilities assumed1,694,911 
Net assets acquired $3,599,471 
(1) Purchase price allocation is still preliminary as of September 30, 2021, as valuations have not been finalized.

Other Intangible Assets
The estimated fair values of identifiable intangible assets were prepared using an income valuation approach, which requires a forecast of expected future cash flows either through the use of the relief-from-royalty method or the multi-period excess earnings method. The estimated useful lives are based on the historical experience of STERIS, available similar industry data and assumptions made by management. Preliminary values and useful lives are presented in the table below.
 
Total (1)
Useful Life
Customer relationships$2,060,000 10 years
Trade name130,000 10 years
Total intangible assets acquired$2,190,000 
(1) Amounts are preliminary as of September 30, 2021, as valuations have not been finalized.

Contingent liabilities assumed totaled $25,000 and were related to contingent consideration associated with a prior acquisition completed by Cantel. Payment of the liability was made in June 2021.
Actual and Pro Forma Impact
Our consolidated financial statements include Cantel's results of operations from the date of acquisition on June 2, 2021 through September 30, 2021. Net sales and operating income (loss) attributable to Cantel and included in our consolidated financial statements for the three-month period ended September 30, 2021 total $312,903 and $(57,946), respectively. Net sales and operating income (loss) attributable to Cantel from the date of acquisition and included in our consolidated financial statements for the six-month period ended September 30, 2021 total $414,661 and $(191,136), respectively.
The following unaudited pro forma information gives effect to our acquisition of Cantel as if the acquisition had occurred on April 1, 2020 and Cantel had been included in our consolidated results of operations for the three-month and six-month periods ended September 30, 2021 and 2020.

14

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2021 and 2020
(dollars in thousands, except as noted)


Three Months Ended September 30,Six Months Ended September 30
(unaudited)(unaudited)
 2021202020212020
Net revenues$1,196,985 $1,035,265 $2,370,504 $1,905,139 
Net income (loss) from continuing operations137,375 58,593 231,017 (62,106)
The historical consolidated financial information of STERIS and Cantel has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the transaction and factually supportable. The unaudited pro forma results include adjustments to reflect the amortization of the inventory step-up and the incremental intangible asset amortization to be incurred based on preliminary valuations of assets acquired. Adjustments to financing costs and income tax expense also were made to reflect the capital structure and anticipated effective tax rate of the combined entity. These pro forma amounts are not necessarily indicative of the results that would have been obtained if the acquisition had occurred as of the beginning of the period presented or that may occur in the future, and does not reflect future synergies, integration costs, or other such costs or savings.
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:
 September 30,
2021
March 31,
2021
(*as adjusted)
Raw materials$193,836 $103,939 
Work in process79,426 54,283 
Finished goods313,033 176,623 
Reserve for excess and obsolete inventory(21,763)(19,778)
Inventories, net$564,532 $315,067 
*Certain amounts have been adjusted to reflect the change in inventory accounting method, as described in our Annual report on Form 10-K filed with the SEC on May 28, 2021.
Inventory has increased since March 31, 2021 primarily due to the acquisition of Cantel.
4. Property, Plant and Equipment
Information related to the major categories of our depreciable assets is as follows:
 September 30,
2021
March 31,
2021
Land and land improvements (1)
$83,479 $69,477 
Buildings and leasehold improvements678,945 567,132 
Machinery and equipment883,897 779,044 
Information systems225,890 193,222 
Radioisotope579,617 565,681 
Construction in progress (1)
282,313 211,381 
Total property, plant, and equipment2,734,141 2,385,937 
Less: accumulated depreciation and depletion(1,222,886)(1,150,537)
Property, plant, and equipment, net$1,511,255 $1,235,400 
(1)Land is not depreciated. Construction in progress is not depreciated until placed in service.

15

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2021 and 2020
(dollars in thousands, except as noted)


5. Debt
Indebtedness was as follows:
 September 30,
2021
March 31,
2021
Short-term debt
Term loan, current portion$13,750 $ 
Delayed draw term loan, current portion8,125  
Total short-term debt$21,875 $ 
Long-term debt
Private Placement$857,367 $860,308 
Revolving Credit Facility184,400 247,423 
Deferred financing costs(27,243)(7,191)
Term loan411,250 550,000 
Delayed draw term loan641,875  
Senior public notes 1,350,000  
Financing leases3,857  
Total long-term debt$3,421,506 $1,650,540 
Total debt$3,443,381 $1,650,540 

During the first quarter of fiscal 2022, we borrowed $650,000 under our Delayed draw term loan agreement and used the proceeds to partially fund the Cantel acquisition.
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, 2021 dated May 28, 2021.
Senior Public Notes
On April 1, 2021, STERIS Irish FinCo Unlimited Company ("FinCo," "STERIS Irish FinCo," the "Issuer") completed an offering of $1,350,000 in aggregate principal amount, of its senior notes in two separate tranches: (i) $675,000 aggregate principal amount of the Issuer’s 2.70% Senior Notes due 2031 (the “2031 Notes”) and (ii) $675,000 aggregate principal amount of the Issuer’s 3.750% Senior Notes due 2051 (the “2051 Notes” and, together with the 2031 Notes, the “Senior Public Notes”). The Senior Public Notes were issued pursuant to an Indenture, dated as of April 1, 2021 (the “Base Indenture”), among FinCo, and STERIS plc, STERIS Corporation and STERIS Limited (the “Guarantors”) and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated as of April 1, 2021, among FinCo, the Guarantors and the Trustee (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”). Each of the Guarantors guaranteed the Senior Public Notes jointly and severally on a senior unsecured basis (the “Guarantees”). The 2031 Notes will mature on March 15, 2031 and the 2051 Notes will mature on March 15, 2051. The Senior Public Notes will bear interest at the rates set forth above. Interest on the Senior Public Notes is payable on March 15 and September 15 of each year, beginning on September 15, 2021, until their respective maturities.
Cantel's Convertible Debt
On May 15, 2020, Cantel issued $168,000 aggregate principal amount of 3.25% convertible senior notes due 2025 (the “Notes”) in a private placement. The initial conversion price was $41.51 per share of Cantel common stock (based on an initial conversion rate of 24.0912 shares of Cantel common stock per one thousand dollars in principal amount of Notes) and was, along with the conversion rate, subject to adjustment if certain events occurred.
On June, 3, 2021, Cantel (a) delivered a notice to holders of its Notes pursuant to the indenture governing the Notes (as supplemented, the "Cantel Indenture”), notifying holders that, as a result of each of (i) the consummation of the series of mergers (the “Mergers”) contemplated by the Agreement and Plan of Merger, dated as of January 12, 2021 (as amended by Amendment to Agreement and Plan of Merger, dated as of March 1, 2021), among Cantel, STERIS plc (“Parent”), Solar New US Holding Co, LLC (now known as Solar New US Holding Corporation) (“US Holdco”), an indirect and wholly owned subsidiary of Parent, and Crystal Merger Sub 1, LLC, a direct and wholly owned subsidiary of US Holdco, and (ii) the delisting of Cantel common stock from the New York Stock Exchange (the “NYSE”), a “Fundamental Change” and a “Make-Whole Fundamental Change,” each as defined in the Cantel Indenture, had occurred effective as of June 2, 2021 and (b) commenced an offer to purchase any and all outstanding Notes as a result of the Fundamental Change.
16

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2021 and 2020
(dollars in thousands, except as noted)


A tender offer statement on Schedule TO (“Schedule TO”) was filed by Cantel with the U.S. Securities and Exchange Commission ("SEC") with respect to the right of each holder (each, a “Holder”) of the Notes to require Cantel to repurchase, at the Holder’s option, 100% of the principal amount of the Notes, plus accrued and unpaid interest thereon to, but excluding the settlement date of July 6, 2021 (as such date was amended by Amendment No. 1 to Schedule TO (“Amendment No. 1”), dated June 29, 2021).
The offer to purchase the Notes expired at 11:59 p.m. New York City time, on July 1, 2021 (the “Expiration Time,” as such date was amended by Amendment No. 1), and was not extended. Wells Fargo Bank, National Association, as paying agent and trustee under the Indenture (the “Cantel Trustee”), informed Cantel that as of the Expiration Time, none of the Notes had been validly tendered (and not properly withdrawn) for purchase.
Pursuant to the terms of the Cantel Indenture, in connection with the consummation of the Mergers, Cantel, Parent and the Cantel Trustee entered into a supplemental indenture providing that, following the Mergers, each holder’s right to convert each one thousand dollar principal amount of Notes into shares of Cantel common stock was changed into a right to convert such principal amount of Notes into the kind and amount of cash, stock, other securities, other property or assets, subject to settlement method election provisions of the Indenture, that a holder of Cantel common stock was entitled to receive upon consummation of the Mergers. At the consummation of the Mergers, holders of Cantel common stock received $16.93 in cash and 0.33787 ordinary shares, par value $0.001 per share, of the Parent (“Parent Shares”) for each share of Cantel common stock (each a “unit of Reference Property”).
Because each of the consummation of the Mergers and the delisting of Cantel common stock from the NYSE constituted a “Make-Whole Fundamental Change” under the Cantel Indenture, any Notes surrendered for conversion from and including June 2, 2021 until July 2, 2021 (the “Make-Whole Conversion Period”) are subject to conversion at the conversion rate of 25.0843 units of Reference Property (the “Make-Whole Conversion Rate”), which corresponds to 8.4752 Parent Shares and approximately $424.68 in cash per one thousand dollars in principal amount of Cantel Notes. The Make-Whole Conversion Rate was based on an increase in the Conversion Rate by 0.9931 Additional Shares (as defined in the Indenture) based on a Make-Whole Effective Date of June 2, 2021 and a Stock Price (each as defined in the Indenture) of $81.3520. As previously announced by Cantel, it will settle all conversions of Notes in connection with the Make-Whole Fundamental Changes that constitute the Mergers and delisting of Cantel common stock from the NYSE pursuant to the Cash Settlement provisions of the Cantel Indenture.
The Cantel Trustee, acting as conversion agent, informed Cantel that holders of 100% of the outstanding Notes elected to convert their Notes during the Make-Whole Conversion Period.
The fair value of the Notes exceeded their aggregate par value of $168,000 at the date of consummation of the Mergers. The fair value was estimated utilizing the closing price of Parent Shares on June 2, 2021. A premium of approximately $175,555 in excess of the aggregate par value of the Notes represented purchase consideration and was initially classified in additional paid-in capital in accordance with ASC 2020-06, "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)."
Because all Holders elected to convert during the Make-Whole Conversion Period, the aggregate par value outstanding has been reclassified to current liabilities in the balance sheet. The premium initially recorded as additional paid in capital at the effective time of the Mergers was reclassified to "Convertible debt, premium liability," also classified as a current liability, and was settled in cash.
The final total Cash Settlement value of the Notes was approximately $371,361, comprised of the aggregate par value of $168,000 and the fair value of the liability representing the premium over par of approximately $203,361.
The liability representing the premium over par value increased between the effective date of the Mergers and settlement because of the movement in trading prices of Parent Shares during the Observation Periods. The fluctuation in fair value during such Observation Periods is reported in the statement of income as a component of “Non-operating expense, net.”

The combined annual aggregate amount of maturities of our outstanding debt excluding leases by fiscal year is as follows:
2023
142,875 
202460,000 
2025165,938