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 class	Trading symbol(s)	Name of Exchange on Which Registered
Ordinary Shares, $0.001 par value	STE	New York Stock Exchange
2.700% Senior Notes due 2031	STE/31	New York Stock Exchange
3.750% Senior Notes due 2051	STE/51	New 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

		Page
Part I—Financial Information
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	48
Part II—Other Information
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 6.	Exhibits	52
	Signature	53

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, net	564,532		315,067
Prepaid expenses and other current assets	194,598		66,750
Total current assets	1,904,627		1,211,754
Property, plant, and equipment, net	1,511,255		1,235,400
Lease right-of-use assets, net	199,332		150,142
Goodwill	5,132,697		3,026,049
Intangibles, net	2,954,417		898,406
Other assets	50,120		52,720
Total assets	$	11,752,448	$	6,574,471
Liabilities and equity
Current liabilities:
Accounts payable	$	219,255	$	156,950
Accrued income taxes	11,222		27,561
Accrued payroll and other related liabilities	187,473		150,078
Lease obligations due within one year	36,939		22,774
Short-term indebtedness	21,875		—
Accrued expenses and other	308,937		220,557
Total current liabilities	785,701		577,920
Long-term indebtedness	3,421,506		1,650,540
Deferred income taxes, net	752,881		236,860
Long-term lease obligations	163,836		129,673
Other liabilities	83,593		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 earnings	1,893,196		1,939,408
Accumulated other comprehensive loss	(105,733)		(61,243)
Total shareholders’ equity	6,535,644		3,880,990
Noncontrolling interests	9,287		10,478
Total equity	6,544,931		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,
	2021		2020		2021		2020
Revenues:			(*as adjusted)				(*as adjusted)
Product	$	685,238	$	339,504	$	1,174,517	$	640,612
Service	511,747		416,628		990,890		784,452
Total revenues	1,196,985		756,132		2,165,407		1,425,064
Cost of revenues:
Product	427,484		175,798		698,890		330,537
Service	289,157		250,297		559,891		477,106
Total cost of revenues	716,641		426,095		1,258,781		807,643
Gross profit	480,344		330,037		906,626		617,421
Operating expenses:
Selling, general, and administrative	344,799		172,707		738,551		327,878
Research and development	18,832		16,143		37,024		32,374
Restructuring expenses	210		(76)		224		90
Total operating expenses	363,841		188,774		775,799		360,342
Income from operations	116,503		141,263		130,827		257,079
Non-operating expenses, net:
Interest expense	23,036		8,665		44,848		18,157
Fair value adjustment related to convertible debt, premium liability	4,883		—		27,806		—
Interest (income) and miscellaneous expense	(1,023)		(1,188)		(2,457)		(3,477)
Total non-operating expenses, net	26,896		7,477		70,197		14,680
Income before income tax expense	89,607		133,786		60,630		242,399
Income tax expense	19,982		27,778		12,907		46,860
Net income	69,625		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,
	2021		2020		2021		2020
			(*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 shareholders	69,811		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,
	2021		2020
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 amortization	201,663		103,372
Deferred income taxes	3,129		(524)
Share-based compensation expense	37,910		13,901
Loss on the disposal of property, plant, equipment, and intangibles, net	537		178
Loss on sale of businesses, net	404		5
Fair value adjustment related to convertible debt, premium liability	27,806		—
Amortization of inventory fair value adjustments	85,154		—
Other items	7,986		5,460
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net	15,932		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 activities	268,766		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 intangibles	387		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 notes	1,350,000		—
Proceeds from term loan	650,000		—
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, net	7,829		20,621
Net cash provided by (used in) financing activities	579,703		(199,319)
Effect of exchange rate changes on cash and cash equivalents	(5,171)		8,556
Increase (decrease) in cash and cash equivalents	162,963		(7,553)
Cash and cash equivalents at beginning of period	220,531		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 Shares			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Equity
	Number	Amount
Balance at June 30, 2021	99,746	$	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 other	236	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, 2021	99,911	$	4,748,181	$	1,893,196	$	(105,733)	$	9,287	$	6,544,931

	Six Months Ended September 30, 2021
	Ordinary Shares			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Equity
	Number	Amount
Balance at March 31, 2021	85,353	$	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 other	392	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, 2021	99,911	$	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 Shares			Retained Earnings (as adjusted *)		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Equity
	Number	Amount
Balance at June 30, 2020	85,060	$	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 other	204	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, 2020	85,251	$	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 Shares			Retained Earnings (as adjusted *)		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total Equity
	Number	Amount
Balance at March 31, 2020	84,924	$	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 other	438	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, 2020	85,251	$	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:

Standard	Date of Issuance	Description	Date of Adoption	Effect on the financial statements or other significant matters
Standards that have been adopted in fiscal 2022
ASU 2019-12 "Income Taxes (Topic 740)"	December 2019	The 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 2022	We 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 2022	We 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 programs	18,173
Consideration related to equity component of Cantel convertible debt	175,555
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 receivable	172,226
Inventory	271,132
Property, plant and equipment	227,783
Lease right-of-use assets, net	48,504
Other assets	65,837
Intangible assets	2,190,000
Goodwill	2,149,827
Total assets acquired	5,294,382
Convertible debt, par value	168,000
Other current liabilities	243,331
Long-term lease obligations	40,768
Deferred income taxes, net	521,528
Long-term indebtedness	721,284
Total liabilities assumed	1,694,911
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 name	130,000		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)
	2021		2020		2021		2020
Net revenues	$	1,196,985	$	1,035,265	$	2,370,504	$	1,905,139
Net income (loss) from continuing operations	137,375		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 process	79,426		54,283
Finished goods	313,033		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 improvements	678,945		567,132
Machinery and equipment	883,897		779,044
Information systems	225,890		193,222
Radioisotope	579,617		565,681
Construction in progress (1)	282,313		211,381
Total property, plant, and equipment	2,734,141		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 portion	8,125		—
Total short-term debt	$	21,875	$	—
Long-term debt
Private Placement	$	857,367	$	860,308
Revolving Credit Facility	184,400		247,423
Deferred financing costs	(27,243)		(7,191)
Term loan	411,250		550,000
Delayed draw term loan	641,875		—
Senior public notes	1,350,000		—
Financing leases	3,857		—
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
2024	60,000
2025	165,938
2026	686,900
2027 and thereafter	2,411,054
Total	$	3,466,767

17

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)

6. Additional Consolidated Balance Sheet Information

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

	September 30, 2021	March 31, 2021
Accrued payroll and other related liabilities:
Compensation and related items	$