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   001-39729

SOTERA HEALTH COMPANY

(Exact name of registrant as specified in its charter)

Delaware	47-3531161
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
9100 South Hills Blvd, Suite 300
Broadview Heights, Ohio	44147
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code	(440)	262-1410

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	SHC	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒ Yes   ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒ Yes   ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated 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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ☐ Yes   ☒ No

As of November 3, 2021, there were 282,916,909 shares of the registrant’s common stock, $0.01 par value per share, outstanding.

SOTERA HEALTH COMPANY

- TABLE OF CONTENTS -

Part I—FINANCIAL INFORMATION	5
Item 1. Financial Statements	5
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	49
Item 1. Legal Proceedings.	49
Item 1A. Risk Factors.	50
Item 6. Exhibits.	51
SIGNATURES	52

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements are often characterized by the use of the words such as “believes,” “estimates,” “expects,” “projects,” “may,” “intends,” “plans” or “anticipates,” or by discussions of strategy, plans or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from historical results or any future results, performance or achievements expressed, suggested or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to:

•any disruption in the availability of, or increases in the price of, ethylene oxide (“EO”), cobalt-60 (“Co-60”) or our other direct materials, services and supplies, including as a result of current geopolitical instability arising from U.S. relations with Russia and related sanctions;

•adverse changes in industry trends;

•adverse changes in environmental, health and safety regulations;

•accidents resulting from the safety risks associated with the use and disposal of potentially hazardous materials such as EO and Co-60;

•accidents resulting from the safety risks associated with the transportation of potentially hazardous materials such as EO and Co-60;

•liability claims relating to health risks associated with the use of EO and Co-60;

•current and future legal proceedings;

•the intensity of competition we face;

•any market changes that impact our long-term supply contracts with variable price clauses;

•allegations of our failure to properly perform our services and any potential product liability claims, recalls, penalties and reputational harm;

•the regulatory requirements to which we are subject, and any failures to receive or maintain, or delays in receiving, required clearance or approvals;

•business continuity hazards and other risks associated with our operations, including our reliance on the use and sale of products and services from a single location;

•the impact of the COVID-19 pandemic;

•our ability to increase capacity at existing facilities and build new facilities in a timely and cost-effective manner;

•our ability to renew the long-term leases for our facilities at the end of their terms;

•the risks of doing business internationally;

•instability in global and regional economic and political conditions;

•intense competition for qualified employees in the industries in which we operate;

•the significant regulatory oversight to which our import and export operations are subject, and any failure to comply with applicable regulations;

•any cyber security breaches and data leaks as a result of our dependence on information technology systems;

•the risks of pursuing strategic transactions, including acquisitions, and our ability to find suitable acquisition targets or integrate strategic acquisitions successfully into our business;

•our ability to maintain effective internal controls over financial reporting;

•our reliance on intellectual property to maintain our competitive position and the risk of claims from third parties that we infringe or misappropriate their intellectual property rights;

•the data privacy and security laws and regulations to which we are subject, and any ineffective compliance efforts with such laws and regulations;

•our ability to maintain profitability in the future;

•impairment charges on our goodwill and other intangible assets with indefinite lives;

•unionization efforts and labor regulations in certain countries in which we operate;

•the variety of laws involving the cannabis industry to which we are subject, and any failure to comply with those laws;

•the risk of government or private civil antitrust actions;

•adverse changes to our tax positions in U.S. or non-U.S. jurisdictions, the interpretation and application of recent U.S. tax legislation or other changes in U.S. or non-U.S. taxation of our operations;

•our substantial leverage could adversely affect our ability to raise additional capital, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations under our existing and future indebtedness; and

•our ability to generate sufficient cash flows or access sufficient additional capital to meet our debt obligations or to fund our other liquidity needs.

3

These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them publicly in light of new information or future events, except as required by law. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved.

You should carefully consider the above factors, as well as the factors discussed elsewhere in this Quarterly Report on Form 10-Q, including under Part II, Item 1A, “Risk Factors,” as well as Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 10-K”). If any of these trends, risks or uncertainties actually occurs or continues, our business, financial condition or operating results could be materially adversely affected, the trading prices of our securities could decline and you could lose all or part of your investment. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

Unless expressly indicated or the context requires otherwise, the terms “Sotera Health,” “Company,” “we,” “us,” and “our” in this document refer to Sotera Health Company, a Delaware corporation, and, where appropriate, its subsidiaries on a consolidated basis.

4

Part I—FINANCIAL INFORMATION

Item 1. Financial Statements

Sotera Health Company

Consolidated Balance Sheets

(in thousands)

	As of
	September 30, 2021		December 31, 2020
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	114,912	$	102,447
Restricted cash short-term	7		7
Accounts receivable, net of allowance for uncollectible accounts of $957 and $708, respectively	96,094		91,735
Inventories, net	37,496		34,093
Prepaid expenses and other current assets	67,707		64,964
Income taxes receivable	21,089		21,769
Total current assets	337,305		315,015
Property, plant, and equipment, net	624,341		609,814
Operating lease assets	42,682		45,963
Deferred income taxes	8,015		8,424
Investment in unconsolidated affiliate	9,396		13,457
Other assets	9,211		9,304
Other intangible assets, net	608,641		643,366
Goodwill	1,103,148		1,115,936
Total assets	$	2,742,739	$	2,761,279
Liabilities and equity
Current liabilities:
Accounts payable	$	51,814	$	52,400
Accrued liabilities	54,497		60,518
Deferred revenue	4,866		6,056
Current portion of finance lease obligations	1,339		1,173
Current portion of operating lease obligations	9,546		9,383
Current portion of asset retirement obligations	630		620
Income taxes payable	10,914		10,448
Total current liabilities	133,606		140,598
Long-term debt	1,742,578		1,824,789
Finance lease obligations, less current portion	38,014		34,939
Operating lease obligations, less current portion	35,378		38,941
Noncurrent asset retirement obligations	46,117		45,013
Deferred lease income	20,871		21,255
Post-retirement obligations	42,544		48,223
Mandatorily redeemable noncontrolling interest	—		13,625
Noncurrent liabilities	19,300		17,506
Deferred income taxes	138,562		121,816
Total liabilities	2,216,970		2,306,705
See Commitments and contingencies note
Equity:
Common stock, with $0.01 par value, 1,200,000 shares authorized; 286,037 shares issued at September 30, 2021 and 285,990 at December 31, 2020	2,860		2,860
Preferred stock, with $0.01 par value, 120,000 authorized; no shares issued at September 30, 2021 and December 31, 2020, respectively	—		—
Treasury stock, at cost (3,120 and 2,742 shares at September 30, 2021 and December 31, 2020, respectively)	(34,000)		(34,000)
Additional paid-in capital	1,171,104		1,166,412
Retained deficit	(508,243)		(589,128)
Accumulated other comprehensive loss	(105,952)		(93,842)
Total equity attributable to Sotera Health Company	525,769		452,302
Noncontrolling interests	—		2,272
Total equity	525,769		454,574
Total liabilities and equity	$	2,742,739	$	2,761,279

See notes to consolidated financial statements.

5

Sotera Health Company

Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Service	$	200,499	$	182,176	$	597,907	$	524,025
Product	25,665		17,852		92,322		77,288
Total net revenues	226,164		200,028		690,229		601,313
Cost of revenues:
Service	88,349		83,697		264,776		247,386
Product	12,229		8,820		40,734		30,932
Total cost of revenues	100,578		92,517		305,510		278,318
Gross profit	125,586		107,511		384,719		322,995
Operating expenses:
Selling, general and administrative expenses	44,038		45,632		146,331		125,369
Amortization of intangible assets	15,877		14,849		48,081		43,989
Total operating expenses	59,915		60,481		194,412		169,358
Operating income	65,671		47,030		190,307		153,637
Interest expense, net	18,140		55,330		58,585		167,142
Loss on extinguishment of debt	6,365		—		20,677		—
Foreign exchange loss (gain)	756		(4,571)		1,410		(5,370)
Other income, net	(693)		(3,145)		(7,347)		(4,353)
Income (loss) before income taxes	41,103		(584)		116,982		(3,782)
Provision (benefit) for income taxes	13,659		(1,213)		35,858		(9,677)
Net income	27,444		629		81,124		5,895
Less: Net income attributable to noncontrolling interests	—		619		239		832
Net income attributable to Sotera Health Company	27,444		10		80,885		5,063
Other comprehensive (loss) income net of tax:
Pension and post-retirement benefits (net of taxes of $466, $(182), $240, and $236, respectively)	1,383		(540)		713		700
Interest rate swaps (net of taxes of $0, $661, $0 and $(63), respectively)	—		1,835		—		(179)
Foreign currency translation	(29,867)		17,223		(12,528)		(31,304)
Comprehensive income (loss)	(1,040)		19,147		69,309		(24,888)
Less: comprehensive income attributable to noncontrolling interests	—		620		534		832
Comprehensive income (loss) attributable to Sotera Health Company	$	(1,040)	$	18,527	$	68,775	$	(25,720)
Earnings per share:
Basic	$	0.10	$	—	$	0.29	$	0.02
Diluted	0.10		—		0.29		0.02
Weighted average number of shares outstanding:
Basic	279,381		232,400		279,097		232,400
Diluted	279,560		232,400		279,253		232,400

See notes to consolidated financial statements.

6

Sotera Health Company

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2021		2020
Operating activities:
Net income	$	81,124	$	5,895
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	47,457		47,334
Amortization of intangible assets	65,299		59,824
Loss on extinguishment of debt	20,677		—
Deferred income taxes	8,131		(178)
Share-based compensation expense	10,489		4,019
Accretion of asset retirement obligations	1,751		1,502
Unrealized foreign exchange losses / (gains)	715		(10,006)
Unrealized (gain) / loss on embedded derivative instruments	(424)		579
Amortization of debt issuance costs	4,789		8,828
Other	(6,174)		(5,096)
Changes in operating assets and liabilities:
Accounts receivable	(4,901)		4,533
Inventories	(3,429)		7,175
Other current assets	2,225		(2,697)
Accounts payable	(291)		(7,848)
Accrued liabilities	(7,985)		3,030
Income taxes payable / receivable	(3,620)		(20,057)
Other liabilities	(290)		412
Other long-term assets	(349)		1,491
Net cash provided by operating activities	215,194		98,740
Investing activities:
Purchases of property, plant and equipment	(60,898)		(33,640)
Purchase of mandatorily redeemable noncontrolling interest in Nelson Laboratories Fairfield, Inc.	(12,425)		—
Purchase of BioScience Laboratories, LLC, net of cash acquired	(13,530)		—
Purchase of Iotron Industries Canada, Inc., net of cash acquired	—		(106,280)
Other investing activities	(717)		—
Net cash used in investing activities	(87,570)		(139,920)
Financing activities:
Proceeds from borrowings	—		150,000
Purchase of noncontrolling interests in China subsidiaries	(8,418)		—
Payments of debt issuance costs and prepayment premium	(6,718)		(3,898)
Payments on debt	(100,000)		(61,025)
Other	(368)		(1,116)
Net cash (used in) provided by financing activities	(115,504)		83,961
Effect of exchange rate changes on cash and cash equivalents	345		2,639
Net increase in cash and cash equivalents, including restricted cash	12,465		45,420
Cash and cash equivalents, including restricted cash, at beginning of period	102,454		63,025
Cash and cash equivalents, including restricted cash, at end of period	$	114,919	$	108,445
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	53,726	$	163,965
Cash paid during the period for income taxes, net of tax refunds received	31,922		9,650
Equipment purchases included in accounts payable	14,527		8,494

See notes to consolidated financial statements.

7

Sotera Health Company

Consolidated Statements of Equity

(in thousands)

(Unaudited)

	Three Months Ended September 30, 2021
	Common Stock					Additional Paid-In Capital		Retained Earnings / (Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interests		Total Equity
	Shares	Amount		Treasury Stock
Balance at June 30, 2021	282,917	$	2,860	$	(34,000)	$	1,167,566	$	(535,687)	$	(77,468)	$	—	$	523,271
Share-based compensation plans	—	—		—		3,538		—		—		—		3,538
Comprehensive income (loss):
Pension and post-retirement plan adjustments, net of tax	—	—		—		—		—		1,383		—		1,383
Foreign currency translation	—	—		—		—		—		(29,867)		—		(29,867)
Net income	—	—		—		—		27,444		—		—		27,444
Balance at September 30, 2021	282,917	$	2,860	$	(34,000)	$	1,171,104	$	(508,243)	$	(105,952)	$	—	$	525,769

	Nine Months Ended September 30, 2021
	Common Stock					Additional Paid-In Capital		Retained Earnings / (Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interests		Total Equity
	Shares	Amount		Treasury Stock
Balance at December 31, 2020	283,248	$	2,860	$	(34,000)	$	1,166,412	$	(589,128)	$	(93,842)	$	2,272	$	454,574
Acquisition of noncontrolling interests	—	—		—		(5,772)		—		—		(2,806)		(8,578)
Issuance of shares	47	—		—		1,080		—		—		—		1,080
Share-based compensation plans	(378)	—		—		9,384		—		—		—		9,384
Comprehensive income (loss):
Pension and post-retirement plan adjustments, net of tax	—	—		—		—		—		713		—		713
Foreign currency translation	—	—		—		—		—		(12,823)		295		(12,528)
Net income	—	—		—		—		80,885		—		239		81,124
Balance at September 30, 2021	282,917	$	2,860	$	(34,000)	$	1,171,104	$	(508,243)	$	(105,952)	$	—	$	525,769

See notes to consolidated financial statements.

8

Sotera Health Company

Consolidated Statements of Equity (Deficit) (continued)

(in thousands)

(Unaudited)

	Three Months Ended September 30, 2020
	Common Stock			Additional Paid-In Capital		Retained Earnings / (Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interests		Total Equity (Deficit)
	Shares	Amount
Balance at June 30, 2020	232,400	$	2,324	$	3,118	$	(545,458)	$	(143,688)	$	1,654	$	(682,050)
Share-based compensation plans	—	—		901		—		—		—		901
Comprehensive income (loss):
Pension and post-retirement plan adjustments, net of tax	—	—		—		—		(540)		—		(540)
Foreign currency translation	—	—		—		—		17,640		(417)		17,223
Interest rate swaps	—	—		—		—		1,835		—		1,835
Net income	—	—		—		10		—		620		630
Balance at September 30, 2020	232,400	$	2,324	$	4,019	$	(545,448)	$	(124,753)	$	1,857	$	(662,001)

	Nine Months Ended September 30, 2020
	Common Stock			Additional Paid-In Capital		Retained Earnings / (Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interests		Total Equity (Deficit)
	Shares	Amount
Balance at December 31, 2019	232,400	$	2,324	$	—	$	(550,511)	$	(94,387)	$	1,442	$	(641,132)
Share-based compensation plans	—	—		4,019		—		—		—		4,019
Comprehensive income (loss):
Pension and post-retirement plan adjustments, net of tax	—	—		—		—		700		—		700
Foreign currency translation	—	—		—		—		(30,887)		(417)		(31,304)
Interest rate swaps	—	—		—		—		(179)		—		(179)
Net income	—	—		—		5,063		—		832		5,895
Balance at September 30, 2020	232,400	$	2,324	$	4,019	$	(545,448)	$	(124,753)	$	1,857	$	(662,001)

See notes to consolidated financial statements.

9

Sotera Health Company

Notes to Consolidated Financial Statements

1.Basis of Presentation

Principles of Consolidation – Sotera Health Company (also referred to herein as the “Company,” “we,” “our,” “us” or “its”), is a leading global provider of mission-critical end-to-end sterilization solutions, lab testing and advisory services for the healthcare industry with operations primarily in the Americas, Europe and Asia.

We operate and report in three segments, Sterigenics, Nordion and Nelson Labs. We describe our reportable segments in Note 18, “Segment Information”. All significant intercompany balances and transactions have been eliminated in consolidation.

Noncontrolling interests represent the noncontrolling stockholders’ proportionate share of the total equity in the Company’s consolidated subsidiaries. We consolidate the results of operations of these subsidiaries with our results of operations. In the second quarter of 2021, we purchased the outstanding noncontrolling interests of 15% and 33% of our two China subsidiaries. Refer to Note 4, “Acquisitions” for additional details. We reflect the noncontrolling interests in our two China subsidiaries for all periods presented prior to this purchase transaction on our Consolidated Statements of Operations and Comprehensive Income (Loss) as “Net income attributable to noncontrolling interests.”

On March 11, 2021, we purchased the 15% noncontrolling interest that remained from the August 2018 acquisition of Nelson Laboratories Fairfield, Inc. (“Nelson Labs Fairfield”). As the purchase of this noncontrolling interest was mandatorily redeemable, no earnings were allocated to this noncontrolling interest. See Note 4, “Acquisitions” for additional details.

In July 2020, we acquired a 60% equity ownership interest in a joint venture to construct an E-beam facility in Alberta, Canada in connection with our acquisition of Iotron Industries Canada, Inc. (“Iotron”). Refer to Note 4, “Acquisitions” for additional information. We have determined this to be an investment in a variable interest entity (“VIE”). The investment is not consolidated as the Company has concluded that we are not the primary beneficiary of the VIE. The Company accounts for the joint venture using the equity method. The investment is reflected within “Investment in unconsolidated affiliates” on the Consolidated Balance Sheets.

Use of Estimates – In preparing our consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”), we make estimates and assumptions that affect the amounts reported and the accompanying notes. We regularly evaluate the estimates and assumptions used and revise them as new information becomes available. Actual results may vary from those estimates.

Interim Financial Statements – The accompanying consolidated financial statements include the assets, liabilities, operating results, and cash flows of the Company and its wholly owned subsidiaries. These financial statements are prepared in accordance with U.S. GAAP for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These unaudited interim financial statements should be read in conjunction with the Company's annual consolidated financial statements and accompanying notes on Form 10-K for the year ended December 31, 2020.

2.Recent Accounting Standards

ASUs Issued But Not Yet Adopted

Under the Jumpstart Our Business Startups Act of 2012, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. As an emerging growth company, we have elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies or at which time we conclude it is appropriate to avail ourselves of early adoption provisions of applicable standards. As a result, our results of operations and financial statements may not be comparable to the results of operations and financial statements of other companies who have adopted the new or revised accounting standards.

10

Sotera Health Company

Notes to Consolidated Financial Statements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”): Measurement of Credit Losses on Financial Instruments, and subsequently issued additional guidance that modified ASU 2016-13. The standard requires an entity to change its accounting approach in determining impairment of certain financial instruments, including trade receivables, from an “incurred loss” to a “current expected credit loss” model. We intend to adopt the standard as of January 1, 2022. We are currently assessing the effect that ASU 2016-13 will have on our financial position, results of operations, and disclosures.

In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard simplifies the accounting for income taxes and makes a number of changes meant to add or clarify guidance on accounting for income taxes. This update is effective for annual financial statement periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted in any interim period for which financial statements have not yet been filed. We are currently assessing the effect that ASU 2019-12 will have on our financial position, results of operations, and disclosures.

3.Revenue Recognition

The following table shows disaggregated net revenues from contracts with external customers by timing of revenue and by segment for the three and nine months ended September 30, 2021 and 2020:

(thousands of U.S. dollars)	Three Months Ended September 30, 2021
	Sterigenics		Nordion		Nelson Labs		Consolidated
Point in time	$	145,314	$	28,768	$	—	$	174,082
Over time	—		—		52,082		52,082
Total	$	145,314	$	28,768	$	52,082	$	226,164

(thousands of U.S. dollars)	Three Months Ended September 30, 2020
	Sterigenics		Nordion		Nelson Labs		Consolidated
Point in time	$	126,303	$	20,268	$	—	$	146,571
Over time	—		—		53,457		53,457
Total	$	126,303	$	20,268	$	53,457	$	200,028

(thousands of U.S. dollars)	Nine Months Ended September 30, 2021
	Sterigenics		Nordion		Nelson Labs		Consolidated
Point in time	$	421,647	$	102,439	$	—	$	524,086
Over time	—		1,372		164,771		166,143
Total	$	421,647	$	103,811	$	164,771	$	690,229

(thousands of U.S. dollars)	Nine Months Ended September 30, 2020
	Sterigenics		Nordion		Nelson Labs		Consolidated
Point in time	$	363,955	$	86,034	$	—	$	449,989
Over time	—		—		151,324		151,324
Total	$	363,955	$	86,034	$	151,324	$	601,313

Contract Balances

As of September 30, 2021, and December 31, 2020, contract assets included in “Prepaid expenses and other current assets” on the Consolidated Balance Sheets totaled approximately $14.7 million and $12.7 million, respectively, resulting from revenue recognized over time in excess of the amount billed to the customer.

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Sotera Health Company

Notes to Consolidated Financial Statements

When we receive consideration from a customer prior to transferring goods or services under the terms of a sales contract, we record deferred revenue, which represents a contract liability. Deferred revenue totaled $4.9 million and $6.1 million at September 30, 2021 and December 31, 2020, respectively. We recognize deferred revenue after all revenue recognition criteria are met.

4.Acquisitions

Acquisition of Noncontrolling Interests in China Subsidiaries

On May 18, 2021, the Company acquired the remaining 15% and 33% noncontrolling interests associated with our two subsidiaries located in China. As a result, both entities are now 100% owned by the Company. The purchase price of the remaining equity interests was approximately $8.6 million, net of the cancellation of an $0.8 million demand note. The Company paid 90% of the cash consideration on the acquisition date. The remaining amounts were partially settled in post-closing payments in the third quarter of 2021; $0.2 million of the post-closing payment remains outstanding as of September 30, 2021 subject to the terms of the equity transfer agreements. As a result of the transactions, we continue to consolidate both of these subsidiaries, however, as of May 18, 2021, we no longer record noncontrolling interests in the consolidated financial statements as these subsidiaries are fully owned by the Company. The purchases were accounted for as equity transactions. As a result of these transactions, noncontrolling interests were reduced by $2.8 million reflecting the carrying value of the interest with $5.8 million of the difference charged to additional paid-in capital.

Acquisition of BioScience Laboratories, LLC

On March 8, 2021, we acquired BioScience Laboratories, LLC (“BioScience Labs”) for approximately $13.5 million, net of $0.2 million of cash acquired plus the contemporaneous repayment of BioScience Labs’ outstanding debt of $1.9 million. BioScience is a provider of outsourced topical antimicrobial product testing in the pharmaceutical, medical device, and consumer products industries with one location in Bozeman, Montana.

The purchase price of BioScience Labs was allocated to the underlying assets acquired and liabilities assumed based upon management's estimated fair values at the date of acquisition. Changes to the allocation of the purchase price may occur as these measurements are completed. Approximately $10.6 million of goodwill was recorded related to the BioScience Labs acquisition, representing the excess of the purchase price over the preliminary estimated fair values of all the assets acquired and liabilities assumed. The Company funded this acquisition using available cash. The acquisition price and the results of operations for this acquired entity are not material in relation to the Company's consolidated financial statements.

Acquisition of Mandatorily Redeemable Noncontrolling Interest - Nelson Labs Fairfield

On March 11, 2021, we completed the acquisition of the remaining 15% ownership of Nelson Labs Fairfield for $12.4 million, resulting in a gain of $1.2 million included in “Other expense (income), net” in the Consolidated Statements of Operations and Comprehensive Income (Loss) relative to the $13.6 million previously accrued. Pursuant to the terms of the August 2018 acquisition, we initially acquired 85% of the equity interests of Nelson Labs Fairfield in August 2018 and were obligated to acquire the remaining 15% noncontrolling interest within three years from the date of the acquisition.

Acquisition of Iotron Industries Canada, Inc.

On July 31, 2020, we acquired Iotron for approximately $105.2 million. Iotron was an independent contact sterilizer with two North American locations in Vancouver, Canada, and Columbia City, Indiana. Each location uses proprietary high energy electron beam technology to process products for orthopedic, medical device, plastics, and agricultural businesses. The acquisition was financed by the issuance of $100.0 million of First Lien Notes due 2026. Refer to Note 9, “Long-Term Debt” for additional details.

As part of this acquisition, we also acquired Iotron’s 60% equity ownership interest in a joint venture to construct an E-beam facility in Alberta, Canada. The joint venture is accounted for using the equity method.

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Sotera Health Company

Notes to Consolidated Financial Statements

The estimated fair value of the underlying acquired assets and assumed liabilities of the Iotron acquisition and the measurement period adjustments recognized during the nine months ended September 30, 2021, were as follows:

(thousands of U.S. dollars)
Allocation of purchase price to the fair value of net assets acquired (net of cash acquired):	Amount recognized as of December 31, 2020		Measurement Period Adjustments		Amount recognized as of September 30, 2021
Goodwill	$	69,046	$	(19,447)	$	49,599
Intangibles	16,427		26,273		42,700
Property, plant, and equipment	13,812		4,346		18,158
Working capital, net	1,115		2		1,117
Investment in unconsolidated affiliate	12,881		(4,181)		8,700
Assumed long-term liabilities	(2,248)		—		(2,248)
Other assets/liabilities, net	(5,846)		(6,993)		(12,839)
Total purchase price	$	105,187	$	—	$	105,187

Approximately $49.6 million of goodwill was recorded related to the Iotron acquisition, representing the excess of the purchase price over the estimated fair values of all the assets acquired and liabilities assumed. The fair value allocated to goodwill and tangible and intangible assets are deductible for tax purposes. The qualitative elements of goodwill primarily represent the expanded future growth opportunities for the combined company and the addition of Iotron’s highly skilled workforce. The Company recorded $39.1 million and $3.6 million for intangible assets as part of the acquisition related to customer relationships and employee non-compete agreements, respectively. The estimated useful lives of the identifiable finite-lived intangible assets range from 5 to 15 years.

Iotron’s results of operations are included in our consolidated financial statements from the date of the transaction within the Sterigenics segment. The unaudited pro forma consolidated results for the three and nine months ended September 30, 2020, are reflected in the pro forma table below had the transaction occurred on January 1, 2020. The following unaudited supplemental pro forma financial information is based on our historical consolidated financial statements and Iotron’s historical consolidated financial statements, as adjusted for amortization of acquired intangible assets, an increase in interest expense resulting from interest on the First Lien Notes to finance the acquisition, and to reflect the change in the estimated income tax rate for federal and state purposes.

	Three Months Ended September 30,		Nine Months Ended September 30,
(thousands of U.S. dollars)	2020		2020
Net revenues	$	202,166	$	616,144
Net income