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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, 2023

or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______            
Commission File Number 001-38848
STERIS plc
(Exact name of registrant as specified in its charter)
Ireland 98-1455064
(State or other jurisdiction of
incorporation or organization)
 (IRS Employer
Identification No.)
70 Sir John Rogerson's Quay,Dublin 2,Ireland D02 R296
(Address of principal executive offices) (Zip code)
353 1 232 2000
(Registrant’s telephone number, including area code)
_______________________________________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each classTrading symbol(s)Name of Exchange on Which Registered
Ordinary Shares, $0.001 par valueSTENew York Stock Exchange
2.700% Senior Notes due 2031STE/31New York Stock Exchange
3.750% Senior Notes due 2051STE/51New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company,” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer  Accelerated Filer
Non-Accelerated Filer   Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
The number of ordinary shares outstanding as of November 3, 2023: 98,800,161
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,
2023
March 31,
2023
 (Unaudited) 
Assets
Current assets:
Cash and cash equivalents$213,757 $208,357 
Accounts receivable (net of allowances of $27,123 and $23,427 respectively)
940,331 928,315 
Inventories, net821,129 695,493 
Prepaid expenses and other current assets198,760 179,277 
Total current assets2,173,977 2,011,442 
Property, plant, and equipment, net1,743,858 1,705,512 
Lease right-of-use assets, net192,219 191,741 
Goodwill4,040,245 3,879,219 
Intangibles, net3,057,711 2,955,780 
Other assets72,628 78,145 
Total assets$11,280,638 $10,821,839 
Liabilities and equity
Current liabilities:
Accounts payable$293,628 $279,620 
Accrued income taxes32,251 43,804 
Accrued payroll and other related liabilities135,522 125,642 
Short-term lease obligations34,112 34,961 
Short-term indebtedness70,938 60,000 
Accrued expenses and other306,664 317,817 
Total current liabilities873,115 861,844 
Long-term indebtedness3,366,241 3,018,655 
Deferred income taxes, net613,451 617,538 
Long-term lease obligations162,116 160,493 
Other liabilities76,547 76,137 
Total liabilities$5,091,470 $4,734,667 
Commitments and contingencies (see Note 8)
Ordinary shares, with $0.001 par value; 500,000 shares authorized; 98,789 and 98,629 ordinary shares issued and outstanding, respectively
4,518,911 4,486,375 
Retained earnings2,045,897 1,911,533 
Accumulated other comprehensive loss(386,735)(320,710)
Total shareholders’ equity6,178,073 6,077,198 
Noncontrolling interests11,095 9,974 
Total equity6,189,168 6,087,172 
Total liabilities and equity$11,280,638 $10,821,839 

See notes to consolidated financial statements.
3

STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share amounts)
(Unaudited)
 
 Three Months Ended September 30,Six Months Ended September 30,
 2023202220232022
Revenues:
Product$762,336 $666,394 $1,476,194 $1,303,470 
Service580,024 534,123 1,150,708 1,053,538 
Total revenues1,342,360 1,200,517 2,626,902 2,357,008 
Cost of revenues:
Product407,232 351,079 784,410 683,934 
Service341,599 317,103 675,502 622,941 
Total cost of revenues748,831 668,182 1,459,912 1,306,875 
Gross profit593,529 532,335 1,166,990 1,050,133 
Operating expenses:
Selling, general, and administrative380,651 323,195 739,709 657,821 
Goodwill impairment loss 490,565  490,565 
Research and development27,044 24,928 52,546 49,679 
Restructuring (credits) expenses
(23)62 (4)88 
Total operating expenses407,672 838,750 792,251 1,198,153 
Income (loss) from operations185,857 (306,415)374,739 (148,020)
Non-operating expenses, net:
Interest expense36,940 26,123 69,301 48,797 
Interest and miscellaneous (income) expense(1,237)524 (2,630)1,294 
Total non-operating expenses, net35,703 26,647 66,671 50,091 
Income (loss) before income tax expense150,154 (333,062)308,068 (198,111)
Income tax expense (benefit)33,808 (17,831)67,932 6,365 
Net income (loss)116,346 (315,231)240,136 (204,476)
Less: Net income (loss) attributable to noncontrolling interests1,027 54 1,263 (453)
Net income (loss) attributable to shareholders$115,319 $(315,285)$238,873 $(204,023)
Net income (loss) per share attributed to shareholders
Basic$1.17 $(3.15)$2.42 $(2.04)
Diluted$1.16 $(3.15)$2.41 $(2.04)
Cash dividends declared per share ordinary outstanding$0.52 $0.47 $0.99 $0.90 




See notes to consolidated financial statements.

4

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


Three Months Ended September 30,Six Months Ended September 30,
2023202220232022
Net income (loss)$116,346 $(315,231)$240,136 $(204,476)
  Less: Net income (loss) attributable to noncontrolling
  interests
1,027 54 1,263 (453)
Net income (loss) attributable to shareholders115,319 (315,285)238,873 (204,023)
Other comprehensive income (loss)
Amortization of pension and postretirement benefit plan costs, (net of taxes of $18, $10, 35 and $16 respectively)
59 27 117 56 
Change in cumulative currency translation adjustment(75,935)(209,802)(66,142)(388,396)
Total other comprehensive income (loss)(75,876)(209,775)(66,025)(388,340)
Comprehensive income (loss)$39,443 $(525,060)$172,848 $(592,363)


See notes to consolidated financial statements.



5

STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 Six Months Ended September 30,
 20232022
Operating activities:
Net income (loss)$240,136 $(204,476)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization290,177 272,742 
Deferred income taxes(1,314)(62,898)
Share-based compensation expense32,295 20,511 
Gain on the disposal of property, plant, equipment, and intangibles, net
(1,103)(50)
Loss on sale of businesses, net 4,777 
Amortization of inventory fair value adjustments 2,477 
Goodwill impairment loss 490,565 
Other items113 8,840 
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net(2,464)(2,976)
Inventories, net(100,616)(97,987)
Other current assets(19,630)1,269 
Accounts payable15,076 15,675 
Accruals and other, net(25,446)(112,899)
Net cash provided by operating activities427,224 335,570 
Investing activities:
Purchases of property, plant, equipment, and intangibles, net(149,893)(198,701)
Proceeds from the sale of property, plant, and equipment
7,360 1,323 
Proceeds from the sale of businesses9,458 5,228 
Acquisition of businesses, net of cash acquired(539,758)(15,192)
Net cash used in investing activities(672,833)(207,342)
Financing activities:
Payments on term loans(30,000)(126,875)
Proceeds under credit facilities, net
391,022 99,111 
Payments on acquisition related deferred or contingent consideration
(177)(153)
Repurchases of ordinary shares(9,213)(69,922)
Cash dividends paid to ordinary shareholders(97,795)(89,981)
Stock option and other equity transactions, net2,740 1,458 
Net cash provided by (used in) financing activities
256,577 (186,362)
Effect of exchange rate changes on cash and cash equivalents(5,568)(31,927)
Increase (decrease) in cash and cash equivalents5,400 (90,061)
Cash and cash equivalents at beginning of period208,357 348,320 
Cash and cash equivalents at end of period$213,757 $258,259 

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, 2023
Ordinary SharesRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Non-controlling
Interest
Total
Equity
  NumberAmount 
Balance at June 30, 202398,781 $4,498,212 $1,980,933 $(310,859)$10,086 $6,178,372 
Comprehensive income:
Net income   115,319  1,027 116,346 
Other comprehensive loss
   (75,876) (75,876)
Repurchases of ordinary shares(6)(1,502)1,013   (489)
Equity compensation programs and other14 22,201    22,201 
Cash dividends - $0.52 per ordinary share
  (51,368)  (51,368)
Other changes in noncontrolling interest    (18)(18)
Balance at September 30, 202398,789 $4,518,911 $2,045,897 $(386,735)$11,095 $6,189,168 


Six Months Ended September 30, 2023
Ordinary SharesRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Non-controlling
Interest
Total
Equity
  NumberAmount 
Balance at March 31, 202398,629 $4,486,375 $1,911,533 $(320,710)$9,974 $6,087,172 
Comprehensive income:
Net income  238,873  1,263 240,136 
Other comprehensive loss
   (66,025) (66,025)
Repurchases of ordinary shares(57)(2,499)(6,714)  (9,213)
Equity compensation programs and other217 35,035    35,035 
Cash dividends – $0.99 per ordinary share
  (97,795)  (97,795)
Other changes in noncontrolling interest    (142)(142)
Balance at September 30, 202398,789 $4,518,911 $2,045,897 $(386,735)$11,095 $6,189,168 













7

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

Three Months Ended September 30, 2022
Ordinary SharesRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Non-controlling
Interest
Total
Equity
  NumberAmount 
Balance at June 30, 2022100,090 $4,738,746 $2,057,175 $(388,373)$11,580 $6,419,128 
Comprehensive income:
Net (loss) income— — (315,285)— 54 (315,231)
Other comprehensive loss— — — (209,775)— (209,775)
Repurchases of ordinary shares(231)(45,413)170 — — (45,243)
Equity compensation programs and other9 11,785 — — — 11,785 
Cash dividends – $0.47 per ordinary share
— — (46,973)— — (46,973)
Other changes in noncontrolling interest— — — — (244)(244)
Balance at September 30, 202299,868 $4,705,118 $1,695,087 $(598,148)$11,390 $5,813,447 


Six Months Ended September 30, 2022
Ordinary SharesRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Non-controlling
Interest
Total
Equity
  NumberAmount 
Balance at March 31, 2022100,067 $4,742,920 $1,999,244 $(209,808)$12,281 $6,544,637 
Comprehensive income:
Net loss— — (204,023)— (453)(204,476)
Other comprehensive loss— — — (388,340)— (388,340)
Repurchases of ordinary shares(357)(59,769)(10,153)— — (69,922)
Equity compensation programs and other158 21,967 — — — 21,967 
Cash dividends – $0.90 per ordinary share
— — (89,981)— — (89,981)
Other changes in noncontrolling interest— — — — (438)(438)
Balance at September 30, 202299,868 $4,705,118 $1,695,087 $(598,148)$11,390 $5,813,447 

See notes to consolidated financial statements.

















8

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)
1. Nature of Operations and Summary of Significant Accounting Policies
STERIS is a leading global provider of products and services that support patient care with an emphasis on infection prevention. WE HELP OUR CUSTOMERS CREATE A HEALTHIER AND SAFER WORLD by providing innovative healthcare, life sciences and dental products and services. We offer our Customers a unique mix of innovative consumable products, such as detergents, endoscopy accessories, barrier products, and other products and services, including: equipment installation and maintenance, microbial reduction of medical devices, dental instruments and tools, instrument and scope repair, laboratory testing services, outsourced reprocessing, and capital equipment products, such as sterilizers and surgical tables, automated endoscope reprocessors, and connectivity solutions such as operating room (“OR”) integration.
We operate and report in four reportable business segments: Healthcare, Applied Sterilization Technologies ("AST"), Life Sciences, and Dental. We describe our business segments in Note 9 titled "Business Segment Information."
Our fiscal year ends on March 31. References in this Quarterly Report to a particular “year” or “year-end” mean our fiscal year. The significant accounting policies applied in preparing the accompanying consolidated financial statements of the Company are summarized below:
Interim Financial Statements
We prepared the accompanying unaudited consolidated financial statements of the Company according to accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. This means that they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Our unaudited interim consolidated financial statements contain all material adjustments (including normal recurring accruals and adjustments) management believes are necessary to fairly state our financial condition, results of operations, and cash flows for the periods presented.
These interim consolidated financial statements should be read together with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the Securities and Exchange Commission ("SEC") on May 26, 2023. The Consolidated Balance Sheet at March 31, 2023 was derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
Principles of Consolidation
We use the consolidation method to report our investment in our subsidiaries. Therefore, the accompanying consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. We eliminate intercompany accounts and transactions when we consolidate these accounts. Investments in equity of unconsolidated affiliates, over which the Company has significant influence, but not control, over the financial and operating polices, are accounted for primarily using the equity method. These investments are immaterial to the Company's consolidated financial statements.
Use of Estimates
We make certain estimates and assumptions when preparing financial statements according to U.S. GAAP that affect the reported amounts of assets and liabilities at the financial statement dates and the reported amounts of revenues and expenses during the periods presented. These estimates and assumptions involve judgments with respect to many factors that are difficult to predict and are beyond our control. Actual results could be materially different from these estimates. We revise the estimates and assumptions as new information becomes available. This means that operating results for the three and six month periods ended September 30, 2023 are not necessarily indicative of results that may be expected for future quarters or for the full fiscal year ending March 31, 2024.
Revenue Recognition and Associated Liabilities
Revenue is recognized when obligations under the terms of the contract are satisfied and control of the promised products or services have transferred to the Customer. Revenues are measured at the amount of consideration that we expect to be paid in exchange for the products or services. Product revenue is recognized when control passes to the Customer, which is generally based on contract or shipping terms. Service revenue is recognized when the Customer benefits from the service, which occurs either upon completion of the service or as it is provided to the Customer. Our Customers include end users as well as dealers and distributors who market and sell our products. Our revenue is not contingent upon resale by the dealer or distributor, and we have no further obligations related to bringing about resale. Our standard return and restocking fee policies are applied to sales of products. Shipping and handling costs charged to Customers are included in Product revenues. The associated
9

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


expenses are treated as fulfillment costs and are included in Cost of revenues. Revenues are reported net of sales and value-added taxes collected from Customers.
We have individual Customer contracts that offer discounted pricing. Dealers and distributors may be offered sales incentives in the form of rebates. We reduce revenue for discounts and estimated returns, rebates, and other similar allowances in the same period the related revenues are recorded. The reduction in revenue for these items is estimated based on historical experience and trend analysis to the extent that it is probable that a significant reversal of revenue will not occur. Estimated returns are recorded gross on the Consolidated Balance Sheets.
In transactions that contain multiple performance obligations, such as when products, maintenance services, and other services are combined, we recognize revenue as each product is delivered or service is provided to the Customer. We allocate the total arrangement consideration to each performance obligation based on its relative standalone selling price, which is the price for the product or service when it is sold separately.
Payment terms vary by the type and location of the Customer and the products or services offered. Generally, the time between when revenue is recognized and when payment is due is not significant. We do not evaluate whether the selling price contains a financing component for contracts that have a duration of less than one year.
We do not capitalize sales commissions as substantially all of our sales commission programs have an amortization period of one year or less.
Certain costs to fulfill a contract are capitalized and amortized over the term of the contract if they are recoverable, directly related to a contract and generate resources that we will use to fulfill the contract in the future. At September 30, 2023, assets related to costs to fulfill a contract were not material to our consolidated financial statements.
Refer to Note 9 titled, "Business Segment Information" for disaggregation of revenue.
Product Revenues
Product revenues consist of revenues generated from sales of consumables and capital equipment. These contracts are primarily based on a Customer’s purchase order and may include a Distributor, Dealer or Group Purchasing Organization ("GPO") agreement. We recognize revenue for sales of products when control passes to the Customer, which generally occurs either when the products are shipped or when they are received by the Customer. Revenue related to capital equipment products is deferred until installation is complete if the capital equipment and installation are highly integrated and form a single performance obligation.
Service Revenues
Within our Healthcare and Life Sciences segments, service revenues include revenue generated from parts and labor associated with the maintenance, repair and installation of capital equipment. These contracts are primarily based on a Customer’s purchase order and may include a Distributor, Dealer, or GPO agreement. For maintenance, repair and installation of capital equipment, revenue is recognized upon completion of the service. Healthcare service revenues also include outsourced reprocessing services and instrument repairs. Contracts for outsourced reprocessing services are primarily based on an agreement with a Customer, ranging in length from several months to 15 years. Outsourced reprocessing services revenue is recognized ratably over the contract term using a time-based input measure, adjusted for volume and other performance metrics, to the extent that it is probable that a significant reversal of revenue will not occur. Contracts for instrument repairs are primarily based on a Customer’s purchase order, and the associated revenue is recognized upon completion of the repair.
We also offer preventive maintenance and separately priced extended warranty agreements to our Customers, which require us to maintain and repair our products over the duration of the contract. Generally, these contract terms are cancellable without penalty and range from one to five years. Amounts received under these Customer contracts are initially recorded as a service liability and are recognized as service revenue ratably over the contract term using a time-based input measure.
Within our AST segment, service revenues include contract sterilization and laboratory services. Sales contracts for contract sterilization and laboratory services are primarily based on a Customer’s purchase order and associated Customer agreement and revenues are generally recognized upon completion of the service.
10

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


Contract Liabilities
Payments received from Customers are based on invoices or billing schedules as established in contracts with Customers. Deferred revenue is recorded when payment is received in advance of performance under the contract. Deferred revenue is recognized as revenue upon completion of the performance obligation, which generally occurs within one year. During the first six months of fiscal 2024, $64,241 of the March 31, 2023 deferred revenue balance was recorded as revenue. During the first six months of fiscal 2023, $67,218 of the March 31, 2022 deferred revenue balance was recorded as revenue.
Refer to Note 6 titled, "Additional Consolidated Balance Sheet Information" for deferred revenue balances.
Service Liabilities
Payments received in advance of performance for cancellable preventive maintenance and separately priced extended warranty contracts are recorded as service liabilities. Service liabilities are recognized as revenue as performance is rendered under the contract.
Refer to Note 6 titled, "Additional Consolidated Balance Sheet Information" for service liability balances.
Remaining Performance Obligations
Remaining performance obligations reflect only the performance obligations related to agreements for which we have a firm commitment from a Customer to purchase and exclude variable consideration related to unsatisfied performance obligations. With regard to products, these remaining performance obligations include 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, 2023, the transaction price allocated to remaining performance obligations was approximately $1,579,938. We expect to recognize approximately 53% of the transaction price within one year and approximately 38% beyond one year. The remainder has yet to be scheduled for delivery.
Recently Issued Accounting Standards Impacting the Company
Recently Issued Accounting Standards Impacting the Company are presented in the following table:
StandardDate of IssuanceDescriptionDate of AdoptionEffect on the financial statements or other significant matters
Standards that have not yet been adopted
ASU 2022-04 "Liabilities - Supplier Finance Programs (Subtopic 405-50) Disclosure of Supplier Finance Program Obligations."September 2022The standard provides guidance to enhance the transparency of disclosures for entities that utilize supplier finance programs to include information about the key terms of the programs and present a rollforward of any obligations under the program where those obligations are presented in the balance sheet.NAWe are in the process of evaluating the impact that the standard will have on our consolidated financial statements.
ASU 2023-05 "Business Combinations - Joint Venture Formations (Subtopic 805-60) Recognition and Initial Measurement."
August 2023
The standard adds specific guidance to contributions made to a joint venture, upon formation, in a joint venture's separate financial statements. Upon formation of a new joint venture, assets and liabilities will now be initially measure at fair value. The amendments in this standard are effective for all joint ventures formed with a formation date on or after January 1, 2025. Joint ventures formed prior to this date have the option to apply the amendments retrospectively if there is sufficient information.
NA
We are in the process of evaluating the impact that the standard will have on our consolidated financial statements.
A detailed description of our significant and critical accounting policies, estimates, and assumptions is included in our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023. Our significant and critical accounting policies, estimates, and assumptions have not changed materially from March 31, 2023.
11

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


2. Business Acquisitions
On August 2, 2023, we purchased the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from BD (Becton, Dickinson and Company) (NYSE: BDX). The acquired assets from BD are being integrated into our Healthcare segment.
The purchase price of the acquisition was $539,758 and remains subject to post-closing adjustments to inventory. The acquisition also qualified for a tax benefit related to tax deductible goodwill, with a present value of approximately $60,000. The purchase price of the acquisition was financed with borrowings from our existing credit facility. For more information, refer to Note 5 titled, "Debt."
The table below summarizes the preliminary allocation of the purchase price to the net assets acquired from BD based on fair values at the acquisition date.
BD(1)
Inventory27,006 
Property, plant, and equipment6,755 
Intangible assets
303,598 
Goodwill202,399 
Total assets acquired539,758 
Net assets acquired $539,758 
(1) Purchase price allocation is still preliminary as of September 30, 2023, as valuation has not been finalized.
During the first six months of fiscal 2023, we completed a tuck-in acquisition, which continued to expand our product and service offerings in the Healthcare segment. Total aggregate consideration was approximately $21,892, including contingent deferred consideration of $6,700.
Acquisition and integration expenses totaled $16,013 and $18,722 for the three and six months ended September 30, 2023, respectively. Acquisition and integration expenses totaled $3,844 and $13,676 for the three and six months ended September 30, 2022, respectively. The increase in acquisition and integration expenses for the three and six months ended September 30, 2023 is primarily due to charges related to the acquisition of assets from BD and a fair value adjustment related to a building held for sale from a previous acquisition. Acquisition and integration expenses are reported in the Selling, general and administrative expenses line of our Consolidated Statements of Income (Loss) and include but are not limited to investment banker, advisory, legal, other professional fees, and certain employee-related expenses.








12

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


3. Inventories, Net
Inventories are stated at the lower of their cost and net realizable value determined by the first-in, first-out (“FIFO”) cost method. Inventory costs include material, labor, and overhead. Inventories, net consisted of the following:
 September 30,
2023
March 31,
2023
Raw materials$283,914 $239,081 
Work in process109,827 97,756 
Finished goods483,190 404,238 
Reserve for excess and obsolete inventory(55,802)(45,582)
Inventories, net$821,129 $695,493 

4. Property, Plant, and Equipment
Information related to the major categories of our depreciable assets is as follows:
 September 30,
2023
March 31,
2023
Land and land improvements (1)
$86,804 $84,313 
Buildings and leasehold improvements735,544 691,933 
Machinery and equipment1,065,048 994,188 
Information systems257,002 247,873 
Radioisotope641,750 637,920 
Construction in progress (1)
467,127 478,316 
Total property, plant, and equipment3,253,275 3,134,543 
Less: accumulated depreciation and depletion(1,509,417)(1,429,031)
Property, plant, and equipment, net$1,743,858 $1,705,512 
(1)Land is not depreciated. Construction in progress is not depreciated until placed in service.

13

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


5. Debt
Indebtedness was as follows:
 September 30,
2023
March 31,
2023
Short-term debt
Term Loan, current portion$34,375 $27,500 
Delayed Draw Term Loan, current portion36,563 32,500 
Total short-term debt$70,938 $60,000 
Long-term debt
Private Placement Senior Notes$746,413 $750,302 
Revolving Credit Facility691,966 301,672 
Deferred financing costs(19,325)(21,444)
Term Loan24,375 45,000 
Delayed Draw Term Loan572,812 593,125 
Senior Public Notes 1,350,000 1,350,000 
Total long-term debt$3,366,241 $3,018,655 
Total debt$3,437,179 $3,078,655 
Additional information regarding our indebtedness is included in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.
14

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


6. Additional Consolidated Balance Sheet Information
Additional information related to our Consolidated Balance Sheets is as follows:
 September 30,
2023
March 31,
2023
Accrued payroll and other related liabilities:
Compensation and related items$50,149 $48,565 
Accrued vacation/paid time off14,152 11,080 
Accrued bonuses43,486 33,605 
Accrued employee commissions24,729 29,257 
Other postretirement benefit obligations-current portion1,121 1,121 
Other employee benefit plans obligations-current portion1,885 2,014 
Total accrued payroll and other related liabilities$135,522 $125,642 
Accrued expenses and other:
Deferred revenues$92,947 $92,283 
Service liabilities81,533 72,033 
Self-insured risk reserves-current portion13,233 11,325 
Accrued dealer commissions35,097 31,096 
Accrued warranty14,038 13,683 
Asset retirement obligation-current portion507 543 
Accrued interest11,657 9,243 
Other57,652 87,611 
Total accrued expenses and other$306,664 $317,817 
Other liabilities:
Self-insured risk reserves-long-term portion$22,171 $22,171 
Other postretirement benefit obligations-long-term portion5,870 6,070 
Defined benefit pension plans obligations-long-term portion2,989 2,876 
Other employee benefit plans obligations-long-term portion1,179 1,153 
Accrued long-term income taxes10,103 10,082 
Asset retirement obligation-long-term portion12,640 12,588 
Other21,595 21,197 
Total other liabilities$76,547 $76,137 
7. Income Taxes
The effective income tax rates for the three month periods ended September 30, 2023 and 2022 were 22.5% and 5.4%, respectively. The effective income tax rates for the six month periods ended September 30, 2023 and 2022 were 22.1% and (3.2)%, respectively. The fiscal 2024 effective tax rates increased when compared to fiscal 2023, primarily due to the tax impact of the goodwill impairment loss recognized on the Dental segment during the second quarter of fiscal 2023.
Income tax expense (benefit) is provided on an interim basis based upon our estimate of the annual effective income tax rate, adjusted each quarter for discrete items. In determining the estimated annual effective income tax rate, we analyze various factors, including projections of our annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, our ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives.
We operate in numerous taxing jurisdictions and are subject to regular examinations by various United States federal, state and local, as well as foreign jurisdictions. We are no longer subject to United States federal examinations for years before fiscal 2018 and, with limited exceptions, we are no longer subject to United States state and local, or non-United States, income tax
15

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


examinations by tax authorities for years before fiscal 2017. We remain subject to tax authority audits in various jurisdictions wherever we do business.
In the fourth quarter of fiscal 2021, we completed an appeals process with the U.S. Internal Revenue Service (the “IRS”) regarding proposed audit adjustments related to deductibility of interest paid on intercompany debt for fiscal years 2016 through 2017. An agreement was reached on final interest rates, which also impacts subsequent years through 2020. We estimate the total federal, state, and local tax impact of the settlement to be approximately $12,000, for the fiscal years 2016 through 2020, of which approximately $11,600 has been paid through September 30, 2023.
In May 2021, we received two notices of proposed tax adjustment from the IRS regarding deemed dividend inclusions and associated withholding tax. The notices relate to the fiscal and calendar year 2018. The IRS adjustments would result in a cumulative tax liability of approximately $50,000. We are contesting the IRS’s assertions. We have not established reserves related to these notices. An unfavorable outcome is not expected to have a material adverse impact on our consolidated financial position but it could be material to our consolidated results of operations and cash flows for any one period.
8. Commitments and Contingencies
We are, and will likely continue to be, involved in a number of legal proceedings, government investigations, and claims, which we believe generally arise in the course of our business, given our size, history, complexity, and the nature of our business, products, Customers, regulatory environment, and industries in which we participate. These legal proceedings, investigations and claims generally involve a variety of legal theories and allegations, including, without limitation, personal injury (e.g., slip and falls, burns, vehicle accidents), product liability or regulation (e.g., based on product operation or claimed malfunction, failure to warn, failure to meet specification, or failure to comply with regulatory requirements), product exposure (e.g., claimed exposure to chemicals, gases, asbestos, contaminants, radiation), property damage (e.g., claimed damage due to leaking equipment, fire, vehicles, chemicals), commercial claims (e.g., breach of contract, economic loss, warranty, misrepresentation), financial (e.g., taxes, reporting), employment (e.g., wrongful termination, discrimination, benefits matters), and other claims for damage and relief.
We believe we have adequately reserved for our current litigation and claims that are probable and estimable, and further believe that the ultimate outcome of these pending lawsuits and claims will not have a material adverse effect on our consolidated financial position or results of operations taken as a whole. Due to their inherent uncertainty, however, there can be no assurance of the ultimate outcome or effect of current or future litigation, investigations, claims or other proceedings (including without limitation the matters discussed below). For certain types of claims, we presently maintain insurance coverage for personal injury and property damage and other liability coverages in amounts and with deductibles that we believe are prudent, but there can be no assurance that these coverages will be applicable or adequate to cover adverse outcomes of claims or legal proceedings against us.
Civil, criminal, regulatory or other proceedings involving our products or services could possibly result in judgments, settlements or administrative or judicial decrees requiring us, among other actions, to pay damages or fines or effect recalls, or be subject to other governmental, Customer or other third party claims or remedies, which could materially effect our business, performance, prospects, value, financial condition, and results of operations.
For additional information regarding these matters, see the following portions of our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023, Item 1 titled "Business - Information with respect to our Business in General - Government Regulation" and the "Risk Factors" in Item 1A titled "Product and service related regulations and claims."
From time to time, STERIS is also involved in legal proceedings as a plaintiff involving contract, patent protection, and other claims asserted by us. Gains, if any, from these proceedings are recognized when they are realized.
We are subject to taxation from United States federal, state and local, and foreign jurisdictions. Tax positions are settled primarily through the completion of audits within each individual jurisdiction or the closing of statutes of limitation. Changes in applicable tax law or other events may also require us to revise past estimates. We describe income taxes further in Note 7 to our consolidated financial statements titled, “Income Taxes” in this Quarterly Report on Form 10-Q.



16

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


9. Business Segment Information
We operate and report our financial information in four reportable business segments: Healthcare, AST, Life Sciences and Dental. Non-allocated operating costs that support the entire Company and items not indicative of operating trends are excluded from segment operating income.
Our Healthcare segment provides a comprehensive offering for healthcare providers worldwide, focused on sterile processing departments and procedural centers, such as operating rooms and endoscopy suites. Our products and services range from infection prevention consumables and capital equipment, as well as services to maintain that equipment; to the repair of re-usable procedural instruments; to outsourced instrument reprocessing services. In addition, our procedural products also include endoscopy accessories and capital equipment infrastructure used primarily in operating rooms, ambulatory surgery centers, endoscopy suites, and other procedural areas.
Our AST segment is a third-party service provider for contract sterilization, as well as testing services needed to validate sterility services for medical device and pharmaceutical manufacturers. Our technology-neutral offering supports Customers every step of the way, from testing through sterilization.
Our Life Sciences segment provides a comprehensive offering of products and services that support pharmaceutical manufacturing, primarily for vaccine and other biopharma Customers focused on aseptic manufacturing. These solutions include a full suite of consumable products, equipment maintenance and specialty services, and capital equipment.
Our Dental segment provides a comprehensive offering for dental practitioners and dental schools, offering instruments, infection prevention consumables and instrument management systems.
We disclose a measure of segment income that is consistent with the way management operates and views the business. The accounting policies for reportable segments are the same as those for the consolidated Company.
For the three and six months ended September 30, 2023 and 2022, revenues from a single Customer did not represent ten percent or more of the Healthcare, AST or Life Sciences segment revenues. Three Customers collectively and consistently account for approximately 40.0% of our Dental segment revenue. The percentage associated with these three Customers collectively in any one period may vary due to the buying patterns of these three Customers as well as other Dental Customers. These three Customers collectively accounted for approximately 43.8% and 43.1% of our Dental segment revenues for the three and six months ended September 30, 2023, respectively. These three Customers collectively accounted for approximately 40.1% and 42.1% of our Dental segment revenues for the three and six months ended September 30, 2022, respectively.
Additional information regarding our segments is included in our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.


17

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


Financial information for each of our segments is presented in the following table:
 Three Months Ended September 30,Six Months Ended September 30,
 2023202220232022
Revenues:
Healthcare $870,056 $732,813 $1,688,930 $1,431,339 
AST235,053 232,358 468,152 453,269 
Life Sciences133,095 125,768 264,508 257,975 
Dental104,156 109,578 205,312 214,425 
Total revenues$1,342,360 $1,200,517 $2,626,902 $2,357,008 
Operating income (loss):
Healthcare$204,054 $165,337 $402,236 $321,834 
AST110,783 110,384 220,373 219,699 
Life Sciences50,284 48,619 100,125 103,924 
Dental24,516 28,059 46,555 47,655 
Corporate(87,641)(67,056)(179,906)(142,999)
Total operating income$301,996 $285,343 $589,383 $550,113 
Less: Adjustments
Amortization of acquired intangible assets (1)
$99,011 $93,859 $192,936 $187,786 
Acquisition and integration related charges (2)
16,013 3,844 18,722 13,676 
Tax restructuring costs (3)
 77 9 251 
Gain on fair value adjustment of acquisition related contingent consideration (1)
   (3,100)
Net loss on divestiture of businesses (1)
 899  4,777 
Amortization of inventory and property "step up" to fair value (1)
1,138 2,452 2,981 4,089 
Restructuring (credits) charges (4)
(23)62 (4)89 
Goodwill impairment loss (5)
 490,565  490,565 
Total income (loss) from operations$185,857 $(306,415)$374,739 $(148,020)
(1) For more information regarding our recent acquisitions and divestitures, refer to Note 2 titled, "Business Acquisitions and Divestitures" included in our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.
(2) Acquisition and integration related charges include transaction costs and integration expenses associated with acquisitions.
(3) Costs incurred in tax restructuring.
(4) For more information regarding our restructuring efforts, refer to our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.
(5) For more information regarding our goodwill impairment loss, see Note 17 to our consolidated financial statements titled, "Goodwill."


18

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


Additional information regarding our fiscal 2024 and fiscal 2023 revenue is disclosed in the following tables:
 Three Months Ended September 30,Six Months Ended September 30,
 2023202220232022
Healthcare:
Capital equipment$254,905 $212,484 $493,004 $391,618 
Consumables306,025 246,050 586,306 498,082
Service309,126 274,279 609,620 541,639 
Total Healthcare Revenues $870,056 $732,813 $1,688,930 $1,431,339 
AST:
Capital equipment$1,754 $10,485 $2,628 $11,104 
Service233,299 221,873 465,524 442,165 
Total AST Revenues$235,053 $232,358 $468,152 $453,269 
Life Sciences:
Capital equipment$35,438 $30,015 $66,429 $70,514 
Consumables59,409 57,420 121,107 116,977 
Service38,248 38,333 76,972 70,484 
Total Life Sciences Revenues$133,095 $125,768 $264,508 $257,975 
Dental Revenues$104,156 $109,578 $205,312 $214,425 
Total Revenues$1,342,360 $1,200,517 $2,626,902 $2,357,008 
Three Months Ended September 30,Six Months Ended September 30,
2023202220232022
Revenues:
Ireland$20,439 $16,995 $40,524 $35,171 
United States992,878 871,981 1,923,420 1,706,082 
Other locations329,043 311,541 662,958 615,755 
Total Revenues
$1,342,360 $1,200,517 $2,626,902 $2,357,008 

10. Shares and Preferred Shares
Ordinary shares
We calculate basic earnings per share based upon the weighted average number of shares outstanding. We calculate diluted earnings per share based upon the weighted average number of shares outstanding plus the dilutive effect of share equivalents calculated using the treasury stock method.
The following is a summary of shares and share equivalents outstanding used in the calculations of basic and diluted earnings per share:
 Three Months Ended September 30,Six Months Ended September 30,
Denominator (shares in thousands):2023202220232022
Weighted average shares outstanding—basic98,785 99,969 98,747 100,025 
Dilutive effect of share equivalents(1)
621  576  
Weighted average shares outstanding and share equivalents—diluted99,406 99,969 99,323 100,025 
(1) The dilutive effect of share equivalents is excluded from the calculation of diluted earnings per share for the three and six months ended September 30, 2022 due to our net losses for those periods.
19

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


Options to purchase the following number of shares were outstanding but excluded from the computation of diluted earnings per share because the combined exercise prices, unamortized fair values, and assumed tax benefits upon exercise were greater than the average market price for the shares during the periods, so including these options would be anti-dilutive:
 Three Months Ended September 30,Six Months Ended September 30,
(shares in thousands)2023202220232022
Number of share options625 642 647 467 
Additional Authorized Shares
 The Company has an additional authorized share capital of 50,000,000 preferred shares of $0.001 par value each, plus 25,000 deferred ordinary shares of €1.00 par value each, in order to satisfy minimum statutory capital requirements for all Irish public limited companies.
11. Repurchases of Ordinary Shares
On May 3, 2023 our Board of Directors terminated the previous share repurchase program and authorized a new share repurchase program for the purchase of up to $500,000 (net of taxes, fees and commissions). As of September 30, 2023, we have not made any repurchases under this share repurchase program. This share repurchase program has no specified expiration date.
Under the authorization, the Company may repurchase its shares from time to time through open market purchases, including 10b5-1 plans. Any share repurchases may be activated, suspended or discontinued at any time.
During the first six months of fiscal 2024, we had no share repurchase activity pursuant to authorizations. During the first six months of fiscal 2023, we repurchased 292,487 of our ordinary shares for the aggregate amount of $59,561 (net of fees and commissions) pursuant to the authorizations.
During the first six months of fiscal 2024, we obtained 57,161 of our ordinary shares in the aggregate amount of $9,213 in connection with share-based compensation award programs. During the first six months of fiscal 2023, we obtained 64,436 of our ordinary shares in the aggregate amount of $11,769 in connection with share-based compensation award programs.
12. Share-Based Compensation
We maintain a long-term incentive plan that makes available shares for grants, at the discretion of the Board of Directors or the Compensation and Organizational Development Committee of the Board of Directors, to officers, directors, and key employees in the form of stock options, restricted shares, restricted share units, stock appreciation rights and share grants. We satisfy share award incentives through the issuance of new ordinary shares.
Stock options provide the right to purchase our shares at the market price on the date of grant, or for options granted to employees in fiscal 2019 and thereafter, 110% of the market price on the date of grant, subject to the terms of the plan and agreements. Generally, one-fourth of the stock options granted to employees become exercisable for each full year of employment following the grant date. Stock options granted generally expire 10 years after the grant date, or in some cases earlier if the option holder is no longer employed by us. Restricted shares and restricted share units generally cliff vest after a three or four year period or vest in equal tranches for each year of employment after the grant date. As of September 30, 2023, 2,367,257 ordinary shares remained available for grant under the long-term incentive plan.
The fair value of share-based stock option compensation awards was estimated at their grant date using the Black-Scholes-Merton option pricing model. This model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable, characteristics that are not present in our option grants. If the model permitted consideration of the unique characteristics of employee stock options, the resulting estimate of the fair value of the stock options could be different. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods, which may be impacted by retirement eligibility, in our Consolidated Statements of Income (Loss). The expense is classified as Cost of revenues or Selling, general and administrative expenses in a manner consistent with the employee’s compensation and benefits.


20

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


The following weighted average assumptions were used for options granted during the first six months of fiscal 2024 and 2023:
 Fiscal 2024Fiscal 2023
Risk-free interest rate3.59 %2.44 %
Expected life of options6.0 years5.9 years
Expected dividend yield of stock1.08 %0.80 %
Expected volatility of stock27.92 %24.49 %
The risk-free interest rate is based upon the U.S. Treasury yield curve. The expected life of options is reflective of historical experience, vesting schedules and contractual terms. The expected dividend yield of stock represents our best estimate of the expected future dividend yield. The expected volatility of stock is derived by referring to our historical stock prices over a time frame similar to that of the expected life of the grant. An estimated forfeiture rate of 2.22% and 2.54% was applied in fiscal 2024 and 2023, respectively. This rate is calculated based upon historical activity and represents an estimate of the granted options not expected to vest. If actual forfeitures differ from this calculated rate, we may be required to make additional adjustments to compensation expense in future periods. The assumptions used above are reviewed at the time of each significant option grant, or at least annually.
A summary of share option activity is as follows:
 Number of
Options
Weighted
Average
Exercise
Price Per Share
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Outstanding at March 31, 20231,749,729 $154.60 
Granted253,946 220.24 
Exercised(41,597)60.07 
Forfeited(2,128)200.46 
Outstanding at September 30, 20231,959,950 $165.06 6.3 years$114,142 
Exercisable at September 30, 20231,338,836 $138.12 5.3 years$110,765 
We estimate that 606,045 of the non-vested stock options outstanding at September 30, 2023 will ultimately vest.
The aggregate intrinsic value in the table above represents the total pre-tax difference between the $219.42 closing price of our ordinary shares on September 30, 2023 over the exercise prices of the stock options, multiplied by the number of options outstanding or outstanding and exercisable, as applicable. The aggregate intrinsic value is not recorded for financial accounting purposes and the value changes daily based on the daily changes in the fair market value of our ordinary shares.
The total intrinsic value of stock options exercised during the first six months of fiscal 2024 and fiscal 2023 was $6,467 and $4,553, respectively. Net cash proceeds from the exercise of stock options were $2,740 and $1,458 for the first six months of fiscal 2024 and fiscal 2023, respectively.
The weighted average grant date fair value of stock option grants was $54.60 and $50.72 for the first six months of fiscal 2024 and fiscal 2023, respectively.







21

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


A summary of the non-vested restricted share and share unit activity is presented below:
 Number of
Restricted
Shares
Number of Restricted Share UnitsWeighted Average
Grant Date
Fair Value
Non-vested at March 31, 2023450,793 28,542 $186.60 
Granted170,323 18,344 201.28 
Vested(126,539)(12,787)159.60 
Forfeited(11,848)(1,171)193.73 
Non-vested at September 30, 2023482,729 32,928 $199.06 
Restricted shares and restricted share unit grants are valued based on the closing stock price at the grant date. The value of restricted shares and units that vested during the first six months of fiscal 2024 at the time of grant was $22,194.
As of September 30, 2023, there was a total of $83,007 in unrecognized compensation cost related to non-vested share-based compensation granted under our share-based compensation plans. We expect to recognize the cost over a weighted average period of 1.9 years.
Cantel Share Based Compensation Plan
In connection with the acquisition of Cantel, outstanding, non-vested Cantel restricted share units were replaced with STERIS restricted share units.
As of September 30, 2023, there was a total of $103 in unrecognized compensation cost related to non-vested STERIS restricted share units awarded to replace Cantel restricted share units. We expect to recognize the majority of the remaining cost by the third quarter of fiscal 2024.
A summary of the non-vested restricted share units activity associated with the Cantel share-based compensation plans is presented below:
Number of Restricted Share UnitsWeighted Average
Grant Date
Fair Value
Non-vested at March 31, 202315,670 $191.18 
Vested(603)191.18 
Forfeited(762)191.18 
Non-vested at September 30, 202314,305 $191.18 
13. Financial and Other Guarantees
We generally offer a limited parts and labor warranty on capital equipment. The specific terms and conditions of those warranties vary depending on the product sold and the countries where we conduct business. We record a liability for the estimated cost of product warranties at the time product revenues are recognized. The amounts we expect to incur on behalf of our Customers for the future estimated cost of these warranties are recorded as a current liability on the accompanying Consolidated Balance Sheets. Factors that affect the amount of our warranty liability include the number and type of installed units, historical and anticipated rates of product failures, and material and service costs per claim. We periodically assess the adequacy of our recorded warranty liabilities and adjust the amounts as necessary.
Changes in our warranty liability during the first six months of fiscal 2024 were as follows:
Warranties
Balance at March 31, 2023$13,683 
Warranties issued during the period8,205 
Settlements made during the period(7,850)
Balance at September 30, 2023$14,038 

22

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


14. Derivatives and Hedging
From time to time, we enter into forward contracts to hedge potential foreign currency gains and losses that arise from transactions denominated in foreign currencies, including intercompany transactions. We may also enter into commodity swap contracts to hedge price changes in nickel that impact raw materials included in our Cost of revenues. During the second quarter of fiscal 2024, we also held forward foreign currency contracts to hedge a portion of our expected non-U.S. dollar-denominated earnings against our reporting currency, the U.S. dollar. These foreign currency exchange contracts will mature in fiscal 2024. We did not elect hedge accounting for these forward foreign currency contracts; however, we may seek to apply hedge accounting in future scenarios. We do not use derivative financial instruments for speculative purposes.
These contracts are not designated as hedging instruments and do not receive hedge accounting treatment; therefore, changes in their fair value are not deferred but are recognized immediately in the Consolidated Statements of Income (Loss). At September 30, 2023, we held net foreign currency forward contracts to buy 38.5 million British pounds sterling and 80.3 million Mexican pesos; and to sell 17.0 million Australian dollars, 11.0 million Canadian dollars, and 31.1 million euros. At September 30, 2023, we held commodity swap contracts to buy 376.5 thousand pounds of nickel.
 Asset DerivativesLiability Derivatives
Fair Value atFair Value atFair Value atFair Value at
Balance sheet locationSeptember 30, 2023March 31, 2023September 30, 2023March 31, 2023
Prepaid & other$1,623 $378 $ $ 
Accrued expenses and other$ $ $2,347 $2,054 
The following table presents the impact of derivative instruments and their location within the Consolidated Statements of Income (Loss):
 Location of gain (loss)
recognized in income
Amount of gain (loss) recognized in income
Three Months Ended September 30,Six Months Ended September 30,
2023202220232022
Foreign currency forward contractsSelling, general and administrative$60 $2,279 $1,518 $4,629 
Commodity swap contractsCost of revenues$(358)$(358)$(1,392)$(3,183)

23

STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)
For the Three and Six Months Ended September 30, 2023 and 2022
(dollars in thousands, except as noted)


15. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. We estimate the fair value of financial assets and liabilities using available market information and generally accepted valuation methodologies. The inputs used to measure fair value are classified into three tiers. These tiers include Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring the entity to develop its own assumptions.
The following table shows the fair value of our financial assets and liabilities at September 30, 2023 and March 31, 2023:
  Fair Value Measurements
 Carrying ValueQuoted Prices
in Active Markets
for Identical Assets
Significant Other
Observable Inputs
Significant
Unobservable
Inputs
Level 1Level 2Level 3
September 30,March 31,September 30,March 31,September 30,March 31,September 30,March 31,
Assets:
Cash and cash equivalents$213,757 $208,357 $213,757 $