ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
In Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), we explain the general financial condition and the results of operations for STERIS and its subsidiaries including:
•what factors affect our business;
•what our earnings and costs were in each period presented;
•why those earnings and costs were different from the year before;
•where our earnings came from;
•how this affects our overall financial condition;
•what our expenditures for capital projects were; and
•where cash is expected to come from to fund future debt principal repayments, growth outside of core operations, repurchases of shares, cash dividends and future working capital needs.
The MD&A also analyzes and explains the annual changes in the specific line items in the Consolidated Statements of Income. As you read the MD&A, it may be helpful to refer to information in Item 1, "Business," Part I, Item 1A, "Risk Factors," and Note 12 to our consolidated financial statements titled, "Commitments and Contingencies" for a discussion of some of the matters that can adversely affect our business and results of operations. This information, discussion, and disclosure may be important to you in making decisions about your investments in STERIS.
FINANCIAL MEASURES
In the following sections of the MD&A, we may, at times, refer to financial measures that are not required to be presented in the consolidated financial statements under accounting principles generally accepted in the United States ("U.S. GAAP"). We sometimes use the following financial measures in the context of this report: backlog and debt-to-total capital ratio. We define these financial measures as follows:
•Backlog – We define backlog as the amount of unfilled capital equipment purchase orders (excluding freight) at a point in time. We use this figure as a measure to assist in the projection of short-term financial results and inventory requirements.
•Debt-to-total capital ratio – We define debt-to-total capital ratio as total debt divided by the sum of total debt and shareholders’ equity. We use this figure as a financial liquidity measure to gauge our ability to borrow and fund growth.
We, at times, may also refer to financial measures which are considered to be “non-GAAP financial measures” under SEC rules. We have presented these financial measures because we believe that meaningful analysis of our financial performance is enhanced by an understanding of certain additional factors underlying that performance. These financial measures should not be considered an alternative to measures required by accounting principles generally accepted in the United States. Our calculations of these measures may differ from calculations of similar measures used by other companies, and you should be careful when comparing these financial measures to those of other companies. Additional information regarding these financial measures, including reconciliations of each non-GAAP financial measure, is available in the subsection of MD&A titled, "Non-GAAP Financial Measures."
REVENUES– DEFINED
As required by Regulation S-X, we separately present revenues generated as either Product revenues or Service revenues on our Consolidated Statements of Income for each period presented. When we discuss revenues, we may, at times, refer to revenues summarized differently than the Regulation S-X requirements. The terminology, definitions, and applications of terms that we use to describe revenues may be different from terms used by other companies. We use the following terms to describe revenues:
•Revenues – Our revenues are presented net of sales returns and allowances.
•Product Revenues – We define Product revenues as revenues generated from sales of consumable and capital equipment products.
•Service Revenues – We define Service revenues as revenues generated from parts and labor associated with the maintenance, repair, and installation of our capital equipment. Service revenues also include outsourced reprocessing services and instrument and scope repairs, as well as revenues generated from contract sterilization and laboratory services offered through our AST segment.
•Capital Equipment Revenues – We define capital equipment revenues as revenues generated from sales of capital equipment, which includes steam and gas sterilizers, low temperature liquid chemical sterilant processing systems, automated endoscope reprocessors, pure steam/water systems, surgical lights and tables, and integrated operating rooms.
•Consumable Revenues – We define consumable revenues as revenues generated from sales of the consumable family of products, which includes dedicated consumables used in our capital equipment, gastrointestinal endoscopy accessories, instruments and tools, sterility assurance products, barrier protection solutions, and cleaning consumables.
•Recurring Revenues – We define recurring revenues as revenues generated from sales of consumable products and Service revenues.
GENERAL OVERVIEW AND EXECUTIVE SUMMARY
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 and life science products and services around the globe. We offer our Customers a unique mix of innovative products and services. These include: consumable products, such as detergents, endoscopy accessories, barrier products, instruments and tools; services, including equipment installation and maintenance, microbial reduction of medical devices, instrument and scope repair, laboratory testing, and outsourced reprocessing; capital equipment, such as sterilizers, surgical tables, and automated endoscope reprocessors; and connectivity solutions such as OR integration.
We operate and report our financial information in three reportable business segments: Healthcare, AST, and Life Sciences. Previously, we had four reportable business segments; however, as a result of the fiscal 2025 divestiture of our Dental segment, Dental is presented as discontinued operations. Historical information has been retrospectively adjusted to exclude discontinued operations for comparability, as required. For more information, refer to Note 4 to our consolidated financial statements titled, "Discontinued Operations." Non-allocated operating costs that support the entire Company and items not indicative of operating trends are excluded from segment operating income. We describe our business segments in Note 13 to our consolidated financial statements titled, "Business Segment Information."
The bulk of our revenues are derived from healthcare, medical device and pharmaceutical Customers. Much of the growth in these industries is driven by the aging of the population throughout the world, as an increasing number of individuals are entering their prime healthcare consumption years, and is dependent upon advancement in healthcare delivery, acceptance of new technologies, government policies, and general economic conditions.
In addition, there is increased demand for medical procedures, including preventive screenings such as endoscopies and colonoscopies; and a desire by our Customers to operate more efficiently, all of which are driving increased demand for many of our products and services.
Acquisitions, Divestitures, and Investments. During fiscal 2026, we completed two tuck-in acquisitions which continued to expand our product and service offerings in the Healthcare segment. Total aggregate consideration was approximately $23.4 million, including fair value of contingent consideration. We also purchased investments totaling $134.0 million, predominantly related to a noncontrolling equity investment in a non-U.S.-based healthcare product manufacturer.
During fiscal 2025, we completed several tuck-in acquisitions which continued to expand our product and service offerings in the Healthcare and AST segments. Total aggregate consideration was approximately $54.1 million.
On April 1, 2024, we completed the sale of the Controlled Environment Certification Services ("CECS") business. We recorded net proceeds of $41.9 million and recognized a pre-tax gain on the sale of $19.3 million in fiscal 2025. The business generated approximately $35.0 million in revenues during fiscal 2024.
For more information regarding our recent acquisitions and divestitures, see Note 3 to our consolidated financial statements titled, "Business Acquisitions, Divestitures, and Investments."
Discontinued Operations. On April 11, 2024, the Company announced its plan to sell substantially all of the net assets of its Dental segment for total cash consideration of $787.5 million, subject to customary adjustments, and up to an additional $12.5 million in contingent payment had the Dental business achieved certain revenue targets in fiscal 2025. No amounts have been recorded or are expected to be recorded with respect to this contingent consideration. The transaction was structured as an equity sale and closed on May 31, 2024. A component of an entity is reported in discontinued operations after meeting the criteria for held for sale classification if the disposition represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results. We analyzed the quantitative and qualitative factors relevant to the divestiture of our Dental segment and determined that those conditions for discontinued operations presentation had been met prior to March 31, 2024. The Dental segment results of operations have been reclassified as income (loss) from discontinued operations in the Consolidated Statements of Income for all periods presented. Our Consolidated Statements of Cash Flows include the financial results of the Dental segment through the date of sale on May 31, 2024. A majority of the proceeds received from the sale were utilized to pay off existing debt.
For more information, see Note 4 to our consolidated financial statements titled "Discontinued Operations."
U.S. Tax Reform. On July 4, 2025, the U.S. enacted the One Big Beautiful Bill Act ("OBBBA") which contains substantial changes to its tax policies. Business provisions in the OBBBA, some of which were extensions of those established in the Tax Cuts and Jobs Act, include favorable cost recovery allowances, changes to U.S. international tax rules, and changes to energy and environmental related incentives. The law has multiple effective dates, with certain provisions applicable to fiscal years beginning after fiscal 2026. The law did not have a material impact on our consolidated financial statements for fiscal 2026, and we do not expect it to have a material impact on our effective tax rate in the future.
Highlights. Revenues increased $476.4 million, or 8.7%, to $5,935.9 million for the year ended March 31, 2026, as compared to $5,459.5 million for the year ended March 31, 2025. These increases reflect higher volume and pricing, as well as favorable impacts from foreign currency movements.
Our gross profit percentage increased to 44.2% for fiscal 2026 as compared to 44.0% for fiscal 2025. Favorable impacts from pricing, operational improvements and lower restructuring costs, and productivity were partially offset by unfavorable impacts from tariffs and inflation.
Fiscal 2026 income from operations increased 27.1% to $1,101.8 million over fiscal 2025 income from operations of $866.6 million. This increase was primarily due to increased pricing, volume, and lower restructuring and litigation costs, which were partially offset by inflation and tariffs.
Cash flows provided by operating activities were $1,341.4 million and free cash flow was $982.9 million in fiscal 2026 compared to cash flows provided by operating activities of $1,148.1 million and free cash flow of $787.2 million in fiscal 2025 (see subsection of MD&A titled, "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow). The increase in cash flows from operations and free cash flow during the period was driven primarily by improvements in net income, which more than offset the significantly lower contribution from working capital when compared to the prior year.
Our debt-to-total capital ratio was 21.3% at March 31, 2026. We have paid quarterly dividends each year since 2005 and have increased the dividend each consecutive year, including an increase during fiscal 2026 to $0.63 per share.
Outlook. In fiscal 2027 and beyond, we expect to manage our costs, grow our business with internal product and service development, invest in greater capacity and efficiency, and augment these value creating methods with potential acquisitions of additional products and services. Please refer to "Information With Respect to Our Business In General" in Item 1."Business" to this Annual Report on Form 10-K.
NON-GAAP FINANCIAL MEASURES
We, at times, refer to financial measures which are considered to be “non-GAAP financial measures” under the Securities and Exchange Commission rules. We, at times, also refer to our results of operations excluding certain transactions or amounts that are non-recurring or are not indicative of future results, in order to provide meaningful comparisons between the periods presented.
These non-GAAP financial measures are not intended to be, and should not be, considered separately from or as an alternative to the most directly comparable U.S. GAAP financial measures.
These non-GAAP financial measures are presented with the intent of providing greater transparency to supplemental financial information used by management and the Board of Directors in their financial analysis and operational decision-making. These amounts are disclosed so that the reader has the same financial data that management uses with the belief that it will assist investors and other readers in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented.
We believe that the presentation of these non-GAAP financial measures, when considered along with our U.S. GAAP financial measures and the reconciliation to the corresponding U.S. GAAP financial measures, provides the reader with a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. It is important for the reader to note that the non-GAAP financial measures used may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
We define free cash flow as net cash provided by operating activities as presented in the Consolidated Statements of Cash Flows less purchases of property, plant, equipment, and intangibles (capital expenditures) plus proceeds from the sale of property, plant, equipment, and intangibles, which are also presented within investing activities in the Consolidated Statements of Cash Flows. We use this as a measure to gauge our ability to pay cash dividends, fund growth outside of core operations, fund future debt principal repayments, and repurchase shares.
The following table summarizes the calculation of our free cash flow for the years ended March 31, 2026 and 2025: | | | | | | | | | | | | | | | | |
| | | Years Ended March 31, |
| (in millions) | | 2026 | | 2025 | | |
| Net cash provided by operating activities | | $ | 1,341.4 | | | $ | 1,148.1 | | | |
| Purchases of property, plant, equipment and intangibles | | (369.0) | | | (370.1) | | | |
| Proceeds from the sale of property, plant, equipment and intangibles | | 10.5 | | | 9.2 | | | |
| Free cash flow | | $ | 982.9 | | | $ | 787.2 | | | |
RESULTS OF OPERATIONS
In the following subsections, we discuss our performance and the factors affecting it. We begin with a general overview of our operating results and then separately discuss earnings for our operating segments. As a result of the fiscal 2025 divestiture of our Dental segment, Dental is presented as discontinued operations. Historical information has been retrospectively adjusted to reflect these changes for comparability, as required. Therefore, the discussion within this Results of Operations section excludes discontinued operations and relates solely to our continuing operations.
The discussion of factors affecting our performance for the year ended March 31, 2025 compared to the fiscal year ended March 31, 2024 is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II of our Annual Report on Form 10-K for the year ended March 31, 2025.
FISCAL 2026 AS COMPARED TO FISCAL 2025
Revenues. The following table compares our revenues, in total and by type and geography, for the year ended March 31, 2026 to the year ended March 31, 2025: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended March 31, | | | | Percent |
| (dollars in millions) | | 2026 | | 2025 | | Change | | Change |
| Total revenues | | $ | 5,935.9 | | | $ | 5,459.5 | | | $ | 476.4 | | | 8.7 | % |
| | | | | | | | |
| Revenues by type: | | | | | | | | |
| Service revenues | | 2,875.8 | | | 2,587.9 | | | 287.9 | | | 11.1 | % |
| Consumable revenues | | 1,808.4 | | | 1,685.9 | | | 122.5 | | | 7.3 | % |
| Capital equipment revenues | | 1,251.7 | | | 1,185.7 | | | 66.0 | | | 5.6 | % |
| | | | | | | | |
Revenues by geography (1): | | | | | | | | |
| Ireland revenues | | 108.5 | | | 107.3 | | | 1.1 | | | 1.0 | % |
| United States revenues | | 4,333.8 | | | 4,007.6 | | | 326.2 | | | 8.1 | % |
| Other foreign revenues | | 1,493.7 | | | 1,344.6 | | | 149.1 | | | 11.1 | % |
(1) Allocation of revenues by geography is based on the location of delivery or distribution of products or location where services are performed.
Revenues increased $476.4 million, or 8.7%, to $5,935.9 million for the year ended March 31, 2026, as compared to $5,459.5 million for the year ended March 31, 2025. These increases reflect higher volume, primarily due to organic growth and increased pricing across all three segments, as well as the favorable impacts of foreign currency movements.
Service revenues for fiscal 2026 increased $287.9 million, or 11.1% over fiscal 2025, reflecting growth across all segments. Consumable revenues for fiscal 2026 increased $122.5 million, or 7.3%, over fiscal 2025, reflecting growth in the Healthcare and Life Sciences segments. Capital equipment revenues for fiscal 2026 increased by $66.0 million, or 5.6%, over fiscal 2025, reflecting growth in the Healthcare and Life Sciences segments, partially offset by a decline in the AST segment.
Ireland revenues for fiscal 2026 were $108.5 million, representing an increase of $1.1 million, or 1.0%, over fiscal 2025 revenues of $107.3 million, reflecting growth in service revenues, partially offset by a decline in capital equipment revenues.
United States revenues for fiscal 2026 were $4,333.8 million, representing an increase of $326.2 million, or 8.1%, over fiscal 2025 revenues of $4,007.6 million, reflecting growth in service, consumable, and capital equipment revenues.
Revenues from other foreign locations for fiscal 2026 were $1,493.7 million, representing an increase of $149.1 million, or 11.1%, over the fiscal 2025 revenues of $1,344.6 million. The increase reflects growth across all geographic regions.
Gross Profit. The following table compares our gross profit for the year ended March 31, 2026 to the year ended March 31, 2025: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended March 31, | | Change | | Percent
Change |
| (dollars in millions) | | 2026 | | 2025 | |
| Gross profit: | | | | | | | | |
| Product | | $ | 1,434.6 | | | $ | 1,357.3 | | | $ | 77.3 | | | 5.7 | % |
| Service | | 1,191.9 | | | 1,045.4 | | | 146.5 | | | 14.0 | % |
| Total gross profit | | $ | 2,626.5 | | | $ | 2,402.8 | | | $ | 223.7 | | | 9.3 | % |
| Gross profit percentage: | | | | | | | | |
| Product | | 46.9 | % | | 47.3 | % | | | | |
| Service | | 41.4 | % | | 40.4 | % | | | | |
| Total gross profit percentage | | 44.2 | % | | 44.0 | % | | | | |
Our gross profit is affected by the volume, pricing and mix of sales of our products and services, as well as the costs associated with the products and services that are sold. Our gross profit percentage increased to 44.2% for fiscal 2026 as compared to 44.0% for fiscal 2025. Favorable impacts from pricing (120 basis points), operational improvements and lower restructuring costs (70 basis points), and productivity (50 basis points) were partially offset by unfavorable impacts from tariffs (80 basis points), inflation (70 basis points), materials costs (30 basis points), mix (30 basis points), and currency (10 basis points).
Operating Expenses. The following table compares our operating expenses for the year ended March 31, 2026 to the year ended March 31, 2025: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended March 31, | | Change | | Percent
Change |
| (in millions) | | 2026 | | 2025 | |
| Operating expenses: | | | | | | | | |
| Selling, general, and administrative | | $ | 1,407.7 | | | $ | 1,334.3 | | | $ | 73.4 | | | 5.5 | % |
| | | | | | | | |
| Research and development | | 112.9 | | | 107.6 | | | 5.3 | | | 4.9 | % |
| Illinois EO litigation settlement | | — | | | 48.2 | | | (48.2) | | | NM |
| Restructuring expenses | | 4.1 | | | 46.0 | | | (42.0) | | | (91.1) | % |
| Total operating expenses | | $ | 1,524.7 | | | $ | 1,536.1 | | | $ | (11.4) | | | (0.7) | % |
NM - Not meaningful
Selling, General, and Administrative Expenses. Significant components of total selling, general, and administrative expenses (“SG&A”) are compensation and benefit costs, fees for professional services, travel and entertainment expenses, facility costs, and other general and administrative expenses. SG&A increased 5.5% in fiscal 2026 over fiscal 2025. The increase in SG&A during the fiscal year ended March 31, 2026, compared to the fiscal year ended March 31, 2025, is primarily attributable to increased compensation and benefit costs, dealer commissions, and bad debt expense, which were partially offset by lower costs associated with our EO litigation.
Research and Development. Research and development expenses increased $5.3 million in fiscal 2026 over fiscal 2025. Research and development expenses are influenced by the number and timing of in-process projects and labor hours and other costs associated with these projects. Our research and development initiatives continue to emphasize improving innovation governance processes and leveraging technology to accelerate development initiatives to launch critical capital and consumable products. During fiscal 2026, our investments in research and development have continued to be focused on, but were not limited to, enhancing capabilities of sterile processing technologies, procedural products and accessories, and devices and support accessories used in gastrointestinal endoscopy procedures.
Illinois EO Litigation Settlement. On March 3, 2025, the Company entered into binding confidential term sheets ("Term Sheets") with plaintiffs’ counsel, as well as settlement agreements with several plaintiffs in cases which were at the time scheduled for trial in fiscal 2026. On October 29, 2025, the Company entered into binding confidential settlement agreements ("Settlement Agreements") with plaintiffs' counsel, containing terms and provisions consistent with the Term Sheets. The Settlement Agreements are expected to lead to resolution of substantially all of the claims for personal injury related to EO that are currently pending in the Circuit Court of Cook County, Illinois. We recorded an expense of $48.2 million related to this settlement in fiscal 2025. For more information, refer to Note 12 to our consolidated financial statements titled, "Commitments and Contingencies."
Restructuring Expenses. In May 2024, we adopted and announced a targeted restructuring plan (the "Restructuring Plan"). This plan includes a strategic shift in our approach to the Healthcare surgical business in Europe, as well as other actions including the impairment of an internally developed X-ray accelerator, product rationalizations and facility consolidations. Approximately 300 positions have been eliminated. These restructuring actions were designed to enhance profitability and improve efficiency, which we realized beginning in fiscal 2025 and 2026. As of March 31, 2026, the execution of our Restructuring Plan is substantially complete.
The following table summarizes our total pre-tax restructuring expenses recorded in fiscal 2026 related to the Restructuring Plan:
| | | | | | | | | | | | | | | | | | |
| Restructuring Plan | | | | | | Years Ended March 31, |
| (in millions) | | | | | | 2026 | | 2025 |
| Severance and other compensation related costs | | | | | | $ | 2.6 | | | $ | 29.0 | |
| Lease and other contract termination and other costs | | | | | | 1.5 | | | 12.4 | |
Product rationalization (1) | | | | | | (0.7) | | | 16.2 | |
| Accelerated depreciation and amortization and asset impairment | | | | | | — | | | 4.7 | |
| Total Restructuring Expense | | | | | | $ | 3.4 | | | $ | 62.3 | |
(1) Recorded in Cost of revenues on the Consolidated Statements of Income.The Restructuring Plan expenses incurred during fiscal 2026 and 2025 primarily related to actions taken in our Healthcare segment. Total pre-tax restructuring expense of $110.1 million has been recorded relating to the Restructuring Plan since inception, of which $33.9 million has been recorded in Cost of revenues.
Liabilities related to restructuring activities are recorded as current liabilities in the accompanying Consolidated Balance Sheets within "Accrued payroll and other related liabilities" and "Accrued expenses and other." The following table summarizes our restructuring liability balances: | | | | | | | | |
| (in millions) | | Restructuring Plan |
| Balance at March 31, 2024 | | $ | 0.7 | |
| Fiscal 2025 charges | | 41.4 | |
| Payments | | (23.7) | |
| Balance at March 31, 2025 | | $ | 18.4 | |
| Fiscal 2026 Charges | | 4.1 | |
Payments | | (15.4) | |
| Balance at March 31, 2026 | | $ | 7.1 | |
Non-Operating Expenses, Net. Non-operating expenses, net consists of interest expense on debt, offset by interest earned on cash, cash equivalents, short-term investment balances, losses (gains) related to disposal activities, and other expense (income) related to our equity investments, including our equity earnings and amortization of basis differences arising from our investments. The following table compares our net non-operating expenses, net for the year ended March 31, 2026 to the year ended March 31, 2025: | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended March 31, | | |
| (in millions) | | 2026 | | 2025 | | Change |
| Non-operating expenses, net: | | | | | | |
| Interest expense | | $ | 60.7 | | | $ | 86.3 | | | $ | (25.6) | |
| Interest and miscellaneous income | | (9.8) | | | (8.4) | | | (1.4) | |
| Other expense (income), net | | 3.5 | | | (7.4) | | | 10.9 | |
| Non-operating expenses, net | | $ | 54.4 | | | $ | 70.4 | | | $ | (16.0) | |
Interest expense decreased $25.6 million during fiscal 2026 as compared to fiscal 2025, primarily due to the lower principal amount of debt outstanding. For more information, refer to Note 8 to our consolidated financial statements titled, "Debt."
Interest and miscellaneous income increased during fiscal 2026, as compared to fiscal 2025, by $1.4 million and is driven by higher interest income.
Other expense, net was $3.5 million during fiscal 2026, primarily reflecting a disposal-related fixed asset impairment, as well as amortization related to a noncontrolling equity investment, which were partially offset by a gain on the sale of a building. Other income, net during fiscal 2025 was $7.4 million and primarily related to the gain recorded from the sale of our CECS business, which was partially offset by a loss recorded on an equity investment. For more information on our fixed assets, refer to Note 7 to our consolidated financial statements, titled "Property, Plant, and Equipment." For more information on our equity investments, refer to Note 3 to our consolidated financial statements, titled "Business Acquisitions, Divestitures, and Investments."
Income Tax Expense. The following table compares our tax expense and effective income tax rates for the years ended March 31, 2026 and March 31, 2025: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Years Ended March 31, | | Change | | Percent
Change |
| (dollars in millions) | | 2026 | | 2025 | |
| | | | | | | | |
| Income tax expense | | $ | 262.2 | | | $ | 184.7 | | | $ | 77.6 | | | 42.0% |
| Effective income tax rate | | 25.0 | % | | 23.2 | % | | | | |
The effective income tax rates from continuing operations for fiscal 2026 was 25.0% compared to 23.2% for fiscal 2025. The fiscal 2026 effective tax rate from continuing operations increased when compared to 2025, primarily due to changes in geographic mix of income and unfavorable discrete items, including withholding taxes. Additional information regarding our income tax expense and effective income tax rate is included in Note 10 to our consolidated financial statements titled, "Income Taxes."
Business Segment Results of Operations.
We operate and report our financial information in three reportable business segments: Healthcare, AST, and Life Sciences. Previously, we had four reportable business segments; however, as a result of the fiscal 2025 divestiture of our Dental segment, Dental is presented as discontinued operations. Historical information has been retrospectively adjusted to reflect these changes for comparability, as required.
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, instruments, and capital equipment infrastructure used primarily in operating rooms, ambulatory surgery centers, endoscopy suites, and other procedural areas.
Our AST segment supports medical device and pharmaceutical manufacturers through a global network of contract sterilization and laboratory testing facilities, and integrated sterilization equipment and control systems. 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 designed to support biopharmaceutical and medical device manufacturing facilities, in particular those focused on aseptic manufacturing. Our portfolio includes a full suite of capital equipment, consumable products, equipment maintenance and specialty services.
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 more information regarding our segments please refer to Note 13 to our consolidated financial statements titled, "Business Segment Information," and Item 1, "Business."
The following table compares business segment revenues as well as impacts from acquisitions, divestitures, and foreign currency movements for the year ended March 31, 2026 to the year ended March 31, 2025.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years ended March 31, |
| | As reported, U.S. GAAP | | Impact of Acquisitions | | Impact of Divestitures | | Impact of Foreign Currency Movements | | U.S. GAAP Growth | | Organic Growth | | Constant Currency Organic Growth |
| (dollars in millions) | | 2026 | | 2025 | | 2026 | | 2025 | | 2026 | | 2026 | | 2026 | | 2026 |
| Segment revenues: | | | | | | | | | | | | | | | | |
| Healthcare | | $ | 4,208.6 | | | $ | 3,878.7 | | | $ | 2.4 | | | $ | — | | | $ | 33.5 | | | 8.5 | % | | 8.4 | % | | 7.6 | % |
| AST | | 1,138.5 | | | 1,038.6 | | | — | | | — | | | 30.8 | | | 9.6 | % | | 9.6 | % | | 6.7 | % |
| Life Sciences | | 588.8 | | | 542.3 | | | — | | | — | | | 10.1 | | | 8.6 | % | | 8.6 | % | | 6.7 | % |
| Total | | $ | 5,935.9 | | | $ | 5,459.5 | | | $ | 2.4 | | | $ | — | | | $ | 74.4 | | | 8.7 | % | | 8.7 | % | | 7.3 | % |
Organic revenue growth and constant currency organic revenue growth are non-GAAP financial measures of revenue performance. Organic revenue growth is calculated by removing the impact of acquisitions and divestitures for one year following the respective transaction from the GAAP revenue growth. Constant currency organic revenue growth is subject to a further adjustment to eliminate the impact of foreign currency movements.
Healthcare revenues increased 8.5% in fiscal 2026, as compared to fiscal 2025, reflecting growth across service, consumable, and capital revenues of 11.8%, 7.2%, and 5.7%, respectively. The constant currency organic growth of 7.6% is primarily due to increased volume, impacting revenues by a mid-single digit percentage, as well as increased pricing, impacting revenues by a low-single digit percentage.
The Healthcare segment’s backlog at March 31, 2026 amounted to $392.1 million. The Healthcare segment's backlog at March 31, 2025 was $369.2 million. The increase is due to the timing of shipments and the benefit of acquisitions.
AST revenues increased 9.6% in fiscal 2026, as compared to fiscal 2025. The constant currency organic growth of 6.7% is primarily due to increased pricing, impacting revenues by a mid-single digit percentage, as well as increased volume, impacting revenues by a low-single digit percentage, with service growth partially offset by a decline in capital equipment.
Life Sciences revenues increased 8.6% in fiscal 2026, as compared to fiscal 2025 reflecting growth across capital, consumable, and service revenues of 15.5%, 7.6%, and 4.9% , respectively. The constant currency organic growth of 6.7% is
primarily due to increased volume, impacting revenues by a mid-single digit percentage, as well as increased pricing, impacting revenues by a low-single digit percentage.
The Life Sciences backlog at March 31, 2026 and 2025 amounted to $98.7 million and $83.7 million, respectively. The increase is due to timing of shipments.
The following table compares business segment and Corporate operating income for the year ended March 31, 2026 to the year ended March 31, 2025:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years ended March 31, | | | | Percent |
| (dollars in millions) | | 2026 | | 2025 | | Change | | Change |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Income (loss) from operations before adjustments: | | | | | | | | |
| Healthcare | | $ | 1,036.4 | | | $ | 971.5 | | | $ | 64.8 | | | 6.7 | % |
| AST | | 524.7 | | | 465.6 | | | 59.1 | | | 12.7 | % |
| Life Sciences | | 251.0 | | | 229.4 | | | 21.5 | | | 9.4 | % |
| | | | | | | | |
| Corporate | | (430.1) | | | (399.0) | | | (31.1) | | | 7.8 | % |
| Total income from operations before adjustments | | $ | 1,381.9 | | | $ | 1,267.5 | | | $ | 114.4 | | | 9.0 | % |
| Less: Adjustments | | | | | | | | |
Amortization of acquired intangible assets (1) | | $ | 265.0 | | | $ | 273.8 | | | | | |
Acquisition and integration related charges (2) | | 6.2 | | | 11.2 | | | | | |
Tax restructuring costs (3) | | 0.5 | | | 0.1 | | | | | |
| | | | | | | | |
Amortization of inventory and property "step up" to fair value (1) | | 5.0 | | | 5.4 | | | | | |
Restructuring charges (4) | | 3.4 | | | 62.3 | | | | | |
Illinois EO litigation settlement (5) | | — | | | 48.2 | | | | | |
Total income from operations | | $ | 1,101.8 | | | $ | 866.6 | | | | | |
(1) For more information regarding our recent acquisitions and divestitures, refer to Note 3 to our consolidated financial statements titled, "Business Acquisitions, Divestitures, and Investments."
(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 the restructurings, refer to Note 2 to our consolidated financial statements titled, "Restructuring."
(5) For more information regarding the Illinois EO litigation settlement, refer to Note 12 to our consolidating financial statements titled "Commitments and Contingencies."
The Healthcare segment’s operating income increased $64.8 million to $1,036.4 million in fiscal year 2026, as compared to $971.5 million in fiscal year 2025. The increase in operating income is primarily due to the benefits of higher volume, pricing, and productivity, which were partially offset by increased tariff costs and inflation. The segment's operating margins were 24.6% for fiscal year 2026 and 25.0% for fiscal year 2025. Operating margin declined as tariff costs and inflation more than offset the margin expansion otherwise driven by volume, pricing, and productivity.
The AST segment’s operating income increased $59.1 million to $524.7 million in fiscal year 2026, as compared to $465.6 million in fiscal year 2025. The AST segment's operating margins were 46.1% for fiscal year 2026 and 44.8% for fiscal year 2025. The increase in operating income and margin for the year is primarily due to higher pricing and volume, which were partially offset by increased labor inflation costs.
The Life Sciences segment’s operating income increased $21.5 million to $251.0 million in fiscal year 2026, as compared to $229.4 million in fiscal year 2025. The segment’s operating margins were 42.6% for fiscal year 2026 and 42.3% for fiscal year 2025. The increase in operating income and margin for the year is primarily due to the benefit of higher volume and pricing, which were partially offset by increased inflation and tariff costs.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes significant components of our cash flows for the years ended March 31, 2026 and 2025: | | | | | | | | | | | | | | | | |
| | | Years Ended March 31, |
| (dollars in millions) | | 2026 | | 2025 | | |
| Net cash provided by operating activities | | $ | 1,341.4 | | | $ | 1,148.1 | | | |
| Net cash (used in) provided by investing activities | | (512.5) | | | 388.8 | | | |
Net cash used in financing activities | | (568.2) | | | (1,572.4) | | | |
| Debt-to-total capital ratio | | 21.3 | % | | 23.6 | % | | |
| Free cash flow | | $ | 982.9 | | | $ | 787.2 | | | |
Net Cash Provided By Operating Activities – The net cash provided by our operating activities was $1,341.4 million for the year ended March 31, 2026, compared to $1,148.1 million for the year ended March 31, 2025. Net cash provided by operating activities increased in fiscal 2026 by 16.8% over fiscal 2025, and was driven primarily by improvements in net income, which more than offset the significantly lower contribution from working capital in fiscal 2026 compared with fiscal 2025.
Net Cash Provided By/Used In Investing Activities – The net cash used in our investing activities was $512.5 million for the year ended March 31, 2026, compared to net cash provided by our investing activities of $388.8 million for the year ended March 31, 2025. The following discussion summarizes the significant changes in our investing cash flows for the years ended March 31, 2026 and 2025:
•Purchases of property, plant, equipment, and intangibles – Capital expenditures totaled $369.0 million in fiscal 2026 compared to $370.1 million in fiscal 2025.
•Proceeds from the sale of businesses – During fiscal 2025, we received proceeds of $814.6 million primarily from the sales of our Dental segment and our CECS businesses. For more information, refer to Note 3 to our consolidated financial statements titled, "Business Acquisitions, Divestitures, and Investments" and Note 4 to our consolidated financial statements titled "Discontinued Operations."
•Purchases of investments – During fiscal 2026, we purchased $134.0 million in investments, predominantly related to a noncontrolling equity investment in a non-U.S.-based healthcare product manufacturer. During fiscal 2025, we purchased $10.8 million in equity investments and convertible notes related to funding the development of intellectual property and access to new markets. For more information on our equity investments, refer to Note 3 to our consolidated financial statements titled, "Business Acquisitions and Divestitures."
•Acquisition of businesses, net of cash acquired – During fiscal 2026 and 2025, we used $20.1 million and $54.1 million, respectively, to acquire businesses. For more information on these acquisitions refer to Note 3 to our consolidated financial statements titled, "Business Acquisitions, Divestitures, and Investments."
Net Cash Used In Financing Activities – Net cash used in financing activities was $568.2 million for the year ended March 31, 2026, compared to net cash used in financing activities of $1,572.4 million for the year ended March 31, 2025. The following discussion summarizes the significant changes in our financing cash flows for the years ended March 31, 2026 and 2025:
•Payments on term loans – During fiscal 2025, we repaid $638.1 million of our term loans. Our fiscal 2025 repayments were made with the proceeds from the sale of the Dental segment and funds generated from our operations. For more information on our term loans, refer to Note 8 to our consolidated financial statements titled, "Debt."
•Payments on Private Placement Senior Notes – During fiscal 2026 and 2025, we repaid $125.0 million and $80.0 million of Private Placement Senior Notes, respectively, upon maturity. For more information on our Private Placement Senior Notes, refer to Note 8 to our consolidated financial statements titled, "Debt."
•Payments/Proceeds under credit facilities, net – Net proceeds under credit facilities totaled $3.0 million for fiscal 2026 compared to net payments under credit facilities of $446.3 million for fiscal 2025. The fiscal 2025 payments were made using proceeds from the sale of the Dental segment and funds generated by our operations. At the end of fiscal 2026, $37.8 million of debt was outstanding under our bank credit facility, compared to $34.8 million at the end of fiscal 2025. We provide additional information about our bank credit facility in Note 8 to our consolidated financial statements titled, "Debt."
•Repurchases of ordinary shares – During both fiscal 2026 and 2025, we obtained 0.1 million of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of $12.5 million and $11.3 million,
respectively. During fiscal 2026, we repurchased 0.9 million of our ordinary shares in the aggregate amount of $225.0 million (exclusive of fees, commissions, and other charges) through our Outgoing Repurchase Program. During fiscal 2025, we repurchased 0.9 million of our ordinary shares for the aggregate amount of $200.0 million (exclusive of fees, commissions, and other charges) through our Outgoing Repurchase Program. On May 5, 2026, the Board of Directors terminated the Outgoing Repurchase Program and authorized the New Repurchase Program for the purchase of up to $1,000.0 million (exclusive of fees, commissions, and other charges). We provide additional information about our share repurchases, the Outgoing Repurchase Program and the New Repurchase Program in Note 15 to our consolidated financial statements titled, "Repurchases of Ordinary Shares."
•Cash dividends paid to ordinary shareholders – During fiscal 2026, we paid cash dividends totaling $241.8 million or $2.46 per outstanding share. During fiscal 2025, we paid cash dividends totaling $219.9 million or $2.23 per outstanding share.
•Stock option and other equity transactions, net – We generally receive cash for issuing shares upon the exercise of options under our employee stock option program. During fiscal 2026 and fiscal 2025, we received cash proceeds totaling $32.9 million and $25.5 million, respectively, under these programs.
Cash Flow Measures. The net cash provided by our operating activities was $1,341.4 million in fiscal 2026 compared to $1,148.1 million in fiscal 2025. Free cash flow was $982.9 million in fiscal 2026, compared to $787.2 million in fiscal 2025 (see subsection above titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow). The increase in free cash flow during the period was driven primarily by improvements in net income, which more than offset the significantly lower contribution from working capital in fiscal 2026 compared with fiscal 2025.
Our debt-to-total capital ratio was 21.3% at March 31, 2026 and 23.6% at March 31, 2025.
Sources of Credit. Our sources of credit as of March 31, 2026 are summarized in the following table: | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Maximum
Amounts
Available | | Reductions in
Available Credit
Facility for Other
Financial Instruments | | March 31, 2026 Amounts Outstanding | | March 31, 2026 Amounts
Available |
| Sources of Credit | | | | | | | |
| Private Placement Senior Notes | $ | 557.8 | | | — | | | $ | 557.8 | | | $ | — | |
Revolving Credit Facility (1) | 1,100.0 | | | 9.8 | | | 37.8 | | | 1,052.5 | |
| Senior Public Notes | 1,350.0 | | | — | | | 1,350.0 | | | — | |
| Total Sources of Credit | $ | 3,007.8 | | | $ | 9.8 | | | $ | 1,945.6 | | | $ | 1,052.5 | |
(1) At March 31, 2026, there were $9.8 million of letters of credit outstanding under the Revolving Credit Agreement.
Our sources of funding from credit as of March 31, 2026 are summarized below:
•On October 7, 2024, STERIS plc (“Parent”), STERIS Corporation ("Corporation"), STERIS Limited ("Limited"), and STERIS Irish FinCo Unlimited Company (“FinCo”), each as a borrower and guarantor, entered into a credit agreement with various financial institutions as lenders, and JPMorgan Chase Bank, N.A., as administrative agent (the “Revolving Credit Agreement”) providing for a $1,100.0 million revolving credit facility (the “Revolving Credit Facility”), which replaced a prior credit agreement, dated as of March 19, 2021.
•The Revolving Credit Agreement provides for revolving credit borrowings, swing line borrowings and letters of credit, with sublimits for swing line borrowings and letters of credit. The Revolving Credit Agreement may be increased in specified circumstances by up to $625.0 million in the discretion of the lenders. The Revolving Credit Agreement matures on the date that is five years after October 7, 2024, and all unpaid borrowings, together with accrued and unpaid interest thereon, are repayable on that date. The Revolving Credit Facility bears interest from time to time, at either the Base Rate or the Relevant Rate, as defined in and calculated under and as in effect from time to time under the Revolving Credit Agreement, plus the Applicable Margin, as defined in the Revolving Credit Agreement. The Applicable Margin is determined based on the Debt Rating of Parent, as defined in the Revolving Credit Agreement. Base Rate Advances are payable quarterly in arrears and Term Benchmark Advances are payable at the end of the relevant interest period therefor, but in no event less frequently than every three months. Swingline borrowings bear interest at a rate to be agreed by the applicable swingline lender and the applicable borrower, subject to a cap in the case of swingline borrowings denominated in U.S. Dollars equal to the Base Rate plus the Applicable Margin for Base Rate Advances plus the Facility Fee. There is no premium or penalty for prepayment of Base Rate Advances, but prepayments of Term Benchmark Advances are generally subject to a breakage fee. Advances may be extended in U.S. Dollars or in specified alternative currencies (“Alternative Currency Advances”). Alternative Currency Advances are limited in the aggregate to the equivalent of $625.0 million.
•On April 1, 2021, FinCo completed an offering of $1,350.0 million in aggregate principal amount, of its senior notes in two separate tranches: (i) $675.0 million aggregate principal amount of the FinCo’s 2.700% Senior Notes due 2031 (the “2031 Notes”) and (ii) $675.0 million aggregate principal amount of the FinCo’s 3.750% Senior Notes due 2051 (the “2051 Notes” and, together with the 2031 Notes, the “Senior Public Notes”). The Senior Public Notes were issued pursuant to an Indenture, dated as of April 1, 2021 (the “Base Indenture”), among FinCo, Parent, Corporation and Limited (collectively "the Guarantors”) and U.S. Bank National Association as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated as of April 1, 2021, among FinCo, the Guarantors and the Trustee (together with the Base Indenture, the “Indenture”). Each of the Guarantors guaranteed the Senior Public Notes jointly and severally on a senior unsecured basis. The 2031 Notes will mature on March 15, 2031 and the 2051 Notes will mature on March 15, 2051. The Senior Public Notes will bear interest at the rates set forth above. Interest on the Senior Public Notes is payable on March 15 and September 15 of each year until their respective maturities.
•As of March 31, 2026, a total of $37.8 million was outstanding under the Revolving Credit Agreement, based on currency exchange rates as of March 31, 2026. At March 31, 2026, we had $1,052.5 million of unused funding available under the Revolving Credit Agreement. The Revolving Credit Agreement includes a sub-limit that reduces the maximum amount available to us by letters of credit outstanding. At March 31, 2026, there was $9.8 million in letters of credit outstanding under the Revolving Credit Agreement.
Our outstanding Private Placement Senior Notes at March 31, 2026 were as follows:
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Applicable Note Purchase Agreement | | Maturity Date | | U.S. Dollar Value at March 31, 2026 |
| | | | | | |
| $25,000 Senior notes at 3.55% | | 2012 Private Placement | | December 2027 | | $ | 25.0 | |
| $125,000 Senior notes at 3.55% | | 2015 Private Placement | | May 2027 | | 125.0 | |
| $100,000 Senior notes at 3.70% | | 2015 Private Placement | | May 2030 | | 100.0 | |
| $50,000 Senior notes at 3.93% | | 2017 Private Placement | | February 2027 | | 50.0 | |
| €60,000 Senior notes at 1.86% | | 2017 Private Placement | | February 2027 | | 68.9 | |
| $45,000 Senior notes at 4.03% | | 2017 Private Placement | | February 2029 | | 45.0 | |
| €20,000 Senior notes at 2.04% | | 2017 Private Placement | | February 2029 | | 23.0 | |
| £45,000 Senior notes at 3.04% | | 2017 Private Placement | | February 2029 | | 59.5 | |
| €19,000 Senior notes at 2.30% | | 2017 Private Placement | | February 2032 | | 21.8 | |
| £30,000 Senior notes at 3.17% | | 2017 Private Placement | | February 2032 | | 39.7 | |
| Total Private Placement Senior Notes | | | | | | $ | 557.8 | |
The Private Placement Senior Notes were issued as follows:
•On February 27, 2017, Limited issued and sold an aggregate principal amount of $95.0 million, €99.0 million, and £75.0 million of senior notes (collectively, the "2017 senior notes") in a private placement to certain institutional investors in an offering that was exempt from the registration requirements of the Securities Act of 1933. These notes have maturities of between 10 years and 15 years from the issue date. The agreement governing these notes contains leverage and interest coverage covenants.
•On May 15, 2015, Corporation issued and sold $350.0 million of senior notes (the "2015 senior notes") in a private placement to certain institutional investors in an offering that was exempt from the registration requirements of the Securities Act of 1933. These notes have maturities of 10 years to 15 years from the issue date. The agreement governing these notes contains leverage and interest coverage covenants.
•In December 2012 and in February 2013, Corporation issued and sold $200.0 million of senior notes (collectively, the "2012 senior notes") in a private placement to certain institutional investors in offerings that were exempt from the registration requirements of the Securities Act of 1933. The agreement governing the notes contains leverage and interest coverage covenants.
•On March 19, 2021, Corporation as issuer, and Parent, Limited and FinCo, as guarantors, entered into (1) a First Amendment to Amended and Restated Note Purchase Agreement dated March 5, 2019 (which had amended and restated certain note purchase agreements originally dated December 4, 2012) for the 2012 senior notes (the “2012 Amendment”), and (2) a First Amendment to Amended and Restated Note Purchase Agreement dated March 5, 2019 (which had amended and restated certain note purchase agreements originally dated March 31, 2015) for the 2015 senior notes (the “2015 Amendment”). Also on March 19, 2021, Limited, as issuer, and Parent, Corporation and FinCo, as guarantors, entered into a First Amendment to Amended and Restated Note Purchase Agreement dated March 5, 2019 (which had amended and
restated a certain note purchase agreement originally dated January 23, 2017) for the 2017 senior notes (together with the 2012 Amendment and the 2015 Amendment, the “NPA Amendments”). The NPA Amendments provided, among other things, for the waiver of certain repurchase rights of the note holders and increased the size of certain baskets to more closely align with other current credit agreement baskets.
At March 31, 2026, we were in compliance with all financial covenants associated with our indebtedness. For additional information on our sources of funding and credit, refer to Note 8 to our consolidated financial statements titled, “Debt.”
CAPITAL EXPENDITURES
Our capital expenditure program is a component of our long-term strategy. This program includes, among other things, investments in new and existing facilities, business expansion projects, cobalt-60, information technology enhancements, and research and development advances. During fiscal 2026, our capital expenditures amounted to $369.0 million. We use cash provided by operating activities and our cash and cash equivalent balances to fund capital expenditures. In fiscal 2027, we plan to continue to invest in facility expansions, particularly within our Healthcare and AST segments, and in ongoing maintenance for existing facilities. We will also commence a multi-year project to invest in upgraded technology to support our service and sales workflows within our Healthcare and Life Sciences segments.
MATERIAL FUTURE CASH OBLIGATIONS AND COMMERCIAL COMMITMENTS
Cash Requirements. We intend to use our existing cash and cash equivalent balances and cash generated from operations to fund capital expenditures and meet our other liquidity needs. Our capital requirements depend on many uncertain factors, including our rate of sales growth, our Customers’ acceptance of our products and services, the costs of obtaining adequate manufacturing capacities, the timing and extent of our research and development projects, changes in our operating expenses and other factors. To the extent that existing and anticipated sources of cash are not sufficient to fund our future activities, we may need to raise additional funds through additional borrowings or the sale of equity securities. There can be no assurance that our financing arrangements will provide us with sufficient funds or that we will be able to obtain any additional funds on terms favorable to us or at all.
Our material future cash obligations and commercial commitments as of March 31, 2026 are presented in the following tables. Commercial commitments include standby letters of credit, letters of credit required as security under our self-insured risk retention policies, and other potential cash outflows resulting from events that require us to fulfill commitments.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Payments due by March 31, | | |
| (in millions) | | 2027 | | 2028 | | 2029 | | 2030 | | 2031 and thereafter | | Total |
| Material Future Cash Obligations: | | | | | | | | | | | | |
| Debt | | $ | 118.9 | | | $ | 150.0 | | | $ | 127.5 | | | $ | 37.8 | | | $ | 1,511.5 | | | $ | 1,945.6 | |
| Operating leases | | 42.1 | | | 31.1 | | | 22.1 | | | 14.9 | | | 77.8 | | | 188.1 | |
| Purchase obligations | | 124.4 | | | 11.3 | | | — | | | — | | | — | | | 135.7 | |
| Benefit payments under defined benefit plans | | 6.0 | | | 6.1 | | | 6.3 | | | 6.6 | | | 43.1 | | | 68.1 | |
| Trust assets available for benefit payments under defined benefit plans | | (6.0) | | | (6.1) | | | (6.3) | | | (6.6) | | | (43.1) | | | (68.1) | |
| Benefit payments under other post-retirement benefits plans | | 0.9 | | | 0.8 | | | 0.7 | | | 0.6 | | | 2.5 | | | 5.4 | |
| | | | | | | | | | | | |
| Total Material Future Cash Obligations | | $ | 286.3 | | | $ | 193.2 | | | $ | 150.3 | | | $ | 53.3 | | | $ | 1,591.8 | | | $ | 2,274.9 | |
The table above includes only the principal amounts of our material future cash obligations. We provide information about the interest component of our long-term debt in the subsection of MD&A titled, “Liquidity and Capital Resources,” and in Note 8 to our consolidated financial statements titled, “Debt.”
Purchase obligations shown in the table above relate to minimum purchase commitments with suppliers for materials purchases and long-term construction contracts.
The table above excludes contributions we make to our defined contribution plans. Our future contributions to the defined contribution plans depend on uncertain factors, such as the amount and timing of employee contributions and discretionary employer contributions. We provide additional information about our defined benefit pension plans, defined contribution plan, and other post-retirement benefits plan in Note 11 to our consolidated financial statements titled, "Benefit Plans."
The table above also excludes potential obligations related to our investment activities of approximately $211.0 million (based on contractual amounts, excluding working capital adjustments), including arrangements that provide for the potential
acquisition of the remaining equity interests in an investee, as well as contingent consideration arrangements. The timing and ultimate amount of any such obligations cannot be determined at this time, as they are contingent on the occurrence of specified events or conditions and, in certain cases, future operating performance.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Amount of Commitment Expiring March 31, | | |
| (in millions) | | 2027 | | 2028 | | 2029 | | 2030 | | 2031 and thereafter | | Totals |
| Commercial Commitments: | | | | | | | | | | | | |
| Letters of credit and surety bonds | | $ | 141.6 | | | $ | 2.3 | | | $ | 0.3 | | | $ | 1.4 | | | $ | 1.5 | | | $ | 147.2 | |
| Letters of credit as security for self-insured risk retention policies | | 14.1 | | | — | | | — | | | — | | | — | | | 14.1 | |
| Total Commercial Commitments | | $ | 155.7 | | | $ | 2.3 | | | $ | 0.3 | | | $ | 1.4 | | | $ | 1.5 | | | $ | 161.3 | |
SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
Parent and its wholly-owned subsidiaries, Limited and Corporation, each have provided guarantees of the obligations of FinCo, a wholly-owned subsidiary issuer, under Senior Public Notes issued by FinCo on April 1, 2021 and of certain other obligations relating to the Senior Public Notes. The Senior Public Notes are guaranteed, jointly and severally, on a senior unsecured basis. The Senior Public Notes and the related guarantees are senior unsecured obligations of FinCo and the Guarantors, respectively, and are equal in priority with all other unsecured and unsubordinated indebtedness of FinCo and the Guarantors, respectively, from time to time outstanding, including, as applicable, under the Private Placement Senior Notes and borrowings under the Revolving Credit Facility.
All of the liabilities of non-guarantor direct and indirect subsidiaries of Parent, other than FinCo, Limited and Corporation, including any claims of trade creditors, are effectively senior to the Senior Public Notes.
FinCo’s main objective and source of revenues and cash flows is the provision of short- and long-term financing for the activities of Parent and its subsidiaries.
The ability of our subsidiaries to pay dividends, interest and other fees to FinCo and ability of FinCo and Guarantors to service the Senior Public Notes may be restricted by, among other things, applicable corporate and other laws and regulations as well as agreements to which our subsidiaries are or may become a party.
The following is a summary of these guarantees:
Guarantees of Senior Notes
•Parent Company Guarantor – STERIS plc
•Subsidiary Issuer – STERIS Irish FinCo Unlimited Company
•Subsidiary Guarantor – STERIS Limited
•Subsidiary Guarantor – STERIS Corporation
The guarantee of a Guarantor will be automatically and unconditionally released and discharged:
•in the case of a subsidiary Guarantor, upon the sale, transfer or other disposition (including by way of consolidation or merger) of such subsidiary Guarantor, other than to the Parent or a subsidiary of the Parent and as permitted by the Indenture;
•in the case of a subsidiary Guarantor, upon the sale, transfer or other disposition of all or substantially all the assets of such subsidiary Guarantor, other than to the Parent or a subsidiary of the Parent and as permitted by the Indenture;
•in the case of a subsidiary Guarantor, at such time as such subsidiary Guarantor is no longer a borrower under or no longer guarantees any material credit facility (subject to reinstatement in specified circumstances);
•upon the legal defeasance or covenant defeasance of the Senior Public Notes or the discharge of FinCo’s obligations under the Indenture in accordance with the terms of the Indenture;
•as described in accordance with the terms of the Indenture; or
•in the case of Parent, if FinCo ceases for any reason to be a subsidiary of Parent; provided that all guarantees and other obligations of Parent in respect of all other indebtedness under any material credit facility of FinCo terminate upon FinCo ceasing to be a subsidiary of Parent; and
•upon such Guarantor delivering to the trustee an officer’s certificate and an opinion of counsel, each stating that all conditions precedent provided for in the Indenture relating to such transaction or release have been complied with.
The obligations of each Guarantor under its guarantee are expressly limited to the maximum amount that such Guarantor could guarantee without such guarantee constituting a fraudulent conveyance. Each Guarantor that makes a payment under its guarantee will be entitled upon payment in full of all guaranteed obligations under the indenture to a contribution from each Guarantor in an amount equal to such other Guarantor’s pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with U.S. GAAP.
The following tables present summarized results of operations for the year ended March 31, 2026 and summarized balance sheet information at March 31, 2026 and 2025 for the obligor group of the Senior Public Notes. The obligor group consists of Parent, FinCo, and the other Guarantors. The summarized financial information is presented after elimination of (i) intercompany transactions and balances among the guarantors and issuer and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor or issuer. Transactions with non-issuer and non-guarantor subsidiaries have been presented separately.
| | | | | | | | |
| Summarized Results of Operations | | |
| | Twelve Months Ended |
| | March 31, |
| (in millions) | | 2026 |
| | | |
| Revenues | | $ | 3,313.3 | |
Gross profit | | 1,820.3 | |
| Operating costs arising from transactions with non-issuers and non-guarantors - net | | 716.0 | |
| Income from operations | | 914.1 | |
| Non-operating income (expense) arising from transactions with subsidiaries that are non-issuers and non-guarantors - net | | 1,121.5 | |
| Net income | | $ | 1,179.7 | |
| | | | | | | | | | | |
| Summarized Balance Sheet Information | | | |
| At March 31, |
| (in millions) | 2026 | | 2025 |
| Receivables due from non-issuers and non-guarantor subsidiaries | $ | 21,513.5 | | | $ | 19,931.5 | |
| Other current assets | 1,039.2 | | | 830.5 | |
| Total current assets | $ | 22,552.7 | | | $ | 20,762.0 | |
| | | |
| Non-current receivables due from non-issuers and non-guarantor subsidiaries | $ | 1,280.3 | | | $ | 1,278.4 | |
| Goodwill | 298.0 | | | 297.2 | |
| Other non-current assets | 639.9 | | | 632.6 | |
| Total non-current assets | $ | 2,218.1 | | | $ | 2,208.2 | |
| | | |
| Payables due to non-issuers and non-guarantor subsidiaries | $ | 25,938.3 | | | $ | 23,557.2 | |
| Other current liabilities | 510.0 | | | 333.7 | |
| Total current liabilities | $ | 26,448.3 | | | $ | 23,891.0 | |
| | | |
| Non-current payables due to non-issuers and non-guarantor subsidiaries | $ | 285.9 | | | $ | 285.6 | |
| Other non-current liabilities | 1,820.7 | | | 2,060.8 | |
| Total non-current liabilities | $ | 2,106.6 | | | $ | 2,346.4 | |
Credit Ratings
STERIS's Senior Public Notes have been assigned the following credit ratings:
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| Standard & Poor's | Moody's | Fitch |
Credit Ratings (1) | BBB | Baa2 | BBB |
(1) Effective May 20, 2026Each of the credit rating agencies reviews its rating periodically and there is no guarantee our current credit ratings will remain the same. If our credit ratings were lowered, our ability to access the debt markets, our cost of funds, and other terms for new debt issuances could be adversely impacted.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The following subsections describe our most critical accounting estimates, and assumptions. Our accounting policies and recently issued accounting pronouncements are more fully described in Note 1 to our consolidated financial statements titled, "Nature of Operations and Summary of Significant Accounting Policies."
Estimates and Assumptions. Our discussion and analysis of financial condition and results of operations is based on our consolidated financial statements that were prepared in accordance with United States generally accepted accounting principles. We make certain estimates and assumptions that we believe to be reasonable when preparing these financial statements. These estimates and assumptions involve judgments with respect to numerous factors that are difficult to predict and are beyond management’s control. As a result, actual amounts could be materially different from these estimates. We periodically review these critical accounting policies, estimates, assumptions, and the related disclosures with the Audit Committee of the Company’s Board of Directors.
Revenue Recognition. Revenue is recognized when obligations under the terms of the contract are satisfied and control of the promised products or services has 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 revenues are recognized when control passes to the Customer, which is generally based on contract or shipping terms. Service revenues are 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 revenues are not contingent upon resale by the dealer or distributor, and we have no further obligations related to bringing about resale. Our standard return and restocking fee policies are applied to sales of products. Shipping and handling costs charged to Customers are included in Product revenues. The associated expenses are treated as fulfillment costs and are included in Cost of revenues. Revenues are reported net of sales and value-added taxes collected from Customers.
We have individual Customer contracts that offer discounted pricing. Dealers and distributors may be offered sales incentives in the form of rebates. We reduce revenues for discounts and estimated returns, rebates, and other similar allowances in the same period the related revenues are recorded. The reduction in revenues for these items is estimated based on historical experience and trend analysis to the extent that it is probable that a significant reversal of revenues 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 revenues 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 revenues are 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 March 31, 2026, assets related to costs to fulfill a contract were not material to our consolidated financial statements.
Inventories and Reserves. Inventories are stated at the lower of their cost and net realizable value determined by the first-in, first-out cost method. Inventory costs include material, labor, and overhead.
We review inventory on an ongoing basis, considering factors such as deterioration and obsolescence. We record an allowance for estimated losses when the facts and circumstances indicate that particular inventories will not be usable. If future market conditions vary from those projected, and our estimates prove to be inaccurate, we may be required to write-down inventory values and record an adjustment to Cost of revenues.
Asset Impairment Losses. Property, plant, equipment, and identifiable intangible assets are reviewed for impairment when events and circumstances indicate that the carrying value of such assets may not be recoverable. Impaired assets are recorded at the lower of carrying value or estimated fair value. We conduct this review on an ongoing basis and, if impairment exists, we record the loss in the Consolidated Statements of Income during that period.
When we evaluate assets for impairment, we make certain judgments and estimates, including interpreting current economic indicators and market valuations, evaluating our strategic plans with regards to operations, historical and anticipated performance of operations, and other factors. If we incorrectly anticipate these factors, or unexpected events occur, our operating results could be materially affected.
Purchase Accounting and Goodwill. Assets and liabilities of the business acquired are accounted for at their estimated fair values as of the acquisition date. Any excess of the cost of the acquisition over the fair value of the net tangible and intangible assets acquired is recorded as goodwill. We supplement management expertise with valuation specialists in performing appraisals to assist us in determining the fair values of assets acquired and liabilities assumed. These valuations require us to make estimates and assumptions, especially with respect to intangible assets. We generally amortize our intangible assets over their estimated useful lives with the exception of indefinite lived intangible assets. We do not amortize goodwill, but we evaluate it annually for impairment. Therefore, the allocation of the purchase price to intangible assets and goodwill has a significant impact on future operating results.
We evaluate the recoverability of recorded goodwill amounts annually, or when evidence of potential impairment exists. We may consider qualitative indicators of the fair value of a reporting unit when it is unlikely that a reporting unit has impaired goodwill. We may also utilize a discounted cash flow analysis that requires certain assumptions and estimates be made regarding market conditions and our future profitability. In those circumstances, we test goodwill for impairment by reviewing the book value compared to the fair value at the reporting unit level. We calculate the fair value of our reporting units based on the present value of estimated future cash flows. Management's judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate future cash flows to measure fair value. Assumptions used in our impairment evaluations, such as forecasted growth rates and cost of capital, are consistent with internal projections and operating plans. We believe such assumptions and estimates are also comparable to those that would be used by other marketplace participants.
We evaluate indefinite lived intangible assets annually, or when evidence of potential impairment exists. We evaluate several qualitative indicators and assumptions, and trends that influence the valuation of the assets to determine if any evidence of potential impairment exists.
Income Taxes. Our provision for income taxes is based on our current period income, changes in deferred income tax assets and liabilities, income tax rates, changes in uncertain tax benefits, and tax planning opportunities available to us in the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and the respective governmental taxing authorities. We use judgment in determining our annual effective income tax rate and evaluating our tax positions. We prepare and file tax returns based on our interpretation of tax laws and regulations, and we record estimates based on these judgments and interpretations. We cannot be sure that the tax authorities will agree with all of the tax positions taken by us. The actual income tax liability for each jurisdiction in any year can, in some instances, ultimately be determined several years after the tax return is filed and the financial statements are published.
We evaluate our tax positions using the recognition threshold and measurement attribute in accordance with current accounting guidance. We determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, we presume that the position will be examined by the appropriate taxing authority and that the taxing authority will have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The appropriate unit of account for determining what constitutes an individual tax position, and whether the more-likely-than-not recognition threshold is met for a tax position, is a matter of judgment based on the individual facts and circumstances of that position evaluated in light of all available evidence. We review and adjust our tax estimates periodically because of ongoing examinations by and settlements with the various taxing authorities, as well as changes in tax laws, regulations and precedent.
We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences, and the implementation of tax planning strategies. If we are unable to generate sufficient future taxable income in certain tax jurisdictions, or if there is a material change in the effective income tax rates or time period within which the underlying temporary differences become taxable or deductible, we could be required to increase our valuation allowance, which would increase our effective income tax rate and could result in an adverse impact on our consolidated financial position, results of operations, or cash flows.
We believe that adequate accruals have been made for income taxes. Differences between the estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material adverse effect on our consolidated financial position, but could possibly be material to our consolidated results of operations or cash flows for any one period.
Additional information regarding income taxes is included in Note 10 to our consolidated financial statements titled, “Income Taxes.”
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 record a liability for such contingencies to the extent we conclude that their occurrence is both probable and estimable and believe we have adequately reserved for our current litigation and claims that are probable and estimable. In the event that the estimate of a probable loss is a range and no amount within the range is more likely, we accrue the minimum amount of the range. We consider many factors in making these assessments, including the professional judgment of experienced members of management and our legal counsel. We have made estimates as to the likelihood of unfavorable outcomes and the amounts of such potential losses. Further, we believe that the ultimate outcome of 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. 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, and we may also have contractual indemnification rights against certain liabilities, but there can be no assurance that either will be applicable or adequate to cover adverse outcomes of claims or legal proceedings against us. We record expected recoveries under applicable contracts when we are assured of recovery. Additional information regarding our commitments and contingencies is included in Note 12 to our consolidated financial statements titled, "Commitments and Contingencies."
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 10 to our consolidated financial statements titled, “Income Taxes” in this Annual Report on Form 10-K.
Benefit Plans. We provide defined benefit pension plans for certain employees and retirees. In addition, we sponsor an unfunded post-retirement benefits plan for two groups of United States retirees. Benefits under this plan include retiree life insurance and retiree medical insurance, including prescription drug coverage.
Employee pension and post-retirement benefits plans are a cost of conducting business and represent obligations that will be settled in the future and therefore, require us to use estimates and make certain assumptions to calculate the expense and liabilities related to the plans. Changes to these estimates and assumptions can result in different expense and liability amounts. Future actual experience may be significantly different from our current expectations. We believe that the most critical assumptions used to determine net periodic benefit costs and projected benefit obligations are the expected long-term rate of return on plan assets and the discount rate. A summary of significant assumptions used to determine the March 31, 2026 projected benefit obligations and the fiscal 2026 net periodic benefit costs is as follows:
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| Synergy Health plc | Isotron BV | Synergy Health Daniken AG | Synergy Health Radeberg | Synergy Health Allershausen | Harwell Dosimeters Ltd | U.S. Post-
Retirement Benefits Plan |
| Funding Status | Funded | Funded | Unfunded | Unfunded | Unfunded | Funded | Unfunded |
| Assumptions used to determine March 31, 2026 | | | | | | | |
| Benefit obligations: | | | | | | | |
| Discount rate | 6.10 | % | 4.30 | % | 1.20 | % | 3.80 | % | 3.01 | % | 5.85 | % | 5.00 | % |
| Assumptions used to determine fiscal 2026 | | | | | | | |
| Net periodic benefit costs: | | | | | | | |
| Discount rate | 5.80 | % | 3.80 | % | 1.20 | % | 2.00 | % | 2.20 | % | 5.85 | % | 5.00 | % |
| Expected return on plan assets | 5.30 | % | 3.80 | % | 1.30 | % | n/a | n/a | n/a | n/a |
NA – Not applicable.
We develop our expected long-term rate of return on plan assets assumptions by evaluating input from third-party professional advisors, taking into consideration the asset allocation of the portfolios, and the long-term asset class return expectations. Generally, net periodic benefit costs increase as the expected long-term rate of return on plan assets assumption decreases. Holding all other assumptions constant, lowering the expected long-term rate of return on plan assets assumption for our funded defined benefit pension plans by 50 basis points would have increased the fiscal 2026 benefit costs by less than $0.4 million.
We develop our discount rate assumptions by evaluating input from third-party professional advisers, taking into consideration the current yield on country specific investment grade long-term bonds which provide for similar cash flow streams as our projected benefit obligations. Generally, the projected benefit obligations and the net periodic benefit costs both increase as the discount rate assumption decreases. Holding all other assumptions constant, lowering the discount rate assumption for our defined benefit pension plans and for the other post-retirement benefits plan by 50 basis points would have decreased the fiscal 2026 net periodic benefit costs by less than $0.2 million and would have increased the projected benefit obligations by approximately $7.6 million at March 31, 2026.
We recognize an asset for the overfunded status or a liability for the underfunded status of defined benefit pension and post-retirement benefit plans in our balance sheets. This amount is measured as the difference between the fair value of plan assets and the benefit obligation (the projected benefit obligation for pension plans and the accumulated post-retirement benefit obligation for other post-retirement benefit plans). Changes in the funded status of the plans are recorded in other comprehensive income in the year they occur. We measure plan assets and obligations as of the balance sheet date. Note 11 to our consolidated financial statements titled, “Benefit Plans,” contains additional information about our pension and other post-retirement welfare benefits plans.
FORWARD-LOOKING STATEMENTS
This Form 10-K may contain statements concerning certain trends, expectations, forecasts, estimates, or other forward-looking information affecting or relating to STERIS or its industry, products or activities that are intended to qualify for the protections afforded “forward-looking statements” under the Private Securities Litigation Reform Act of 1995 and other laws and regulations. Forward-looking statements speak only as to the date the statement is made and may be identified by the use of forward-looking terms such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” “outlook,” “impact,” “potential,” “confidence,” “improve,” “optimistic,” “deliver,” “orders,” “backlog,” “comfortable,” “trend,” and “seeks,” or the negative of such terms or other variations on such terms or comparable terminology.
Many factors could cause actual results to differ materially from those in the forward-looking statements including, without limitation, those identified in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K. Other potential risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements include, without limitation: (a) the impact on STERIS and its operations of any legislation, regulations or orders, including but not limited to any new trade, regulations or orders, that may be implemented by the U.S. administration or Congress, or of any responses thereto by non-U.S. governments; (b) operating costs, pressure on pricing (including, without limitation, as a result of inflation), Customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, Customers, clients or suppliers) being greater than expected and leading to erosion of profit margins; (c) the potential of international unrest, military conflicts, economic downturns, currency fluctuations and cybersecurity events and any resulting effects on STERIS’s anticipated growth, performance or other results; (d) changes in healthcare policy or government or other third-party payor reimbursement levels; (e) the possibility that compliance with laws, court rulings, certifications, regulations, or other regulatory actions, or the outcome of any pending or threatened litigation, including the EO litigation, may delay, limit or prevent new product or service introductions, impact production, supply and/or marketing of existing products or services, result in uncovered costs, or otherwise affect STERIS’s performance, results, prospects or value; (f) changes in tax laws or interpretations or the adoption of certain income tax treaties in jurisdictions where we operate that could increase our consolidated tax liabilities, including changes in tax laws that would result in STERIS being treated as a U.S. resident for U.S. federal tax purposes, or the impact of tariffs and/or other trade barriers as a result of STERIS’s corporate structure; (g) the impacts of increasing consolidation and competition within our industry, which may exert pressure on our pricing strategy, manufacturing strategy or lead to decreasing demand for our products and services; (h) the effects on our operations resulting from labor-related issues, such as strikes, unsuccessful union negotiations and other workforce disruptions or from our inability to recruit or retain management and other personnel; (i) the level of STERIS’s indebtedness limiting financial flexibility or increasing future borrowing costs; (j) the effects of changes in credit availability and pricing, as well as the ability of STERIS and STERIS’s Customers and suppliers to adequately access the credit markets, on favorable terms or at all, when needed; and (k) the possibility that anticipated financial results, anticipated revenues, productivity improvements, cost savings, growth synergies, and other anticipated benefits of acquisitions, restructuring efforts, and divestitures will not be realized or will be less than anticipated due to unknown or inestimable liabilities, impairments, or increases in expected integration costs or difficulties in connection with the integration of acquired businesses.
Unless legally required, STERIS does not undertake to update or revise any forward-looking statements even if events make clear that any projected results, express or implied, will not be realized.
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of STERIS plc
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of STERIS plc and subsidiaries (the Company) as of March 31, 2026 and 2025, the related consolidated statements of income, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended March 31, 2026, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2026 and 2025, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2026, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated May 29, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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Description of the Matter | Uncertain Tax Positions
As discussed in Note 10 to the consolidated financial statements, the Company received two notices of deficiency from the U.S. Internal Revenue Service (the “IRS”) regarding deemed dividend inclusions and associated withholding tax for fiscal year 2018. The IRS adjustments would result in a cumulative tax liability of approximately $50.0 million, excluding any interest and penalties, if ultimately assessed. The Company believes it is more-likely-than-not that they will be able to sustain the tax benefit recognized in the U.S. and has not recorded a liability for an uncertain tax position related to this matter.
Auditing management’s analysis of tax positions related to the lack of deemed dividend inclusions and associated withholding tax for fiscal year 2018 was challenging as the analysis is highly judgmental due to complex interpretations of tax laws and legal rulings. In addition, periodic reassessment is required to evaluate changes impacting these tax positions, including regulatory changes, litigation and examination activity. |
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How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting process for uncertain tax positions. For example, we tested controls over management’s identification of uncertain tax positions and its application of the recognition and measurement principles, including management’s review of the facts and circumstances, including current year developments, and the corresponding tax laws relied upon to conclude that it is currently more-likely-than-not that they will realize the benefit recorded.
Our audit procedures included, among others, assessing the Company's correspondence with the relevant tax authorities related to current year developments. With the assistance of our income tax professionals, we evaluated evidence of the status of the dispute with the IRS, including inquiries of and written representations from management and correspondence with external counsel engaged in the matter. We also evaluated the adequacy of the Company's disclosures included in Note 10 to the consolidated financial statements in relation to the matter. |
We have served as the Company’s auditor since 1989.
/s/ Ernst & Young LLP
Cleveland, Ohio
May 29, 2026
STERIS PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
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| March 31, | | 2026 | | 2025 |
| Assets | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | 439.6 | | | $ | 171.7 | |
Accounts receivable (net of allowances of $27.3 and $24.4, respectively) | | 1,092.8 | | | 1,044.0 | |
| Inventories, net | | 631.8 | | | 581.3 | |
| Prepaid expenses and other current assets | | 230.4 | | | 203.8 | |
| Total current assets | | 2,394.6 | | | 2,000.8 | |
| Property, plant, and equipment, net | | 2,161.2 | | | 1,956.5 | |
| Lease right-of-use assets, net | | 155.2 | | | 156.4 | |
| Goodwill | | 4,194.8 | | | 4,095.7 | |
| Intangibles, net | | 1,620.0 | | | 1,854.4 | |
| Other assets | | 211.4 | | | 83.0 | |
| Total assets | | $ | 10,737.2 | | | $ | 10,146.8 | |
| Liabilities and equity | | | | |
| Current liabilities: | | | | |
| Accounts payable | | $ | 338.8 | | | $ | 280.8 | |
| Accrued income taxes | | 28.6 | | | 21.5 | |
| Accrued payroll and other related liabilities | | 221.1 | | | 192.7 | |
| Short-term lease obligations | | 35.8 | | | 34.2 | |
| Short term indebtedness | | 118.9 | | | 125.0 | |
| Accrued expenses and other | | 401.9 | | | 368.1 | |
| Total current liabilities | | 1,145.0 | | | 1,022.2 | |
| Long-term indebtedness | | 1,812.8 | | | 1,918.7 | |
| Deferred income taxes, net | | 390.7 | | | 403.7 | |
| Long-term lease obligations | | 119.6 | | | 124.6 | |
| Other liabilities | | 71.7 | | | 61.9 | |
| Total liabilities | | $ | 3,540.0 | | | $ | 3,531.1 | |
Commitments and contingencies (see Note 12) | | | | |
Ordinary shares, with $0.001 par value; 500.0 shares authorized; 97.8 and 98.3 ordinary shares issued and outstanding, respectively | | 4,280.9 | | | 4,420.4 | |
| Retained earnings | | 3,015.9 | | | 2,475.3 | |
Accumulated other comprehensive loss | | (113.1) | | | (292.3) | |
| Total shareholders’ equity | | 7,183.6 | | | 6,603.4 | |
| Noncontrolling interests | | 13.6 | | | 12.4 | |
| Total equity | | 7,197.2 | | | 6,615.8 | |
| Total liabilities and equity | | $ | 10,737.2 | | | $ | 10,146.8 | |
See notes to consolidated financial statements.
STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
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| Years Ended March 31, | | 2026 | | 2025 | | 2024 | | | | |
| Revenues: | | | | | | | | | | |
| Product | | $ | 3,060.1 | | | $ | 2,871.6 | | | $ | 2,764.0 | | | | | |
| Service | | 2,875.8 | | | 2,587.9 | | | 2,374.7 | | | | | |
| Total revenues | | 5,935.9 | | | 5,459.5 | | | 5,138.7 | | | | | |
| Cost of revenues: | | | | | | | | | | |
| Product | | 1,625.5 | | | 1,514.3 | | | 1,516.1 | | | | | |
| Service | | 1,683.9 | | | 1,542.5 | | | 1,404.5 | | | | | |
| Total cost of revenues | | 3,309.4 | | | 3,056.8 | | | 2,920.5 | | | | | |
| Gross profit | | 2,626.5 | | | 2,402.8 | | | 2,218.2 | | | | | |
| Operating expenses: | | | | | | | | | | |
| Selling, general, and administrative | | 1,407.7 | | | 1,334.3 | | | 1,252.3 | | | | | |
| Research and development | | 112.9 | | | 107.6 | | | 103.7 | | | | | |
| Illinois EO litigation settlement | | — | | | 48.2 | | | — | | | | | |
| Restructuring expense | | 4.1 | | | 46.0 | | | 26.0 | | | | | |
| Total operating expenses | | 1,524.7 | | | 1,536.1 | | | 1,382.0 | | | | | |
| Income from operations | | 1,101.8 | | | 866.6 | | | 836.1 | | | | | |
| Non-operating expenses, net: | | | | | | | | | | |
| Interest expense | | 60.7 | | | 86.3 | | | 144.4 | | | | | |
| Interest and miscellaneous income | | (9.8) | | | (8.4) | | | (11.0) | | | | | |
| Other expense (income), net | | 3.5 | | | (7.4) | | | — | | | | | |
| Total non-operating expenses, net | | 54.4 | | | 70.4 | | | 133.3 | | | | | |
Income from continuing operations before income tax expense | | 1,047.3 | | | 796.2 | | | 702.8 | | | | | |
| Income tax expense | | 262.2 | | | 184.7 | | | 149.5 | | | | | |
Income from continuing operations, net of income tax | | 785.1 | | | 611.6 | | | 553.3 | | | | | |
| Income (loss) from discontinued operations, net of income tax | | — | | | 4.5 | | | (173.2) | | | | | |
| Net income | | 785.1 | | | 616.1 | | | 380.1 | | | | | |
| Less: Net income attributable to noncontrolling interests | | 2.8 | | | 1.4 | | | 1.8 | | | | | |
| Net income attributable to shareholders | | $ | 782.3 | | | $ | 614.6 | | | $ | 378.2 | | | | | |
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| Net income (loss) per share attributable to shareholders - Basic: | | | | | | | | | | |
| Continuing Operations | | $ | 7.97 | | | $ | 6.19 | | | $ | 5.58 | | | | | |
| Discontinued Operations | | $ | — | | | $ | 0.05 | | | $ | (1.75) | | | | | |
| Total | | $ | 7.97 | | | $ | 6.24 | | | $ | 3.83 | | | | | |
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| Net income (loss) per share attributable to shareholders - Diluted: | | | | | | | | | | |
| Continuing Operations | | $ | 7.93 | | | $ | 6.16 | | | $ | 5.55 | | | | | |
| Discontinued Operations | | $ | — | | | $ | 0.05 | | | $ | (1.74) | | | | | |
| Total | | $ | 7.93 | | | $ | 6.20 | | | $ | 3.81 | | | | | |
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| Cash dividends declared per ordinary share outstanding | | $ | 2.46 | | | $ | 2.23 | | | $ | 2.03 | | | | | |
See notes to consolidated financial statements.
STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
| | | | | | | | | | | | | | | | | | | | |
| Years Ended March 31, | | 2026 | | 2025 | | 2024 |
| Net income | | $ | 785.1 | | | $ | 616.1 | | | $ | 380.1 | |
| Less: Net income attributable to noncontrolling interests | | 2.8 | | | 1.4 | | | 1.8 | |
| Net income attributable to shareholders | | $ | 782.3 | | | $ | 614.6 | | | $ | 378.2 | |
| | | | | | |
| Other comprehensive income (loss) | | | | | | |
| Defined benefit plan changes | | (0.6) | | | 0.1 | | | (0.7) | |
| Change in cumulative foreign currency translation adjustment | | 179.7 | | | 36.2 | | | (7.2) | |
| Total other comprehensive income (loss) attributable to shareholders | | 179.2 | | | 36.3 | | | (7.9) | |
| Comprehensive income attributable to shareholders | | $ | 961.5 | | | $ | 651.0 | | | $ | 370.3 | |
See notes to consolidated financial statements.
STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| | | | | | | | | | | | | | | | | | | | |
| Years Ended March 31, | | 2026 | | 2025 | | 2024 |
| Operating activities: | | | | | | |
| Net income | | $ | 785.1 | | | $ | 616.1 | | | $ | 380.1 | |
Adjustments to reconcile net income to net cash provided by
operating activities: | | | | | | |
| Depreciation, depletion, and amortization | | 486.5 | | | 476.2 | | | 565.2 | |
| Deferred income taxes | | (16.9) | | | (76.5) | | | (131.4) | |
| Share-based compensation expense | | 61.7 | | | 57.4 | | | 56.5 | |
Loss on the disposal of property, plant, equipment,
and intangibles, net | | 3.6 | | | 5.7 | | | 25.0 | |
Loss on classification as held for sale | | — | | | — | | | 206.4 | |
| (Gain) loss on sale of businesses and investments, net | | (0.3) | | | 6.4 | | | 0.3 | |
| Amortization of inventory fair value adjustments | | — | | | — | | | 4.8 | |
| Other items | | (5.6) | | | (3.7) | | | 12.3 | |
| Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: | | | | | | |
| Accounts receivable, net | | (25.1) | | | (28.8) | | | (128.1) | |
| Inventories, net | | (24.0) | | | 73.1 | | | (37.5) | |
| Other current assets | | (22.7) | | | (50.3) | | | (1.6) | |
| Accounts payable | | 51.1 | | | 33.6 | | | (19.0) | |
| Accruals and other, net | | 47.8 | | | 38.9 | | | 40.0 | |
| Net cash provided by operating activities | | 1,341.4 | | | 1,148.1 | | | 973.3 | |
| Investing activities: | | | | | | |
| Purchases of property, plant, equipment, and intangibles | | (369.0) | | | (370.1) | | | (360.3) | |
| Proceeds from the sale of property, plant, equipment, and intangibles | | 10.5 | | | 9.2 | | | 7.4 | |
| Proceeds from the sale of businesses | | — | | | 814.6 | | | 9.5 | |
| Proceeds from the sale of investments | | — | | | — | | | 3.9 | |
| Purchases of investments | | (134.0) | | | (10.8) | | | (1.5) | |
| Acquisition of businesses, net of cash acquired | | (20.1) | | | (54.1) | | | (546.3) | |
| Net cash (used in) provided by investing activities | | (512.5) | | | 388.8 | | | (887.4) | |
| Financing activities: | | | | | | |
| Payments on term loans | | — | | | (638.1) | | | (60.0) | |
| Payments on Private Placement Senior Notes | | (125.0) | | | (80.0) | | | — | |
| Proceeds (payments) under credit facilities, net | | 3.0 | | | (446.3) | | | 181.5 | |
| Deferred financing fees and debt issuance costs | | — | | | (2.3) | | | — | |
| Acquisition related deferred or contingent consideration | | (0.4) | | | (0.4) | | | (6.2) | |
| Repurchases of ordinary shares | | (235.5) | | | (211.3) | | | (11.8) | |
| Cash dividends paid to ordinary shareholders | | (241.8) | | | (219.9) | | | (200.6) | |
| Distributions to noncontrolling interest holders | | (1.4) | | | (2.1) | | | (1.6) | |
| Contributions from noncontrolling interest holders | | — | | | 2.5 | | | 3.0 | |
| Stock option and other equity transactions, net | | 32.9 | | | 25.5 | | | 10.5 | |
| Net cash used in financing activities | | (568.2) | | | (1,572.4) | | | (85.2) | |
| Effect of exchange rate changes on cash and cash equivalents | | 7.2 | | | 0.2 | | | (2.1) | |
| Increase (decrease) in cash and cash equivalents | | 267.9 | | | (35.3) | | | (1.3) | |
| Cash and cash equivalents at beginning of period | | 171.7 | | | 207.0 | | | 208.4 | |
| Cash and cash equivalents at end of period | | $ | 439.6 | | | $ | 171.7 | | | $ | 207.0 | |
See notes to consolidated financial statements.
STERIS PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | Retained
Earnings | Accumulated Other Comprehensive Loss | Non-controlling
Interest | Total
Equity |
| | Number | Amount | | | | |
| Balance at March 31, 2023 | 98.6 | | $ | 4,486.4 | | $ | 1,911.5 | | $ | (320.7) | | $ | 10.0 | | $ | 6,087.2 | |
| Comprehensive income: | | | | | | |
| Net income | — | | — | | 378.2 | | — | | 1.8 | | 380.1 | |
| Other comprehensive loss | — | | — | | — | | (7.9) | | — | | (7.9) | |
| Repurchases of ordinary shares | (0.1) | | (10.2) | | (1.6) | | — | | — | | (11.8) | |
| Equity compensation programs and other | 0.3 | | 67.0 | | — | | — | | — | | 67.0 | |
Cash dividends – $2.03 per ordinary share | — | | — | | (200.6) | | — | | — | | (200.6) | |
| Distributions to noncontrolling interest holders | — | | — | | — | | — | | (1.6) | | (1.6) | |
| Contributions from noncontrolling interest holders | — | | — | | — | | — | | 3.0 | | 3.0 | |
| Other changes in noncontrolling interest | — | | — | | — | | — | | (0.1) | | (0.1) | |
| Balance at March 31, 2024 | 98.9 | | 4,543.2 | | 2,087.6 | | (328.7) | | 13.2 | | 6,315.3 | |
| Comprehensive income: | | | | | | |
| Net income | — | | — | | 614.6 | | — | | 1.4 | | 616.1 | |
| Other comprehensive income | — | | — | | — | | 36.3 | | — | | 36.3 | |
| Repurchases of ordinary shares | (1.0) | | (205.6) | | (7.1) | | — | | — | | (212.7) | |
| Equity compensation programs and other | 0.4 | | 82.9 | | — | | — | | — | | 82.9 | |
Cash dividends – $2.23 per ordinary share | — | | — | | (219.9) | | — | | — | | (219.9) | |
| Distributions to noncontrolling interest holders | — | | — | | — | | — | | (2.1) | | (2.1) | |
| Contributions from noncontrolling interest holders | — | | — | | — | | — | | 2.5 | | 2.5 | |
| Divestiture of joint venture interest | — | | — | | — | | — | | (2.6) | | (2.6) | |
| Other changes in noncontrolling interest | — | | — | | — | | — | | (0.1) | | (0.1) | |
| Balance at March 31, 2025 | 98.3 | | $ | 4,420.4 | | $ | 2,475.3 | | $ | (292.3) | | $ | 12.4 | | $ | 6,615.8 | |
| Comprehensive income: | | | | | | |
Net income | — | | — | | 782.3 | | — | | 2.8 | | 785.1 | |
| Other comprehensive income | — | | — | | — | | 179.2 | | — | | 179.2 | |
| Repurchases of ordinary shares | (1.0) | | (236.1) | | — | | — | | — | | (236.1) | |
| Equity compensation programs and other | 0.5 | | 96.6 | | — | | — | | — | | 96.6 | |
Cash dividends – $2.46 per ordinary share | — | | — | | (241.8) | | — | | — | | (241.8) | |
| Distributions to noncontrolling interest holders | — | | — | | — | | — | | (1.4) | | (1.4) | |
| Other changes in noncontrolling interest | — | | — | | — | | — | | (0.1) | | (0.1) | |
| Balance at March 31, 2026 | 97.8 | | $ | 4,280.9 | | $ | 3,015.9 | | $ | (113.1) | | $ | 13.6 | | $ | 7,197.2 | |
See notes to consolidated financial statements.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations. STERIS is a leading global provider of products and services that support patient care with an emphasis on infection prevention. WE HELP OUR CUSTOMERS CREATE A HEALTHIER AND SAFER WORLD by providing innovative healthcare and life science products and services around the globe. We offer our Customers a unique mix of innovative products and services. These include: consumable products, such as detergents, endoscopy accessories, barrier products, instruments and tools; services, including equipment installation and maintenance, microbial reduction of medical devices, instrument and scope repair, laboratory testing, and outsourced reprocessing; capital equipment, such as sterilizers, surgical tables, and automated endoscope reprocessors; and connectivity solutions such as operating room (“OR”) integration.
We operate and report our financial information in three reportable business segments: Healthcare, Applied Sterilization Technologies ("AST"), and Life Sciences. Previously, we had four reportable business segments, however, as a result of the fiscal 2025 divestiture of our Dental segment, Dental is presented as discontinued operations. Historical information has been retrospectively adjusted to reflect these changes for comparability purposes, as required. We describe our business segments in Note 13 titled "Business Segment Information."
Our fiscal year ends on March 31. References in this Annual Report to a particular "year," "fiscal," "fiscal 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.
Principles of Consolidation. We use the consolidation method to report our investment in our subsidiaries. Therefore, the accompanying consolidated financial statements include the financial statements of the Company and its wholly-owned and majority-owned subsidiaries. We eliminate intercompany accounts and transactions when we consolidate these financial statements. 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. Transactions between the Company and our unconsolidated affiliates are eliminated to the extent of the Company's ownership interest until such amounts are realized through transactions with third parties.
Our reporting currency is United States Dollars (USD). Columns and rows within tables may not add due to rounding. Percentages have been calculated using actual, non-rounded figures.
Discontinued Operations. On April 11, 2024, the Company announced its plan to sell substantially all of the net assets of its Dental segment for total cash consideration of $787.5 million, subject to customary adjustments, and up to an additional $12.5 million in contingent payment had the Dental business achieved certain revenue targets in fiscal 2025. No amounts have been recorded or are expected to be recorded with respect to this contingent consideration. The transaction was structured as an equity sale and closed on May 31, 2024. A component of an entity is reported in discontinued operations after meeting the criteria for held for sale classification if the disposition represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results. We analyzed the quantitative and qualitative factors relevant to the divestiture of our Dental segment and determined that those conditions for discontinued operations presentation had been met prior to March 31, 2024. The Dental segment results of operations have been classified as income (loss) from discontinued operations in the Consolidated Statements of Income for all periods presented. Our Consolidated Statements of Cash Flows include the financial results of the Dental segment through the date of sale on May 31, 2024. For additional information regarding this transaction and its effect on our financial reporting, refer to Note 4 titled, "Discontinued Operations" and Note 13 titled, "Business Segment Information."
Use of Estimates. We make certain estimates and assumptions when preparing financial statements according to accounting principles generally accepted in the United States ("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.
Cash Equivalents. Cash equivalents are all highly liquid investments with a maturity of three months or less when purchased. We invest our excess cash in short-term instruments including money market funds, money market deposit accounts, bank savings accounts, and time deposits with major banks and financial institutions. We select investments in accordance with the criteria established in our investment policy. Our investment policy specifies, among other things, maturity, credit quality and concentration restrictions with the objective of preserving capital and maintaining adequate liquidity.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 revenues are recognized when control passes to the Customer, which is generally based on contract or shipping terms. Service revenues are 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 revenues are not contingent upon resale by the dealer or distributor, and we have no further obligations related to bringing about resale. Our standard return and restocking fee policies are applied to sales of products. Shipping and handling costs charged to Customers are included in Product revenues. The associated expenses are treated as fulfillment costs and are included in Cost of revenues. Revenues are reported net of sales and value-added taxes collected from Customers.
We have individual Customer contracts that offer discounted pricing. Dealers and distributors may be offered sales incentives in the form of rebates. We reduce revenues for discounts and estimated returns, rebates, and other similar allowances in the same period the related revenues are recorded. The reduction in revenues for these items is estimated based on historical experience and trend analysis to the extent that it is probable that a significant reversal of revenues 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 revenues 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 revenues are 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 March 31, 2026, assets related to costs to fulfill a contract were not material to our consolidated financial statements.
Refer to Note 13 titled, "Business Segment Information" for disaggregation of revenues.
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 revenues 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. Revenues related to capital equipment products are 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 revenues 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, revenues are 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 20 years. Outsourced reprocessing services revenues are 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 revenues will not occur. Contracts for instrument repairs are primarily based on a Customer’s purchase order, and the associated revenues are 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 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 revenues ratably over the contract term using a time-based input measure.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Within our AST segment, Service revenues include contract sterilization and laboratory services, as well as service support for our installed base of capital equipment. Sales contracts for contract sterilization and laboratory services are primarily based on a Customer’s purchase order and associated Customer agreement, and revenues are generally recognized upon completion of the service.
Contract Liabilities
Payments received from Customers are based on invoices or billing schedules as established in contracts with Customers. Deferred revenue is recorded when payment is received in advance of performance under the contract. Deferred revenues are recognized as revenues upon completion of the performance obligation, which generally occurs within one year. During fiscal 2026, we recognized revenues of $51.5 million that were included in our contract liability balance at the beginning of the period. During fiscal 2025, we recognized revenues of $65.1 million that were included in our contract liability balance at the beginning of the period.
Refer to Note 9 titled, "Additional Consolidated Balance Sheet Information" for deferred revenues 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 revenues as performance is rendered under the contract.
Refer to Note 9 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 orders for capital equipment and consumables where control of the products has not passed to the Customer. With regard to service, these remaining performance obligations primarily include installation, certification, and outsourced reprocessing services. As of March 31, 2026, the transaction price allocated to remaining performance obligations was approximately $1,366.2 million. We expect to recognize approximately 56% of the transaction price within one year and approximately 35% beyond one year. The remainder has yet to be scheduled for delivery.
Accounts Receivable. Accounts receivable are presented at their face amount, less allowances for sales returns and uncollectible accounts. Accounts receivable consist of amounts billed and currently due from Customers and amounts earned but unbilled. We may obtain and perfect a security interest in products sold where allowed by laws and regulations when we have a concern with the Customer's risk profile.
We maintain an allowance for uncollectible accounts receivable for estimated losses in the collection of amounts owed by Customers. We estimate the allowance based on analyzing a number of factors, including amounts written off historically, Customer payment practices, and general economic conditions. We also analyze significant Customer accounts on a regular basis and record a specific allowance when we become aware of a specific Customer’s inability to pay. As a result, the related accounts receivable are reduced to an amount that we reasonably believe is collectible.
We maintain an allowance for sales returns based upon known returns and estimated returns for both capital equipment and consumables. We estimate returns of capital equipment and consumables based upon recent historical experience.
Inventories, net. Inventories are stated at the lower of their cost and net realizable value determined by the first-in, first-out cost method. Inventory costs include material, labor, and overhead.
We review inventory on an ongoing basis, considering factors such as deterioration, obsolescence, and other items. We record an allowance for estimated losses when the facts and circumstances indicate that particular inventories will not be usable. If future market conditions vary from those projected, and our estimates prove to be inaccurate, we may be required to write-down inventory values and record an adjustment to Cost of revenues.
Property, Plant, and Equipment. Our property, plant, and equipment consists of land and land improvements, buildings and leasehold improvements, machinery and equipment, information systems, cobalt-60, and construction in progress. Property, plant, and equipment are presented at cost less accumulated depreciation and depletion. We capitalize additions and improvements. Repairs and maintenance are charged to expense as they are incurred.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Land is not depreciated and construction in progress is not depreciated until placed in service. Depreciation of most assets is computed on the cost less the estimated salvage value by using the straight-line method over the estimated remaining useful lives. Depletion of radioisotope is computed using the annual decay factor of the material, which is similar to the sum-of-the-years-digits method.
We generally depreciate or deplete property, plant, and equipment over the useful lives presented in the following table:
| | | | | | | | |
| Asset Type | | Useful Life
(years) |
| Land improvements | | 3-40 |
| Buildings and leasehold improvements | | 2-50 |
| Machinery and equipment | | 2-20 |
| Information Systems | | 2-20 |
| Cobalt-60 | | 20 |
When we sell, retire, or dispose of property, plant, and equipment, we remove the asset’s cost and accumulated depreciation from our Consolidated Balance Sheet. We recognize the net gain or loss on the sale or disposition in the Consolidated Statements of Income in the period when the transaction occurs.
Interest. We capitalize interest costs incurred during the construction of long-lived assets. We capitalized interest costs of $12.0 million and $7.2 million for the years ended March 31, 2026 and 2025, respectively. Total interest expense for the years ended March 31, 2026, 2025, and 2024 was $60.7 million, $86.3 million, and $144.4 million, respectively.
Identifiable Intangible Assets. Our identifiable intangible assets include product technology rights, trademarks, licenses, non-compete agreements, and Customer and vendor relationships. We record these assets at cost, or when acquired as part of a business acquisition, at estimated fair value. Determining the fair value of identifiable intangible assets requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to forecasted revenue growth rates, forecasted profit margins, and Customer attrition rates, among other items. We generally amortize identifiable intangible assets over periods ranging from 5 to 20 years using the straight-line method. Our intangible assets also include indefinite lived assets including certain trademarks and tradenames that were acquired in connection with business combinations. These assets are tested at least annually for impairment.
Investments. Investments in marketable securities are stated at fair value. Changes in the fair value of these investments are recorded in the Other (income) expense line of the Consolidated Statements of Income. Investments without readily determinable fair values, are measured at cost, less any impairment, adjusted for changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.
The cost of equity method investments includes the purchase price plus transaction-related costs that are directly attributable to the investments. The investments are subsequently adjusted to recognize the Company's proportionate share of the investees' earnings or losses, distributions received, amortization of basis differences, and impairments, if any, with the impacts on our earnings recorded within Other (income) expense on the Consolidated Statements of Income.
Where the cost of the Company's investment exceeds our proportionate share of the underlying book value of our investees' net assets, the excess is attributed to basis differences between the fair value and carrying amount of the identifiable assets and liabilities. Basis differences associated with depreciable or amortizable assets are amortized over their estimated useful lives.
These investments are included in Other assets on our Consolidated Balance Sheets.
Asset Impairment Losses. Property, plant, equipment, and identifiable intangible assets are reviewed for impairment when indicators of impairment exist and circumstances indicate that the carrying value of such assets may not be recoverable. Impaired assets are recorded at the lower of carrying value or estimated fair value. We monitor for such indicators on an ongoing basis and if an impairment exists, we record the loss in the Consolidated Statements of Income during that period. We also evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Asset Retirement Obligations. We incur retirement obligations for certain assets. We record initial liabilities for the asset retirement obligations ("ARO") at fair value. Recognition of ARO includes estimating the present value of a liability and offsetting asset, the subsequent accretion of that liability and depletion of the asset, and a periodic review of the ARO liability estimates and discount rates used in the analysis. We provide additional information about our asset retirement obligations in Note 7 titled, “Property, Plant, and Equipment.”
Acquisitions of Business. Assets acquired and liabilities assumed in a business combination are accounted for at fair value on the date of acquisition. Costs related to the acquisition are expensed as incurred.
Goodwill. We perform our annual impairment test for goodwill in the third quarter of each year. We may consider qualitative indicators of the fair value of a reporting unit when it is unlikely that a reporting unit has impaired goodwill. We may also utilize a discounted cash flow analysis that requires certain assumptions and estimates be made regarding market conditions and our future profitability. We review the book value compared to the fair value at the reporting unit level. We calculate the fair value of our reporting units based on the present value of estimated future cash flows. Management's judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate future cash flows to measure fair value. Assumptions used in our impairment evaluations, such as forecasted growth rates and cost of capital, are consistent with internal projections, strategic plans, and operating plans. We believe such assumptions and estimates are also comparable to those that would be used by other marketplace participants.
Self-Insurance Liabilities. We record a liability for self-insured risks that we retain for general and product liabilities, workers’ compensation, and automobile liabilities based on actuarial calculations. We use our historical loss experience and actuarial methods to calculate the liability. This liability includes estimates for both known losses and incurred but not reported claims. We review the assumptions used to calculate the estimated liability at least annually to evaluate the adequacy of the amount recorded. We maintain insurance policies to cover losses greater than our estimated liability, which are subject to the terms and conditions of those policies. We are also self-insured for certain employee medical claims. We estimate a liability for incurred but not reported claims based upon recent claims experience. Liability amounts are recorded in the "Accrued expenses and other" and "Other liabilities" lines of our Consolidated Balance Sheets.
Benefit Plans. We sponsor defined benefit pension plans. We also sponsor a post-retirement benefits plan for certain former employees. We determine our costs and obligations related to these plans by evaluating input from third-party professional advisers. These costs and obligations are affected by assumptions including the discount rate, expected long-term rate of return on plan assets, the annual rate of change in compensation for eligible employees, estimated changes in costs of healthcare benefits, and other factors. We review the assumptions used on an annual basis.
We recognize an asset for the overfunded status or a liability for the underfunded status of defined benefit pension and post-retirement benefits plans in our Consolidated Balance Sheets. This amount is measured as the difference between the fair value of plan assets and the benefit obligation (the projected benefit obligation for pension plans and the accumulated post-retirement benefit obligation for other post-retirement benefit plans). Changes in the funded status of the plans are recorded in other comprehensive income in the year they occur. We measure plan assets and obligations as of the balance sheet date. We provide additional information about our pension and other post-retirement benefits plans in Note 11 titled, “Benefit Plans.”
Foreign Currency Translation. Our reporting currency is United States Dollars ("USD"). Most of our operations use their local currency as their functional currency. Financial statements of subsidiaries are translated into USD using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange rate for each period for revenues, expenses, gains and losses. Translation adjustments for subsidiaries whose local currency is their functional currency are recorded as a component of accumulated other comprehensive income (loss) within equity. Transactions with equity method investees are recorded in their transactional currency and converted to the functional currency of the investor. The carrying amount of the investment is translated from the functional currency of the investor to USD, with translation adjustments recorded in accumulated other comprehensive income (loss) within equity. Transaction gains and losses resulting from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized as incurred in the accompanying Consolidated Statements of Income, except for certain intercompany balances designated as long-term in nature.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Forward and Swap Contracts. We enter into foreign currency forward contracts to hedge assets and liabilities 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. We may also hold foreign currency forward contracts to hedge a portion of our expected non-U.S. dollar denominated earnings against our reporting currency, the U.S. dollar. We do not use derivative financial instruments for speculative purposes. These contracts are marked to market, with gains and losses recognized within Selling, general, and administrative expenses or Cost of revenues in the accompanying Consolidated Statements of Income.
Warranty. Warranties are provided on the sale of certain of our products and services and an accrual for estimated future claims is recorded at the time revenues are recognized. We estimate warranty expense based primarily on historical warranty claim experience.
Shipping and Handling. We record shipping and handling costs in Cost of revenues. Shipping and handling costs charged to Customers are recorded as revenues in the period the product revenues are recognized.
Advertising Expenses. Costs incurred for communicating, advertising and promoting our products are generally expensed when incurred as a component of Selling, general, and administrative expenses. We incurred $20.3 million, $19.9 million, and $25.5 million of advertising costs during the years ended March 31, 2026, 2025, and 2024, respectively.
Research and Development. We incur research and development costs associated with commercial products and expense these costs as incurred. If a Customer reimburses us for research and development costs, the costs are charged to the related contracts as Cost of revenues.
Income Taxes. We defer income taxes for all temporary differences between pre-tax financial and taxable income and between the book and tax basis of assets and liabilities. We record valuation allowances to reduce net deferred tax assets to an amount that we expect will more-likely-than-not be realized. In making such a determination, we consider all available information, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and if applicable, any carryback claims that can be filed. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which would reduce the provision for income taxes and the effective tax rate.
We evaluate uncertain tax positions in accordance with a two-step process. The first step is recognition: The determination of whether or not it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, we presume that the position will be examined by the appropriate tax authority and that the tax authority will have full knowledge of all relevant information. The second step is measurement: A tax position that meets the more-likely-than-not threshold is measured to determine the amount of benefit to recognize in the financial statements. The measurement process requires the determination of the range of possible settlement amounts and the probability of achieving each of the possible settlements. The tax position is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. No tax benefits are recognized for positions that do not meet the more-likely-than-not threshold. Tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold are derecognized in the first subsequent financial reporting period in which the threshold is no longer met. We describe income taxes further in Note 10 titled, “Income Taxes.”
Share-Based Compensation. We describe share-based compensation in Note 16 titled, “Share-Based Compensation.” We measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The expense is classified as Cost of revenues, Selling, general, and administrative expenses or Research and development expenses in a manner consistent with the employee’s compensation and benefits. These costs are recognized in the Consolidated Statements of Income over the period during which an employee is required to provide service in exchange for the award.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restructuring. We recognize restructuring expenses associated with actions designed to enhance profitability and improve efficiency of our operations. Severance and other compensation related costs include severance, medical benefits, and other termination benefits. For ongoing benefit arrangements, a liability is recognized when it is probable that employees will be entitled to benefits and the amount can be reasonably estimated. For one-time benefit arrangements, a liability is incurred and must be accrued at the date the plan is communicated to employees, unless they will be retained beyond a minimum retention period. In this case, the liability is calculated at the date the plan is communicated to employees and is accrued ratably over the future service period. Asset impairment expenses primarily relate to adjustments in the carrying value of facilities and machinery and equipment associated with restructuring actions to their estimated fair value. In addition, the remaining useful lives of other property, plant, and equipment associated with the restructuring actions are re-evaluated, which may result in the acceleration of depreciation and amortization of certain assets. Other restructuring expenses are expensed as incurred. Product rationalization charges relate to inventory write-downs and are recognized in Cost of revenues in the Consolidated Statements of Income. For additional information regarding our recent restructurings, refer to Note 2 titled, "Restructuring."
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recently Issued Accounting Standards Impacting the Company
Recently Issued Accounting Standards Impacting the Company are presented in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Standard | | Date of Issuance | | Description | | Date of Adoption | | Effect on the financial statements or other significant matters |
Standards that have been adopted in fiscal 2026 |
| ASU 2023-09 "Income Taxes (Topic 740) Improvements to Income Tax Disclosures." | | December 2023 | | The standard provides guidance to enhance disclosures related to effective tax rate reconciliations, requiring separate disclosure of certain categories and further disaggregation of items that meet a quantitative threshold. It also addresses disclosures of income taxes paid (net of refunds), requiring disaggregation by federal, state, and foreign, and disclosure of individual jurisdictions that meet a quantitative threshold. The standard also requires disclosure of income (loss) from continuing operations before income taxes, disaggregated between domestic and foreign, and income tax expense (or benefit) disaggregated by federal, state, and foreign. Finally, the standard removes the requirement for certain disclosures related to changes in unrecognized tax benefits and certain amounts of temporary differences. The amendments in this standard are effective for annual periods beginning after December 15, 2024. | | Fourth Quarter Fiscal 2026 | | We adopted this standard on a prospective basis in fiscal 2026. Refer to Note 10 titled, "Income Taxes" for enhanced disclosures. |
| Standards that have not yet been adopted. |
ASU 2024-03 "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses." | | November 2024 | | The standard provides guidance to enhance disclosures related to the disaggregation of income statement expenses. The standard requires, in the notes to the financial statements, disclosure of specified information about certain costs and expenses which includes purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each relevant expense caption. The standard also requires amounts that are already required to be disclosed under U.S. GAAP in the same disclosure as the other disaggregation requirements, disclosure of a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, and disclosure of the total amount of selling expenses and, in annual reporting periods, an entity's definition of selling expenses. The amendments in this standard are effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. | | NA | | We are currently assessing the impact of this standard update on our disclosures in the notes to the consolidated financial statements. |
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | |
ASU 2025-05
"Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses for Accounts Receivable and Contract Assets." | | July
2025 | | The standard introduces a practical expedient allowing entities to assume current economic conditions, as of the balance sheet date, remain unchanged when estimating expected credit losses for current trade receivables and contract assets. The guidance is effective for fiscal years beginning after December 15, 2025, including interim periods, with early adoption permitted. | | NA | | We are currently assessing the impact of this standard update on our disclosures in the notes to the consolidated financial statements. |
| ASU 2025-06 "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) Targeted Improvements to the Accounting for Internal-Use Software | | September 2025 | | The standard removes all references to prescriptive and sequential software development stages and requires entities to begin capitalizing software costs when management has both authorized and committed to funding the software project, and it is probable that the project will both be completed and the software will be used to perform the function intended. Capitalized internal-use software costs are now subject to the same disclosure requirements as property, plant, and equipment (PPE), even if they are presented as intangible assets or under a different line item. The amendments in this standard are effective for annual periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods, with early adoption permitted. | | NA | | We are in the process of evaluating the impact that the standard update will have on our consolidated financial statements. |
ASU 2025-10 "Government Grants (Topic 832)
Accounting for Government Grants Received by Business Entities" | | December 2025 | | The standard provides authoritative guidance on the recognition, measurement, presentation, and disclosure of government grants received by business entities. The standard defines a government grant as a transfer of a monetary or tangible nonmonetary asset from a government to a business entity in a nonexchange transaction and requires a grant to be recognized only when it is probable that the entity will comply with the grant’s conditions and that the grant will be received. The amendments introduce an accounting model largely based on International Accounting Standard (IAS) 20, under which grants related to assets or income are recognized over the periods in which the related costs or expenses are incurred. The standard also amends Topic 832, which previously included only disclosure requirements, and provides guidance on presentation and repayment of grants. The guidance excludes certain transactions such as income tax items, below-market interest rate loans, and government guarantees from its scope. The amendments are effective for annual periods beginning after December 15, 2028 (including interim periods within those annual periods) for public business entities and one year later for all other entities. Early adoption is permitted. | | NA | | We are in the process of evaluating the impact that the standard update will have on our consolidated financial statements. |
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. RESTRUCTURING
In May 2024, we adopted and announced a targeted restructuring plan (the "Restructuring Plan"). This plan includes a strategic shift in our approach to the Healthcare surgical business in Europe, as well as other actions including the impairment of an internally developed X-ray accelerator, product rationalizations and facility consolidations. Approximately 300 positions have been eliminated. These restructuring actions were designed to enhance profitability and improve efficiency. As of March 31, 2026, the execution of our Restructuring Plan is substantially complete.
The following table summarizes our total pre-tax restructuring expenses recorded in fiscal 2026 and 2025 related to the Restructuring Plan:
| | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | | | | | | | | | |
| Restructuring Plan | | | | | | | | | | |
| Years Ended March 31, | | | | | | 2026 | | 2025 | | 2024 |
| Severance and other compensation related costs | | | | | | $ | 2.6 | | | $ | 29.0 | | | $ | 0.7 | |
| Lease and other contract termination and other costs | | | | | | 1.5 | | | 12.4 | | | — | |
Product rationalization (1) | | | | | | (0.7) | | | 16.2 | | | 18.3 | |
| Accelerated depreciation and amortization and asset impairment | | | | | | — | | | 4.7 | | | 25.4 | |
Total Restructuring Expense | | | | | | $ | 3.4 | | | $ | 62.3 | | | $ | 44.4 | |
(1) Recorded in Cost of revenues on the Consolidated Statements of Income.
The Restructuring Plan expenses incurred during fiscal 2026 and 2025 primarily related to actions taken in our Healthcare and AST segments. Total pre-tax restructuring expense of $110.1 million has been recorded relating to the Restructuring Plan since inception, of which $33.9 million has been recorded in Cost of revenues.
Liabilities related to restructuring activities are recorded as current liabilities in the accompanying Consolidated Balance Sheets within "Accrued payroll and other related liabilities" and "Accrued expenses and other." The following table summarizes our restructuring liability balances: | | | | | | | | |
| | |
| (in millions) | | Restructuring Plan |
| Balance at March 31, 2024 | | $ | 0.7 | |
| Fiscal 2025 charges | | 41.4 | |
| Payments | | (23.7) | |
| Balance at March 31, 2025 | | $ | 18.4 | |
| Fiscal 2026 charges | | 4.1 | |
Payments | | (15.4) | |
| Balance at March 31, 2026 | | $ | 7.1 | |
3. BUSINESS ACQUISITIONS, DIVESTITURES, AND INVESTMENTS
Fiscal 2026 Acquisitions
During fiscal 2026, we completed two tuck-in acquisitions, recorded at fair value, which continued to expand our product and service offerings in the Healthcare segment. Total aggregate consideration was approximately $23.4 million, including the fair value of potential contingent consideration.
Purchase price allocations are based on the latest draft valuations and remain preliminary. As we finalize the fair value of assets acquired and liabilities assumed, additional purchase price adjustments and associated deferred taxes may be recorded during the remaining measurement period, not to exceed one year from closing.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal 2026 Investments
During fiscal 2026, we purchased $134.0 million in investments, predominantly related to a noncontrolling equity investment representing an approximately one-third ownership interest in a non-U.S.-based healthcare product manufacturer accounted for under the equity method. In connection with the equity method investment, the Company entered into arrangements that provide rights (and, in certain cases, obligations) that could result in the Company acquiring the remaining equity interests in the investee upon the occurrence of specified events or conditions. The potential acquisition would be for a purchase price that is proportionate to the Company's initial investment, subject to customary working capital adjustments, on a debt‑free, cash‑free basis. The timing of such acquisition, if any, would depend on the terms of those arrangements and the satisfaction of the applicable conditions.
Fiscal 2025 Acquisitions
During fiscal 2025, we completed several tuck-in acquisitions which continued to expand our product and service offerings in the Healthcare and AST segments. Total aggregate consideration was approximately $54.1 million.
Fiscal 2024 Acquisitions
On August 2, 2023 we purchased the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from Becton, Dickinson and Company (NYSE: BDX) ("BD"). The acquired assets from BD were integrated into our Healthcare segment. The acquisition was accounted for as a business combination in accordance with ASC 805.
The purchase price of the acquisition was $539.8 million. The acquisition also qualified for a tax benefit related to tax deductible goodwill, with a present value of approximately $60.0 million. The purchase price of the acquisition was financed with borrowings from our existing credit facility. For more information, refer to Note 8 titled, "Debt."
In addition to the acquisition of assets from BD, we completed two tuck-in acquisitions during fiscal 2024, which expanded our product and service offerings in the AST and Healthcare segments. Total aggregate consideration was approximately $6.9 million, net of cash acquired.
Fair Value of Assets Acquired and Liabilities Assumed in Business Combinations
The table below summarizes the allocation of the purchase price to the net assets acquired based on fair values at the acquisition dates for our fiscal 2026, 2025, and 2024 acquisitions.
| | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Fiscal Year 2026 (1) | | Fiscal Year 2025 | | Fiscal Year 2024 | | |
| All Acquisitions | | All Acquisitions | | BD | Other Acquisitions | | |
| Cash | $ | 0.4 | | | $ | — | | | $ | — | | $ | 0.4 | | | |
| Accounts receivable | 5.0 | | | 1.3 | | | — | | 1.5 | | | |
| Inventory | 12.2 | | | 1.2 | | | 31.8 | | 0.7 | | | |
| Property, plant, and equipment | 2.9 | | | 21.2 | | | 7.9 | | 0.2 | | | |
| Lease right-of-use assets, net | 1.0 | | | 4.6 | | | 1.7 | | — | | | |
| Other assets | 1.9 | | | 4.3 | | | — | | — | | | |
| Intangible assets | 9.2 | | | 15.9 | | | 303.0 | | 2.9 | | | |
| Goodwill | 8.8 | | | 10.6 | | | 197.1 | | 2.5 | | | |
| Total assets | 41.4 | | | 59.2 | | | 541.5 | | 8.2 | | | |
| Current liabilities | (17.3) | | | (2.1) | | | | (0.6) | | | |
| Non-current liabilities | (0.7) | | | (2.9) | | | (1.7) | | (0.7) | | | |
| Total liabilities | (18.0) | | | (5.1) | | | (1.7) | | (1.3) | | | |
| Net assets | $ | 23.4 | | | $ | 54.1 | | | $ | 539.8 | | $ | 6.9 | | | |
(1) Purchase price allocation is preliminary as of March 31, 2026, as valuations have not been finalized.
Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenues and cost synergies of the combined company and assembled workforce. No portion of the goodwill recognized in fiscal 2026 was deductible for tax purposes. The deductible portion of goodwill recognized as a result of fiscal 2025 and fiscal 2024 acquisitions was $0.4 million and $195.7 million, respectively.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Acquisition related transaction and integration costs totaled $6.2 million, $11.2 million, and $25.5 million for the fiscal years ended March 31, 2026, 2025, and 2024, respectively. Acquisition and integration expenses declined in fiscal 2026 as we completed fewer acquisitions during fiscal 2026 as compared to prior years. These costs are included in Selling, general, and administrative expenses in the Consolidated Statements of Income and include, but are not limited to, investment banker, advisory, legal and other professional fees, and certain employee-related expenses.
Divestitures
Fiscal 2025
On April 11, 2024, the Company announced its plan to sell its Dental segment for total cash consideration of $787.5 million, subject to customary adjustments, and up to an additional $12.5 million in contingent payment had the Dental business achieved certain revenue targets in fiscal 2025. No amounts have been recorded or are expected to be recorded with respect to this contingent consideration. The transaction was structured as an equity sale and closed on May 31, 2024. The disposal of the Dental segment met the criteria to be presented as a discontinued operation. For more information refer to Note 4 titled "Discontinued Operations."
On April 1, 2024, we completed the sale of the Controlled Environment Certification Services business. We recorded net proceeds of $41.9 million and recognized a pre-tax gain on the sale of $19.3 million in fiscal 2025. The business generated approximately $35.0 million in revenues in fiscal 2024.
4. DISCONTINUED OPERATIONS
On April 11, 2024, the Company announced its plan to sell substantially all of the net assets of its Dental segment for total cash consideration of $787.5 million, subject to customary adjustments, and up to an additional $12.5 million in contingent payment had the Dental business achieved certain revenue targets in fiscal 2025. No amounts have been recorded or are expected to be recorded with respect to this contingent consideration. The transaction was structured as an equity sale and closed on May 31, 2024. A component of an entity is reported in discontinued operations after meeting the criteria for held for sale classification if the disposition represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results. We analyzed the quantitative and qualitative factors relevant to the fiscal 2025 divestiture of our Dental segment and determined that those conditions for discontinued operations presentation had been met prior to March 31, 2024. The Dental segment results of operations have been classified as income (loss) from discontinued operations in the Consolidated Statements of Income for all periods presented. Our Consolidated Statements of Cash Flows include the financial results of the Dental segment through the date of sale on May 31, 2024. A majority of the proceeds received from the sale were utilized to pay off existing debt.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the major line items constituting income (loss) of discontinued operations associated with the Dental segment for the years ended March 31, 2025, and 2024:
| | | | | | | | | | | | | | | | | |
| (in millions) | | | | | |
| Years Ended March 31, | | | 2025 | | 2024 |
| Revenues: | | | | | |
| Product | | | $ | 63.9 | | | $ | 407.0 | |
| Cost of revenues: | | | | | |
| Product | | | 35.1 | | | 226.9 | |
| Gross profit: | | | 28.8 | | | 180.1 | |
| Operating expenses: | | | | | |
| Selling, general, and administrative | | | 13.5 | | | 199.5 | |
| Goodwill impairment loss | | | — | | | — | |
| Research and development | | | 0.4 | | | 3.0 | |
Income (loss) from operations (1) | | | 15.0 | | | (22.4) | |
| Non-operating expenses (income), net | | | — | | | — | |
Pre-tax loss on sale (2) | | | (14.0) | | | (206.4) | |
| Income (loss) before income tax expense | | | 1.0 | | | (228.8) | |
| Income tax benefit | | | (3.6) | | | (55.6) | |
| Income (loss) from discontinued operations, net of income tax | | | $ | 4.5 | | | $ | (173.2) | |
(1) Income from operations for the year ended March 31, 2025 includes two months of operating results prior to the transaction close on May 31, 2024 and excludes depreciation and amortization of property, plant, equipment, and intangible assets subsequent to the held for sale classification as of March 2, 2024.
(2) Fiscal 2025 pre-tax loss on sale driven by sale price adjustments relating to working capital. Fiscal 2024 amount relates to accrued transaction costs and the estimated accrued loss included in held for sale as of March 31, 2024.
The effective income tax rates for the years ended March 31, 2025 and 2024 were (371.0)%, and 24.3%, respectively. Our fiscal 2025 tax rate was driven by favorable discrete items.
Significant non-cash operating items and capital expenditures related to discontinued operations are reflected in the statement of cash flows as follows:
| | | | | | | | | | | | | | | | | |
| (in millions) | | | 2025 | | 2024 |
Operating activities of discontinued operations: | | | | | |
Depreciation, depletion, and amortization (1) | | | $ | — | | | $ | 115.2 | |
| Investing activities of discontinued operations: | | | | | |
| Purchases of property, plant, equipment, and intangibles | | | $ | (0.4) | | | $ | (9.2) | |
(1) We concluded that the criteria to report assets held for sale was met on March 2, 2024, as such we did not depreciate or amortize related property, plant, equipment and intangible assets subsequent to this date.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. GOODWILL AND INTANGIBLE ASSETS
Changes to the carrying amount of goodwill for the years ended March 31, 2026 and 2025 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Healthcare | | AST | | Life Sciences | | Total |
| Balance at March 31, 2024 | | $ | 2,500.9 | | | $ | 1,387.6 | | | $ | 182.2 | | | $ | 4,070.7 | |
| Goodwill acquired | | 2.1 | | | 8.5 | | | — | | | 10.6 | |
| Measurement period adjustments to acquired goodwill | | — | | | (0.5) | | | (11.6) | | | (12.1) | |
| Foreign currency translation adjustments and other | | 6.3 | | | 19.9 | | | 0.3 | | | 26.4 | |
| Balance at March 31, 2025 | | $ | 2,509.3 | | | $ | 1,415.4 | | | $ | 170.9 | | | $ | 4,095.7 | |
| Goodwill acquired | | 8.8 | | | — | | | — | | | 8.8 | |
| Measurement period adjustments to acquired goodwill | | — | | | — | | | — | | | — | |
| Divestiture | | — | | | — | | | — | | | — | |
| Foreign currency translation adjustments and other | | 21.0 | | | 66.8 | | | 2.6 | | | 90.4 | |
| Balance at March 31, 2026 | | $ | 2,539.0 | | | $ | 1,482.3 | | | $ | 173.5 | | | $ | 4,194.8 | |
See Note 3 titled, "Business Acquisitions, Divestitures, and Investments," for additional information regarding our recent business acquisitions and divestitures.
We evaluate the recoverability of recorded goodwill and indefinite-lived intangible assets annually during the third fiscal quarter, or when indicators of potential impairment exist. Our goodwill is assessed at the reporting unit level which is equivalent to the Company's reportable operating segments.
During our annual reviews for fiscal 2026, 2025, and 2024, there were no indicators that impairment of goodwill or indefinite-lived intangible assets was more likely than not.
Identifiable intangible assets are also reviewed for impairment when events and circumstances indicate that the carrying value of such assets may not be recoverable. Impaired assets are recorded at the lower of carrying value or estimated fair value. We conduct this review on an ongoing basis, and, if impairment exists, we record the loss in the Consolidated Statements of Income during that period.
When we evaluate these assets for impairment, we make certain judgments and estimates, including interpreting current economic indicators and market valuations, evaluating our strategic plans with regards to operations, historical and anticipated performance of operations, and other factors. It is possible that unfavorable developments related to these factors in the near term could result in an impairment loss relative to intangible assets. Such an impairment loss may be material to our results of operations in the period recorded.
Information regarding our intangible assets is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2026 | | 2025 |
| March 31, | | Gross
Carrying
Amount | | Accumulated
Amortization | | Gross
Carrying
Amount | | Accumulated
Amortization |
| Customer relationships | | $ | 2,655.8 | | | $ | 1,344.0 | | | $ | 2,564.3 | | | $ | 1,067.4 | |
| Non-compete agreements | | — | | | — | | | 15.1 | | | 15.0 | |
| Patents and technology | | 456.6 | | | 303.0 | | | 480.3 | | | 294.1 | |
| Trademarks and tradenames | | 235.8 | | | 106.8 | | | 247.9 | | | 105.1 | |
| Supplier relationships | | 54.8 | | | 29.2 | | | 54.8 | | | 26.5 | |
| Total | | $ | 3,403.0 | | | $ | 1,783.0 | | | $ | 3,362.4 | | | $ | 1,508.0 | |
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Certain trademarks and tradenames obtained as a result of business combinations are indefinite-lived assets. The approximate carrying value of these assets at March 31, 2026 and March 31, 2025 was $14.3 million. We evaluate our indefinite-lived intangible assets annually during the third quarter or when evidence of potential impairment exists. No impairment was recognized for fiscal years 2026, 2025 or 2024.
Total amortization expense for intangible assets was $268.2 million, $276.2 million, and $268.3 million for the years ended March 31, 2026, 2025, and 2024, respectively. Based upon the current amount of intangible assets subject to amortization, the amortization expense for each of the five succeeding fiscal years is estimated to be as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2027 | | 2028 | | 2029 | | 2030 | | 2031 |
| Estimated amortization expense | | $ | 253.1 | | | $ | 248.2 | | | $ | 246.3 | | | $ | 241.3 | | | $ | 209.1 | |
The estimated annual amortization expense presented in the preceding table has been calculated based upon March 31, 2026 currency exchange rates.
6. INVENTORIES, NET
Components of our inventories are presented in the following table. | | | | | | | | | | | | | | |
| (in millions) | | | | |
| March 31, | | 2026 | | 2025 |
| Raw materials | | $ | 225.4 | | | $ | 213.1 | |
| Work in process | | 90.7 | | | 83.1 | |
| Finished goods | | 355.2 | | | 334.9 | |
| Reserve for excess and obsolete inventory | | (39.4) | | | (49.8) | |
| Inventories, net | | $ | 631.8 | | | $ | 581.3 | |
7. PROPERTY, PLANT, AND EQUIPMENT
Information related to the major categories of our depreciable assets is as follows: | | | | | | | | | | | | | | |
| (in millions) | | | | |
| March 31, | | 2026 | | 2025 |
Land and land improvements (1) | | $ | 112.3 | | | $ | 106.1 | |
| Buildings and leasehold improvements | | 903.6 | | | 832.1 | |
| Machinery and equipment | | 1,434.3 | | | 1,205.4 | |
| Information systems | | 316.3 | | | 282.1 | |
| Radioisotope | | 829.9 | | | 749.8 | |
Construction in progress (1) | | 509.5 | | | 512.1 | |
| Total property, plant, and equipment | | 4,105.9 | | | 3,687.7 | |
| Less: accumulated depreciation and depletion | | (1,944.6) | | | (1,731.1) | |
| Property, plant, and equipment, net | | $ | 2,161.2 | | | $ | 1,956.5 | |
(1) Land is not depreciated. Construction in progress is not depreciated until placed in service.
Depreciation and depletion expense were $218.3 million, $199.7 million and $181.7 million, for the years ended March 31, 2026, 2025, and 2024, respectively.
Asset Retirement Obligations
We provide contract sterilization services including Gamma irradiation which utilizes cobalt-60 in the form of cobalt pencils. We have incurred asset retirement obligations (ARO) associated with the future disposal of these assets once depleted. Recognition of ARO includes: the present value of a liability and offsetting asset, the subsequent accretion of that liability and depletion of the asset, and the periodic review of the ARO liability estimates and discount rates used in the analysis.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the activity in the liability for asset retirement obligations. | | | | | |
| (in millions) | Asset Retirement Obligations |
| Balance at March 31, 2024 | $ | 13.7 | |
| Liabilities incurred during the period | 0.6 | |
| Liabilities settled during the period | (0.1) | |
| Accretion expense and change in estimate | 0.3 | |
| Foreign currency and other | (0.1) | |
| Balance at March 31, 2025 | $ | 14.4 | |
| Liabilities incurred during the period | 1.0 | |
| Liabilities settled during the period | — | |
| Accretion expense and change in estimate | 0.3 | |
| Foreign currency and other | (0.4) | |
| Balance at March 31, 2026 | $ | 15.3 | |
8. DEBT
Indebtedness as of March 31, 2026 and 2025 was as follows: | | | | | | | | | | | | | | |
| (in millions) | | March 31,
2026 | | March 31,
2025 |
| Short-term debt | | | | |
| Private Placement Senior Notes | | 118.9 | | | 125.0 | |
| Total short-term debt | | $ | 118.9 | | | $ | 125.0 | |
| | | | |
| Long-term debt | | | | |
| Private Placement Senior Notes | | $ | 438.9 | | | $ | 549.2 | |
| Revolving Credit Facility | | 37.8 | | | 34.8 | |
| Deferred financing costs | | (13.8) | | | (15.3) | |
| Senior Public Notes | | 1,350.0 | | | 1,350.0 | |
| Total long-term debt | | $ | 1,812.8 | | | $ | 1,918.7 | |
| Total debt | | $ | 1,931.7 | | | $ | 2,043.7 | |
Revolving Credit Facility
On October 7, 2024, STERIS plc (“Parent”), STERIS Corporation ("Corporation"), STERIS Limited ("Limited"), and STERIS Irish FinCo Unlimited Company (“FinCo”), each as a borrower and guarantor, entered into a credit agreement with various financial institutions as lenders, and JPMorgan Chase Bank, N.A., as administrative agent (the “Revolving Credit Agreement”) providing for a $1,100.0 million revolving credit facility (the “Revolving Credit Facility”), which replaced a prior credit agreement, dated as of March 19, 2021.
The Revolving Credit Agreement provides for revolving credit borrowings, swing line borrowings and letters of credit, with sublimits for swing line borrowings and letters of credit. The Revolving Credit Agreement may be increased in specified circumstances by up to $625.0 million in the discretion of the lenders. The Revolving Credit Agreement matures on the date that is five years after October 7, 2024, and all unpaid borrowings, together with accrued and unpaid interest thereon, are repayable on that date. The Revolving Credit Facility bears interest from time to time, at either the Base Rate or the Relevant Rate, as defined in and calculated under and as in effect from time to time under the Revolving Credit Agreement, plus the Applicable Margin, as defined in the Revolving Credit Agreement. The Applicable Margin is determined based on the Debt Rating of Parent, as defined in the Revolving Credit Agreement. Base Rate Advances are payable quarterly in arrears and Term Benchmark Advances are payable at the end of the relevant interest period therefor, but in no event less frequently than every three months. Swingline borrowings bear interest at a rate to be agreed by the applicable swingline lender and the applicable borrower, subject to a cap in the case of swingline borrowings denominated in U.S. Dollars equal to the Base Rate plus the Applicable Margin for Base Rate Advances plus the Facility Fee. There is no premium or penalty for prepayment of Base Rate Advances, but prepayments of Term Benchmark Advances are generally subject to a breakage fee. Advances may be extended
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
in U.S. Dollars or in specified alternative currencies (“Alternative Currency Advances”). Alternative Currency Advances are limited in the aggregate to the equivalent of $625.0 million.
As of March 31, 2026 a total of $37.8 million of borrowings were outstanding under the Revolving Credit Facility.
Senior Public Notes
On April 1, 2021, FinCo completed an offering of $1,350.0 million in aggregate principal amount, of its senior notes in two separate tranches: (i) $675.0 million aggregate principal amount of FinCo’s 2.700% Senior Notes due 2031 (the “2031 Notes”) and (ii) $675.0 million aggregate principal amount of FinCo’s 3.750% Senior Notes due 2051 (the “2051 Notes” and, together with the 2031 Notes, the “Senior Public Notes”). The Senior Public Notes were issued pursuant to an Indenture, dated as of April 1, 2021, among FinCo, as the issuer, Parent, Corporation and Limited (together Parent, Corporation and Limited, the “Guarantors”) and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated as of April 1, 2021, among FinCo, the Guarantors and the Trustee. Each of the Guarantors guaranteed the Senior Public Notes jointly and severally on a senior unsecured basis. The 2031 Notes will mature on March 15, 2031 and the 2051 Notes will mature on March 15, 2051. The Senior Public Notes will bear interest at the rates set forth above. Interest on the Senior Public Notes is payable on March 15 and September 15 of each year until their respective maturities.
Private Placement Senior Notes
Our outstanding Private Placement Senior Notes at March 31, 2026 and 2025 were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Applicable Note Purchase Agreement | | Maturity Date | | U.S. Dollar Value at March 31, 2026 | | U.S. Dollar Value at March 31, 2025 |
| | | | | | | | |
$25,000 Senior notes at 3.55% | | 2012 Private Placement | | December 2027 | | $ | 25.0 | | | $ | 25.0 | |
$125,000 Senior notes at 3.45% | | 2015 Private Placement | | May 2025 | | — | | | 125.0 | |
$125,000 Senior notes at 3.55% | | 2015 Private Placement | | May 2027 | | 125.0 | | | 125.0 | |
$100,000 Senior notes at 3.70% | | 2015 Private Placement | | May 2030 | | 100.0 | | | 100.0 | |
$50,000 Senior notes at 3.93% | | 2017 Private Placement | | February 2027 | | 50.0 | | | 50.0 | |
€60,000 Senior notes at 1.86% | | 2017 Private Placement | | February 2027 | | 68.9 | | | 65.0 | |
$45,000 Senior notes at 4.03% | | 2017 Private Placement | | February 2029 | | 45.0 | | | 45.0 | |
€20,000 Senior notes at 2.04% | | 2017 Private Placement | | February 2029 | | 23.0 | | | 21.7 | |
£45,000 Senior notes at 3.04% | | 2017 Private Placement | | February 2029 | | 59.5 | | | 58.2 | |
€19,000 Senior notes at 2.30% | | 2017 Private Placement | | February 2032 | | 21.8 | | | 20.6 | |
£30,000 Senior notes at 3.17% | | 2017 Private Placement | | February 2032 | | 39.7 | | | 38.8 | |
| Total Private Placement Senior Notes | | | | $ | 557.8 | | | $ | 674.2 | |
On February 27, 2017, Limited issued and sold an aggregate principal amount of $95.0 million, €99.0 million, and £75.0 million, of senior notes (collectively, the “2017 senior notes”) in a private placement to certain institutional investors in an offering that was exempt from the registration requirements of the Securities Act of 1933. These notes have maturities of between 10 years and 15 years from the issue date. The agreement governing these notes contains leverage and interest coverage covenants.
On May 15, 2015, Corporation issued and sold $350.0 million of senior notes (the "2015 senior notes"), in a private placement to certain institutional investors in an offering that was exempt from the registration requirements of the Securities Act of 1933. These notes have maturities of 10 years to 15 years from the issue date. The agreement governing these notes contains leverage and interest coverage covenants.
In December 2012, and in February 2013 Corporation issued and sold $200.0 million of senior notes (collectively, the "2012 senior notes"), in a private placement to certain institutional investors in offerings that were exempt from the registration requirements of the Securities Act of 1933. The agreement governing the notes contains leverage and interest coverage covenants.
On March 19, 2021, Corporation as issuer, and Parent, Limited and FinCo, as guarantors, entered into (1) a First Amendment to Amended and Restated Note Purchase Agreement dated March 5, 2019 (which had amended and restated certain note purchase agreements originally dated December 4, 2012) for the 2012 senior notes (the “2012 Amendment”), and
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) a First Amendment to Amended and Restated Note Purchase Agreement dated March 5, 2019 (which had amended and restated certain note purchase agreements originally dated March 31, 2015) for the 2015 senior notes (the “2015 Amendment”). Also on March 19, 2021, Limited, as issuer, and Parent, Corporation and FinCo, as guarantors, entered into a First Amendment to Amended and Restated Note Purchase Agreement dated March 5, 2019 (which had amended and restated a certain note purchase agreement originally dated January 23, 2017) for the 2017 senior notes (together with the 2012 Amendment and the 2015 Amendment, the “NPA Amendments”). The NPA Amendments provided, among other things, for the waiver of certain repurchase rights of the note holders and increased the size of certain baskets to more closely align with other current credit agreement baskets.
At March 31, 2026, we were in compliance with all financial covenants associated with our indebtedness.
The combined annual aggregate amount of maturities of our outstanding debt by fiscal year is as follows: | | | | | |
| (in millions) | |
| 2027 | $ | 118.9 | |
| 2028 | 150.0 | |
| 2029 | 127.5 | |
| 2030 | 37.8 | |
| 2031 and thereafter | 1,511.5 | |
| Total | $ | 1,945.6 | |
Supplemental cash flow information related to debt is as follows::
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | | | | | |
| Years Ended March 31, | | 2026 | | 2025 | | 2024 |
| Cash paid during the year for interest | | $ | 64.7 | | | $ | 89.4 | | | $ | 142.2 | |
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. ADDITIONAL CONSOLIDATED BALANCE SHEET INFORMATION
Additional information related to our Consolidated Balance Sheets is as follows: | | | | | | | | | | | | | | |
| (in millions) | | | | |
| March 31, | | 2026 | | 2025 |
| Accrued payroll and other related liabilities: | | | | |
| Compensation and related items | | $ | 63.7 | | | $ | 69.8 | |
| Accrued vacation/paid time off | | 16.7 | | | 16.2 | |
| Accrued bonuses | | 97.5 | | | 66.5 | |
| Accrued employee commissions | | 39.6 | | | 37.4 | |
| Other post-retirement benefits obligations-current portion | | 0.9 | | | 1.0 | |
| Other employee benefit plans' obligations-current portion | | 2.7 | | | 1.8 | |
| Total accrued payroll and other related liabilities | | $ | 221.1 | | | $ | 192.7 | |
| Accrued expenses and other: | | | | |
| Deferred revenues | | $ | 59.1 | | | $ | 57.5 | |
| Service liabilities | | 137.5 | | | 107.8 | |
| Self-insured and related risk reserves-current portion | | 14.5 | | | 15.1 | |
Illinois EO litigation settlement(1) | | 43.2 | | | 48.2 | |
| Accrued dealer commissions | | 32.5 | | | 32.1 | |
| Accrued warranty | | 17.5 | | | 16.3 | |
| Asset retirement obligation-current portion | | 0.5 | | | 0.6 | |
| Accrued interest | | 6.2 | | | 7.8 | |
| Other | | 90.9 | | | 82.8 | |
| Total accrued expenses and other | | $ | 401.9 | | | $ | 368.1 | |
| Other liabilities: | | | | |
| Self-insured risk reserves-long-term portion | | $ | 24.8 | | | $ | 24.0 | |
| Other post-retirement benefits obligations-long-term portion | | 4.3 | | | 4.8 | |
| Defined benefit pension plans obligations-long-term portion | | 4.1 | | | 3.3 | |
| Other employee benefit plans obligations-long-term portion | | 1.6 | | | 1.3 | |
| Accrued long-term income taxes | | 0.3 | | | 1.9 | |
| Asset retirement obligation-long-term portion | | 14.7 | | | 13.8 | |
| Other | | 21.9 | | | 12.7 | |
| Total other liabilities | | $ | 71.7 | | | $ | 61.9 | |
(1) Pursuant to the terms of our settlement agreement, settlement funds have been deposited into escrow. The corresponding escrow asset is included in the Prepaid expenses and other current assets line of our Consolidated Balance Sheets.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INCOME TAXES
We present a reconciliation of the effective global income tax rate from the Irish national trading rate, our country of domicile. The total provision for income taxes for the year ended March 31, 2026 can be reconciled to the tax computed at the Ireland statutory trading income tax rate, presented in accordance with the requirements of newly adopted ASU 2023-09, as follows:
| | | | | | | | | | | | | | |
| | Year Ended March 31, 2026 |
| (dollars in millions) | | Amount | | Percentage |
| Tax at national statutory rate | | $ | 130.9 | | | 12.5 | % |
| National nontaxable, nondeductible items | | (0.1) | | | — | % |
| National cross-border laws | | 7.3 | | | 0.7 | % |
| National other | | 3.1 | | | 0.3 | % |
| Foreign tax effects, U.S. | | | | |
| Statutory rate differential | | 62.9 | | | 6.0 | % |
| Federal credits | | (6.1) | | | (0.6) | % |
| State and local taxes, net | | 30.8 | | | 2.9 | % |
| Equity based compensation | | (7.0) | | | (0.7) | % |
| Withholding taxes | | 19.8 | | | 1.9 | % |
| Foreign-derived deduction eligible income | | (8.5) | | | (0.8) | % |
| Other | | 10.9 | | | 1.0 | % |
| Foreign tax effects, U.K. | | | | |
| Statutory rate differential | | 6.8 | | | 0.6 | % |
| Other | | 0.3 | | | — | % |
| Foreign tax effects, other jurisdictions | | 12.2 | | | 1.2 | % |
| Global changes in uncertain tax positions | | (1.6) | | | (0.2) | % |
| All other, net | | 0.6 | | | 0.2 | % |
| Total Provision for Income Taxes | | $ | 262.2 | | | 25.0 | % |
| | | | |
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The total provision for income taxes for the years ended March 31, 2025 and March 31, 2024 can be reconciled to the tax computed at the Ireland statutory tax rate, presented before adoption of ASU 2023-09, as follows:
| | | | | | | | | | | | | | |
| Years Ended March 31, | | 2025 | | 2024 |
| National statutory tax rate | | 12.5 | % | | 12.5 | % |
| Change in accruals for uncertain tax positions | | (0.1) | % | | — | % |
| U.S. state and local taxes, net of federal income tax expense (benefit) | | 2.8 | % | | 2.2 | % |
| Change in valuation allowances | | 0.7 | % | | 0.9 | % |
| U.S. research and development credit | | (0.6) | % | | (0.7) | % |
| U.S. foreign income tax credit | | (0.7) | % | | (0.9) | % |
| Difference in non-Ireland tax rates | | 9.9 | % | | 8.5 | % |
| U.S. federal audit adjustments | | (0.3) | % | | 0.1 | % |
| Excess tax benefit for equity compensation | | (0.8) | % | | (0.7) | % |
| Tax rate changes on deferred tax assets and liabilities | | — | % | | (0.3) | % |
U.S. tax reform impact, GILTI and FDII | | (0.3) | % | | (0.2) | % |
| All other, net | | 0.1 | % | | (0.1) | % |
| Total Provision for Income Taxes | | 23.2 | % | | 21.3 | % |
| | | | |
Our effective tax rate is affected by i) the tax rates in Ireland (our country of domicile), the United States, and other jurisdictions in which we operate, and ii) the relative amount of income before income taxes by geography. Income before income taxes by geography are based on the geographic location of our operations to which such earnings are attributable. Transactions between two or more of the entities within our group occur routinely and involve the sale of goods and services, loans and related interest, intellectual property and related royalties, and shared costs. The pricing used in these transactions is consistent with the prices that would be charged between unrelated parties in accordance with our interpretation of current tax regulations. Income before income taxes by geography includes the transfer of income before income taxes that results from these transactions.
We operate a global financing structure using a wholly-owned financing company domiciled in Ireland, FinCo, which has a material impact on the relative amount of income before income taxes by geography. In each of the years presented, FinCo contributed a significant majority of the pre-tax income of Ireland operations. Its activities are driven by funding needs for acquisitions, capital investments, and working capital. A significant majority of FinCo’s income before income taxes during the years presented was driven by loans to our operations in the United States in response to such funding needs.
Significant transactions not indicative of operating trends that impacted the amount of income before income taxes by geography and resulting provision for income tax and effective tax rate include:
•In fiscal 2026, there were no significant transactions of this nature.
•In fiscal 2025, income from continuing operations before income taxes, in the United States and Other locations, was impacted by $62.3 million of expenses associated with restructuring. This resulted in approximately $6.0 million of an increase to our valuation allowance in Other locations.
•In fiscal 2024, income from continuing operations before income taxes, in the United States and Other locations, was impacted by $44.4 million of expenses associated with restructuring. This resulted in approximately $2.6 million of an increase to our valuation allowance in Other locations.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income from continuing operations before income taxes of our domestic and foreign operations based on the geographic locations of our operations was as follows: | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | | | | | |
| Years Ended March 31, | | 2026 | | 2025 | | 2024 |
| | | | | | |
| United States operations | | $ | 725.3 | | | $ | 559.5 | | | $ | 491.9 | |
| Ireland operations | | 56.7 | | | 62.5 | | | 51.5 | |
| Other locations operations | | 265.3 | | | 174.2 | | | 159.4 | |
| | $ | 1,047.3 | | | $ | 796.2 | | | $ | 702.8 | |
The components of the provision for income taxes related to income from continuing operations consisted of the following: | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | | | | | |
| Years Ended March 31, | | 2026 | | 2025 | | 2024 |
| | | | | | |
| Current: | | | | | | |
| United States federal | | $ | 162.2 | | | $ | 145.2 | | | $ | 133.5 | |
| United States state and local | | 38.1 | | | 32.4 | | | 26.2 | |
| Ireland | | 17.6 | | | 12.9 | | | 7.6 | |
| Other locations | | 61.2 | | | 51.3 | | | 51.3 | |
| | 279.1 | | | 241.7 | | | 218.7 | |
| Deferred: | | | | | | |
| United States federal | | (8.3) | | | (43.1) | | | (43.5) | |
| United States state and local | | 0.9 | | | (5.0) | | | (11.2) | |
| Ireland | | (0.2) | | | (0.6) | | | (0.9) | |
| Other locations | | (9.3) | | | (8.3) | | | (13.5) | |
| | (16.9) | | | (57.1) | | | (69.1) | |
| Total Provision for Income Taxes | | $ | 262.2 | | | $ | 184.7 | | | $ | 149.5 | |
Unrecognized Tax Benefits. We classify uncertain tax positions and related interest and penalties as long-term liabilities within “Other liabilities” in our accompanying Consolidated Balance Sheets, unless they are expected to be paid within 12 months, in which case, the uncertain tax positions would be classified as Current liabilities within the "Accrued income taxes" line in our accompanying Consolidated Balance Sheets. We recognize interest and penalties related to unrecognized tax benefits within the “Income tax expense” line in our accompanying Consolidated Statements of Income.
A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows: | | | | | | | | | | | | | | |
| (in millions) | | 2026 | | 2025 |
| Unrecognized Tax Benefits Balance at April 1 | | $ | 1.8 | | | $ | 2.2 | |
| Increases for tax provisions of current year | | — | | | — | |
| Decreases for tax provisions of prior year | | (1.6) | | | (0.3) | |
| Unrecognized Tax Benefits Balance at March 31 | | $ | 0.2 | | | $ | 1.8 | |
We recognized interest and penalties related to uncertain tax positions in the provision for income taxes. As of March 31, 2026 and 2025, we had $0.1 million accrued for interest and penalties. If all unrecognized tax benefits were recognized, the net impact on the provision for income tax expense would be $0.2 million. The decrease in the balance of unrecognized tax benefits from prior year is due to the expiration of old positions.
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
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
examinations by tax authorities for years before fiscal 2018. We remain subject to tax authority audits in various jurisdictions wherever we do business.
In November 2023, we received two Notices of Deficiency from the IRS regarding the previously disclosed deemed dividend inclusions and associated withholding tax matter. The notices relate to the fiscal and calendar year 2018. The IRS adjustments would result in a cumulative tax liability of approximately $50.0 million, excluding any interest and penalties, if ultimately assessed. We are contesting the IRS’s assertions and have filed petitions with the U.S. Tax Court. We have not established reserves related to these notices. An unfavorable outcome is not expected to have a material adverse impact on our consolidated financial position but could be material to our consolidated results of operations and cash flows for any one period.
We estimate that the tax benefit from our Costa Rica Tax Holiday is $7.4 million (or $0.07 per fully diluted share), annually. The Tax Holiday runs fully exempt from income tax through 2031.
Deferred Taxes. The significant components of the deferred tax assets and liabilities recorded in our accompanying balance sheets at March 31, 2026 and 2025 were as follows: | | | | | | | | | | | | | | |
| (in millions) | | | | |
| March 31, | | 2026 | | 2025 |
| | | | |
| Deferred Tax Assets: | | | | |
| Post-retirement benefit accrual | | $ | 1.3 | | | $ | 1.4 | |
| Compensation | | 34.5 | | | 29.7 | |
| Net operating loss carryforwards | | 25.7 | | | 35.5 | |
| Accrued expenses | | 13.3 | | | 13.8 | |
| Insurance | | 2.2 | | | 2.1 | |
| Illinois EO Litigation Settlement | | 11.0 | | | 12.0 | |
| Deferred income | | 24.3 | | | 24.1 | |
| Bad debt & other allowances | | 4.7 | | | 3.8 | |
| Research & experimental expenditures | | 47.5 | | | 40.5 | |
Operating leases (1) | | 36.1 | | | 37.6 | |
| Foreign tax credit carryforwards | | 10.3 | | | 8.1 | |
| Other | | 17.4 | | | 16.0 | |
| Deferred Tax Assets | | 228.3 | | | 224.6 | |
| Less: Valuation allowance | | 29.0 | | | 30.6 | |
| Total Deferred Tax Assets | | 199.3 | | | 194.0 | |
| Deferred Tax Liabilities: | | | | |
| Depreciation and depletion | | 116.8 | | | 97.0 | |
Operating leases (1) | | 35.4 | | | 36.6 | |
| Intangibles | | 418.1 | | | 441.0 | |
| Pension | | 3.8 | | | 3.8 | |
| Other | | 3.0 | | | 2.6 | |
| Total Deferred Tax Liabilities | | 577.1 | | | 581.0 | |
Net Deferred Tax Liabilities(2) | | $ | (377.8) | | | $ | (386.9) | |
(1) For more information regarding our operating leases, see Note 12 titled, "Commitments and Contingencies."
(2) A portion of the Net Deferred Tax Liabilities is presented in the "Other Assets" line of our Consolidated Balance Sheets.
At March 31, 2026, we had U.S. federal operating loss carryforwards of $6.3 million, which remain subject to a 20 year carryforward period. Additionally, we had non-U.S. operating loss carry forwards of $86.4 million. Although the majority of the non-U.S. carryforwards have indefinite expiration periods, those carryforwards that have definite expiration periods will expire if unused between fiscal years 2027 and 2047. In addition, we have a pre-valuation allowance tax benefits balance of $2.3 million related to U.S. state operating loss carryforwards. If unused, these state operating loss carryforwards will expire
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
between fiscal years 2027 and 2047. At March 31, 2026, we had $13.2 million of pre-valuation allowance tax credit carryforwards. These credit carryforwards can be used through fiscal 2036.
We review the need for a valuation allowance against our deferred tax assets. A valuation allowance of $29.0 million has been applied to a portion of the net deferred tax assets because we do not believe it is more-likely-than-not that we will receive future benefit. The valuation allowance decreased during fiscal 2026 by $1.6 million.
Other than the tax expense previously recorded for the one-time transition tax on unremitted earnings of non-US subsidiaries, no additional provision has been made for income taxes on undistributed earnings of foreign subsidiaries as the Company’s position is that these amounts continue to be indefinitely reinvested. The amount of undistributed earnings of subsidiaries was approximately $3,000.0 million at March 31, 2026. It is not practicable to estimate the additional income taxes and applicable withholding taxes that would be payable on the remittance of such undistributed earnings.
On October 8, 2021, the OECD announced the OECD/G20 Inclusive Framework on BEPS, which agreed to a two-pillar solution to address tax challenges arising from digitalization of the economy. On December 20, 2021, the OECD released Pillar Two Model Rules defining the global minimum tax (GloBE), which calls for the taxation of large corporations at a minimum rate of 15%. The OECD continues to release additional guidance on the global minimum tax. The global minimum tax rules were effective from our fiscal year beginning April 1, 2024. We do not expect the impact to be material to the Company's consolidated financial statements.
Cash paid for income taxes (net of refunds received) for the year ended March 31, 2026, presented in accordance with the requirements of newly adopted ASU 2023-09, is as follows:
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | | | | | |
| Year Ended March 31, | | | | | 2026 |
| Cash paid during the year for: | | | | | | |
| Income taxes, net, Ireland | | | | | | $ | 8.4 | |
| Income taxes, net, U.S. | | | | | | 231.3 | |
| Income taxes, net, other locations | | | | | | 49.2 | |
| Income taxes, net of refunds, total | | | | | | $ | 289.0 | |
Cash paid for income taxes and cash received for refunds for the years ended March 31, 2025 and 2024, presented before adoption of ASU 2023-09, is as follows:
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | | | | | |
| Years Ended March 31, | | | 2025 | | 2024 |
| Cash paid during the year for: | | | | | | |
| Income taxes | | | | 273.6 | | | 271.3 | |
| Cash received during the year for income tax refunds | | | | 9.5 | | | 19.2 | |
11. BENEFIT PLANS
In the United States, we sponsor an unfunded post-retirement welfare benefits plan for two groups of United States retirees. Benefits under this plan include retiree life insurance and retiree medical insurance, including prescription drug coverage.
We sponsor several defined benefit pension schemes outside the United States: two in the UK, one in the Netherlands, two in Germany, and one in Switzerland. The Synergy Health plc Retirement Benefit Scheme is a defined benefit (final salary) funded pension scheme. In previous years, Synergy sponsored a funded defined benefit arrangement in the Netherlands. This was a separate fund holding the pension scheme assets to meet long-term pension liabilities for past and present employees. Accrual of benefits ceased under the scheme effective January 1, 2013. The Synergy Radeberg and Synergy Allershausen Schemes are unfunded defined pension schemes and are closed to new entrants. The Synergy Daniken Scheme is a defined benefit funded pension scheme. As a result of our fiscal 2018 acquisition of Harwell Dosimeters Ltd, we also sponsor the Harwell Dosimeters Ltd Retirement Benefits Scheme which is a defined benefit funded pension scheme.
We recognize the funded status of our defined benefit pension and post-retirement benefit plans in our Consolidated Balance Sheets, with a corresponding adjustment to accumulated other comprehensive income, net of tax. The funded status is measured as of March 31 each year and is calculated as the difference between the fair value of plan assets and the benefit obligation (which is the projected benefit obligation for pension plans and the accumulated post-retirement benefit obligation
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for post-retirement benefit plans). Accumulated comprehensive income (loss) represents the net unrecognized actuarial losses and unrecognized prior service cost. These amounts will be recognized in net periodic benefit cost as they are amortized. We will recognize future changes to the funded status of these plans in the year the change occurs, through other comprehensive income.
Obligations and Funded Status. The following table reconciles the funded status of the defined benefit pension plans and the other post-retirement benefits plan to the amounts recorded on our Consolidated Balance Sheets at March 31, 2026 and 2025, respectively. Benefit obligation balances presented in the following table reflect the projected benefit obligations for our defined benefit pension plans and the accumulated other post-retirement benefit obligation for our post-retirement benefits plan. The measurement date of our defined benefit pension plans and other post-retirement benefits plan is March 31, for both periods presented. | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Defined Benefit Pension Plans | | Other
Post-Retirement
Benefits Plan |
| 2026 | | 2025 | | 2026 | | 2025 |
| Change in Benefit Obligations: | | | | | | | |
| Benefit Obligations at Beginning of Year | $ | 90.7 | | | $ | 96.4 | | | $ | 5.8 | | | $ | 6.2 | |
| Service cost | 0.7 | | | 0.7 | | | — | | | — | |
| Prior service cost | 2.4 | | | — | | | — | | | — | |
| Interest cost | 4.7 | | | 4.2 | | | 0.3 | | | .3 | |
Actuarial gain | (1.9) | | | (9.1) | | | (0.4) | | | (.6) | |
| Benefits and expenses | (6.2) | | | (4.6) | | | (0.5) | | | (.1) | |
| Employee contributions | 0.6 | | | 1.0 | | | — | | | — | |
| Curtailments/settlements | (0.9) | | | — | | | — | | | — | |
| Impact of foreign currency exchange rate changes | 2.9 | | | 2.1 | | | — | | | — | |
| Benefit Obligations at End of Year | $ | 93.1 | | | $ | 90.7 | | | $ | 5.2 | | | $ | 5.8 | |
| Change in Plan Assets: | | | | | | | |
| Fair Value of Plan Assets at Beginning of Year | $ | 109.3 | | | $ | 113.9 | | | $ | — | | | $ | — | |
| Actual return on plan assets | 6.0 | | | (4.9) | | | — | | | — | |
| Employer contributions | 0.7 | | | 1.2 | | | 0.5 | | | 0.1 | |
| Employee contributions | 0.6 | | | 1.0 | | | — | | | — | |
| Benefits and expenses paid | (6.0) | | | (4.5) | | | (0.5) | | | (0.1) | |
| Curtailments/settlements | (0.9) | | | — | | | — | | | — | |
| Impact of foreign currency exchange rate changes | 3.2 | | | 2.6 | | | — | | | — | |
| Fair Value of Plan Assets at End of Year | $ | 112.8 | | | $ | 109.3 | | | $ | — | | | $ | — | |
| Funded Status of the Plans | $ | 19.7 | | | $ | 18.6 | | | $ | (5.2) | | | $ | (5.8) | |
Amounts recognized in the Consolidated Balance Sheets consist of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Defined Benefit Pension Plans | | Other Post-Retirement Benefits Plan |
| | | 2026 | | 2025 | | 2026 | | 2025 |
| | | | | | | | |
| Non-current assets | | $ | 23.8 | | | $ | 21.9 | | | $ | — | | | $ | — | |
| Current liabilities | | — | | | — | | | (0.9) | | | (1.0) | |
| Non-current liabilities | | (4.1) | | | (3.3) | | | (4.3) | | | (4.8) | |
| Net assets (liabilities) | | $ | 19.7 | | | $ | 18.6 | | | $ | (5.2) | | | $ | (5.8) | |
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The pre-tax amount of unrecognized actuarial net loss and unamortized prior service cost included in accumulated other comprehensive (loss) at March 31, 2026, was approximately $2.1 million and $1.8 million, respectively.
Defined benefit plans with an accumulated benefit obligation and projected benefit obligation exceeding the fair value of plan assets had the following plan assets and obligations at March 31, 2026 and 2025:
| | | | | | | | | | | | | | |
| (in millions) | | Defined Benefit Pension Plans |
| | 2026 | | 2025 |
| Aggregate fair value of plan assets | | $ | 112.8 | | | $ | 109.3 | |
| Aggregate accumulated benefit obligations | | 93.1 | | | 90.7 | |
| Aggregate projected benefit obligations | | 93.1 | | | 90.7 | |
Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income. Components of the annual net periodic benefit cost of our defined benefit pension plans and our other post-retirement benefits plan were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Defined Benefit Pension Plans | | Other Post-Retirement Benefits Plan |
| | | 2026 | | 2025 | | 2024 | | 2026 | | 2025 | | 2024 |
| Service cost | | $ | 0.7 | | | $ | 0.7 | | | $ | 0.7 | | | $ | — | | | $ | — | | | $ | — | |
| Interest cost | | 4.7 | | | 4.2 | | | 4.1 | | | 0.3 | | | 0.3 | | | 0.3 | |
| Expected return on plan assets | | (5.4) | | | (4.9) | | | (6.1) | | | — | | | — | | | — | |
| Prior service cost recognition | | — | | | — | | | — | | | — | | | — | | | — | |
| Net amortization and deferral | | — | | | — | | | — | | | — | | | 0.1 | | | 0.2 | |
| Curtailments/settlements | | — | | | — | | | — | | | — | | | — | | | — | |
| Net periodic benefit (credit) cost | | $ | 0.2 | | | $ | 0.1 | | | $ | (1.2) | | | $ | 0.3 | | | $ | 0.4 | | | $ | 0.5 | |
| Recognized in other comprehensive loss (income) before tax: | | | | | | | | | | | | |
| Net loss (gain) occurring during year | | $ | 0.2 | | | $ | 0.6 | | | $ | 2.6 | | | $ | 0.4 | | | $ | 0.6 | | | $ | 0.4 | |
| Amortization of prior service credit | | (0.1) | | | (0.1) | | | (0.1) | | | — | | | — | | | — | |
| Amortization of net loss | | — | | | — | | | — | | | — | | | (0.1) | | | (0.2) | |
| Total recognized in other comprehensive loss (income) | | 0.2 | | | 0.5 | | | 2.5 | | | 0.3 | | | 0.4 | | | 0.2 | |
| Total recognized in total benefits cost and other comprehensive loss (income) | | $ | 0.3 | | | $ | 0.6 | | | $ | 1.3 | | | $ | 0.6 | | | $ | 0.9 | | | $ | 0.8 | |
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assumptions Used in Calculating Benefit Obligations and Net Periodic Benefit Cost. The following table presents significant assumptions used to determine the projected benefit obligations at March 31: | | | | | | | | | | | | | | |
| | 2026 | | 2025 |
| Discount Rate: | | | | |
| Synergy Health plc Retirement Benefits Scheme | | 6.10 | % | | 4.80 | % |
| Isotron BV Pension Plan | | 4.30 | % | | 3.80 | % |
| Synergy Health Daniken AG | | 1.20 | % | | 1.10 | % |
| Synergy Health Radeberg | | 3.80 | % | | 3.80 | % |
| Synergy Health Allershausen | | 3.01 | % | | 2.82 | % |
| Harwell Dosimeters Ltd Retirement Benefits Scheme | | 5.85 | % | | 5.65 | % |
| Other post-retirement plan | | 5.00 | % | | 5.00 | % |
The following table presents significant assumptions used to determine the net periodic benefit costs for the years ended March 31: | | | | | | | | | | | | | | | | | | | | |
| | 2026 | | 2025 | | 2024 |
| Discount Rate: | | | | | | |
| Synergy Health plc Retirement Benefits Scheme | | 5.80 | % | | 5.80 | % | | 4.70 | % |
| Isotron BV Pension Plan | | 3.80 | % | | 3.40 | % | | 3.70 | % |
| Synergy Health Daniken AG | | 1.20 | % | | 1.10 | % | | 1.50 | % |
| Synergy Health Radeberg | | 2.00 | % | | 2.00 | % | | 2.00 | % |
| Synergy Health Allershausen | | 2.20 | % | | 2.20 | % | | 2.20 | % |
| Harwell Dosimeters Ltd Retirement Benefits Scheme | | 5.85 | % | | 5.65 | % | | 4.85 | % |
| Other post-retirement plan | | 5.00 | % | | 5.00 | % | | 4.75 | % |
| Expected Return on Plan Assets: | | | | | | |
| Synergy Health plc Retirement Benefits Scheme | | 5.30 | % | | 5.30 | % | | 6.10 | % |
| Isotron BV Pension Plan | | 3.80 | % | | 3.40 | % | | 3.70 | % |
| Synergy Health Daniken AG | | 1.30 | % | | 1.10 | % | | 1.50 | % |
The net periodic benefit cost and the actuarial present value of projected benefit obligations are based upon assumptions that we review on an annual basis. These assumptions may be revised annually based upon an evaluation of long-term trends, as well as market conditions that may have an impact on the cost of providing benefits.
We develop our expected long-term rate of return on plan assets assumptions by evaluating input from third-party professional advisers, taking into consideration the asset allocation of the portfolios and the long-term asset class return expectations.
We develop our discount rate assumptions by evaluating input from third-party professional advisers, taking into consideration the current yield on country specific investment grade long-term bonds which provide for similar cash flow streams as our projected obligations. Prior to fiscal 2026, we made assumptions regarding healthcare costs in computing our other post-retirement benefit obligation. The assumed rates of increase generally declined ratably over a five-year period from the assumed current year healthcare cost trend rate to the assumed long-term healthcare cost trend rates noted below. As of fiscal 2026, healthcare cost trend assumptions are no longer applied. Beginning in fiscal 2026, the plan limits healthcare costs to a capped monthly amount per participant. | | | | | | | | | | | | | | |
| | 2025 | | 2024 |
| Healthcare cost trend rate – medical | | 8.50 | % | | 7.50 | % |
| Healthcare cost trend rate – prescription drug | | 8.50 | % | | 7.50 | % |
| Long-term healthcare cost trend rate | | 4.50 | % | | 4.50 | % |
To determine the healthcare cost trend rates, we evaluated a combination of information, including ongoing claims cost monitoring, annual statistical analyses of claims data, reconciliation of forecasted claims against actual claims, review of trend
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
assumptions of other plan sponsors and national health trends, and adjustments for plan design changes, workforce changes, and changes in plan participant behavior.
Plan Assets. The investment policies for our plans are generally established by the local pension plan trustees and seek to maintain the plans' ability to meet liabilities and to comply with local minimum funding requirements. Plan assets are invested in diversified portfolios that provide adequate levels of return at an acceptable level of risk. The investment policies are reviewed at least annually and revised, as deemed appropriate to ensure that the objectives are being met. At March 31, 2026, the targeted allocation for the plans were approximately 30% equity investments and 70% fixed income investments.
Financial instruments included in pension plan assets are categorized into three tiers. These tiers include a fair value hierarchy of three levels, based on the degree of subjectivity inherent in the valuation methodology as follows:
Level 1 - Quoted prices for identical assets in active markets.
Level 2 - Quoted prices for similar assets in active markets with inputs that are observable, either directly or indirectly.
Level 3 - Unobservable prices or inputs in which little or no market data exists.
The fair value of our pension benefits plan assets at March 31, 2026 and 2025 by asset category is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value Measurements at March 31, 2026 |
| (in millions) | | Total | | Quoted
Prices in
Active Markets
for Identical
Assets
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Significant
Other
Unobservable
Inputs
(Level 3) |
| Cash | | $ | 0.9 | | | $ | 0.9 | | | $ | — | | | $ | — | |
| Insured annuities | | 9.1 | | | — | | | 9.1 | | | — | |
| Insurance contracts | | 7.8 | | | — | | | — | | | 7.8 | |
| Common and collective trusts valued at net asset value: | | | | | | | | |
| Equity security trusts | | 31.3 | | | — | | | — | | | — | |
| Debt security trusts | | 63.8 | | | — | | | — | | | — | |
| Total Plan Assets | | $ | 112.8 | | | $ | 0.9 | | | $ | 9.1 | | | $ | 7.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fair Value Measurements at March 31, 2025 |
| (in millions) | | Total | | Quoted
Prices in
Active Markets
for Identical
Assets
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Significant
Other
Unobservable
Inputs
(Level 3) |
| Cash | | $ | 0.4 | | | $ | 0.4 | | | $ | — | | | $ | — | |
| Insured annuities | | 9.9 | | | — | | | 9.9 | | | — | |
| Insurance contracts | | 6.9 | | | — | | | — | | | 6.9 | |
| Common and collective trusts valued at net asset value: | | | | | | | | |
| Equity security trusts | | 39.8 | | | — | | | — | | | — | |
| Debt security trusts | | 52.3 | | | — | | | — | | | — | |
| Total Plan Assets | | $ | 109.3 | | | $ | 0.4 | | | $ | 9.9 | | | $ | 6.9 | |
Collective investment trusts are measured at fair value using the net asset value per share practical expedient. These trusts have not been categorized in the fair value hierarchy and are being presented in the tables above to permit a reconciliation of the fair value hierarchy to the total plan assets.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed during fiscal year 2026 due to the following: | | | | | | | | |
| (in millions) | | Insurance contracts |
| Balance at March 31, 2024 | | $ | 6.1 | |
| Gains (losses) related to assets still held at year-end | | 0.1 | |
| Transfers into Level 3 | | 0.6 | |
| Foreign currency | | 0.1 | |
| Balance at March 31, 2025 | | $ | 6.9 | |
| Transfers into Level 3 | | 0.2 | |
| Foreign currency | | 0.7 | |
| Balance at March 31, 2026 | | $ | 7.8 | |
Cash Flows. We contribute amounts to our defined benefit pension plans at least equal to the minimum amounts required by applicable employee benefit laws and local tax laws. We anticipate fiscal 2027 contributions to approximate those of fiscal 2026.
Based upon the actuarial assumptions utilized to develop our benefit obligations at March 31, 2026, the following benefit payments are expected to be made to plan participants: | | | | | | | | | | | | | | |
| (in millions) | | Other Defined Benefit Pension Plans | | Other Post-Retirement Benefits Plan |
| 2027 | | $ | 6.0 | | | $ | 0.9 | |
| 2028 | | 6.1 | | | 0.8 | |
| 2029 | | 6.3 | | | 0.7 | |
| 2030 | | 6.6 | | | 0.6 | |
| 2031 | | 6.7 | | | 0.6 | |
| 2032 and thereafter | | 36.4 | | | 1.9 | |
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) provides a prescription drug benefit for Medicare beneficiaries, a benefit we provide to Medicare eligible retirees covered by our post-retirement benefits plan. We have concluded that the prescription drug benefit provided in our post-retirement benefit plan is considered to be actuarially equivalent to the benefit provided under the Act and thus qualifies for the subsidy under the Act. Benefits are subject to a per capita per month cost cap and any costs above the cap become the responsibility of the retiree. Under the plan, the subsidy is applied to reduce the retiree responsibility. As a result, the expected future subsidy no longer reduces our accumulated post-retirement benefit obligation and net periodic benefit cost. We collected subsidies totaling approximately $0.2 million and $0.3 million, during fiscal 2026 and fiscal 2025, respectively, which reduced the retiree responsibility for costs in excess of the caps established in the post-retirement benefit plan.
Defined Contribution Plans. We maintain 401(k) defined contribution plans for eligible U.S. employees, a 401(k) defined contribution plan for eligible Puerto Rico employees and similar savings plans for certain employees in Canada, United Kingdom, Ireland, and Finland. We provide a match on a specified portion of an employee’s contribution. The U.S. plan assets are held in trust and invested as directed by the plan participants. The Canadian plan assets are held by insurance companies. The aggregate fair value of the U.S. plan assets was $1,608.0 million at March 31, 2026. At March 31, 2026, the U.S. plan held 0.3 million STERIS ordinary shares with a fair value of $74.1 million. We paid dividends of $0.8 million, $0.9 million, and $0.9 million to the plan and participants on STERIS shares held by the plan for the years ended March 31, 2026, 2025, and 2024, respectively. We contributed approximately $50.2 million, $44.7 million, and $39.6 million, to the defined contribution plans for the years ended March 31, 2026, 2025, and 2024, respectively.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We also maintain a domestic non-qualified deferred compensation plan covering certain employees, which formerly allowed for the deferral of compensation for an employee-specified term or until retirement or termination. There have been no employee contributions made to this plan since fiscal 2012. The Plan was amended in fiscal 2012 to disallow deferrals of salary payable in 2012 and subsequent calendar years and of commissions and other incentive compensation payable in respect of the 2013 and subsequent fiscal years. We hold investments in mutual funds to satisfy future obligations of the plan. We account for these assets as available-for-sale securities and they are included in “Other assets” on our accompanying Consolidated Balance Sheets, with a corresponding liability for the plan’s obligation recorded in Accrued expenses and other. The aggregate value of the assets was $1.3 million and $1.1 million at March 31, 2026 and March 31, 2025, respectively. Realized gains and losses on these investments are recorded in Other expense (income) within Non-operating expenses, net on our accompanying Consolidated Statements of Income. Changes in the fair value of the assets are recorded in Accumulated other comprehensive income (loss) on our accompanying Consolidated Balance Sheets.
12. 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 record a liability for such contingencies to the extent we conclude that their occurrence is both probable and estimable and believe we have adequately reserved for our current litigation and claims that are probable and estimable. In the event that the estimate of a probable loss is a range and no amount within the range is more likely, we accrue the minimum amount of the range. We consider many factors in making these assessments, including the professional judgment of experienced members of management and our legal counsel. We have made estimates as to the likelihood of unfavorable outcomes and the amounts of such potential losses. Further, we believe that the ultimate outcome of 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. For certain types of claims, we presently maintain insurance coverage for bodily injury and third party property damage and other liability coverages in amounts and with retentions and deductibles that we believe are prudent, and we may also have contractual indemnification rights against certain liabilities, but there can be no assurance that either will be applicable or adequate to cover adverse outcomes of claims or legal proceedings against us. We record expected recoveries under applicable contracts when we are assured of recovery.
Civil, criminal, regulatory or other proceedings involving our products or services, including the matters discussed herein, 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 affect our business, performance, prospects, value, financial condition, and results of operations. Further, the Company may incur material defense costs as a result of such proceedings, which may also divert management attention from other priorities.
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.
In addition, the Company may pursue opportunities to recover amounts previously paid in connection with certain legal or regulatory matters, tariffs or similar governmental charges, including the approximately $28 million of net replacement tariffs we paid pursuant to the International Economic Emergency Powers Act ("IEEPA"). Any such matters are subject to applicable processes and uncertainty, including timing of resolution, and we have not recorded a receivable related to these amounts as of March 31, 2026.
Illinois EO Litigation Settlement
A subsidiary of the Company was sued in Illinois state court by individual plaintiffs who worked or resided near a facility in Lake County, Illinois, where the subsidiary provided sterilization services using ethylene oxide (“EO”) from January 2005 to
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 2008. The plaintiffs filed separate suits in which each alleges that they have been diagnosed with one or more types of cancer, allegedly resulting from exposure to EO emissions from the facility into the ambient air.
On March 3, 2025, the Company entered into binding confidential term sheets ("Term Sheets") with plaintiffs’ counsel, as well as settlement agreements with several plaintiffs in cases which were at the time scheduled for trial in fiscal 2026. On October 29, 2025, the Company entered into binding confidential settlement agreements ("Settlement Agreements") with plaintiffs' counsel, containing terms and provisions consistent with the Term Sheets. The Settlement Agreements are expected to lead to resolution of substantially all of the claims for personal injury related to EO that are currently pending in the Circuit Court of Cook County, Illinois.
Pursuant to the Settlement Agreements, the Company agreed to pay up to $48.2 million to settle claims. We recorded a charge for this amount in fiscal 2025, and the remaining liability is included in the "Accrued expenses and other" line within our Consolidated Balance Sheets. None of the Settlement Agreements are an admission of liability or that emissions from the Waukegan, Illinois facility ever posed a safety hazard to the people who live or work in the surrounding areas. The Settlement Agreements establish a claims administration process that includes guidelines and procedures for administering individual settlements, which process has continued into fiscal 2027. The Company anticipates dismissal of all pending EO related claims brought by the covered plaintiffs upon completion of the claims administration process and approval by the court.
The Company may exercise walkaway rights with respect to the claims covered by the Settlement Agreements if certain agreed terms are not fulfilled, including if a substantial number of plaintiffs in such cases do not agree to settle or are disqualified under the applicable terms or the resulting settlements are ultimately not approved by the court. In the event it exercises its walkaway rights, the Company is prepared to continue to defend itself in the litigation and reserves all legal and factual defenses against such claims.
Additional Information
For additional information regarding these matters, see the risks and uncertainties described under the titles "product and service related regulations and claims" and "business and operational risks" in Item 1A. of this Annual Report on Form 10-K.
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 10 to our consolidated financial statements titled, “Income Taxes” in this Annual Report on Form 10-K.
As of March 31, 2026 and 2025, our commercial commitments totaled $161.3 million and $127.4 million, respectively. Commercial commitments include standby letters of credit, letters of credit required as security under our self-insured risk retention policies, and other potential cash outflows resulting from an event that requires payment by us. Approximately $3.1 million and $10.9 million of the March 31, 2026 and 2025 totals, respectively, relate to letters of credit required as security under our self-insured risk retention policies.
As of March 31, 2026, we had minimum purchase commitments with suppliers for raw material purchases totaling $64.2 million. As of March 31, 2026, we also had commitments of $71.5 million for long term construction contracts.
Leases
We lease manufacturing, warehouse and office space, service facilities, vehicles, equipment and communication systems. Certain leases contain options that provide us with the ability to extend the lease term. Such options are included in the lease term when it is reasonably certain that the option will be exercised. We made an accounting policy election to not recognize lease assets or lease liabilities for leases with a lease term of twelve months or less.
We determine if an agreement contains a lease and classify our leases as operating or finance at the lease commencement date. Finance leases are generally those leases for which we will pay substantially all the underlying asset’s fair value or will use the asset for all or a major part of its economic life, including circumstances in which we will ultimately own the asset. Lease assets arising from finance leases are included in Property, plant, and equipment, net and the liabilities are included in Other liabilities. For finance leases, we recognize interest expense using the effective interest method, and we recognize amortization expense on the lease asset over the shorter of the lease term or the useful life of the asset. Our finance leases are not material as of March 31, 2026 and for the twelve-month period then ended.
Operating lease assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Lease assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. As most leases do not provide an implicit
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
interest rate, we estimate an incremental borrowing rate to determine the present value of lease payments. Our estimated incremental borrowing rate reflects a secured rate based on recent debt issuances, our estimated credit rating, lease term, as well as publicly available data for instruments with similar characteristics. For operating leases, we recognize lease cost on a straight-line basis over the term of the lease. When accounting for leases, we combine payments for leased assets, related services and other components of a lease.
The components of operating lease expense recognized in income from continuing operations in the consolidated statements of income are as follows: | | | | | | | | | | | | | | | | | |
| (in millions) | Year Ended | | Year Ended | | Year Ended |
| March 31, 2026 | | March 31, 2025 | | March 31, 2024 |
| Fixed operating lease expense | $ | 45.2 | | | $ | 46.5 | | | $ | 41.3 | |
| Variable operating lease expense | 32.6 | | | 21.3 | | | 24.4 | |
| Total operating lease expense | $ | 77.8 | | | $ | 67.8 | | | $ | 65.8 | |
Supplemental cash flow information related to operating leases is as follows: | | | | | | | | | | | | | | | | | |
| (in millions) | Year Ended | | Year Ended | | Year Ended |
| March 31, 2026 | | March 31, 2025 | | March 31, 2024 |
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | 45.2 | | | $ | 46.5 | | | $ | 46.9 | |
| Right-of-use assets obtained in exchange for operating lease obligations, net | $ | 17.1 | | | $ | 29.8 | | | $ | 24.7 | |
Maturities of lease liabilities at March 31, 2026 are as follows:
| | | | | |
| (in millions) | March 31,
2026 |
| 2027 | $ | 42.1 | |
| 2028 | 31.1 | |
| 2029 | 22.1 | |
| 2030 | 14.9 | |
| 2031 and thereafter | 77.8 | |
| Total operating lease payments | $ | 188.1 | |
| Less imputed interest | 32.7 | |
| Total operating lease liabilities | $ | 155.4 | |
In the preceding table, the future minimum annual rentals payable under noncancelable leases denominated in foreign currencies have been calculated using March 31, 2026 foreign currency exchange rates.
Supplemental information related to operating leases is as follows:
| | | | | | | | | | | |
| March 31, | | March 31, |
| 2026 | | 2025 |
| Weighted-average remaining lease term of operating leases | 8.8 years | | 9.1 years |
| Weighted-average discount rate of operating leases | 4.6 | % | | 4.5 | % |
13. BUSINESS SEGMENT INFORMATION
We operate and report our financial information in three reportable business segments: Healthcare, AST, and Life Sciences. Previously, we had four reportable business segments, however, as a result of the fiscal 2025 divestiture of our Dental segment, Dental is presented as discontinued operations. The Dental segment previously met the criteria for a reportable segment and has been removed from segment disclosures for all periods presented following its classification as discontinued operations. Historical information has been retrospectively adjusted to reflect these changes for comparability, as required. For more information, refer to Note 4 titled, "Discontinued Operations." Non-allocated operating costs that support the entire Company and items not indicative of operating trends are excluded from segment operating income. These costs include expenses
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
primarily include executive management costs, certain centralized finance, legal, human resources, information technology functions, global systems costs, and other corporate‑level activities that are not directly attributable to the reportable segments.
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, instruments, and capital equipment infrastructure used primarily in operating rooms, ambulatory surgery centers, endoscopy suites, and other procedural areas.
Our AST segment supports medical device and pharmaceutical manufacturers through a global network of contract sterilization and laboratory testing facilities, and integrated sterilization equipment and control systems. 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 designed to support biopharmaceutical and medical device research and manufacturing facilities, in particular those focused on aseptic manufacturing. Our portfolio includes a full suite of capital equipment, consumable products, equipment maintenance and specialty services.
Our chief operating decision maker ("CODM") is our President and Chief Executive Officer ("CEO"). The CEO is responsible for performance assessment and resource allocation. The CEO regularly receives discrete financial information about each reportable segment and uses this information to assess performance and allocate resources. This information includes Revenues and Cost of revenues; Selling, general, and administrative expenses; and Research and development expenses for each reportable segment.
Segment operating income represents revenues less cost of revenues, selling, general and administrative expenses, and research and development expenses that are directly attributable to the segment. Segment operating income excludes amortization of acquired intangible assets, acquisition and integration‑related charges, restructuring costs, costs incurred in tax restructuring initiatives, and other items that management does not consider indicative of segment operating performance. These excluded items are reported within the tables below to reconcile segment operating income to income from operations.
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 years ended March 31, 2026, revenues from a single Customer did not represent ten percent or more of the Healthcare, AST or Life Sciences segment revenues.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information regarding our segments is presented in the following tables. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended March 31, 2026 |
| (in millions) | | Healthcare | | AST | | Life Sciences | | Corporate | | Company |
| | | | | | | | | | |
| Revenues | | $ | 4,208.6 | | | $ | 1,138.5 | | | $ | 588.8 | | | $ | — | | | $ | 5,935.9 | |
| | | | | | | | | | |
| Segment expenses | | | | | | | | | | |
| Cost of revenues | | 2,422.5 | | | 552.8 | | | 262.7 | | | | | |
| Selling, general, and administrative | | 652.3 | | | 57.7 | | | 65.0 | | | | | |
| Research and development | | 97.5 | | | 3.3 | | | 10.3 | | | | | |
| Total income from operations before adjustments | | $ | 1,036.4 | | | $ | 524.7 | | | $ | 251.0 | | | $ | (430.1) | | | $ | 1,381.9 | |
| Less: Adjustments | | | | | | | | | | |
Amortization of acquired intangible assets (1) | | | | | | | | | | 265.0 | |
Acquisition and integration related charges (2) | | | | | | | | | | 6.2 | |
Tax restructuring costs (3) | | | | | | | | | | 0.5 | |
Amortization of inventory and property "step up" to fair value (1) | | | | | | | | | | 5.0 | |
Restructuring charges (4) | | | | | | | | | | 3.4 | |
Total income from operations | | | | | | | | | | $ | 1,101.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended March 31, 2025 |
| (in millions) | | Healthcare | | AST | | Life Sciences | | Corporate | | Company |
| | | | | | | | | | |
| Revenues | | $ | 3,878.7 | | | $ | 1,038.6 | | | $ | 542.3 | | | $ | — | | | $ | 5,459.5 | |
| | | | | | | | | | |
| Segment expenses | | | | | | | | | | |
| Cost of revenues | | 2,204.1 | | | 516.7 | | | 243.7 | | | | | |
| Selling, general, and administrative | | 610.0 | | | 52.5 | | | 59.8 | | | | | |
| Research and development | | 93.1 | | | 3.8 | | | 9.4 | | | | | |
| Total income from operations before adjustments | | $ | 971.5 | | | $ | 465.6 | | | $ | 229.4 | | | $ | (399.0) | | | $ | 1,267.5 | |
| Less: Adjustments | | | | | | | | | | |
Amortization of acquired intangible assets (1) | | | | | | | | | | 273.8 | |
Acquisition and integration related charges (2) | | | | | | | | | | 11.2 | |
Tax restructuring costs (3) | | | | | | | | | | 0.1 | |
Amortization of inventory and property "step up" to fair value (1) | | | | | | | | | | 5.4 | |
Restructuring charges (4) | | | | | | | | | | 62.3 | |
Illinois EO litigation settlement (5) | | | | | | | | | | 48.2 | |
Total income from operations | | | | | | | | | | $ | 866.6 | |
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended March 31, 2024 |
| (in millions) | | Healthcare | | AST | | Life Sciences | | Corporate | | Company |
| | | | | | | | | | |
| Revenues | | $ | 3,613.0 | | | $ | 954.0 | | | $ | 571.7 | | | $ | — | | | $ | 5,138.7 | |
| | | | | | | | | | |
| Segment expenses | | | | | | | | | | |
| Cost of revenues | | 2,083.9 | | | 458.4 | | | 283.9 | | | | | |
| Selling, general, and administrative | | 568.0 | | | 51.7 | | | 58.2 | | | | | |
| Research and development | | 89.8 | | | 4.1 | | | 8.3 | | | | | |
| Total income from operations before adjustments | | $ | 871.4 | | | $ | 439.7 | | | $ | 221.3 | | | $ | (348.5) | | | $ | 1,184.0 | |
| Less: Adjustments | | | | | | | | | | |
Amortization of acquired intangible assets (1) | | | | | | | | | | 266.4 | |
Acquisition and integration related charges (2) | | | | | | | | | | 25.5 | |
Tax restructuring costs (3) | | | | | | | | | | 0.6 | |
Net loss on divestiture of businesses (1) | | | | | | | | | | 0.9 | |
Amortization of inventory and property "step up" to fair value (1) | | | | | | | | | | 10.0 | |
Restructuring charges (4) | | | | | | | | | | 44.4 | |
Total income from operations | | | | | | | | | | $ | 836.1 | |
(1) For more information regarding our recent acquisitions and divestitures, refer to Note 3 titled, "Business Acquisitions, Divestitures, and Investments"
(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 Note 2 titled, "Restructuring".
(5) For more information regarding our Illinois EO litigation settlement, refer to Note 12 titled, "Commitments and Contingencies".
Assets include the current and long-lived assets directly attributable to the segment based on the management of the location or on utilization. Certain corporate assets were allocated to the reportable segments based on revenues. Assets attributed to sales and distribution locations are only allocated to the Healthcare and Life Sciences segments.
Individual facilities, equipment, and intellectual properties are utilized by both the Healthcare and Life Sciences segments at varying levels over time. As a result, an allocation of total assets, capital expenditures, and depreciation and amortization is not meaningful to the individual performance of the Healthcare and Life Sciences segments. Therefore, their respective amounts are reported together.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | |
| (in millions) | | | | |
| March 31, | | 2026 | | 2025 |
| Assets | | | | |
| Healthcare and Life Sciences | | $ | 7,146.8 | | | $ | 6,806.4 | |
| AST | | 3,590.4 | | | 3,340.4 | |
| Total assets | | $ | 10,737.2 | | | $ | 10,146.8 | |
| | | | | | | | | | | | | | | | | | | | |
| Years Ended March 31, | | 2026 | | 2025 | | 2024 |
| Capital Expenditures | | | | | | |
| Healthcare and Life Sciences | | $ | 130.6 | | | $ | 142.8 | | | $ | 114.2 | |
| AST | | 238.4 | | | 227.2 | | | 237.0 | |
| Total Capital Expenditures | | $ | 369.0 | | | $ | 370.1 | | | $ | 351.2 | |
| Depreciation, Depletion, and Amortization | | | | | | |
| Healthcare and Life Sciences | | $ | 329.8 | | | $ | 334.2 | | | $ | 322.2 | |
| AST | | 156.8 | | | 142.0 | | | 127.8 | |
| Total Depreciation, Depletion, and Amortization | | $ | 486.5 | | | $ | 476.2 | | | $ | 450.1 | |
Financial information for each of our United States and international geographic areas is presented in the following table. Revenues are attributed to the geographic areas based on the location of these operations and their Customers. Property, plant, and equipment, net are those assets that are identified within the operations in each geographic area.
| | | | | | | | | | | | | | |
| (in millions) | | | | |
| March 31, | | 2026 | | 2025 |
| Property, Plant, and Equipment, Net | | | | |
| Ireland | | $ | 88.1 | | | $ | 74.9 | |
| United States | | 1,094.4 | | | 1,008.7 | |
| Other locations | | 978.7 | | | 872.9 | |
| Property, Plant, and Equipment, Net | | $ | 2,161.2 | | | $ | 1,956.5 | |
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | | | | | |
| Years Ended March 31, | | 2026 | | 2025 | | 2024 |
| Revenues: | | | | | | |
| Ireland | | $ | 108.5 | | | $ | 107.3 | | | $ | 82.7 | |
| United States | | 4,333.8 | | | 4,007.6 | | | 3,751.4 | |
| Other locations | | 1,493.7 | | | 1,344.6 | | | 1,304.6 | |
| Total Revenues | | $ | 5,935.9 | | | $ | 5,459.5 | | | $ | 5,138.7 | |
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | | | | | |
| Years Ended March 31, | | 2026 | | 2025 | | 2024 |
| Healthcare: | | | | | | |
| Capital equipment | | $ | 1,095.9 | | | $ | 1,037.2 | | | $ | 1,091.5 | |
| Consumables | | 1,496.6 | | | 1,396.0 | | | 1,248.4 | |
| Service | | 1,616.0 | | | 1,445.4 | | | 1,273.1 | |
| Total Healthcare Revenues | | $ | 4,208.6 | | | $ | 3,878.7 | | | $ | 3,613.0 | |
| AST: | | | | | | |
| Capital equipment | | $ | 20.0 | | | $ | 30.9 | | | $ | 14.5 | |
| Service | | 1,118.5 | | | 1,007.6 | | | 939.5 | |
| Total AST Revenues | | $ | 1,138.5 | | | $ | 1,038.6 | | | $ | 954.0 | |
| Life Sciences: | | | | | | |
| Capital equipment | | $ | 135.7 | | | $ | 117.5 | | | $ | 155.5 | |
| Consumables | | 308.3 | | | 286.7 | | | 251.6 | |
| Service | | 144.8 | | | 138.1 | | | 164.6 | |
| Total Life Sciences Revenues | | $ | 588.8 | | | 542.3 | | | 571.7 | |
| Total Revenues | | $ | 5,935.9 | | | $ | 5,459.5 | | | $ | 5,138.7 | |
14. 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. Income from continuing operations is used as the benchmark to determine whether share equivalents are dilutive or anti-dilutive. Earnings per share is calculated independently for earnings per share from continuing operations and earnings per share from discontinued operations. The sum of earnings per share from continuing operations and earnings per share from discontinued operations may not equal total company earnings per share due to rounding. The following is a summary of shares and share equivalents outstanding used in the calculations of basic and diluted earnings per share: | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| (shares in millions) | | | | | | |
| Years ended March 31, | | 2026 | | 2025 | | 2024 |
Denominator: | | | | | | |
| Weighted average shares outstanding—basic | | 98.2 | | | 98.6 | | | 98.8 | |
| Dilutive effect of share equivalents | | 0.4 | | | 0.5 | | | 0.6 | |
| Weighted average shares outstanding and share equivalents—diluted | | 98.7 | | | 99.1 | | | 99.4 | |
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: | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| (shares in millions) | | | | | | |
| Years ended March 31, | | 2026 | | 2025 | | 2024 |
| Number of ordinary share options | | 0.6 | | | 0.7 | | | 0.6 | |
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.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. 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 (the "Outgoing Repurchase Program") for the purchase of up to $500.0 million (exclusive of fees, commissions, and other charges), with no specified expiration date. As of March 31, 2026, there was $75.0 million (exclusive of fees, commissions, and other charges) of remaining availability under the Outgoing Repurchase Program.
Under the Outgoing Repurchase Program, the Company could repurchase its shares from time to time through open market purchases, including 10b5-1 plans. It also permitted share repurchases to be activated, suspended or discontinued at any time.
On May 5, 2026, the Board of Directors terminated the Outgoing Repurchase Program and authorized a new share repurchase program (the "New Repurchase Program") for the purchase of up to $1,000.0 million (exclusive of fees, commissions, and other charges).
Under the New Repurchase Program, we may repurchase our 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. There is no limitation to the number of shares that can be repurchased in a year and there is no expiration date for the New Repurchase Program.
During fiscal 2026, we repurchased 0.9 million of our ordinary shares for the aggregate amount of $225.0 million (exclusive of fees, commissions, and other charges) pursuant to authorizations under the Outgoing Repurchase Program. During fiscal 2025, we repurchased 0.9 million of our ordinary shares for the aggregate amount of $200.0 million (exclusive of fees, commissions, and other charges) pursuant to the authorizations under the Outgoing Repurchase Program. During fiscal 2024, we had no share repurchase activity pursuant to Outgoing Repurchase Program authorizations.
During fiscal 2026, we obtained 0.1 million of our ordinary shares in the aggregate amount of $12.5 million in connection with share-based compensation award programs. During fiscal 2025, we obtained 0.1 million of our ordinary shares in the aggregate amount of $11.3 million in connection with share-based compensation award programs. During fiscal 2024, we obtained 0.1 million of our ordinary shares in the aggregate amount of $11.8 million in connection with share-based compensation award programs.
16. 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 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. In recent years, grants have been limited to stock options, restricted shares, and restricted share units.
Stock option awards to employees generally vest and become nonforfeitable in increments of 25% per year over a four-year period, with full vesting four years after the date of grant. Historically, restricted stock awards to employee recipients generally cliff vested on the fourth anniversary of the grant date if the recipient remained in continuous employment through that date. Beginning with fiscal 2024 grants, Company restricted stock (and restricted stock units) generally cliff vest over a three year period after the grant date. However, employees who are grantees of restricted stock and have attained age 55 and been employed for at least five years at the time of the grant or meet these criteria during the term of the grant and are employed in the U.S. or in a few other foreign jurisdictions, or employees who have 25 years of service at the time of grant or meet that criterion during the term of the grant, will be subject to installment vesting rules over the applicable vesting period. Awards to certain employees in the U.S. or a few other jurisdictions may provide for continued vesting after “retirement,” if certain conditions are met. As of March 31, 2026, 1.7 million 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 in our Consolidated Statements of Income. 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.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following weighted-average assumptions were used for options granted during fiscal 2026, fiscal 2025 and fiscal 2024: | | | | | | | | | | | | | | | | | | | | |
| | | Fiscal 2026 | | Fiscal 2025 | | Fiscal 2024 |
| Risk-free interest rate | | 4.02 | % | | 4.21 | % | | 3.59 | % |
| Expected life of options | | 6.1 years | | 6.1 years | | 6.0 years |
| Expected dividend yield of stock | | 1.12 | % | | 0.94 | % | | 1.08 | % |
| Expected volatility of stock | | 28.16 | % | | 28.42 | % | | 27.92 | % |
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 2.21%, 2.07% and 2.22% was applied in fiscal 2026, 2025 and 2024 respectively. This rate is calculated based upon historical activity and represents an estimate of the granted options not expected to vest. If actual forfeitures differ from this calculated rate, we may be required to make additional adjustments to compensation expense in future periods. The assumptions used above are reviewed at the time of each significant option grant, or at least annually.
A summary of share option activity is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Number of
Options | | Weighted
Average
Exercise
Price | | Average
Remaining
Contractual
Term | | Aggregate
Intrinsic
Value
(in millions) |
| Outstanding at March 31, 2025 | | 1,823,883 | | | $ | 185.51 | | | | | |
| Granted | | 187,058 | | | 265.21 | | | | | |
| Exercised | | (287,514) | | | 123.46 | | | | | |
| Forfeited | | (6,560) | | | 245.47 | | | | | |
| Outstanding at March 31, 2026 | | 1,716,867 | | | $ | 204.51 | | | 5.7 years | | $ | 49.7 | |
| Exercisable at March 31, 2026 | | 1,223,025 | | | $ | 186.44 | | | 4.7 years | | $ | 49.6 | |
We estimate that 0.5 million of the non-vested stock options outstanding at March 31, 2026 will ultimately vest.
The aggregate intrinsic value in the table above represents the total pre-tax difference between the $221.13 closing price of our ordinary shares on March 31, 2026 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 years ended March 31, 2026, 2025 and 2024 was $36.7 million, $30.7 million and $18.2 million, respectively. Net cash proceeds from the exercise of stock options were $32.9 million, $25.5 million and $10.5 million for the years ended March 31, 2026, 2025 and 2024, respectively. The tax benefit from stock option exercises was $8.0 million, $7.6 million and $5.5 million for the years ended March 31, 2026, 2025 and 2024, respectively.
The weighted average grant date fair value of stock option grants was $69.59, $67.81 and $54.60 for the years ended March 31, 2026, 2025 and 2024, respectively.
A summary of the non-vested restricted share and restricted share unit activity is presented below: | | | | | | | | | | | | | | | | | | | | |
| | | Number of
Restricted
Shares | | Number of Restricted Share Units | | Weighted-Average
Grant Date
Fair Value |
| Non-vested at March 31, 2025 | | 449,131 | | | 29,555 | | | $ | 214.21 | |
| Granted | | 167,055 | | | 17,298 | | | 241.42 | |
| Vested | | (137,143) | | | (2,644) | | | 207.10 | |
| Forfeited | | (22,963) | | | (13,920) | | | 220.81 | |
| Non-vested at March 31, 2026 | | 456,080 | | | 30,289 | | | $ | 226.73 | |
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 at the time of grant that vested during fiscal 2026 was $31.3 million.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 31, 2026, there was a total of $42.6 million 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 1.5 years.
17. 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 periods presented are as follows: | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | | | | | |
| Years Ended March 31, | | 2026 | | 2025 | | 2024 |
| Balance, Beginning of Year | | $ | 16.3 | | | $ | 15.4 | | | $ | 13.4 | |
| Warranties issued during the period | | 20.9 | | | 19.2 | | | 18.1 | |
| Settlements made during the period | | (19.8) | | | (18.2) | | | (16.1) | |
| Balance, End of Year | | $ | 17.5 | | | $ | 16.3 | | | $ | 15.4 | |
18. DERIVATIVES AND HEDGING
We utilize foreign currency forward contracts to hedge a portion of our monetary assets and liabilities denominated in foreign currencies, including intercompany transactions. Within each fiscal year, we also utilize foreign currency forward contracts to hedge a portion of our expected non-U.S. dollar-denominated earnings against our reporting currency, the U.S. dollar. Further, we utilize commodity swap contracts to hedge price changes in nickel that impact raw materials included in our Cost of revenues.
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. We do not use derivative financial instruments for speculative purposes.
At March 31, 2026, we held foreign currency forward contracts to buy 210.0 million Mexican pesos; and to sell 7.0 million New Zealand dollars and 4.0 million Australian dollars. At March 31, 2026, we held commodity swap contracts to buy 0.6 million pounds of nickel. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Asset Derivatives | | Liability Derivatives |
| (in millions) | | Fair Value at | | Fair Value at | | Fair Value at | | Fair Value at |
| Balance Sheet Location | | March 31, 2026 | | March 31, 2025 | | March 31, 2026 | | March 31, 2025 |
| Prepaid & Other | | $ | 0.2 | | | $ | 0.1 | | | $ | — | | | $ | — | |
| Accrued expenses and other | | — | | | — | | | 0.7 | | | 0.6 | |
The following table presents the impact of derivative instruments and their location within the Consolidated Statements of Income: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Location of (loss) gain recognized in income | | Amount of (loss) gain recognized in income |
| Years Ended March 31, |
| 2026 | | 2025 | | 2024 |
| Foreign currency forward contracts | | Selling, general, and administrative | | $ | (0.5) | | | $ | 2.0 | | | $ | 1.3 | |
| Commodity swap contracts | | Cost of revenues | | (0.6) | | | (0.2) | | | (1.6) | |
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. 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 March 31, 2026 and March 31, 2025: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | | | | Fair Value Measurements |
| At March 31, | | Carrying Value | | Quoted Prices
in Active Markets
for Identical Assets | | Significant Other
Observable Inputs | | Significant
Unobservable
Inputs |
| | | Level 1 | | Level 2 | | Level 3 |
| 2026 | 2025 | | 2026 | 2025 | | 2026 | 2025 | | 2026 | 2025 |
| Assets: | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 439.6 | | $ | 171.7 | | | $ | 439.6 | | $ | 171.7 | | | $ | — | | $ | — | | | $ | — | | $ | — | |
Forward and swap contracts (1) | | 0.2 | | 0.1 | | | — | | — | | | 0.2 | | 0.1 | | | — | | — | |
Deferred compensation plan (2) | | 1.3 | | 1.1 | | | 1.3 | | 1.1 | | | — | | — | | | — | | — | |
| Other investments | | 3.2 | | 3.0 | | | 3.2 | | 3.0 | | | — | | — | | | — | | — | |
| Liabilities: | | | | | | | | | | | | |
Forward and swap contracts (1) | | $ | 0.7 | | $ | 0.6 | | | $ | — | | $ | — | | | $ | 0.7 | | $ | 0.6 | | | $ | — | | $ | — | |
Deferred compensation plan (2) | | 1.5 | 1.2 | | 1.5 | 1.2 | | — | — | | — | — |
Total debt (3) | | 1,931.7 | 2,043.7 | | — | — | | 1,666.4 | 1,756.5 | | — | — |
Contingent consideration obligations (4) | | 6.1 | 3.2 | | — | — | | — | — | | 6.1 | 3.2 |
(1) The fair values of forward and swap contracts are based on period-end forward rates and reflect the value of the amount that we would pay or receive for the contracts involving the same notional amounts and maturity dates.
(2) We maintain a frozen domestic non-qualified deferred compensation plan covering certain employees, which allowed for the deferral of payment of previously earned compensation for an employee-specified term or until retirement or termination. Amounts deferred can be allocated to various hypothetical investment options (compensation deferrals have been frozen under the plan). We hold investments to satisfy the future obligations of the plan. Employees who made deferrals are entitled to receive distributions of their hypothetical account balances (amounts deferred, together with earnings (losses)). Changes in the fair value of these investments are recorded in the Other expense (income) line of the Consolidated Statements of Income. During fiscal 2026 and fiscal 2025, we recorded gains of $0.2 million and $0.9 million, respectively, related to these investments.
(3)We estimate the fair value of our debt using discounted cash flow analyses, based on our current incremental borrowing rates for similar types of borrowing arrangements.
(4) As of March 31, 2026 and 2025, we had contingent consideration obligations of $6.1 million and $3.2 million arising from business acquisitions, respectively. The fair values are based on discounted cash flow analyses reflecting the possible achievement of specified performance measures or events and captures the contractual nature of the contingencies, commercial risk, and the time value of money. Contingent consideration obligations are classified in the Consolidated Balance Sheets as Accrued expense (short-term) and Other liabilities (long-term), as appropriate based on the contractual payment dates.
As of March 31, 2026 and 2025, we also held $45.5 million and $14.3 million of other investments without readily determinable fair values measured at cost less impairment, if any, adjusted to fair value for any observable price changes in orderly transactions for identical or similar investments of the same issuer. These investments are included in the "Other assets" line of our Consolidated Balance Sheets.
STERIS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Amounts in Accumulated Other Comprehensive Income (Loss) are presented net of the related tax. Foreign Currency Translation is not adjusted for income taxes. Accumulated other comprehensive income (loss) shown in our Consolidated Statements of Shareholders' Equity and changes in our balances, net of tax, for the years ended March 31, 2026, 2025 and 2024 were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Defined Benefit Plans (1) | Foreign Currency Translation | Total Accumulated Other Comprehensive Loss |
| (in millions) | 2026 | 2025 | 2024 | 2026 | 2025 | 2024 | 2026 | 2025 | 2024 |
| Beginning Balance | $ | (0.6) | | $ | (0.7) | | $ | — | | $ | (291.8) | | $ | (327.9) | | $ | (320.7) | | $ | (292.3) | | $ | (328.7) | | $ | (320.7) | |
| Other Comprehensive (Loss) Income before reclassifications | (0.2) | | 0.4 | | 0.6 | | 181.8 | | 9.2 | | (7.2) | | 181.6 | | 9.6 | | (6.6) | |
| Amounts reclassified from Accumulated Other Comprehensive (Loss) Income | (0.4) | | (0.3) | | (1.4) | | (2.0) | | 27.0 | | — | | (2.4) | | 26.7 | | (1.4) | |
| Net current-period Other Comprehensive (Loss) Income | (0.6) | | 0.1 | | (0.7) | | 179.7 | | 36.2 | | (7.2) | | 179.2 | | 36.3 | | (7.9) | |
| Ending Balance | $ | (1.1) | | $ | (0.6) | | $ | (0.7) | | $ | (112.0) | | $ | (291.8) | | $ | (327.9) | | $ | (113.1) | | $ | (292.3) | | $ | (328.7) | |
(1) The amortization (gain) of defined benefit plan costs is reported in the Interest and miscellaneous income line of our Consolidated Statements of Income.