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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.08pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.05pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.11pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
failure+5
adversely+3
adverse+3
claims+3
harm+3
Positive rising
effective+3
efficiencies+2
profitability+2
beautiful+2
successful+1
Risk Factors (Item 1A)
10,803 words
ITEM 1A. RISK FACTORS
This section describes certain risk factors that could affect our business, financial condition and results of operations. You should consider these risk factors when evaluating the forward-looking statements contained in this Annual Report on Form 10-K, because our actual results and financial condition might differ materially from those projected in the forward-looking statements should these risks occur. We face other risks besides those highlighted below. These other risks include additional uncertainties not presently known to us or that we currently believe are immaterial, but may ultimately have a significant impact. In addition, the impacts of ongoing geopolitical conflicts may also exacerbate any of these risks, which could have a material effect on us. Although the risks are organized by headings, and each risk is discussed separately, many are interrelated. Should any of these risks, described below or otherwise, actually occur, our business, financial condition, performance, prospects, value, or results of operations could be negatively affected.
LEGAL, REGULATORY AND TAX RISKS
Doing Business Internationally
Changes in economic climate may adversely affect us.
Adverse economic cycles or conditions, and Customer, regulatory or government responses to those cycles or conditions, have affected and could further affect our results of operations. The onset of these cycles or conditions may not be foreseeable and there can be no assurance when they will begin to after they occur. There also can be no assurance as to the or length of any recovery from a business or . Credit and liquidity may make it for some businesses to access credit markets and obtain financing and may cause some businesses to spending to conserve cash in anticipation of business and liquidity needs. If our Customers have financing their purchases due to tight credit markets or related factors or because of other operational or utilization they may be experiencing or otherwise decide to their purchases, our business could be affected. Our exposure to debt could also increase if Customers are to pay for products previously ordered and delivered.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
restructuring+2
impairment+1
critical+1
plaintiffs+1
bad+1
Positive rising
improvements+3
effective+2
favorable+2
exclusive+2
efficiency+1
MD&A (Item 7)
12,946 words
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.
Some of our Customers are governmental entities or other entities that rely on government healthcare systems or government funding. If government funding for healthcare becomes limited or restricted in countries in which we operate, including as a result of the impacts of a pandemic or its residual effects, our Customers may be unable to pay their obligations on a timely basis or to make payment in full and it may become necessary to increase reserves. In addition, there can be no assurance that there will not be an increase in collection difficulties. Prospectively, additional adverse effects resulting from these conditions may include decreased healthcare utilization, further pricing pressure on our products and services, and/or weaker overall demand for our products and services, particularly capital products.
The effects of geopolitical instability may adversely affect us and create significant risks and uncertainties for our business, with the ultimate impact dependent on future developments, which are highly uncertain and unpredictable.
Geopolitical instability has negatively impacted, and could in the future negatively impact, the global and U.S. economies, including by causing supply chain disruptions, rising inflation, volatility in capital markets and foreign currency exchange rates, rising interest rates, reduced consumer and Customer demand, economic slowdowns and recessions and heightened cybersecurity risks. The extent to which such geopolitical instability, including changes to trade policy, adversely affects our business, financial condition and results of operations, as well as our liquidity and capital profile, may depend on future developments that are highly uncertain and unpredictable. If geopolitical instability or evolving trade policy materially affects us, it may also have the effect of heightening other risks related to our business.
The potential impacts of geopolitical instability, which may result from the actions of state and non-state actors, include supply chain and logistics disruptions, financial impacts including volatility in foreign exchange and interest rates, increased inflationary pressure on raw materials and energy, reduced consumer and Customer demand, economic slowdowns and recessions and other risks, including an elevated risk of cybersecurity threats and the potential for new or further sanctions, tariffs or changes to international trade policy .
Furthermore, the U.S. and other countries have announced and enacted changes, and planned changes, to international trade policy, including increasing tariffs on imports, and potentially renegotiating or terminating existing trade agreements. The international trade environment is highly dynamic, and such changes, and retaliatory responses thereto, continue to evolve. Tariffs, trade restrictions and other changes to international trade policies may result in increased production costs and product pricing, supply chain disruptions, limited access to end markets, lower profitability, increasing inability of consumers and Customers to pay, reduced consumer and Customer demand, economic slowdowns and recessions and uncertainty related to planning long-term investments and strategies, and may have other competitive effects, including those exacerbated by competitors with different supply chain footprints, each of which could have a material adverse effect on our business. In addition, the United States-Mexico-Canada Agreement (“USMCA”) requires a formal six-year joint evaluation of the agreement. The first such review is expected to commence on July 1, 2026, the sixth anniversary of the agreement's entry into
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force. The U.S. has solicited feedback from the trading community regarding the operation of the USMCA, and the joint review could result in changes, including, for example, the processes by which goods qualify for preferential treatment, the tariffs applicable to products or other restrictions on the movement of goods within the region under the USMCA. Changes to the USMCA could adversely affect our manufacturing operations and those of our suppliers in Canada and Mexico and impact our ability to manufacture and market products or source materials at competitive prices, which could have a material adverse effect on our financial condition and results of operations. We cannot predict the ultimate scope, duration, or impact of current or future tariff measures, changes to existing trade agreements, such as the USMCA, or the imposition of other trade restrictions.
We may also need to make material changes to our global production footprint and workforce as a result of geopolitical developments or changes to trade policy, which could require significant capital expenditures and could result in asset impairments and other charges, including restructuring charges, any of which could be material. The duration and scope of all such changes that have been and will ultimately be implemented are not known at this time, and as such, any resulting impacts on our business are uncertain.
Compliance with multiple, and potentially conflicting, international laws and regulations, import and export limitations, anti-corruption laws, and exchange controls may be difficult, burdensome or expensive.
We are subject to compliance with various laws and regulations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to officials for the purpose of obtaining or retaining business. We are also subject to limitations on trade with sanctioned persons or persons in sanctioned countries and exchange controls. While our employees and agents are required to comply with these laws and regulations, our internal policies and procedures may not protect us from violations of these laws, which violations could affect financial condition, results of operations, or cash flows .
Healthcare Policy and Reimbursement
Changes in healthcare policy or government and other third-party payor reimbursement levels to healthcare providers, or failure to meet healthcare reimbursement or other requirements, might negatively impact our business.
We sell many of our products and services to hospitals and other healthcare providers and pharmaceutical manufacturers. Many of these Customers are subject to or supported by government programs or receive reimbursement for services from third-party payors, such as government programs, including Medicare and Medicaid in the U.S., private insurance plans, and managed care programs. Reimbursement systems vary significantly by country. Government-managed healthcare systems control reimbursement for healthcare services in many countries. Public budgetary constraints or uncertainties, which may be exacerbated by public health crises, may significantly impact the ability of hospitals, pharmaceutical manufacturers, and other Customers supported by such systems to purchase our products. Government or other third-party payors may deny or change coverage, reduce their current levels of reimbursement for healthcare services, or otherwise implement measures to regulate pricing or contain costs. In addition, our costs may increase more rapidly than reimbursement levels or permissible pricing increases or we may not satisfy the standards or requirements for reimbursement.
Various healthcare reform proposals have emerged and may in the future emerge at the federal and state level, and we are unable to predict which, if any, of those proposals will be enacted or the level of government funding of healthcare in any country in which we operate. For example, in 2025, the United States passed the One Big Beautiful Bill Act (the “OBBBA”) which may reduce Medicaid funding, result in decreased Medicaid reimbursements and negatively impact Customers who purchase our products and services.
Product and Service Related Regulations and Claims
We are subject to extensive regulatory requirements and must receive and maintain regulatory clearance or approval for many products and operations. Failure to receive or maintain, or delays in receiving, clearance or approvals may negatively impact our revenues, profitability, financial condition, or value.
Our operations are subject to extensive regulation in the countries where we do business. In the U.S., our products and services are regulated by the FDA and other regulatory authorities. In many foreign countries, sales of our products and services are subject to extensive regulations that may or may not be comparable to those of the FDA. In Europe, our products are regulated primarily by country and community regulations of those countries within the European Economic Area and must conform to the requirements of those authorities.
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Government regulation applies to nearly all aspects of testing, manufacturing, safety, labeling, storing, recordkeeping, reporting, promoting, distributing, and importing or exporting of medical devices, products, and services. In general, unless an exemption applies, a sterilization, decontamination or medical device or product or service must receive regulatory approval or clearance before it can be marketed or sold. Modifications to existing products or the marketing of new uses for existing products also may require regulatory approvals, approval supplements or clearances. If there are delays in and/or we are unable to obtain any required approvals, approval supplements or clearances for any modification to a previously cleared or approved device, we may be required to cease manufacturing and sale, or recall or restrict the use of such modified device, pay fines, or take other action until such time as appropriate clearance or approval is obtained. Any protraction or de-prioritization or delay in regulatory review could materially affect our ongoing device design, development, and commercialization plans.
Regulatory agencies may refuse to grant approval or clearance, or review and disagree with our interpretation of approvals or clearances, or with our decision that regulatory approval is not required or has been maintained. Regulatory submissions may require the provision of additional data and may be time consuming and costly, and their outcome is uncertain. Regulatory agencies may also change policies and procedures, change or reduce staff, adopt additional regulations, or revise existing regulations, each of which could prevent or delay approval or clearance of devices, or could impact our ability to market a previously cleared, approved, or unregulated device. Our failure to comply with the regulatory requirements of the FDA or other applicable regulatory requirements in the U.S. or elsewhere might subject us to administratively or judicially imposed sanctions. These sanctions include, among others, warning letters, fines, civil penalties, criminalpenalties, loss of tax benefits, injunctions, product seizure, recalls, suspensions or restrictions, re-labeling, detention, and/or debarment.
Our products are subject to recalls and restrictions, even after receiving U.S. or foreign regulatory clearance or approval.
Ongoing medical device reporting regulations require that we report to appropriate governmental authorities in the U.S. and/or other countries when our products cause or contribute to a death or seriousinjury or malfunction in a way that would be reasonably likely to contribute to a death or seriousinjury if the malfunction were to reoccur. Governmental authorities can require product recalls or impose restrictions for product design, manufacturing, labeling, clearance, or other issues. For the same reasons, we may voluntarily elect to recall or restrict the use of a product. Any recall or restriction could divert managerial and financial resources and might harm our reputation among our Customers and other healthcare professionals who use or recommend our products and services.
We may be adversely affected by product liability claims or other legal actions or regulatory or compliance matters .
We face an inherent business risk of exposure to product liability claims and other legal and regulatory actions. A significant increase in the number, severity, amount, or scope of these claims and actions may, as described above with respect to recalls and restrictions, result in substantial costs and harm our reputation or otherwise adversely affect product sales and our business. Product liability claims and other legal and regulatory actions may also distract management from other business responsibilities.
We are also subject to a variety of other types of claims, proceedings, investigations, and litigation initiated by government agencies or third parties and other potential risks and liabilities. These include compliance matters, product regulation or safety, taxes, employee benefit plans, employment discrimination, health and safety, environmental, antitrust, customs, import/export, government contract compliance, financial controls or reporting, intellectual property, allegations of misrepresentation, falseclaims or false statements, commercial claims, claims regarding promotion of our products and services, or other similar or different matters. Any such claims, proceedings, investigations or litigation, regardless of the merits, might result in substantial costs, restrictions on product use or sales, or otherwise negatively impact our business.
Administratively or judicially imposed or agreed sanctions might include warning letters, fines, civil penalties, criminalpenalties, loss of tax benefits, injunctions, product seizure, recalls, suspensions or restrictions, re-labeling, detention, and/or debarment. We also might be required to take actions such as payment of substantial amounts, or revision of financial statements, or to take, or be subject to, the following types of actions with respect to our products, services, or business: redesign, re-label, restrict, or recall products; cease manufacturing and selling products; seizure of product inventory; comply with a court injunction restricting or prohibiting further marketing and sale of products or services; comply with a consent decree, which could result in further regulatory constraints; dedication of significant internal and external resources and costs to respond to and comply with legal and regulatory issues and constraints; respond to claims, litigation, and other proceedings brought by Customers, users, governmental agencies, and others; disruption of product improvements and product launches; discontinuation of certain product lines or services; or other restrictions or limitations on product sales, use or operation, or other activities or business practices.
Some product replacements or substitutions may not be possible or may be prohibitively costly or time consuming. The impact of any legal, regulatory, or compliance claims, proceeding, investigation, or litigation, is difficult to predict.
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We maintain product liability and other insurance with coverages believed to be adequate. However, product liability or other claims may exceed insurance coverage limits, fines, penalties and regulatory sanctions may not be covered by insurance, or insurance may not continue to be available or available on commercially reasonable terms. Additionally, our insurers might deny claim coverage for valid or other reasons or may become insolvent.
Our business and financial condition could be adversely affected by difficulties in acquiring or maintaining a proprietary intellectual ownership position.
To maintain our competitive position for our products, we need to obtain patent or other proprietary rights for new and improved products and to maintain and enforce our existing patents and other proprietary rights. We typically apply for patents in the U.S. and in strategic other countries. We may also acquire patents through acquisitions. We may encounter difficulties in obtaining or protecting patents.
We rely on a combination of patents, trademarks, trade secrets, know-how, and confidentiality agreements to protect the proprietary aspects of our technology. These measures afford only limited protection, and competitors may gain access to our intellectual property and proprietary information. Litigation may be necessary to enforce or defend our intellectual property rights, to protect our trade secrets, and to determine the validity and scope of our proprietary rights. Litigation may also be brought against us claiming that we have violated the intellectual property rights of others. Litigation may be costly and may divert management’s attention from other matters. Additionally, in some foreign countries with weaker intellectual property rights, it may be difficult to maintain and enforce patents and other proprietary rights or defendagainstclaims of infringement.
Tax Risks
We may be adversely impacted by changes in tax laws or challenges to our tax positions, and our effective tax rate is uncertain and may vary from expectations, which could have a material impact on our results of operations and earnings per share.
We are subject to the tax laws at the federal, state or provincial, and local government levels in the many jurisdictions in which we operate or sell our products or services. Tax laws may change in ways that adversely affect our tax positions, effective tax rate and cash flow. These tax laws are extremely complex and subject to varying interpretations, and we are subject to tax examinations in various jurisdictions that may assess additional tax liabilities against us. Our tax reporting positions may be challenged by relevant tax authorities, we may incur significant expense in our efforts to defend those challenges, and we may be unsuccessful in such efforts. Developments in examinations and challenges may materially change our provision for taxes in the affected periods and may differ materially from our historical tax accruals. Any of these risks may have a materially adverse impact on our business operations, our cash flows, our financial position or results of operations and our effective tax rate.
In addition, there can be no assurance that we will be able to maintain any particular worldwide effective corporate tax rate. We cannot give any assurance as to what our effective tax rate will be in the future because of, among other things, uncertainty regarding the tax policies of the jurisdictions in which we and our affiliates operate and uncertainty of earnings across geographies. Further, our effective tax rate may increase as a result of withholding taxes incurred in connection with cross-border cash movements to fund operations, investments, and shareholder returns. These transfers may be subject to withholding taxes, and increases in such taxes or changes in applicable tax laws could place upward pressure on our effective tax rate. Our actual effective tax rate may vary from our expectations, and such variance may be material. Additionally, tax laws or their implementation and applicable tax authority practices in any particular jurisdiction could change in the future, possibly on a retroactive basis, and any such change could have a material adverse impact on us and our affiliates. In addition, the GloBE rules, which have been or are expected to be implemented in most of the jurisdictions where we have operations, and the CAMT (both defined and discussed in more detail below) may adversely impact our effective corporate tax rate.
Current economic and political conditions make tax rules in any jurisdiction subject to significant change.
The One Big Beautiful Bill Act (the “OBBBA”) was signed into law on July 4, 2025. Some limited guidance has been issued clarifying the application of some of the provisions in this legislation, and more guidance is expected to be issued in the near future with respect to a number of income tax provisions in the OBBBA. The law did not have a material impact on our fiscal 2026 consolidated financial statements, and we do not expect it to have a material impact on our effective tax rate in future years. However, we are unable to fully predict the overall impact that the OBBBA and additional guidance may have on our business. Furthermore, some non-U.S. jurisdictions have raised tax rates, and it is reasonable to expect that other global taxing authorities will be reviewing current legislation for potential modifications.
In August 2022, the Inflation Reduction Act (the “IRA”) was signed into law. One of the provisions in the IRA added a corporate alternative minimum tax (“CAMT”) to the U.S. Internal Revenue Code of 1986, as amended (the “Code”), beginning for fiscal years 2023. Although we do not expect to be subject to the CAMT regime for fiscal years through 2026, we continue to monitor our status under the CAMT rules. If in the future we become subject to CAMT, and if our regular income tax
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liability in the U.S. is lower than the income tax liability calculated under the CAMT provisions, we will be subject to additional income taxes in the U.S.
In addition, further changes in the tax laws of other jurisdictions will likely arise, including as a result of the base erosion and profit shifting ("BEPS") project undertaken by the Organization for Economic Cooperation and Development ("OECD"). The OECD, which represents a coalition of member countries, has issued recommendations that, in some cases, would make substantial changes to numerous long-standing tax positions and principles. Following the issuance of such recommendation, in December 2022, the European Union issued a directive to adopt Global Base Erosion laws ("GloBE" or "Pillar Two") in the EU member countries, in most cases beginning in fiscal year 2024. Most EU member countries and many non-EU member countries have already adopted local legislation based on GloBE Model Rules. Some of the countries that have not yet adopted GloBE are expected to do so in the near future. In addition, the GloBE rules have certain transition period provisions that apply to certain intercompany transactions occurring between December 1, 2021 and the effective date of the GloBE rules in a given jurisdiction. These transition period provisions may have an adverse impact on our effective tax rate, and subject us to additional income tax, in some of the jurisdictions that adopt the GloBE rules. OECD continues to issue guidance under GloBE which could result in amendments and modifications of the local GloBE rules and further uncertainty of GloBE’s impact on our income tax expense. In the most recent guidance, issued in January of 2026, OECD modified, among other things, certain rules relating to the one-year extension of the transitional country-by-country reporting safe harbor and the addition of both a permanent simplified effective tax rate safe harbor and a substance-based tax incentive safe harbor. This guidance also introduced a so-called “side-by-side” safe harbor pursuant to which multinational groups with an ultimate parent entity (or a "UPE") located in a qualifying jurisdiction are effectively exempt from certain GloBE taxes. At this time, only the United States is included on the list of qualifying jurisdictions allowing U.S.-parented multinational companies to avoid such GloBE taxes. While we have substantial presence in the U.S., we do not anticipate to benefit from the side-by-side safe harbor at this time, because we are a multinational enterprise with a UPE organized in Ireland. As a result, the GloBE rules could subject us to additional income taxes in the jurisdictions that adopted GloBE if our effective corporate tax rate in those jurisdictions (determined under the GloBE rules) is below 15%. Accordingly, the GloBE rules could increase tax uncertainty and adversely impact our provision for income taxes.
Changes in tax treaties and trade agreements could negatively impact our costs, results of operations and earnings per share.
Legislative and regulatory action may be taken in the U.S. which, if ultimately adopted, could override or otherwise adversely impact tax treaties upon which we rely or broaden the circumstances under which STERIS plc would be considered a U.S. resident, each of which could materially and adversely affect our tax obligations. We cannot predict the outcome of any specific legislative or regulatory proposals. However, if proposals are adopted that have the effect of disregarding our organization in Ireland or limiting our ability as an Irish company to take advantage of tax treaties with the U.S., we could be subject to increased taxation and/or potentially significant expense. Further, our organization under the laws of Ireland could be challenged by the IRS. Should the IRS assert that we should be treated as a U.S. corporation for U.S. federal tax purposes, we could be subject to substantial additional U.S. tax liability and non-U.S. holders of our ordinary shares would be subject to U.S. withholding tax on the gross amount of any dividends we paid to such shareholders. For Irish tax purposes, we are expected, regardless of our U.S. tax resident status, to be treated as an Irish tax resident. Consequently, if we are treated as a U.S. corporation for U.S. federal tax purposes, we could be liable for both U.S. and Ireland taxes, which could have a material adverse effect on our financial condition and results of operations.
On June 7, 2017, several countries, including many countries in which we operate and have subsidiaries, adopted the OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the "MLI"), which generally is meant to prevent treaty abuse, improvedispute resolution, prevent the artificial avoidance of permanent establishment status and neutralize the effect of hybrid mismatch agreements. The MLI came into effect on July 1, 2018. The MLI may modify effected tax treaties making it more difficult for us to obtain advantageous tax-treaty benefits. The number of affected tax treaties could eventually be significant. To date, more than 100 jurisdictions have joined the BEPS MLI, out of which most jurisdictions have ratified, accepted, or approved the MLI, and it covers almost 2,000 bilateral tax treaties worldwide. Signatories include jurisdictions from all continents and all levels of development and other jurisdictions are also actively working towards signature. As a result, our income may be taxed in jurisdictions where it is not currently taxed and at higher rates than it is currently taxed, all of which may increase our effective tax rate.
Existing free trade laws and regulations provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements. Changes in laws and regulations or policies governing the terms of foreign trade, and in particular, increased trade restrictions, tariffs or taxes on imports from countries where we manufacture products could have a material adverse impact on our business and financial results.
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Legislation relating to the denial of U.S. federal or state governmental contracts to U.S. companies that redomicile abroad could adversely affect our business.
Various U.S. federal and state legislative proposals that would deny governmental contracts to redomiciled companies may, and future proposals could, adversely affect us if adopted into law. We are unable to predict the likelihood that any such proposed legislation might become law, the nature of regulations that may be promulgated under any future legislative enactments, or the effect such enactments or increased regulatory scrutiny could have on our business.
BUSINESS AND OPERATIONAL RISKS
Our business environment is highly competitive, and if we fail to compete successfully, our revenues and results of operations may be negatively impacted .
We operate in a highly competitive environment. Our businesses compete with other broad-line manufacturers, as well as many smaller businesses specializing in particular products or services, primarily on the basis of brand, design, quality, safety, ease of use, serviceability, price, product features, warranty, delivery, service, and technical support. We also continue to work with our suppliers to implement plans to improve our competitive position by reducing material costs and manufacturing inefficiencies and realize productivity gains and distribution and supply chain efficiencies. Maintaining and improving our competitive position will require continued investment by us in manufacturing, engineering, quality standards, marketing, Customer service and support of our distribution networks. We also face increased competition from new infection prevention, sterile processing, contamination control, surgical support, cleaning consumables, gastrointestinal endoscopy accessories, contract sterilization, and other products and services entering the market. Competitors and potential competitors also are attempting to develop alternate technologies and sterilizing agents, as well as disposable medical instruments and other devices designed to address the risk of contamination. In addition, we also face competition within our AST segment from our Customers who may insource their sterilization needs by utilizing their own technology and systems. If we cannot successfully implement our strategies to compete, our revenues and results of operations may be negatively impacted, which could adversely affect our business, financial condition and results of operations or our long-term prospects.
Consolidations among our healthcare and pharmaceutical Customers may result in a loss of Customers or more significant pricing pressures .
A number of our Customers have consolidated. These consolidations are due in part to healthcare cost reduction measures initiated by competitive pressures as well as legislators, regulators and third-party payors. This may result in greater pricing pressures on us and in some cases loss of Customers. Furthermore, consolidation in healthcare may continue, including as a result of trends regarding increasing vertical integration and corporate ownership. Additional consolidations could result in a loss of Customers or more significant pricing pressures.
Supply chain disruption might increase our production costs, limit our production capabilities or curtail our operations.
We purchase raw materials, fabricated and other components, and energy supplies from a variety of suppliers. Key raw materials include stainless steel, organic and inorganic chemicals, fuel, cobalt-60 and EO, and key components include plastic components, as well as various electronics including control boards and computer chips. The availability and prices of raw materials and energy supplies are subject to volatility and are influenced by worldwide economic conditions, speculative action, world supply and demand balances, inventory levels, availability of substitute materials, currency exchange rates, anticipated or perceived shortages, and other factors. In addition, administrations in the U.S. and other countries continue to announce plans to implement or increase tariffs and other trade barriers, and it remains unclear what the ultimate outcome of these policy changes will be on our supply chains. Also, certain of our key materials and components have a limited number of suppliers, and some are single-sourced in certain regions of the world, such as cobalt-60 and EO, which are necessary for our AST operations. Given the limited number of suppliers for such materials, they may become subject to supply shortages or unavailability or increasing prices which could have a negative impact on our operations. Further, changes in regulatory requirements regarding the use of these materials might disrupt or cause shutdowns of portions of our AST operations or have other adverse consequences. Shortages in supply, increased regulatory or security requirements, or increases in the price of any of the raw materials, components and energy supplies used in our operations may adversely affe ct us.
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Our operations, and those of our suppliers, are subject to a variety of business continuity hazards and risks, any of which could interrupt production or operations or otherwise adversely affect our performance, results, or value.
Business continuity hazards and other risks include: explosions, fires, earthquakes, public health crises, extreme weather conditions, and other disasters, including those associated with climate change; disruptions of supply chains, or distribution for certain products or commodities; utility or other mechanical failures; unscheduleddowntime; labor difficulties; inability to obtain or maintain any required licenses or permits; disruption of communications; data security, preservation and redundancy disruptions; inability to hire or retain key management or employees; and regulation of the safety, security or other aspects of our operations.
The occurrence of these types of events has disrupted and may in the future disrupt or shut down operations, or otherwise adversely impact the production or profitability of a particular facility, or our operations as a whole. These events also might cause personal injury, loss of life, and other social and human effects (such as population dislocations), compliance costs and transition risks (such as regulatory or technology changes) or severedamage to or destruction of inventory, equipment, and other property, and for injuries occurring at our facilities or as a result of actions of our employees, result in liability claimsagainst us. Although we maintain property and casualty insurance and liability and similar insurance of the types and in the amounts that we believe are appropriate for our business, there can be no assurance that we will be able to continue our insurance with acceptable terms, conditions or limits or that our insurance policies will provide adequate protection against all potential significant risks and liabilities.
Expectations relating to corporate responsibility considerations expose us to potential liabilities, increased costs, reputational harm and other adverse effects on our business.
Many governments, regulators, investors, employees, Customers and other stakeholders continue to be focused on corporate responsibility, including policies regarding climate change and greenhouse gas emissions. Other stakeholders, including governments, regulators, and elected officials have expressed concerns about or opposition to businesses' social commitments, and sustainability goals, and other ESG-focused policies, including concerns about or allegations of "greenwashing". Responding to these considerations involves risks and uncertainties, requires significant investments and is impacted by factors that may be outside our control. In addition, some stakeholders may disagree with our priorities, statements and initiatives and the focus of stakeholders may change and evolve over time. Stakeholders also may have very different views on where corporate focus should be placed, including differing or conflicting views of regulators or elected officials in the various jurisdictions in which we operate. For instance, the European Union has generally adopted more extensive sustainability reporting requirements and environmental regulations, while certain U.S. federal and state authorities have adopted or proposed measures that may restrict or penalize companies for adopting certain ESG-related practices, targets or investment criteria.
Any failure, or perceived failure, by us to achieve our goals, further our initiatives, adhere to our public statements, comply with federal, state or international laws and regulations or meet evolving and varied stakeholder expectations and standards could result in reputational harm or advocacy group campaigns or legal and regulatory proceedings against us that could materially adversely affect our business, reputation, results of operations, financial condition and stock price.
Many of our Customers are also committing to, and may become subject to legal or regulatory requirements with respect to, long-term targets to reduce greenhouse gas emissions within their supply chains and associated emissions reporting. If we are unable to support Customers in fulfilling these obligations or achieving reductions, we may lose revenue if our Customers find other suppliers who are betterable to support such efforts. A failure, or perceived failure, to respond to expectations of all key stakeholders could cause harm to our business and reputation and have a negative impact on the market price of our ordinary shares. Further, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on social and environmental disclosures and commitments. Such ratings are used by some investors to inform their investment or voting decisions. Unfavorable ratings could lead to negative investor sentiment toward us and/or our industry, which could have a negative impact on our access to and costs of capital.
We may be adversely affected by global climate change or by existing and future legal, regulatory or market responses to such change.
The long-term effects of climate change are difficult to assess and predict. The impacts may include social and human effects (such as population dislocations or harm to health and well-being), compliance costs and transition risks (such as regulatory or technology changes) and others. The effects could impair, for example, the availability and cost of energy (including utilities), and we may bear losses as a result.
The regulations surrounding greenhouse gas emissions disclosures and sustainability reporting have also continued to evolve, with compliance and other requirements varying by jurisdiction, which subjects us to transition risks. Governments, regulatory bodies and other stakeholders vary in their support of or opposition to sustainability and environmental matters in different jurisdictions in which we operate, which can lead to rapid shifts in reporting obligations and differing obligations across these jurisdictions. Both the standard setting and regulatory landscapes are also extremely complex and present
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significant compliance and communication challenges in light of these uncertain and varied approaches to greenhouse gas emissions disclosures and sustainability reporting. If our greenhouse gas emissions-related data, processes or reporting are incomplete or inaccurate, we fail to comply with relevant reporting frameworks or efficiency standards from existing or newly emerging regulations, or we become subject to expanded carbon pricing mechanisms, we may incur enhanced costs, monetary penalties and reputational harm, investor demand for our securities could decrease, or we could become subject to litigation or governmental investigations, any of which may have a material adverse effect on our financial condition and results of operations.
The introduction and evolution of climate- and sustainability-related laws, regulations and reporting requirements—many of which are not uniform across jurisdictions—can increase the complexity and cost of compliance and heighten our exposure to enforcement actions, litigation and reputational harm. For example, the European Union adopted the CSRD in 2023, and in 2025 the European Commission proposed amendments to the CSRD aimed at simplifying sustainability reporting in Europe. Such amendments entered into force in March 2026, with transposition into national law by EU member states required in 2027, while changes to the ESRS are expected to be finalized later in calendar year 2026. While the EU has adopted extensive requirements through CSRD and ESRS, which continue to evolve, other jurisdictions, including, for example, the United Kingdom and California, have their own sustainability reporting frameworks. Managing compliance across these inconsistent regimes is complex and costly, and may result in disclosures that emphasize different metrics, use different methodologies or reach different conclusions depending on the applicable frameworks. We may also face challenges in presenting consistent and comparable sustainability information to global stakeholders.
These changes, and any other new or pending legal or regulatory matters, may result in the expenditure of additional resources or costs to comply with such requirements, which could affect our financial condition, results of operations or cash flows.
Our operations are subject to regulations and permitting, which may be changed or amended by the relevant authorities, and which may limit or eliminate our current operations or increase the complexity, burden, or expense of compliance, and regulated materials or processes that we use in our operations are, and may in the future become subject to litigation.
Our AST segment is a technology-neutral contract sterilization service that offers our Customers a wide range of sterilization modalities through a worldwide network of over 60 contract sterilization and laboratory facilities. One of the modalities offered by our AST operations is EO sterilization. In the U.S., several regulators, including the EPA, FDA, and agencies at the state and local level, play a role in regulating the use of EO sterilization. In 2016, the EPA changed the cancer risk basis for EO and determined that EO is carcinogenic to humans. Announcements of the temporary or permanent closure of EO sterilization facilities operated by others have been associated with state and/or local regulatory or other legal action related to EO emissions at those facilities. Our AST operations have taken and will continue to take measures to comply with all applicable emissions regulations and to reduce emissions. However, no assurance can be given that current or future legislative or regulatory action, or current or future litigation to which we are or may become a party, will not significantly affect the costs of conducting our EO contract sterilization operations or impact the use of EO in our contract sterilization operations. A significant reduction in our EO contract sterilization activities may have a material adverse effect on our financial condition and results of operations. Further, we have settled claims of liability resulting from EO sterilization activities in the past and could in the future be liable for further material damages and fines as a result of legislative or regulatory action or litigation, and any current or future liability could exceed our insurance and indemnification coverage, if any, and have a material adverse effect on our financial condition. Additionally, for many medical devices, EO sterilization may be the only current method of sterilization that effectively sterilizes and does not damage the device during the sterilization process. In the event of regulatory, legislative, or legal action that curtails or eliminates EO sterilization, there could be a shortage of medical devices and consequently a decline in surgical procedures. A decline in surgical procedures could result in a decline in demand for the products and services provided by our Healthcare business, which may have a material adverse effect on our financial condition and results of operations.
Our EO sterilization operations subject us to claims of liability and associated adverse effects .
Some current or past operators of EO sterilization facilities, including us, have been the target of litigation on behalf of private plaintiffsalleging personal and other injuries as a result of exposure to emissions from such facilities and have experienced adverse judgments and entered into settlements. These developments, as well as other publicity related to EO litigation or regulatory activity, may increase the likelihood that we will continue to be subject to these claims or that we will be subject to more claims on behalf of similar plaintiffs in the future.
Although we believe we have valid defenses to such claims, there can be no assurance that we will prevail on the merits, as the outcome of trials before juries and other aspects of litigation can be highly unpredictable, and, as a result, we have chosen to pursue a settlement process with respect to certain pending cases in Illinois. Pursuant to binding confidential settlement agreements entered into in March and October 2025, we agreed to pay up to approximately $48.2 million to resolve substantially all of the claims for personal injuryagainst a subsidiary related to EO exposure that are pending in the Circuit
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Court of Cook County, Illinois. A claims process regarding confidential settlement agreements is ongoing and subject to final court approval. Furthermore, some claims would be subject to further litigation if certain terms of the applicable settlement agreements are not fulfilled and we exercise our walkaway rights. Please refer to Note 12 to our consolidated financial statements titled “Commitments and Contingencies” for further information.
The financial impact of litigation, particularly mass tort action lawsuits, is also difficult to predict and a judgment entered or settlement reached in one case or group of cases is not necessarily representative of the outcome of other comparable cases. Regardless of the merits of the claims at issue or the ultimate outcome of cases, any future litigation related to our EO operations may be costly to defend, could result in an increase of our insurance premiums, reduction of limits and terms and could exhaust available insurance coverage. Defense of litigation may also result in diversion of management attention from other priorities, which could have a material adverse effect on our financial condition and results of operations.
If our continuing efforts to create a Lean business, to in-source production and to support smart manufacturing to reduce costs are not successful, our profitability may be negatively impacted or our business otherwise might be adversely affected .
We have undertaken various activities to incorporate Lean concepts and practices to more efficiently operate our business, including in-sourcing and smart manufacturing. We continue to look for opportunities to in-source production that is currently provided by third parties. These activities may not produce the full efficiencies and cost reduction benefits that we expect, or efficiencies and benefits might be delayed. Implementing these activities can be complex and time-consuming, and anticipated initial costs may exceed expectations. The failure to realize such efficiencies and cost reduction benefits, or increases in the costs of doing business related to in-sourced production, could adversely impact our financial condition and results of operations.
Similarly, we continue to invest in smart manufacturing to drive structural cost reduction in our facilities, including aligning work to more efficient manufacturing centers, implementing advanced manufacturing capabilities such as digital initiatives, automation and robots, and closing facilities that are not required to meet future capacity and work needs. Our success will depend on various factors, including our ability to either source or custom develop the necessary technology and components, and the digital transformation initiative’s cost-effectiveness, utility and competitive positioning. If our digital transformation initiative fails to develop as we expect, or progresses more slowly than expected, such failure to realize efficiencies and cost reduction benefits could adversely impact our financial condition and results of operations.
A pandemic or similar public health crisis could have a material adverse impact on our ability to staff our operations.
There can be no assurances that our measures to protect the health and wellbeing of our employees in the event of future health crises will be sufficient to protect our employees or that they may not otherwise be exposed to an illness outside of our workplace. If a large or otherwise impactful number of our employees, including key employees, become ill, incapacitated or are otherwise unable or unwilling to continue working during any future health crises, our operations may be adversely impacted. Furthermore, restrictive measures implemented by us or governmental entities in response to a future pandemic or similar public health crisis could adversely impact our ability to hire and retain employees. Any failure to staff our operations resulting from an emergent public health crisis could adversely impact our financial condition and results of operations.
Our business and results of operations may be adversely affected if we are unable to recruit and retain qualified management and other personnel.
Our continued success depends, in large part, on our ability to hire and retain highly qualified people, and if we are unable to do so, our business and operations may be impaired or disrupted. There is no assurance that we will be successful in attracting replacements to fill vacant positions, retaining successors to fill retirements or employees moving to new positions, or otherwise retaining qualified personnel. In addition, the increasing complexity of legal, regulatory and compliance matters have created additional responsibilities for our management and other personnel and can create significant distraction or diversion of their attention, which could have a material adverse effect on our ability to attract and retain such personnel.
We could experience a failure of a key information technology system, process or site or a breach of information security, including a cybersecurity breach of one or more key information technology systems, networks, processes, associated sites or service providers; failure to manage these and other risks associated with the use of sophisticated technology could materially impact our business.
We rely extensively on information technology (“IT”) systems to conduct business, including but not limited to interacting with Customers and suppliers, fulfilling orders, generating invoices, collecting and making payments, manufacturing and shipping products, providing Customer support, and fulfilling contractual obligations. In addition, we rely on networks and services, including internet sites, cloud and software-as-a-service solutions, data hosting, electronic payment systems, and processing facilities and tools and other hardware, software and technical applications and platforms, including some that employ artificial intelligence (“AI”), some of which are managed, hosted, provided and/or used by third-parties or their vendors, to assist in conducting our busines s. While we have been the previous target of cyberattacks and security breaches, none of these attacks or breaches to date have had a material adverse effect on the Company. We cannot guarantee that future
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cyberattacks, if successful, will not have a material effect on our business or financial results. Numerous and evolving cybersecurity threats continue to pose potential risks to the security of our IT systems, networks and services, as well as the confidentiality, availability and integrity of our data, and we may fail to sufficiently adapt to them. For instance, generative AI and other artificial intelligence technologies may be used by malicious actors to create more targeted phishing narratives, develop sophisticated malware, spread false information about us or our products, or otherwise enhance the social engineering and attack capabilities of such malicious actors.
Some of our products, services, and information technology systems contain or use open-source software, which poses additional risks, including potential security vulnerabilities, licensing compliance issues, and quality issues. A security breach, whether of our products, of our Customers’ network security and systems or of third-party hosting services, could impact the use of such products and the security of information stored therein. While we have made investments seeking to address these threats, including monitoring of networks and systems, hiring of exp erts, employee training and security policies for employees and third-party providers, the techniques used in these attacks change frequently and may be difficult to detect for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures. When cybersecurity incidents occur, we expect to follow our incident response policy and address them in accordance with applicable governmental regulations and other legal requirements. Our response to these incidents and our investments to protect our information technology infrastructure and data may not shield us from significant losses and potential liability or prevent any future interruption or breach of our systems. We maintain cyber liability insurance with terms, conditions, and limits believed to be adequate. However, cybersecurity-related liability or other claims may exceed insurance coverage limits, fines, penalties and regulatory sanctions may not be covered by insurance, or insurance may not continue to be available or available on commercially reasonable terms. Additionally, our insurers might deny claim coverage for valid or other reasons or may become insolvent.
If our IT systems are damaged or cease to function properly, the networks or service providers we rely upon fail to function properly, or we or one of our third-party providers suffer a loss or disclosure of our business or stakeholder information due to any number of causes ranging from catastrophic events or power outages to improper data handling or security breaches or other cyber incidents, and our business continuity plans do not effectively address these failures on a timely basis, we may be exposed to reputational, competitive and business harm as well as litigation and regulatory action. In the past, our Customers and resellers of our products have experienced cybersecurity attacks and incidents that have impacted their ability to do business, process payments and sell products, and there can be no assurance that future cybersecurity attacks and incidents affecting our Customers and resellers will not impact our business if and when they occur.
In addition, a large number of our employees, as well as those of our Customers and suppliers, work remotely part of the time, which may increase the risk of IT systems vulnerabilities and attacks and unauthorized access of information. Furthermore, future geopolitical conflicts could result in increases in cybersecurity incidents. The General Data Protection Regulation (“GDPR”) is focused on the protection of personal data, not merely the privacy of personal data. The GDPR has created a range of compliance obligations and can impose significant financial penalties for noncompliance (including possible fines of up to 4% of global annual revenues for the preceding financial year or €20 million (whichever is higher) for the most seriousinfringements). Other legislative or governmental regulatory requirements may come into effect that may similarly increase our compliance obligations or significantly increase our exposure to financial penalties for noncompliance.
Likewise, governments and regulatory bodies worldwide are actively developing new laws, regulations and ethical guidelines governing AI use, including the European Union’s Artificial Intelligence Act. Compliance with evolving and potentially inconsistent AI regulations across jurisdictions may be costly and complex. Failure to comply could result in significant penalties, restrictions on our use of AI, or reputational harm. The use of AI may also raise data privacy concerns, particularly if AI systems process sensitive health information subject to GDPR, HIPAA or other privacy regulations. If our competitors deploy AI technologies more effectively than we do, we may lose market share or be unable to maintain our competitive position. Failure to adequately manage AI-related risks could have a material adverse effect on our business, reputation, financial condition, and results of operations.
Our debt level or access to credit markets may limit our financial and business flexibility.
As of March 31, 2026, STERIS had approximately $1,931.7 million of indebtedness outstanding (net of deferred financing fees), which included $1,350.0 million of Senior Public Notes issued April 1, 2021, $557.8 million of Private Placement Senior Notes, and $37.8 million o f borrowings outstanding under our Revolving Credit Facility (each as defined below). STERIS’s ability to repay all the foregoing obligations will depend on, among other things, STERIS’s financial position and performance, as well as prevailing market conditions and other factors beyond our control.
Our indebtedness could have important consequences to our shareholders, including increasing risk associated with general adverse economic and industry conditions, limiting our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements, requiring the use of a substantial portion of our cash flow from operations for the payment of principal and interest on indebtedness, thereby reducing our ability to use our cash flow to fund
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working capital, acquisitions, capital expenditures and general corporate matters, including dividend payments and stock repurchases, limiting our flexibility in planning for, or reacting to, changes in our business and our industry and creating a disadvantage compared to our competitors with less indebtedness.
In addition, our ability and the ability of our Customers, suppliers and other business counterparties to obtain indebtedness and the cost thereof is dependent on credit profiles, prevailing market interest rates and other factors. Credit rating downgrades, a high interest rate environment, market volatility, market disruptions and other factors may limit our and our Customers’, suppliers’ and other counterparties’ access to credit markets or increase the cost of financing activities which may have an adverse effect on our operations.
RISKS RELATED TO BUSINESS DEVELOPMENT
We engage in acquisitions and affiliations, divestitures, and other business arrangements. Our growth may be adversely affected if we are unable to successfully identify and price strategic business candidates or otherwise optimize our business portfolio.
Our success depends, in part, on strategic acquisitions and joint ventures, which are intended to complement or expand our businesses, divestiture of non-strategic businesses, and other assets, and other actions intended to optimize our portfolio of businesses. This strategy depends upon our ability to identify, appropriately price, and complete these types of business development transactions or arrangements and to obtain any necessary financing. In recent fiscal years we have made a number of acquisitions, joint ventures and dispositions. We may be unable to find or consummate future acquisitions, joint ventures opportunities and divestitures at acceptable prices and terms. We continually evaluate potential business developments opportunities in the ordinary course of business.
Competition for strategic business candidates may result in increases in costs and price for acquisition candidates and market valuation issues may reduce the value available for divestiture of non-strategic businesses. These types of transactions are also subject to a number of other risks and uncertainties, including: delays in realizing or failure to realize anticipated benefits of the transactions; a termination or delay in the consummation of acquisition or disposition transactions by counterparties; diversion of management’s time and attention from other business concerns; difficulties in retaining key employees, Customers, or suppliers of the acquired or divested businesses; difficulties in maintaining uniform standards, controls, procedures and policies, or other integration or divestituredifficulties, including those that may expose us to greater cybersecurity risk; adverse effects on existing business relationships with suppliers or Customers; other events contributing to difficulties in generating future cash flows; risks associated with the assumption of contingent or other liabilities of acquisition targets or retention of liabilities for divested businesses and difficulties in obtaining financing.
Furthermore, assumptions that we have made with respect to acquisitions, dispositions or joint ventures, such as with respect to anticipated operating synergies or the costs associated with realizing such synergies, significant long-term cash flow generation, and the continuation of our investment grade credit profile, may not be realized. The processes involved with disposing of our businesses, entering into joint ventures or post-acquisition integration, as well as the implementation of other strategic initiatives, may result in the loss of key employees, the disruption of ongoing business, changes in strategy or inconsistencies in standards, controls, procedures and policies. There could also be potential unknown liabilities and unforeseen expenses that were not discovered or previously expected. Although we conduct what we believe to be a prudent level of investigation regarding the operating and financial condition of the businesses, product or service lines, assets or technologies we purchase, divest or invest in, an unavoidable level of risk remains regarding their actual operating and financial condition, as well as their strategic fit. We may not be able to ascertain actual value or understand potential liabilities until or after we actually assume operational control of these businesses, product or service lines, assets or technologies.
Our investments in our business and product offerings may not be as successful as anticipated.
From time to time, we may invest in technology, business infrastructure, new businesses, product offerings and manufacturing innovations and expansion of existing businesses, each of which may require substantial cash investments and management attention. We believe cost-effective investments are essential to business growth and profitability; however, significant investments are subject to typical risks and uncertainties inherent in developing a new business or expanding an existing business. The failure of any significant investment to provide expected returns or profitability could have a material adverse effect on our financial results and divert management attention from more profitable business operations.
Our business realignment initiatives may not be as successful as anticipated.
We execute organizational realignments to support our growth and cost management strategies. We also engage in initiatives aimed to increase productivity, efficiencies and cash flow and to reduce costs. If we are unable to successfully manage these and other organizational changes, the ability to complete such activities and realize anticipated synergies or cost savings as well as our results of operations and financial condition could be materially adversely affected. We cannot offer assurances that any of these initiatives will be beneficial to the extent anticipated, or that the estimated efficiencyimprovements, incremental cost savings or cash flow improvements will be realized as anticipated or at all.
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Our acquisition activity and ability to grow organically may be adversely affected if we are unable to continue to access the financial markets .
We have financed acquisitions through cash on hand, borrowings under our bank credit facilities and through public note offerings. Future acquisitions or other capital requirements and investments will necessitate additional cash. To the extent our existing sources of cash are insufficient to fund these or other future activities, we have in the past needed and may in the future need to raise additional funds through new or expanded financing arrangements, which could include further borrowings or equity issuances. There can be no assurance that we will be able to obtain additional funds on terms favorable to us, or at all, or that our existing bank credit facilities or other indebtedness can be replaced or refinanced when they mature or terminate.
The integration of acquired businesses into STERIS or working arrangements with joint venture partners may not be as successful as anticipated.
The integration of acquired businesses into STERIS as well as the entry into and operation of strategic joint ventures involves numerous operational, strategic, financial, accounting, legal, tax and other risks; potential liabilities associated with the acquired businesses or partners; and uncertainties related to design, operation and integration of internal controls over financial reporting. These risks and difficulties may result in the business performing differently than expected, in operational challenges, in strategic changes or in the failure to realize anticipated expense-related efficiencies. STERIS’s existing businesses could also be negatively impacted by integration actions or the administration of joint ventures. Potential difficulties that may be encountered include, among other factors:
• the inability to successfully integrate the business of an acquired business into STERIS in a manner that permits STERIS to achieve the full revenue and cost savings anticipated from the acquisition;
• complexities associated with managing the larger, more complex, integrated business;
• not realizing anticipated operating synergies or incurring unexpected costs to realize such synergies;
• integrating personnel from acquired businesses into STERIS while maintaining focus on providing consistent, high-quality products and services;
• potential unknown liabilities and unforeseen expenses;
• loss of key employees;
• integrating relationships with Customers, vendors and business partners;
• performance shortfalls as a result of the diversion of management’s attention caused by integration or joint venture activities; and
• the disruption of, or the loss of momentum in a new business and STERIS’s ongoing business or inconsistencies in standards, controls, procedures and policies.
Past and future business acquisitions may not be as accretive to STERIS’s earnings per share and cash flow from operations per share, which may negatively affect the market price of STERIS shares.
Past and future acquisitions may not be as accretive to STERIS’s earnings per share and cash flow from operations per share as expected. Future events and conditions could decrease or delay any expected accretion, result in dilution or cause greater dilution than is currently expected, including adverse changes in market conditions, production levels, operating results, competitive conditions, laws and regulations affecting STERIS, capital expenditure obligations, higher than expected integration costs, lower than expected synergies and general economic conditions.
Any decrease or delay of any accretion to STERIS’s earnings per share or cash flow from operations per share could cause the price of the STERIS’s ordinary shares to decline.
STERIS has incurred and expects to incur significant transaction and related costs in connection with strategic transactions, which may be in excess of those anticipated.
STERIS has incurred substantial expenses in connection with the negotiation and completion of past business acquisitions, dispositions and joint ventures, and expects to incur similar costs for any future strategic transactions. The anticipated benefits and cost savings from such initiatives may not be realized fully or at all, may take longer to realize than expected, may require more non-recurring costs and expenditures to realize than expected or could have other adverse effects that we do not currently foresee.
STERIS expects to incur non-recurring costs associated with the integrations of recent acquisitions into STERIS, joint ventures and working towards achievingdesired synergies. These fees and costs have been, and may continue to be, substantial. The non-recurring expenses include, among others, employee retention costs, fees paid to financial, legal and accounting advisors, and severance and benefit costs.
STERIS also expects to incur and has incurred costs to consolidate facilities and systems. Additional unanticipated costs may be incurred in connection with strategic transactions. Although STERIS expects that the elimination of duplicative costs, as
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well as the realization of other efficiencies related to the integration of acquired businesses, should allow STERIS to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.
STERIS may not achieve expected returns and benefits in connection with dispositions, which may require continued involvement in a divested business, such as through transition service agreements, guarantees, indemnities or other financial obligations. Under these arrangements, the performance of the divested business, or other conditions outside our control, could affect our future financial results. The costs described above, as well as other unanticipated costs and expenses, could have a material adverse effect on the financial condition and operating results.
We have recorded goodwill and other intangible assets that could become impaired and result in material non-cash charges to our results of operation in the future.
Our total assets include goodwill, intangibles and other long-lived assets. If we determine that these items have become impaired in the future, it may have a material adverse effect on our financial condition and results of operations. As of March 31, 2026 , we had recorded goodwill o f $4 billion and other intangible assets, net of accumulated amortization of $2 billion. Goodwill represents the excess of purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets of a business acquired. Goodwill is evaluated for impairment annually or more frequently, if indicators of impairment exist. If the impairment evaluations for goodwill indicate the carrying amount exceeds the estimated fair value, an impairmentloss is recognized in an amount equal to that excess. Our operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment.
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."
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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 integrati on.
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.
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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.
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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 greatertransparency 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)
Net cash provided by operating activities
Purchases of property, plant, equipment and intangibles
Proceeds from the sale of property, plant, equipment and intangibles
Free cash flow
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.
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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)
Change
Change
Total revenues
Revenues by type:
Service revenues
Consumable revenues
Capital equipment revenues
Revenues by geography (1) :
Ireland revenues
United States revenues
Other foreign revenues
(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)
Gross profit:
Product
Service
Total gross profit
Gross profit percentage:
Product
Service
Total gross profit percentage
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).
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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)
Operating expenses:
Selling, general, and administrative
Research and development
Illinois EO litigation settlement
Restructuring expenses
Total operating expenses
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 improvinginnovation 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 enhanceprofitability and improveefficiency, 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)
Severance and other compensation related costs
Lease and other contract termination and other costs
Product rationalization (1)
Accelerated depreciation and amortization and asset impairment
Total Restructuring Expense
(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.
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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
Fiscal 2025 charges
Payments
Balance at March 31, 2025
Fiscal 2026 Charges
Payments
Balance at March 31, 2026
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)
Change
Non-operating expenses, net:
Interest expense
Interest and miscellaneous income
Other expense (income), net
Non-operating expenses, net
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)
Income tax expense
Effective income tax rate
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."
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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)
Segment revenues:
Healthcare
AST
Life Sciences
Total
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
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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)
Change
Change
Income (loss) from operations before adjustments:
Healthcare
AST
Life Sciences
Corporate
Total income from operations before adjustments
Less: Adjustments
Amortization of acquired intangible assets (1)
Acquisition and integration related charges (2)
Tax restructuring costs (3)
Amortization of inventory and property "step up" to fair value (1)
Restructuring charges (4)
Illinois EO litigation settlement (5)
Total income from operations
(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.
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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)
Net cash provided by operating activities
Net cash (used in) provided by investing activities
Net cash used in financing activities
Debt-to-total capital ratio
Free cash flow
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,
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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
Revolving Credit Facility (1)
Senior Public Notes
Total Sources of Credit
(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.
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• 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
$125,000 Senior notes at 3.55%
2015 Private Placement
May 2027
$100,000 Senior notes at 3.70%
2015 Private Placement
May 2030
$50,000 Senior notes at 3.93%
2017 Private Placement
February 2027
€60,000 Senior notes at 1.86%
2017 Private Placement
February 2027
$45,000 Senior notes at 4.03%
2017 Private Placement
February 2029
€20,000 Senior notes at 2.04%
2017 Private Placement
February 2029
£45,000 Senior notes at 3.04%
2017 Private Placement
February 2029
€19,000 Senior notes at 2.30%
2017 Private Placement
February 2032
£30,000 Senior notes at 3.17%
2017 Private Placement
February 2032
Total Private Placement Senior Notes
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
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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)
2031 and thereafter
Total
Material Future Cash Obligations:
Debt
Operating leases
Purchase obligations
Benefit payments under defined benefit plans
Trust assets available for benefit payments under defined benefit plans
Benefit payments under other post-retirement benefits plans
Total Material Future Cash Obligations
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
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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)
2031 and thereafter
Totals
Commercial Commitments:
Letters of credit and surety bonds
Letters of credit as security for self-insured risk retention policies
Total Commercial Commitments
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.
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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)
Revenues
Gross profit
Operating costs arising from transactions with non-issuers and non-guarantors - net
Income from operations
Non-operating income (expense) arising from transactions with subsidiaries that are non-issuers and non-guarantors - net
Net income
Summarized Balance Sheet Information
At March 31,
(in millions)
Receivables due from non-issuers and non-guarantor subsidiaries
Other current assets
Total current assets
Non-current receivables due from non-issuers and non-guarantor subsidiaries
Goodwill
Other non-current assets
Total non-current assets
Payables due to non-issuers and non-guarantor subsidiaries
Other current liabilities
Total current liabilities
Non-current payables due to non-issuers and non-guarantor subsidiaries
Other non-current liabilities
Total non-current liabilities
Credit Ratings
STERIS's Senior Public Notes have been assigned the following credit ratings:
Standard & Poor's
Moody's
Fitch
Credit Ratings (1)
BBB
Baa2
BBB
(1) Effective May 20, 2026
Each 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.
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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 ImpairmentLosses. 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.
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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.”
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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., wrongfultermination, 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 t his 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:
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
Assumptions used to determine fiscal 2026
Net periodic benefit costs:
Discount rate
Expected return on plan assets
NA – Not applicable.
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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.
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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 threatenedlitigation, 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.
