SEC Filing | Sotera Health

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2022


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

For the transition period from to

Commission file number 001-39729

SOTERA HEALTH COMPANY

(Exact name of registrant as specified in its charter)

Delaware

47-3531161

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

9100 South Hills Blvd, Suite 300

Broadview Heights, Ohio

44147

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code

(440)

262-1410

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


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

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

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

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


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of July 27, 2022, there were 282,902,367 shares of the registrant’s common stock, $0.01 par value per share, outstanding.

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SOTERA HEALTH COMPANY

- TABLE OF CONTENTS -


Part I—FINANCIAL INFORMATION			5
Item 1. Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			31
Item 3. Quantitative and Qualitative Disclosures About Market Risk			45
Item 4. Controls and Procedures			46
Part II—OTHER INFORMATION			47
Item 1. Legal Proceedings.			47
Item 1A. Risk Factors.			48
Item 6. Exhibits.			49
SIGNATURES			50

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

•adverse changes in industry trends;

•changes in environmental, health and safety regulations or preferences;

•health and safety risks associated with the use, storage, transportation and disposal of potentially hazardous materials such as EO and Co-60;

•liability claims relating to health risks associated with the use of EO;

•current and future legal proceedings;

•competition we face;

•market changes, including inflationary trends, that impact our long-term supply contracts with variable price clauses and increase our cost of revenues;

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

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

•business continuity hazards, including supply chain disruptions and other risks associated with our operations;

•the ongoing impact of the COVID-19 pandemic;

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

•our ability to attract and retain qualified employees;

•the risks of doing business internationally, including global and regional economic and political instability and compliance with numerous laws and regulations in multiple jurisdictions;

•cyber security breaches, unauthorized data disclosures, and our dependence on information technology systems;

•any inability to pursue strategic transactions, including our ability to find suitable acquisition targets, or our failure to integrate strategic acquisitions successfully into our business;

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

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

•our ability to comply with rapidly evolving data privacy and security laws and regulations and any ineffective compliance efforts with such laws and regulations;

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

•our ability to maintain profitability in the future;

•impairment charges on our goodwill and other intangible assets with indefinite lives, as well as other long-lived assets and intangible assets with definite lives;

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

•our significant leverage could adversely affect our ability to raise additional capital, limit our ability to react to changes in the economy or our industry, limit our flexibility in operating our business through restrictions contained in our debt agreements and prevent us from meeting our obligations under our existing and future indebtedness; and

•uncertainty around discontinuation of LIBOR and transition to certain other interest “benchmarks.”

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

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You should carefully consider the above factors, as well as the factors discussed elsewhere in this Quarterly Report on Form 10-Q, including under Part II, Item 1A, “Risk Factors,” as well as Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 10-K”). If any of these trends, risks or uncertainties actually occurs or continues, our business, financial condition or operating results could be materially adversely affected, the trading prices of our securities could decline and you could lose all or part of your investment. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

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

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Part I—FINANCIAL INFORMATION

Item 1. Financial Statements

Sotera Health Company

Consolidated Balance Sheets

(in thousands)


	As of
	June 30, 2022		December 31, 2021
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	139,564	$	106,917
Restricted cash short-term	1,054		7
Accounts receivable, net of allowance for uncollectible accounts of $1,816 and $1,287, respectively	119,852		108,183
Inventories, net	39,652		54,288
Prepaid expenses and other current assets	81,173		71,923
Income taxes receivable	17,386		4,643
Total current assets	398,681		345,961
Property, plant, and equipment, net	699,571		650,797
Operating lease assets	29,853		39,946
Deferred income taxes	5,425		5,885
Investment in unconsolidated affiliate	—		9,405
Post-retirement assets	8,788		5,478
Other assets	38,308		12,866
Other intangible assets, net	543,057		598,844
Goodwill	1,116,002		1,120,320
Total assets	$	2,839,685	$	2,789,502
Liabilities and equity
Current liabilities:
Accounts payable	$	65,271	$	72,868
Accrued liabilities	52,658		61,861
Deferred revenues	6,863		8,669

Current portion of finance lease obligations	1,615		1,160
Current portion of operating lease obligations	8,132		9,289
Current portion of asset retirement obligations	606		619
Income taxes payable	6,876		6,695
Total current liabilities	142,021		161,161
Long-term debt	1,745,548		1,743,534
Finance lease obligations, less current portion	57,140		40,877
Operating lease obligations, less current portion	24,546		33,017
Noncurrent asset retirement obligations	42,688		41,833
Deferred lease income	20,146		20,745
Post-retirement obligations	11,198		11,464
Noncurrent liabilities	15,668		16,274
Deferred income taxes	144,730		134,501
Total liabilities	2,203,685		2,203,406
See Commitments and contingencies note
Equity:
Common stock, with $0.01 par value, 1,200,000 shares authorized; 286,037 shares issued at June 30, 2022 and December 31, 2021, respectively.	2,860		2,860
Preferred stock, with $0.01 par value, 120,000 authorized; no shares issued at June 30, 2022 and December 31, 2021, respectively	—		—
Treasury stock, at cost (3,135 and 3,052 shares at June 30, 2022 and December 31, 2021, respectively)	(32,654)		(33,545)
Additional paid-in capital	1,181,995		1,172,593
Retained deficit	(411,187)		(472,246)
Accumulated other comprehensive loss	(105,014)		(83,566)
Total equity attributable to Sotera Health Company	636,000		586,096
Noncontrolling interests	—		—
Total equity	636,000		586,096
Total liabilities and equity	$	2,839,685	$	2,789,502

See notes to consolidated financial statements.

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Sotera Health Company

Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Revenues:
Service	$	221,529	$	208,710	$	427,747	$	397,408
Product	45,110		43,207		75,646		66,657
Total net revenues	266,639		251,917		503,393		464,065
Cost of revenues:
Service	98,407		91,391		192,983		176,427
Product	17,836		16,765		31,139		28,505
Total cost of revenues	116,243		108,156		224,122		204,932
Gross profit	150,396		143,761		279,271		259,133
Operating expenses:
Selling, general and administrative expenses	63,132		49,828		122,674		102,293
Amortization of intangible assets	15,769		15,661		31,610		32,204

Total operating expenses	78,901		65,489		154,284		134,497
Operating income	71,495		78,272		124,987		124,636
Interest expense, net	14,044		19,163		24,448		40,445
Impairment of investment in unconsolidated affiliate	9,613		—		9,613		—
Loss on extinguishment of debt	—		—		—		14,312
Foreign exchange (gain) loss	(755)		76		33		654
Other expense (income), net	485		(2,764)		(2,482)		(6,654)
Income before income taxes	48,108		61,797		93,375		75,879
Provision for income taxes	17,690		19,182		32,316		22,199
Net income	30,418		42,615		61,059		53,680
Less: Net income attributable to noncontrolling interests	—		16		—		239
Net income attributable to Sotera Health Company	30,418		42,599		61,059		53,441
Other comprehensive income (loss) net of tax:
Pension and post-retirement benefits (net of taxes of $179, $(142), $87, and $(226), respectively)	532		(421)		258		(670)
Interest rate derivatives (net of taxes of $1,241, $0, $3,350 and $0, respectively)	3,178		—		9,357		—
Foreign currency translation	(46,038)		20,425		(31,063)		17,339
Comprehensive income (loss)	(11,910)		62,619		39,611		70,349
Less: comprehensive income attributable to noncontrolling interests	—		326		—		534
Comprehensive income (loss) attributable to Sotera Health Company	$	(11,910)	$	62,293	$	39,611	$	69,815
Earnings per share:
Basic	$	0.11	$	0.15	$	0.22	$	0.19
Diluted	0.11		0.15		0.22		0.19
Weighted average number of shares outstanding:
Basic	279,990		279,078		279,910		278,953
Diluted	280,171		279,214		280,038		279,078

See notes to consolidated financial statements.

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Sotera Health Company

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2022		2021
Operating activities:
Net income	$	61,059	$	53,680
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	31,611		31,062
Amortization of intangible assets	41,378		44,060
Impairment of investment in unconsolidated affiliate	9,613		—
Loss on extinguishment of debt	—		14,312
Deferred income taxes	10,416		3,504
Share-based compensation expense	10,339		6,942
Accretion of asset retirement obligations	1,118		1,153
Unrealized foreign exchange losses	1,274		1,097
Unrealized gains on derivatives not designated as hedging instruments	(8,029)		(1,614)
Amortization of debt issuance costs	2,836		3,245
Other	(4,043)		(4,241)
Changes in operating assets and liabilities:
Accounts receivable	(13,921)		(25,754)
Inventories	14,012		(770)
Other current assets	(6,683)		983
Accounts payable	(9,993)		15,080
Accrued liabilities	(11,869)		(4,375)
Income taxes payable / receivable	(15,968)		(3,998)
Other liabilities	(468)		(95)
Other long-term assets	(4,426)		(15)
Net cash provided by operating activities	108,256		134,256
Investing activities:
Purchases of property, plant and equipment	(71,642)		(44,789)
Purchase of mandatorily redeemable noncontrolling interest in Nelson Laboratories Fairfield, Inc.	—		(12,425)
Purchase of BioScience Laboratories, LLC, net of cash acquired	—		(13,760)
Adjustment to purchase of Regulatory Compliance Associates Inc.	450		—
Net cash used in investing activities	(71,192)		(70,974)
Financing activities:
Purchase of noncontrolling interests in China subsidiaries	—		(7,720)
Payments of debt issuance costs	(27)		(3,661)
Other financing activities	(1,056)		(709)
Net cash used in financing activities	(1,083)		(12,090)
Effect of exchange rate changes on cash and cash equivalents	(2,287)		2,578
Net increase in cash and cash equivalents, including restricted cash	33,694		53,770
Cash and cash equivalents, including restricted cash, at beginning of period	106,924		102,454
Cash and cash equivalents, including restricted cash, at end of period	$	140,618	$	156,224
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	42,057	$	36,615
Cash paid during the period for income taxes, net of tax refunds received	37,340		22,785
Purchases of property, plant and equipment included in accounts payable	17,923		9,670

See notes to consolidated financial statements.

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Sotera Health Company

Consolidated Statements of Equity

(in thousands)

(Unaudited)


	Three Months Ended June 30, 2022
	Common Stock					Additional Paid-In Capital		Retained Earnings / (Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interests		Total Equity
	Shares	Amount		Treasury Stock
Balance at March 31, 2022	282,930	$	2,860	$	(33,536)	$	1,177,097	$	(441,605)	$	(62,686)	$	—	$	642,130
Share-based compensation plans	(28)	—		882		4,898		—		—		—		5,780
Comprehensive income (loss):
Pension and post-retirement plan adjustments, net of tax	—	—		—		—		—		532		—		532
Foreign currency translation	—	—		—		—		—		(46,038)		—		(46,038)
Interest rate derivatives, net of tax	—	—		—		—		—		3,178		—		3,178
Net income	—	—		—		—		30,418		—		—		30,418
Balance at June 30, 2022	282,902	$	2,860	$	(32,654)	$	1,181,995	$	(411,187)	$	(105,014)	$	—	$	636,000


	Six Months Ended June 30, 2022
	Common Stock					Additional Paid-In Capital		Retained Earnings / (Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interests		Total Equity
	Shares	Amount		Treasury Stock
Balance at December 31, 2021	282,985	$	2,860	$	(33,545)	$	1,172,593	$	(472,246)	$	(83,566)	$	—	$	586,096
Share-based compensation plans	(83)	—		891		9,402		—		—		—		10,293
Comprehensive income (loss):
Pension and post-retirement plan adjustments, net of tax	—	—		—		—		—		258		—		258
Foreign currency translation	—	—		—		—		—		(31,063)		—		(31,063)
Interest rate derivatives, net of tax	—	—		—		—		—		9,357		—		9,357
Net income	—	—		—		—		61,059		—		—		61,059
Balance at June 30, 2022	282,902	$	2,860	$	(32,654)	$	1,181,995	$	(411,187)	$	(105,014)	$	—	$	636,000

See notes to consolidated financial statements.

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Sotera Health Company

Consolidated Statements of Equity (continued)

(in thousands)

(Unaudited)


	Three Months Ended June 30, 2021
	Common Stock					Additional Paid-In Capital		Retained Earnings / (Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interests		Total Equity
	Shares	Amount		Treasury Stock
Balance at March 31, 2021	282,900	$	2,860	$	(34,000)	$	1,169,852	$	(578,286)	$	(97,162)	$	2,480	$	465,744
Acquisition of noncontrolling interests	—	—		—		(5,772)		—		—		(2,806)		(8,578)
Issuance of shares	47	—		—		1,080		—		—		—		1,080
Share-based compensation plans	(30)	—		—		2,406		—		—		—		2,406
Comprehensive income (loss):
Pension and post-retirement plan adjustments, net of tax	—	—		—		—		—		(421)		—		(421)
Foreign currency translation	—	—		—		—		—		20,115		310		20,425

Net income	—	—		—		—		42,599		—		16		42,615
Balance at June 30, 2021	282,917	$	2,860	$	(34,000)	$	1,167,566	$	(535,687)	$	(77,468)	$	—	$	523,271


	Six Months Ended June 30, 2021
	Common Stock					Additional Paid-In Capital		Retained Earnings / (Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Noncontrolling Interests		Total Equity
	Shares	Amount		Treasury Stock
Balance at December 31, 2020	283,248	$	2,860	$	(34,000)	$	1,166,412	$	(589,128)	$	(93,842)	$	2,272	$	454,574
Acquisition of noncontrolling interests	—	—		—		(5,772)		—		—		(2,806)		(8,578)
Issuance of shares	47	—		—		1,080		—		—		—		1,080
Share-based compensation plans	(378)	—		—		5,846		—		—		—		5,846
Comprehensive income (loss):
Pension and post-retirement plan adjustments, net of tax	—	—		—		—		—		(670)		—		(670)
Foreign currency translation	—	—		—		—		—		17,044		295		17,339

Net income	—	—		—		—		53,441		—		239		53,680
Balance at June 30, 2021	282,917	$	2,860	$	(34,000)	$	1,167,566	$	(535,687)	$	(77,468)	$	—	$	523,271

See notes to consolidated financial statements.

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Sotera Health Company

Notes to Consolidated Financial Statements

1.Basis of Presentation

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

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

Noncontrolling interests represented the noncontrolling stockholders’ proportionate share of the total equity in the Company’s consolidated subsidiaries. In the second quarter of 2021, we purchased the outstanding noncontrolling interests of 15% and 33% of our two China subsidiaries. Refer to Note 4, “Acquisitions” for additional details. Prior to our acquisition of the noncontrolling interests in our two subsidiaries in China, we consolidated the results of operations of these subsidiaries with our results of operations and reflected the noncontrolling interest on our Consolidated Statements of Operations and Comprehensive Income (Loss) as “Net income attributable to noncontrolling interests.”

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

In July 2020, we acquired a 60% equity ownership interest in Auralux Enterprises, Ltd. (“Auralux”), a joint venture to construct an E-beam facility in Alberta, Canada in connection with our acquisition of Iotron Industries Canada, Inc. (“Iotron”). We determined this to be an investment in a variable interest entity (“VIE”). The investment was not consolidated as the Company concluded that we are not the primary beneficiary of the VIE. The Company accounts for the joint venture using the equity method. The investment is reflected within “Investment in unconsolidated affiliates” on the Consolidated Balance Sheets. During the three months ended June 30, 2022, we identified certain events and circumstances that indicated a decline in value of our investment in Auralux that was other-than-temporary. Consequently, as of June 30, 2022, we wrote down the investment in Auralux to its fair value of $0, resulting in an impairment charge of approximately $9.6 million.

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

Interim Financial Statements – The accompanying consolidated financial statements include the assets, liabilities, operating results, and cash flows of the Company and its wholly owned subsidiaries. These financial statements are prepared in accordance with U.S. GAAP for interim financial information, the instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These unaudited interim financial statements should be read in conjunction with the Company's annual consolidated financial statements and accompanying notes on Form 10-K for the year ended December 31, 2021.

2.Recent Accounting Standards

Adoption of Accounting Standard Updates

Effective January 1, 2022, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”): Measurement of Credit Losses on Financial Instruments, and the subsequently issued additional guidance that modified ASU 2016-13 which was originally issued by the Financial Accounting Standards Board (“FASB”) in June 2016. The standard requires an entity to change its accounting approach in determining impairment of certain financial instruments, including trade receivables, from an “incurred loss” to a “current expected credit loss” model. The adoption of this standard did not have a material impact on our consolidated financial statements and disclosures.

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Sotera Health Company

Notes to Consolidated Financial Statements

Effective January 1, 2022, we adopted ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which was issued by the FASB in December 2019. The standard simplifies the accounting for income taxes and makes a number of changes meant to add or clarify guidance on accounting for income taxes. The adoption of this standard did not have a material impact on our consolidated financial statements and disclosures.

ASUs Issued But Not Yet Adopted

In October 2021, the FASB issued ASU 2021-08 - Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). The amendments in ASU 2021-08 require that an acquiring entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contract with Customers (“ASC Topic 606”). At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC Topic 606 as if it had originated the contracts. For public business entities, these amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are currently assessing the effect that ASU 2021-08 will have on our financial position, results of operations, and disclosures.

3.Revenue Recognition

The following table shows disaggregated net revenues from contracts with external customers by timing of revenue and by segment for the three and six months ended June 30, 2022 and 2021:


(thousands of U.S. dollars)	Three Months Ended June 30, 2022
	Sterigenics		Nordion		Nelson Labs		Consolidated
Point in time	$	157,792	$	46,386	$	—	$	204,178
Over time	—		4,092		58,369		62,461
Total	$	157,792	$	50,478	$	58,369	$	266,639


(thousands of U.S. dollars)	Three Months Ended June 30, 2021
	Sterigenics		Nordion		Nelson Labs		Consolidated
Point in time	$	145,182	$	47,753	$	—	$	192,935
Over time	—		1,372		57,610		58,982
Total	$	145,182	$	49,125	$	57,610	$	251,917


(thousands of U.S. dollars)	Six Months Ended June 30, 2022
	Sterigenics		Nordion		Nelson Labs		Consolidated
Point in time	$	307,254	$	79,671	$	—	$	386,925
Over time	—		4,809		111,659		116,468
Total	$	307,254	$	84,480	$	111,659	$	503,393


(thousands of U.S. dollars)	Six Months Ended June 30, 2021
	Sterigenics		Nordion		Nelson Labs		Consolidated
Point in time	$	276,333	$	73,671	$	—	$	350,004
Over time	—		1,372		112,689		114,061
Total	$	276,333	$	75,043	$	112,689	$	464,065

Contract Balances

As of June 30, 2022, and December 31, 2021, contract assets included in “Prepaid expenses and other current assets” on the Consolidated Balance Sheets totaled approximately $21.7 million and $15.6 million, respectively, resulting from revenue recognized over time in excess of the amount billed to the customer.

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Sotera Health Company

Notes to Consolidated Financial Statements

When we receive consideration from a customer prior to transferring goods or services under the terms of a sales contract, we record deferred revenue, which represents a contract liability. Deferred revenue totaled $6.9 million and $8.7 million at June 30, 2022 and December 31, 2021, respectively. We recognize deferred revenue after all revenue recognition criteria are met.

4.Acquisitions

Acquisition of Regulatory Compliance Associates Inc.

On November 4, 2021, we acquired Regulatory Compliance Associates Inc. (“RCA”) for approximately $30.6 million, net of $0.6 million of cash acquired. RCA is an industry leader in providing life sciences consulting focused on quality, regulatory, and technical advisory services for the pharmaceutical, medical device and combination device industries. Headquartered in Pleasant Prairie, Wisconsin, RCA will expand and further strengthen the technical consulting and expert advisory capabilities of our Nelson Labs segment.

The purchase price of RCA was allocated to the underlying assets acquired and liabilities assumed based upon management's estimated fair values at the date of acquisition. Changes to the allocation of the purchase price may occur as these measurements are completed. As of June 30, 2022, approximately $25.2 million of goodwill was recorded related to the RCA acquisition, representing the excess of the purchase price over preliminary estimated fair values of all the assets acquired and liabilities assumed. Based on our most recent estimates, we also recorded $6.4 million of finite-lived intangible assets, primarily related to customer relationships. The purchase price allocation will be finalized within a measurement period not to exceed one year from closing. We funded this acquisition using available cash. The acquisition price and the results of operations for this acquired entity are not material in relation to our consolidated financial statements.

Acquisition of Noncontrolling Interests in China Subsidiaries

On May 18, 2021, we acquired the remaining 15% and 33% noncontrolling interests associated with our two subsidiaries located in China. As a result, both entities are now 100% owned by the Company. The purchase price of the remaining equity interests was approximately $8.6 million, net of the cancellation of an $0.8 million demand note. We paid 90% of the cash consideration on the acquisition date. The remaining amounts were partially settled in post-closing payments in the third quarter of 2021; $0.2 million of the post-closing payment remain outstanding as of June 30, 2022 subject to the terms of the equity transfer agreements. As a result of the transactions, we continue to consolidate both of these subsidiaries, however, as of May 18, 2021, we no longer record noncontrolling interests in the consolidated financial statements as these subsidiaries are fully owned by the Company. The purchases were accounted for as equity transactions. As a result of these transactions, noncontrolling interests were reduced by $2.8 million reflecting the carrying value of the interest with $5.8 million of the difference charged to additional paid-in capital.

Acquisition of Mandatorily Redeemable Noncontrolling Interest - Nelson Labs Fairfield

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

Acquisition of BioScience Laboratories, LLC

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

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Sotera Health Company

Notes to Consolidated Financial Statements

The purchase price of BioScience was allocated to the underlying assets acquired and liabilities assumed based upon management's estimated fair values at the date of acquisition. Approximately $8.4 million of goodwill was recorded related to the BioScience Labs acquisition, representing the excess of the purchase price over preliminary estimated fair values of all the assets acquired and liabilities assumed. We funded this acquisition using available cash. The acquisition price and the results of operations for this acquired entity are not material in relation to our consolidated financial statements.

5.Inventories

Inventories consisted primarily of the following:


(thousands of U.S. dollars)
	June 30, 2022		December 31, 2021
Raw materials and supplies	$	33,329