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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to
Commission file number   001-39729
https://cdn.kscope.io/d9e367b4b65ead17d0ea4aeac22f5035-Logo.jpg
SOTERA HEALTH COMPANY
(Exact name of registrant as specified in its charter)
Delaware47-3531161
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareSHCThe 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 filerAccelerated filer
Non-accelerated filerSmaller 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 October 25, 2023, there were 282,622,621 shares of the registrant’s common stock, $0.01 par value per share, outstanding.


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SOTERA HEALTH COMPANY
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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 words such as “believes,” “estimates,” “expects,” “projects,” “may,” “intends,” “plans” or “anticipates,” or by discussions of strategy, plans or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from historical results or any future results, performance or achievements expressed, suggested or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to:
any disruption in the availability or supply 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 and/or sanctions arising from United States, Canadian, United Kingdom or European Union relations with Russia;
foreign currency exchange rates and changes in those rates;
changes in environmental, health and safety regulations or preferences, and general economic, social and business conditions;
health and safety risks associated with the use, storage, transportation and disposal of potentially hazardous materials such as EO and Co-60;
the impact and outcome of current and future legal proceedings and liability claims, including litigation related to purported exposure to emissions of EO from our facilities in Illinois, Georgia and New Mexico and the possibility that other claims will be made in the future relating to these or other facilities;
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;
adverse changes in industry trends;
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;
business continuity hazards, including supply chain disruptions and other risks associated with our operations;
the risks of doing business internationally, including global and regional economic and political instability and compliance with numerous laws and regulations in multiple jurisdictions;
our ability to increase capacity at existing facilities, build new facilities in a timely and cost-effective manner and renew leases for our leased facilities;
our ability to attract and retain qualified employees;
severe health events, such as the COVID-19 pandemic, or environmental events;
cyber security breaches, unauthorized data disclosures, and our dependence on information technology systems;
any inability to pursue strategic transactions or 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;
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;
the effects of unionization efforts and labor regulations in certain countries in which we operate;
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; and
our significant leverage and how this 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/or prevent us from meeting our obligations under our existing and future indebtedness.
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These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them publicly in light of new information or future events, except as required by law. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved.
You should carefully consider the above factors, as well as the factors discussed elsewhere in this Quarterly Report on Form 10-Q, including under Part II, Item 1A, “Risk Factors,” as well as Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”). If any of these trends, risks or uncertainties actually occur or continue, 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, except per share amounts)
As of
September 30, 2023December 31, 2022
Assets(Unaudited)
Current assets:
Cash and cash equivalents$244,959 $395,214 
Restricted cash short-term7,575 1,080 
Accounts receivable, net of allowance for uncollectible accounts of $2,100 and $1,871, respectively
118,396 118,482 
Inventories, net37,924 37,145 
Prepaid expenses and other current assets84,201 80,995 
Income taxes receivable26,591 12,094 
Total current assets519,646 645,010 
Property, plant, and equipment, net884,385 774,527 
Operating lease assets24,672 26,481 
Deferred income taxes4,043 4,101 
Post-retirement assets39,342 35,570 
Other assets34,563 38,983 
Other intangible assets, net429,112 491,265 
Goodwill1,100,811 1,101,768 
Total assets$3,036,574 $3,117,705 
Liabilities and equity
Current liabilities:
Accounts payable$57,125 $74,139 
Accrued liabilities106,371 490,130 
Deferred revenue12,712 12,140 
Current portion of long-term debt5,235 197,119 
Current portion of finance lease obligations8,398 1,722 
Current portion of operating lease obligations6,362 7,554 
Current portion of asset retirement obligations252 2,896 
Income taxes payable4,139 5,867 
Total current liabilities200,594 791,567 
Long-term debt2,222,789 1,747,115 
Finance lease obligations, less current portion63,219 56,955 
Operating lease obligations, less current portion20,674 21,577 
Noncurrent asset retirement obligations44,382 42,586 
Deferred lease income18,444 18,902 
Post-retirement obligations7,760 7,910 
Noncurrent liabilities12,415 12,831 
Deferred income taxes68,826 68,024 
Total liabilities2,659,103 2,767,467 
See Commitments and contingencies note
Equity:
Common stock, with $0.01 par value, 1,200,000 shares authorized; 286,037 shares issued at September 30, 2023 and December 31, 2022
2,860 2,860 
Preferred stock, with $0.01 par value, 120,000 authorized; no shares issued at September 30, 2023 and December 31, 2022
  
Treasury stock, at cost (3,414 and 3,616 shares at September 30, 2023 and December 31, 2022, respectively)
(28,474)(29,775)
Additional paid-in capital1,210,346 1,189,622 
Retained deficit(693,121)(705,816)
Accumulated other comprehensive loss(114,140)(106,653)
Total equity377,471 350,238 
Total liabilities and equity$3,036,574 $3,117,705 
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 September 30,Nine Months Ended September 30,
2023202220232022
Revenues:
Service$227,120 $216,704 $667,680 $644,451 
Product36,057 32,000 71,369 107,646 
Total net revenues263,177 248,704 739,049 752,097 
Cost of revenues:
Service103,580 99,772 311,690 292,755 
Product13,613 12,919 30,284 44,058 
Total cost of revenues117,193 112,691 341,974 336,813 
Gross profit145,984 136,013 397,075 415,284 
Operating expenses:
Selling, general and administrative expenses54,112 57,091 176,309 179,765 
Amortization of intangible assets15,774 15,727 48,098 47,337 
Total operating expenses69,886 72,818 224,407 227,102 
Operating income76,098 63,195 172,668 188,182 
Interest expense, net40,627 23,427 100,225 47,875 
Georgia EO litigation settlement35,000  35,000  
Impairment of investment in unconsolidated affiliate   9,613 
Foreign exchange (gain) loss(426)(535)386 (502)
Other expense (income), net427 (1,713)(3,300)(4,195)
Income before income taxes470 42,016 40,357 135,391 
Provision for income taxes14,130 16,926 27,662 49,242 
Net income (loss)(13,660)25,090 12,695 86,149 
Other comprehensive income (loss) net of tax:
Pension and post-retirement benefits (net of taxes of $(43), $357, $(54), and $444, respectively)
(126)1,065 (159)1,323 
Interest rate derivatives (net of taxes of $(934), $3,368, $(3,294) and $6,718, respectively)
(1,714)9,408 (6,963)18,765 
Foreign currency translation(32,996)(69,460)(365)(100,523)
Comprehensive income (loss)$(48,496)$(33,897)$5,208 $5,714 
Earnings per share:
Basic$(0.05)$0.09 $0.04 $0.31 
Diluted(0.05)0.09 0.04 0.31 
Weighted average number of shares outstanding:
Basic281,105 280,142 280,898 279,988 
Diluted281,105 280,172 283,190 280,093 
See notes to consolidated financial statements.
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Sotera Health Company
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended September 30,
20232022
Operating activities:
Net income$12,695 $86,149 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation55,913 47,496 
Amortization of intangible assets61,290 61,596 
Impairment of investment in unconsolidated affiliate 9,613 
Deferred income taxes3,284 17,153 
Share-based compensation expense24,034 14,955 
Accretion of asset retirement obligations1,683 1,645 
Unrealized foreign exchange (gain) loss2,444 (5,610)
Unrealized loss (gain) on derivatives not designated as hedging instruments
1,087 (4,323)
Amortization of debt issuance costs6,522 4,259 
Other(3,492)(6,109)
Changes in operating assets and liabilities:
Accounts receivable302 (8,558)
Inventories(866)13,896 
Other current assets(892)(13,066)
Accounts payable(17,412)(13,367)
Accrued liabilities(11,389)(1,874)
Illinois EO litigation settlement(407,712) 
Georgia EO litigation settlement35,000  
Income taxes payable / receivable, net(18,366)(25,050)
Other liabilities(809)1,489 
Other long-term assets(4,171)(4,259)
Net cash provided by (used in) operating activities(260,855)176,035 
Investing activities:
Purchases of property, plant and equipment(150,149)(110,642)
Adjustment to purchase of Regulatory Compliance Associates Inc. 450 
Other investing activities69 34 
Net cash used in investing activities(150,080)(110,158)
Financing activities:
Proceeds from long-term borrowings500,000  
Payment of revolving credit facility(200,000) 
Payment of long-term borrowings(1,250) 
Payments of debt issuance costs and debt discount(25,645)(31)
Other financing activities(3,353)(1,452)
Net cash provided by (used in) financing activities269,752 (1,483)
Effect of exchange rate changes on cash and cash equivalents(2,577)(6,357)
Net increase (decrease) in cash and cash equivalents, including restricted cash(143,760)58,037 
Cash and cash equivalents, including restricted cash, at beginning of period396,294 106,924 
Cash and cash equivalents, including restricted cash, at end of period$252,534 $164,961 
Supplemental disclosures of cash flow information:
Cash paid during the period for interest$150,696 $65,045 
Cash paid during the period for income taxes, net of tax refunds received42,587 56,474 
Purchases of property, plant and equipment included in accounts payable16,383 18,583 
See notes to consolidated financial statements.
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Sotera Health Company
Consolidated Statements of Equity
(in thousands)
(Unaudited)
Three Months Ended September 30, 2023
Common Stock
Additional
Paid-In
Capital
Retained
Earnings /
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
(Loss) Income
Total
Equity
Shares
Amount
Treasury
Stock
Balance at June 30, 2023282,544 $2,860 $(28,700)$1,202,972 $(679,461)$(79,304)$418,367 
Share-based compensation plans79 — 226 7,374 — — 7,600 
Comprehensive income (loss):
Pension and post-retirement plan adjustments, net of tax— — — — — (126)(126)
Foreign currency translation— — — — — (32,996)(32,996)
Interest rate derivatives, net of tax— — — —  (1,714)(1,714)
Net loss— — — — (13,660)— (13,660)
Balance at September 30, 2023282,623 $2,860 $(28,474)$1,210,346 $(693,121)$(114,140)$377,471 
Nine Months Ended September 30, 2023
Common Stock

Additional
Paid-In
Capital
Retained
Earnings /
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
(Loss) Income
Total
Equity
Shares
Amount
Treasury
Stock
Balance at December 31, 2022282,421 $2,860 $(29,775)$1,189,622 $(705,816)$(106,653)$350,238 
Share-based compensation plans202 — 1,301 20,724 — — 22,025 
Comprehensive income (loss):
Pension and post-retirement plan adjustments, net of tax— — — — — (159)(159)
Foreign currency translation— — — — — (365)(365)
Interest rate derivatives, net of tax— — — —  (6,963)(6,963)
Net income— — — — 12,695 — 12,695
Balance at September 30, 2023282,623 $2,860 $(28,474)$1,210,346 $(693,121)$(114,140)$377,471 
See notes to consolidated financial statements.
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Sotera Health Company
Consolidated Statements of Equity (continued)
(in thousands)
(Unaudited)
Three Months Ended September 30, 2022
Common Stock

Additional
Paid-In
Capital
Retained
Earnings /
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
(Loss) Income
Total
Equity
Shares
Amount
Treasury
Stock
Balance at June 30, 2022282,902 $2,860 $(32,654)$1,181,995 $(411,187)$(105,014)$636,000 
Share-based compensation plans(789)— 1 4,625 — — 4,626 
Comprehensive income (loss):— — — — — — 
Pension and post-retirement plan adjustments, net of tax— — — — — 1,065 1,065 
Foreign currency translation— — — — — (69,460)(69,460)
Interest rate derivatives, net of tax— — — — — 9,408 9,408 
Net income— — — — 25,090 — 25,090 
Balance at September 30, 2022282,113 $2,860 $(32,653)$1,186,620 $(386,097)$(164,001)$606,729 
Nine Months Ended September 30, 2022
Common Stock

Additional
Paid-In
Capital
Retained
Earnings /
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
(Loss) Income
Total
Equity
Shares
Amount
Treasury
Stock
Balance at December 31, 2021282,985 $2,860 $(33,545)$1,172,593 $(472,246)$(83,566)$586,096 
Share-based compensation plans(872)— 892 14,027 — — 14,919 
Comprehensive income (loss):
Pension and post-retirement plan adjustments, net of tax— — — — — 1,323 1,323 
Foreign currency translation— — — — — (100,523)(100,523)
Interest rate derivatives, net of tax— — — — — 18,765 18,765 
Net income— — — — 86,149 — 86,149
Balance at September 30, 2022282,113 $2,860 $(32,653)$1,186,620 $(386,097)$(164,001)$606,729 
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 17, “Segment Information”. All significant intercompany balances and transactions have been eliminated in consolidation.
In July 2020, we acquired a 60% equity ownership interest in a joint venture to construct an E-beam facility in Alberta, Canada in connection with our acquisition of Iotron Industries Canada, Inc. (“Iotron”). Our equity ownership interest in the joint venture was determined to be an investment in a variable interest entity (“VIE”). The investment was not consolidated as the Company concluded that it was not the primary beneficiary of the VIE. The Company accounted for the joint venture using the equity method.
During the year ended December 31, 2022, we identified certain events and circumstances that indicated a decline in value of our investment in this joint venture that was other-than-temporary. Consequently, in the second quarter of 2022, we wrote down the investment in the joint venture to its fair value of $0, resulting in an impairment charge of approximately $9.6 million. In February 2023, we entered into a Share Purchase Agreement to transfer our equity ownership interest to the joint venture partner, thereby terminating our equity ownership interest.
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 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 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 in our 2022 10-K.
2.Recent Accounting Standards
Adoption of Accounting Standard Updates
Effective January 1, 2023, we adopted 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 Contracts 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. The adoption of this standard did not have a material impact on our consolidated financial statements and disclosures.
3.Revenue Recognition
The following table shows disaggregated net revenues from contracts with external customers by timing of revenue and by segment for the three and nine months ended September 30, 2023 and 2022:
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Sotera Health Company
Notes to Consolidated Financial Statements
(thousands of U.S. dollars)Three Months Ended September 30, 2023
SterigenicsNordionNelson LabsConsolidated
Point in time$168,347 $37,068 $ $205,415 
Over time 3,030 54,732 57,762 
Total$168,347 $40,098 $54,732 $263,177 
(thousands of U.S. dollars)Three Months Ended September 30, 2022
SterigenicsNordionNelson LabsConsolidated
Point in time$157,723 $33,830 $ $191,553 
Over time 1,241 55,910 57,151 
Total$157,723 $35,071 $55,910 $248,704 
(thousands of U.S. dollars)Nine Months Ended September 30, 2023
SterigenicsNordionNelson LabsConsolidated
Point in time$494,934 $75,309 $ $570,243 
Over time 5,315 163,491 168,806 
Total$494,934 $80,624 $163,491 $739,049 
(thousands of U.S. dollars)Nine Months Ended September 30, 2022
SterigenicsNordionNelson LabsConsolidated
Point in time$464,977 $113,501 $ $578,478 
Over time 6,050 167,569 173,619 
Total$464,977 $119,551 $167,569 $752,097 
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 $12.7 million and $12.1 million at September 30, 2023 and December 31, 2022, 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 expands and further strengthens our technical consulting and expert advisory capabilities within 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. As of September 30, 2023, approximately $25.3 million of goodwill was recorded related to the RCA acquisition, representing the excess of the purchase price over the estimated fair values of all the assets acquired and liabilities assumed. We also recorded $6.4 million of finite-lived intangible assets, primarily related to customer relationships. 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.
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Sotera Health Company
Notes to Consolidated Financial Statements
5.Inventories
Inventories consisted of the following:
(thousands of U.S. dollars)
September 30, 2023December 31, 2022
Raw materials and supplies$33,563 $36,402 
Work-in-process590 584 
Finished goods3,887 276 
38,040 37,262 
Reserve for excess and obsolete inventory(116)(117)
Inventories, net$37,924 $37,145 
6.Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
(thousands of U.S. dollars)
September 30, 2023December 31, 2022
Prepaid taxes$29,515 $26,598 
Prepaid business insurance1,822 9,964 
Prepaid rent1,226 998 
Customer contract assets25,531 19,777 
Insurance and indemnification receivables2,039 3,724 
Current deposits412 660 
Prepaid maintenance contracts605 324 
Value added tax receivable3,636 1,640 
Prepaid software licensing2,344 1,832 
Stock supplies3,819 3,656 
Embedded derivatives2,287 2,721 
Other10,965 9,101 
Prepaid expenses and other current assets$84,201 $80,995 
7.Goodwill and Other Intangible Assets
Changes to goodwill during the nine months ended September 30, 2023 were as follows:
(thousands of U.S. dollars)SterigenicsNordionNelson LabsTotal
Goodwill at December 31, 2022$657,458 $270,966 $173,344 $1,101,768 
Changes due to foreign currency exchange rates131 (690)(398)(957)
Goodwill at September 30, 2023$657,589 $270,276 $172,946 $1,100,811 
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Sotera Health Company
Notes to Consolidated Financial Statements
Other intangible assets consisted of the following:
(thousands of U.S. dollars)
Gross Carrying
Amount
Accumulated
Amortization
As of September 30, 2023
Finite-lived intangible assets
Customer relationships$652,421 $466,828 
Proprietary technology83,538 54,474 
Trade names2,561 1,081 
Land-use rights8,497 1,748 
Sealed source and supply agreements203,865 101,918 
Other4,464 2,647 
Total finite-lived intangible assets955,346 628,696 
Indefinite-lived intangible assets
Regulatory licenses and other(a)
76,781 — 
Trade names / trademarks25,681 — 
Total indefinite-lived intangible assets102,462 — 
Total$1,057,808 $628,696 
As of December 31, 2022
Gross Carrying
Amount
Accumulated
Amortization
Finite-lived intangible assets
Customer relationships$652,811 $422,277 
Proprietary technology86,054 50,952 
Trade names2,553 701 
Land-use rights8,986 1,683 
Sealed source and supply agreements204,391 93,034 
Other4,469 1,979 
Total finite-lived intangible assets959,264 570,626 
Indefinite-lived intangible assets
Regulatory licenses and other(a)
76,978 — 
Trade names / trademarks25,649 — 
Total indefinite-lived intangible assets102,627 — 
Total$1,061,891 $570,626 
(a)Includes certain transportation certifications, a class 1B nuclear license and other intangibles related to obtaining such licensure. These assets are considered indefinite-lived as the decision for renewal by the Canadian Nuclear Safety Commission is highly based on a licensee’s previous assessments, reported incidents, and annual compliance and inspection results. New applications for license can take a significant amount of time and cost; whereas an existing licensee with a historical record of compliance and current operating conditions more than likely ensures renewal for another 10 year license period as Nordion has demonstrated over its 75 years of history.
Amounts include the impact of foreign currency translation. Fully amortized amounts are written off.
Amortization expense for other intangible assets was $20.2 million ($4.4 million is included in “Cost of revenues”) and $61.3 million ($13.2 million is included in “Cost of revenues”) in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2023, respectively.
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Sotera Health Company
Notes to Consolidated Financial Statements
Amortization expense for other intangible assets was $20.2 million ($4.5 million is included in “Cost of revenues”) and $61.6 million ($14.3 million is included in “Cost of revenues”) in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2022, respectively.
The estimated aggregate amortization expense for finite-lived intangible assets for each of the next five years and thereafter is as follows:
(thousands of U.S. dollars)
For the remainder of 2023$19,988 
202479,336 
202542,208 
202622,130 
202721,053 
Thereafter141,935 
Total$326,650 
The weighted-average remaining useful life of the finite-lived intangible assets was approximately nine years as of September 30, 2023.
8.Accrued Liabilities
Accrued liabilities consisted of the following:
(thousands of U.S. dollars)
September 30, 2023December 31, 2022
Accrued employee compensation$29,361 $32,936 
Georgia EO litigation settlement reserve35,000  
Illinois EO litigation settlement reserve288 408,000 
Legal reserves2,939 3,776 
Accrued interest expense2,478 23,291 
Embedded derivatives4,176 3,508 
Professional fees18,159 6,436 
Accrued utilities1,946 1,906 
Insurance accrual2,508 2,392 
Accrued taxes3,507 2,567 
Other6,009 5,318 
Accrued liabilities$106,371 $490,130 
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Sotera Health Company
Notes to Consolidated Financial Statements
9.Long-Term Debt
Long-term debt consisted of the following:
(thousands of U.S. dollars)
As of September 30, 2023Gross AmountUnamortized Debt Issuance CostsUnamortized Debt DiscountNet Amount
Term loan, due 2026$1,763,100 $(1,760)$(11,155)$1,750,185 
Term loan B, due 2026498,750 (8,003)(13,357)477,390 
Other long-term debt450 (1) 449 
2,262,300 (9,764)(24,512)2,228,024 
Less current portion5,450 (80)(135)5,235 
Long-term debt$2,256,850 $(9,684)$(24,377)$2,222,789 
(thousands of U.S. dollars)
As of December 31, 2022Gross AmountUnamortized Debt Issuance CostsUnamortized Debt DiscountNet Amount
Term loan, due 2026$1,763,100 $(2,140)$(13,845)$1,747,115 
Revolving credit facility200,000 (3,328) 196,672 
Other long-term debt450 (3)— 447 
1,963,550 (5,471)(13,845)1,944,234 
Less current portion200,450 (3,331) 197,119 
Long-term debt$1,763,100 $(2,140)$(13,845)$1,747,115 

Debt Facilities
Senior Secured Credit Facilities
On December 13, 2019, Sotera Health Holdings, LLC (“SHH”), our wholly owned subsidiary, entered into senior secured first lien credit facilities (the “Senior Secured Credit Facilities”), consisting of both a prepayable senior secured first lien term loan (the “Term Loan”) and a senior secured first lien revolving credit facility (the “Revolving Credit Facility”) pursuant to a first lien credit agreement (the “Credit Agreement”). The Revolving Credit Facility and Term Loan mature on June 13, 2026 and December 13, 2026, respectively. After giving effect to the Revolving Credit Facility Amendment (defined below), the total borrowing capacity under the Revolving Credit Facility is $423.8 million. The Senior Secured Credit Facilities also provide SHH the right at any time and under certain conditions to request incremental term loans or incremental revolving credit commitments based on a formula defined in the Senior Secured Credit Facilities. As of September 30, 2023 and December 31, 2022, total borrowings under the Term Loan were $1,763.1 million. The weighted average interest rate on borrowings under the Term Loan for the three months ended September 30, 2023 and September 30, 2022 was 8.14% and 4.96%, respectively, and 7.82% and 3.92% for the nine months ended September 30, 2023 and September 30, 2022, respectively.

On February 23, 2023, we entered into the First Lien Credit Agreement (the “2023 Credit Agreement”), which provides for, among other things, a new Term Loan B facility (the “2023 Term Loan”) in an aggregate principal amount of $500.0 million and bears interest, at the Company’s option, at a variable rate per annum equal to either (x) the Term Secured Overnight Financing Rate (“Term SOFR”) (as defined in the 2023 Credit Agreement) plus an applicable margin of 3.75% or (y) an alternative base rate (“ABR”) plus an applicable margin of 2.75%. The 2023 Credit Agreement is secured on a first priority basis on substantially all of our assets and is guaranteed by certain of our subsidiaries. It is prepayable without premium or penalty at any time six months after the closing date. The principal balance shall be paid at 1% of the aggregate principal amount ($5.0 million) per year, with the balance due at the end of 2026. The Company used the proceeds of the 2023 Term Loan to fund a previously announced $408.0 million EO litigation settlement in Cook County, Illinois and pay down the $200.0 million of existing borrowings under the Revolving Credit Facility concurrent with the funding of the 2023 Term Loan on February 23, 2023. In addition, the Company plans to use the remaining proceeds to further enhance liquidity and for general corporate purposes. The weighted average interest rate on borrowings under the 2023 Term Loan for the three and nine months ended September 30, 2023 was 8.84% and 8.83%, respectively.
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Sotera Health Company
Notes to Consolidated Financial Statements
On March 21, 2023, the Company entered into an Incremental Facility Amendment to the Credit Agreement (“Revolving Credit Facility Amendment”), which provides for an increase in the commitments under the existing Revolving Credit Facility in an aggregate principal amount of $76.3 million. In addition, certain of the lenders providing revolving credit commitments provided additional commitments for the issuance of the letters of credit under the Revolving Credit Facility in an aggregate principal amount of $165.1 million. The Revolving Credit Facility Amendment also provides for the replacement of the reference interest rate option for Revolving Loans from London Interbank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”) plus an applicable credit spread adjustment of 0.10% (subject to a minimum floor of 0.00%). After giving effect to the Revolving Credit Facility Amendment, the aggregate amount of the lenders’ revolving commitments is $423.8 million. The maturity date of the Revolving Credit Facility remains June 13, 2026. The Company borrowed $200.0 million under the Revolving Credit Facility during the fourth quarter of 2022, which was repaid in the first quarter of 2023, as noted above. As of September 30, 2023, there were no borrowings outstanding under the Revolving Credit Facility.
The Senior Secured Credit Facilities and 2023 Credit Agreement contain additional covenants that, among other things, restrict, subject to certain exceptions, our ability and the ability of our restricted subsidiaries to engage in certain activities, such as incur indebtedness or permit to exist any lien on any property or asset now owned or hereafter acquired, as specified in the Senior Secured Credit Facilities and 2023 Credit Agreement. The Senior Secured Credit Facilities and 2023 Credit Agreement also contain certain customary affirmative covenants and events of default, including upon a change of control. An event of default under the Senior Secured Credit Facilities and 2023 Credit Agreement would occur if the Company or certain of its subsidiaries received one or more enforceable judgments for payment in an aggregate amount in excess of $100.0 million, which judgment or judgments are not stayed or remain undischarged for a period of 60 consecutive days or if, in order to enforce such a judgment, a judgment creditor attached or levied upon assets that are material to the business and operations, taken as a whole, of the Company and certain of its subsidiaries. As of September 30, 2023, we were in compliance with all of the Senior Secured Credit Facilities and 2023 Credit Agreement covenants.
All of SHH’s obligations under the Senior Secured Credit Facilities and 2023 Credit Agreement are unconditionally guaranteed by the Company and each existing and subsequently acquired or organized direct or indirect wholly-owned domestic restricted subsidiary of the Company, with customary exceptions including, among other things, where providing such guarantees is not permitted by law, regulation or contract or would result in material adverse tax consequences. All obligations under the Senior Secured Credit Facilities and 2023 Credit Agreement, and the guarantees of such obligations, are secured by substantially all assets of the borrower and guarantors, subject to permitted liens and other exceptions and exclusions, as outlined in the Senior Secured Credit Facilities and 2023 Credit Agreement.
Outstanding letters of credit are collateralized by encumbrances against the Revolving Credit Facility and the collateral pledged thereunder, or by cash placed on deposit with the issuing bank. As of September 30, 2023, the Company had $24.0 million of letters of credit issued against the Revolving Credit Facility, resulting in total availability under the Revolving Credit Facility of $399.8 million.
Term Loan Interest Rate Risk Management
The Company utilizes interest rate derivatives to reduce the variability of cash flows in the interest payments associated with our variable rate debt due to changes in LIBOR (up to June 22, 2023) and Term SOFR. For additional information on the derivative instruments described above, refer to Note 16, “Financial Instruments and Financial Risk”, “Derivative Instruments.”

LIBOR Transition
Publication of all U.S. LIBOR tenors ceased after June 30, 2023. To align with the market phaseout of LIBOR, SHH entered into an amendment to the Senior Secured Credit Facilities to replace the LIBOR-based reference interest rate option under the Term Loan with a reference interest rate option based on Term SOFR plus an applicable credit spread adjustment of 0.11448% (for one-month interest periods), 0.26161% (for three-month interest periods) and 0.42826% (for six-month interest periods) (in all cases, subject to a minimum floor of 0.50%).
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Sotera Health Company
Notes to Consolidated Financial Statements
In accordance with ASC 848 Reference Rate Reform, we have elected to apply certain optional expedients for contract modifications and hedging relationships for derivative instruments impacted by the benchmark interest rate transition. The optional expedients remove the requirement to remeasure contract modifications or dedesignate hedging relationships impacted by reference rate reform.
Aggregate Maturities
Aggregate maturities of the Company’s long-term debt, excluding debt discounts, as of September 30, 2023, are as follows:
(thousands of U.S. dollars)
2023$1,700 
20245,000 
20255,000 
20262,250,600 
2027 
Thereafter 
Total$2,262,300 
10.Income Taxes
Income tax expense is provided on an interim basis based upon our estimate of the annual effective income tax rate. In determining the estimated annual effective income tax rate, we analyze various factors, including projections of our annual earnings and the taxing jurisdictions where the earnings will occur, the impact of state and local taxes, our ability to utilize tax credits and net operating loss carryforwards and available tax planning alternatives.
Income tax expense for the three months ended September 30, 2023 differed from the statutory rate primarily due to a net increase in the valuation allowance attributable to the limitation on the deductibility of interest expense, the impact of the foreign rate differential, and global intangible low-tax income (“GILTI”), partially offset by a benefit for state income taxes. The increase in the valuation allowance was a direct result of the $35.0 million Georgia EO litigation settlement, as described in Note 15, “Commitments and Contingencies”. Income tax expense for the three months ended September 30, 2022 differed from the statutory rate primarily due to a net increase in the valuation allowance, the impact of the foreign rate differential, and GILTI. The increase in the valuation allowance for the three months ended September 30, 2022 was attributable to the limitation on the deductibility of interest expense and the impairment of an investment in a joint venture.
Income tax expense for the nine months ended September 30, 2023 differed from the statutory rate primarily due to a net increase in the valuation allowance attributable to the limitation on the deductibility of interest expense, the impact of the foreign rate differential, and GILTI, partially offset by a benefit for state income taxes. Income tax expense for the nine months ended September 30, 2022 differed from the statutory rate primarily due to a net increase in the valuation allowance, the impact of the foreign rate differential, and GILTI.
11.Employee Benefits
The Company sponsors various post-employment benefit plans including, in certain countries outside the U.S., defined benefit and defined contribution pension plans, retirement compensation arrangements, and plans that provide extended health care coverage to retired employees, the majority of which relate to Nordion.
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Sotera Health Company
Notes to Consolidated Financial Statements
Defined benefit pension plans
The following defined benefit pension plan disclosure relates to Nordion. Certain immaterial foreign defined benefit pension plans have been excluded from the table below. The interest cost, expected return on plan assets and amortization of net actuarial gain are recorded in “Other expense (income), net” and the service cost component is included in the same financial statement line item as the applicable employee’s wages in the Consolidated Statements of Operations and Comprehensive Income (Loss). The components of net periodic pension benefit for the defined benefit plans for the three and nine months ended September 30, 2023 and 2022 were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(thousands of U.S. dollars)2023202220232022
Service cost$132 $242 $395 $738 
Interest cost2,745 1,848 8,211 5,640 
Expected return on plan assets(4,050)(3,595)(12,115)(10,975)
Net periodic benefit$(1,173)$(1,505)$(3,509)$(4,597)
Other benefit plans
Other benefit plans disclosed below relate to Nordion and include a supplemental retirement arrangement, a retirement and termination allowance, and post-retirement benefit plans, which include contributory health and dental care benefits and contributory life insurance coverage. Certain immaterial other foreign benefit plans have been excluded from the table below. All but one non-pension post-employment benefit plans are unfunded. The components of net periodic pension cost for the other benefit plans for the three and nine months ended September 30, 2023 and 2022 were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(thousands of U.S. dollars)2023202220232022
Service cost$2 $4 $6 $12 
Interest cost91 63 271 193 
Amortization of net actuarial gain(44)(2)(132)(6)
Net periodic cost$49 $65 $145 $199 
We currently expect funding requirements of approximately $0.3 million in each of the next five years to fund the regulatory solvency deficit, as defined by Canadian federal regulation, which requires solvency testing on defined benefit pension plans.
The Company may obtain a qualifying letter of credit for solvency payments, up to 15% of the market value of solvency liabilities as determined on the valuation date, instead of paying cash into the pension fund. As of September 30, 2023, and December 31, 2022, we had letters of credit outstanding relating to the defined benefit plans totaling $16.0 million and $44.1 million, respectively. The actual funding requirements over the five-year period will be dependent on subsequent annual actuarial valuations. These amounts are estimates, which may change with actual investment performance, changes in interest rates, any pertinent changes in Canadian government regulations and any voluntary contributions.
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Sotera Health Company
Notes to Consolidated Financial Statements
12.    Other Comprehensive Income (Loss)
Amounts in accumulated other comprehensive income (loss) are presented net of the related tax. Foreign currency translation is not adjusted for income taxes.
Changes in our accumulated other comprehensive income (loss) balances, net of applicable tax, were as follows:
(thousands of U.S. dollars)
Defined
Benefit
Plans
Foreign
Currency
Translation
Interest
Rate
Derivatives
Total
Beginning balance – July 1, 2023$3,176 $(98,574)$16,094 $(79,304)
Other comprehensive income (loss) before
reclassifications
(82)(32,996)2,976 (30,102)
Amounts reclassified from accumulated other
comprehensive income (loss)
(44)
(a)
 (4,690)
(b)
(4,734)
Net current-period other comprehensive loss(126)(32,996)(1,714)(34,836)
Ending balance – September 30, 2023$3,050 $(131,570)$14,380 $(114,140)
Beginning balance – January 1, 2023$3,209 $(131,205)$21,343 $(106,653)
Other comprehensive income (loss) before
reclassifications
(27)(365)11,531 11,139 
Amounts reclassified from accumulated other
comprehensive income (loss)
(132)
(a)
 (18,494)
(b)
(18,626)