Sotera Health Co (SHC)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read this Management’s Discussion and Analysis (“MD&A”) in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This MD&A contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of various factors, including the factors we describe in Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

OVERVIEW

We are a leading global provider of mission-critical end-to-end sterilization solutions, lab testing and advisory services for the healthcare industry. We are driven by our mission: Safeguarding Global Health®. We provide end-to-end sterilization as well as microbiological and analytical lab testing and advisory services to help ensure that medical, pharmaceutical and food products are safe for healthcare practitioners, patients and consumers in the United States and around the world. In 2024, our customers included over 40 of the top 50 medical device companies and nine of the top ten global pharmaceutical companies (based on revenue). Our services are an essential aspect of our customers’ manufacturing processes and supply chains, helping to ensure sterilized medical products reach healthcare practitioners and patients. Most of these services are necessary for our customers to satisfy applicable government requirements.

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We are a trusted partner to approximately 5,000 customers in over 50 countries. We strive to give our customers confidence that their products meet regulatory, safety and effectiveness requirements. With our industry-recognized scientific and technological expertise, we help to promote the safety of millions of patients and healthcare practitioners around the world every year. Across our 62 facilities worldwide, we have over 3,000 employees who are dedicated to safety and quality.

We serve our customers throughout their product lifecycles, from product design to manufacturing and delivery, helping to promote the sterility, effectiveness and safety of their products for the end user. We operate across two core businesses: sterilization services and lab services. Each of our businesses has a longstanding record and is a leader in its respective market, supported and connected by our core capabilities including deep end market, regulatory, technical and logistics expertise. The combination of Sterigenics, our terminal sterilization business, and Nordion, our Co-60 supply business, makes us the only vertically integrated global gamma sterilization provider in the sterilization industry. This provides us with additional insights and allows us to better serve our customers. For financial reporting purposes, our sterilization services business breaks out into two reportable segments, Sterigenics and Nordion, and our lab services business constitutes a third reportable segment, Nelson Labs.

For the year ended December 31, 2024, we recorded net revenues of $1,100.4 million, net income of $44.4 million, Adjusted Net Income of $198.5 million and Adjusted EBITDA of $548.6 million. Adjusted Net Income and Adjusted EBITDA are financial measures not based on any standardized methodology prescribed by U.S. Generally Accepted Accounting Principles (“GAAP”). For the definition of Adjusted Net Income and Adjusted EBITDA and the reconciliation of these non-GAAP measures from net income (loss), please see “Non-GAAP Financial Measures.”

TRENDS AND KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS

We expect that our performance and financial condition will continue to be driven by the key trends impacting our industries, customers and their end markets as outlined in Item 1, “Business.” In addition, we believe the following trends and key factors have underpinned our recent operating results and may continue to affect our performance and financial condition in future periods.

•Business and market conditions. Consolidated net revenues and Adjusted EBITDA for the year ended December 31, 2024 increased from the year ended December 31, 2023, which was primarily a result of favorable pricing and improvements in volume and mix across all three reportable segments, partially offset by unfavorable changes in foreign currency exchanges rates.

As discussed in Item 1A, “Risk Factors”, a portion of our supply of Co-60 is generated by Russian nuclear reactors. We continue to monitor the potential for disruption in the supply of Co-60 from Russian nuclear reactors. There was no impact to our supply or revenue in the year ended December 31, 2024.

•Investment initiatives. We continue to advance our growth-related investments, including our two active capacity expansion projects within the Sterigenics segment, Co-60 development projects in the Nordion segment and lab expansion efforts to support pharma testing services in the Nelson Labs segment.

•Disciplined and strategic M&A activity. We remain committed to our highly disciplined acquisition strategy and continue to seek suitable acquisition targets.

•Litigation costs. We are currently the subject of tort lawsuits alleging injury by purported exposure to EO used, emitted or released by current facilities in Atlanta, Georgia and Vernon, California and our former facility in Willowbrook, Illinois. Additional EO lawsuits have been threatened relating to Sterigenics’ former facility in Willowbrook and existing facilities in Atlanta, Georgia; Charlotte, North Carolina; Grand Prairie, Texas; and Vernon, California and may be filed in the future relating to these or Sterigenics’ other EO facilities; these threats of additional EO lawsuits are comparable to threats that have similarly been made against other companies within our industry. In addition, we are defendants in a lawsuit brought by the State of New Mexico Attorney General alleging that emissions of EO from our Santa Teresa facility negatively impacted Santa Teresa and surrounding communities. We maintain that these facilities did not pose and do not pose any safety risk to their surrounding communities. We deny the allegations in these lawsuits and are vigorously defending against these claims. See Item 3, “Legal Proceedings” and Note 19, “Commitments and Contingencies,” to our consolidated financial statements.

For the years ended December 31, 2024, 2023 and 2022, we recorded costs of $32.7 million, $45.3 million and $72.6 million, respectively, representing professional fees and other expenses related to litigation associated with our EO sterilization facilities.

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•Borrowings, financing costs and financial leverage. On May 30, 2024, the Company and SHH entered into Amendment No. 4 to the Senior Secured Credit Facilities, which provided for the issuance of term loans to the Company in an aggregate principal amount of $1,509.4 million maturing on May 30, 2031. On the same date, the Company issued Secured Notes in an aggregate principal amount of $750.0 million, which bear interest at an annual rate of 7.375% and mature on June 1, 2031. The proceeds from the Refinancing Term Loans and the issuance of the Secured Notes, along with cash on the balance sheet, were used to refinance all of the Company’s previously outstanding term loans due December 2026.

COMPONENTS OF OUR RESULTS OF OPERATIONS

Net Revenues

Service revenues primarily consist of revenue generated from contract sterilization and lab testing and advisory services within our Sterigenics and Nelson Labs segments, respectively. Service revenues also primarily consist of Co-60 installation and disposal revenues and gamma irradiation system refurbishments and installation services within our Nordion segment. Product revenues primarily consist of revenues generated from sales of Co-60 radiation sources and gamma irradiation systems. Provisions for discounts, rebates to customers, and other adjustments may be provided for as reductions in net revenues. Refunds, returns, warranties and other related obligations are not material to any of our business units, nor do we intend to incur material incremental costs to secure customer contracts.

Cost of Revenues

Our cost of revenues consists primarily of direct materials, utilities, labor and related benefit costs, and depreciation and amortization. Although the cost of utilities and direct materials can fluctuate, the remaining components of cost of revenues are generally more stable. Direct material costs relating to service revenues primarily includes EO gas, nitrogen gas and Co-60. The physical decay of Co-60 assets is included within depreciation expense as a cost of revenue. Direct material costs relating to product revenues also include the costs associated with acquiring Co-60 in finished or semi-finished form, acquiring Co-59 in a form ready for insertion into reactors for conversion into Co-60, the reactor time and associated services to convert Co-59 into Co-60, and parts and equipment associated with maintaining gamma irradiation systems.

Operating Expenses

SG&A Expenses

Selling, general and administrative expenses (“SG&A”) primarily consists of compensation and benefits costs and general operating and administrative expenses, including professional service fees (which include finance and legal costs), travel and entertainment expenses, and other general and administrative expenses. Share-based compensation expense is also included in SG&A.

Amortization of Intangible Assets

Amortization of intangible assets primarily consists of expense associated with customer relationship intangible assets, the majority of which relate to the fair values attributed to these assets upon the recapitalization of the Company in connection with the acquisition by the Sponsors in 2015. These customer relationship intangible assets were initially assigned a weighted average useful life of ten years and have a remaining useful life of approximately one year. These customer relationship intangible assets accounted for approximately $48.4 million of our current annual amortization expense and are expected to be fully amortized in 2025. Amortization expense fluctuates when we have an acquisition, disposition, impairment charge, or as their useful lives expire.

Operating Income

Operating income represents gross profit, less SG&A and amortization of intangible assets.

Interest Expense, Net

Interest expense, net, represents interest paid or accruing on our outstanding indebtedness and the amortization of debt discount and debt issuance costs. Interest expense, net is primarily affected by changes in average outstanding indebtedness (including finance lease obligations) and variable interest rates. We present interest expense net of interest income, which primarily consists of interest earned on cash on hand.

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Loss on Refinancing of Debt

Loss on refinancing of debt for the year ended December 31, 2024 occurred in connection with the refinancing of our capital structure in May 2024 and Amendment No. 3 (as defined below) to Revolving Credit Facility. The refinancing activity primarily resulted in the write off of certain unamortized debt issuance costs and discounts on the Term Loans due 2026. In addition, certain new debt issuance costs and discounts were expensed upon the issuance of the Refinancing Term Loans and Secured Notes.

Georgia EO litigation settlement

On October 16, 2023, the Company reached an agreement to resolve 79 EO claims in the State of Georgia. Under the terms of the agreements, the Company paid $35.0 million to settle the claims.

Illinois EO litigation settlement

On January 9, 2023, the Company reached agreements to settle approximately 880 pending and threatened EO claims in Illinois. Under the terms of the agreements, the Company paid $407.7 million to settle the claims.

Impairment of investment in unconsolidated affiliate

During the year ended December 31, 2022, we recorded an impairment charge of $9.6 million related to a joint venture investment, which was acquired as part of the 2020 acquisition of Iotron Industries Canada, Inc.. Due to a shift in business strategy, the joint venture did not proceed. Based on these facts and circumstances, we concluded that the investment was impaired as of June 30, 2022.

Other Income, Net

Other income, net primarily consists of changes in the fair value of the embedded derivatives in Nordion’s contracts, the net impact of pension related benefits and the income related to deferred income on a lease associated with the 2018 divestiture of the Medical Isotopes business.

Provision (Benefit) for Income Taxes

Provision for income taxes primarily consists of income taxes in foreign jurisdictions and U.S. federal and state income taxes.

Constant Currency Sales Growth (Non-GAAP)

“Constant currency” is a non-GAAP financial measure we use to assess performance excluding the impact of foreign currency exchange rate changes. Constant currency sales growth is calculated by translating prior year sales in local currency at the average exchange rates applicable for the current period. The translated results are then used to determine year-over-year percentage increases or decreases. We generally refer to such amounts calculated on a constant currency basis as excluding the impact of foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with U.S. GAAP.

Adjusted Net Income and Adjusted EBITDA (Non-GAAP)

We use Adjusted Net Income and Adjusted EBITDA, non-GAAP financial measures, as the principal measures of our operating performance. Management believes Adjusted Net Income and Adjusted EBITDA are useful because they allow management to more effectively evaluate our operating performance and compare the results of our operations from period to period without the impact of certain non-cash items and non-routine items that we do not expect to continue at the same level in the future and other items that are not core to our operations. We believe that these measures are useful to our investors because they provide a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. In addition, we believe Adjusted Net Income and Adjusted EBITDA will assist investors in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. Our management also uses Adjusted Net Income and Adjusted EBITDA in their financial analysis and operational decision-making and Adjusted EBITDA serves as the metric for attainment of our primary annual incentive program. Adjusted Net Income and Adjusted EBITDA may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.

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For more information regarding our definition and calculation of Adjusted Net Income and Adjusted EBITDA, including information about its limitations as a tool for analysis and reconciliation to the most directly comparable financial measures calculated in accordance with GAAP, please see “Non-GAAP Financial Measures” within this Item 7.

Segment Income

Segment income is the primary earnings measure we use to evaluate the performance of our reportable segments, as disclosed in Note 21, “Segment and Geographic Information” to our consolidated financial statements. Costs associated with support functions that are not directly associated with one of the three reportable segments, such as corporate operating expenses for executive management, accounting, information technology, legal, human resources, treasury, investor relations, corporate development, tax, purchasing, and marketing, are allocated to the segments based on net revenue. Corporate operating expenses that are directly incurred by a segment are reflected in each segment’s income. Segment income excludes certain items which are included in “Income (loss) before taxes” as determined in our Consolidated Statements of Operations and Comprehensive Income (Loss).

CONSOLIDATED RESULTS OF OPERATIONS

The following section summarizes the consolidated results of operations for the years ended December 31, 2024 and 2023. The discussion of the consolidated results of operation for the years ended December 31, 2023 and 2022 are presented within our Annual Report on Form 10-K for the year ended December 31, 2023 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Consolidated Results of Operations.”

Year Ended December 31, 2024 as compared to Year Ended December 31, 2023

The following table sets forth the components of our results of operations for the years ended December 31, 2024 and 2023.

(1)Adjusted Net Income and Adjusted EBITDA are non-GAAP financial measures. For more information regarding our calculation of Adjusted Net Income and Adjusted EBITDA, including information about their limitations as tools for analysis and a reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted Net Income and Adjusted EBITDA, please see the reconciliation included below in “Non-GAAP Financial Measures.”

Total Net Revenues

The following table compares our revenues by type for the year ended December 31, 2024 to the year ended December 31, 2023.

Net revenues were $1,100.4 million in the year ended December 31, 2024, an increase of $51.2 million, or 4.9%, as compared with the prior year. Net revenues in the year ended December 31, 2024 increased approximately 5.4% compared with the same period in 2023 on a constant currency basis.

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Service revenues

Service revenues increased $36.2 million, or 4.0%, to $941.8 million in 2024 as compared to $905.6 million in 2023. Favorable pricing of $30.6 million and $6.7 million in the Sterigenics and Nelson Labs segments, respectively, coupled with an increase in service revenue volume and mix of $2.2 million and $1.0 million in the Sterigenics and Nelson Labs segments, respectively, were the primary drivers of service revenue growth. Partially offsetting these growth factors was a $2.2 million unfavorable impact from changes in foreign currency exchange rates across all segments as well as a decline in service revenue of $2.1 million in the Nordion segment.

Product revenues

Product revenues increased $14.9 million, or 10.4%, to $158.6 million in the year ended December 31, 2024 as compared to $143.7 million in the year ended December 31, 2023. Volume and mix growth of $10.3 million coupled with favorable pricing of $7.3 million were the primary drivers of the increase in product revenues. Partially offsetting these growth factors was an unfavorable change in foreign currency exchange rates of $2.7 million.

Total Cost of Revenues

The following table compares our cost of revenues by type for the year ended December 31, 2024 to the year ended December 31, 2023.

Total cost of revenues accounted for approximately 45.3% and 45.0% of our consolidated net revenues for the years ended December 31, 2024 and 2023, respectively.

Cost of service revenues

Cost of service revenues increased $20.9 million for the year ended December 31, 2024 as compared to the prior year. The primary drivers of the increase in cost of service revenues were higher employee compensation costs of $10.1 million, a $5.1 million increase in depreciation related to capital assets recently placed in service and an increase in certain facility repairs and maintenance costs of $3.3 million. The remaining difference was primarily driven by other inflationary pressures. This was partially offset by favorable changes in foreign currency exchange rates of $1.2 million.

Cost of product revenues

Cost of product revenues increased $5.1 million, or 9.5%, for the year ended December 31, 2024 as compared to the prior year. The increase was primarily a result of higher volumes of Co-60 shipments and supplier mix, which resulted in increases in direct material and material transportation costs of $4.8 million. Changes in foreign currency exchange rates resulted in a $0.8 million favorable impact to cost of product revenues.

Operating Expenses

The following table compares our operating expenses for the year ended December 31, 2024 to the year ended December 31, 2023:

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Operating expenses accounted for approximately 27.7% and 28.6% of our consolidated net revenues for the years ended December 31, 2024 and 2023, respectively.

SG&A

SG&A increased $6.0 million, or 2.5%, for the year ended December 31, 2024 as compared to the prior year. The increase was driven primarily by $9.9 million of incremental SG&A compensation related costs and a $4.5 million increase in share-based compensation expense, partially offset by a $9.5 million decrease in legal and other professional services expenses.

Amortization of intangible assets

Amortization of intangible assets decreased $1.8 million, or 2.8%, for the year ended December 31, 2024, compared to the prior year, due primarily to changes in foreign currency exchange rates.

Interest Expense, Net

Interest expense, net increased $21.8 million, or 15.3%, for the year ended December 31, 2024 as compared to the prior year. Lower favorability from interest rate derivative activity of $15.0 million coupled with an $8.4 million decline in interest income on cash and cash equivalents on deposit at financial institutions were the primary drivers of the increase in interest expense, net.

Loss on Refinancing of Debt

Loss on refinancing of debt for the year ended December 31, 2024 was $24.2 million and primarily occurred in connection with the refinancing of our capital structure in May 2024 and Amendment No. 3 to Revolving Credit Facility. The refinancing activity resulted in the write off of certain unamortized debt issuance costs and discounts on the Term Loans due 2026. In addition, certain new debt issuance costs and discounts were expensed upon the issuance of the Refinancing Term Loans and Secured Notes.

Georgia EO litigation settlement

On October 16, 2023, the Company reached an agreement to resolve 79 pending EO claims in the State of Georgia. Under the terms of the agreement, the Company paid $35.0 million in January 2024 to settle the claims.

Foreign Exchange Loss

Foreign exchange loss was $0.2 million for the year ended December 31, 2024 and 2023. Foreign exchange gains and losses in our Consolidated Statements of Operations and Comprehensive Income (Loss) mainly relates to short-term gains and losses on transactions denominated in currencies other than the functional currency of our operating entities. As described in Note 20, “Financial Instruments and Financial Risk”, we enter into monthly U.S. dollar-denominated foreign currency forward contracts to manage foreign currency exchange rate risk related to our international subsidiaries.

Other Income, Net

Other income, net was $5.3 million for the year ended December 31, 2024, a decrease of $2.1 million, or 28.0%, as compared to the prior year. The fluctuation was primarily driven by a $3.9 million unfavorable change in the fair value of embedded derivatives in Nordion’s purchase and sales contracts, partially offset by $1.1 million of other income related to a tax credit incentive.

Provision for Income Taxes

Provision for income taxes was $69.5 million for the year ended December 31, 2024 as compared to $54.7 million in the prior year. The change was primarily attributable to higher pre-tax income of $113.9 million in the year ended December 31, 2024 compared to $106.0 million for the year ended December 31, 2023, and an incremental increase in the valuation allowance attributable to the limitation on the deductibility of interest expense, partially offset by a decrease in Global Intangible Low Taxed Income (“GILTI”).

Provision for income taxes for the year ended December 31, 2024 differed from the statutory rate of 21% primarily due to a net increase in the valuation allowance attributable to the limitation on the deductibility of interest expense and the foreign rate

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differential, partially offset by a benefit for state income taxes. The provision for income taxes for the year ended December 31, 2023 differed from the statutory rate of 21% primarily due to an increase in the the valuation allowance attributable to the limitation on the deductibility of interest expense as well as federal and state net operating loss carryforward balances, the impact of the foreign rate differential and GILTI, partially offset by a benefit for state income taxes.

Net Income, Adjusted Net Income and Adjusted EBITDA

Net income for the year ended December 31, 2024 was $44.4 million, as compared to net income of $51.4 million for the year ended December 31, 2023, primarily due to the factors described above. Adjusted Net Income was $198.5 million for the year ended December 31, 2024, as compared to $204.3 million for the year ended December 31, 2023, primarily due to the factors described above. Adjusted EBITDA was $548.6 million for the year ended December 31, 2024, as compared to $528.0 million for the year ended December 31, 2023, primarily due to the factors described above. Please see “Non-GAAP Financial Measures” below for a reconciliation of Adjusted Net Income and Adjusted EBITDA to their most directly comparable financial measure calculated and presented in accordance with GAAP.

NON-GAAP FINANCIAL MEASURES

To supplement our consolidated financial statements presented in accordance with GAAP, we consider Adjusted Net Income and Adjusted EBITDA, financial measures that are not based on any standardized methodology prescribed by GAAP.

We define Adjusted Net Income as net income (loss) before amortization and certain other adjustments that we do not consider in our evaluation of our ongoing operating performance from period to period as discussed further below. We define Adjusted EBITDA as Adjusted Net Income before interest expense, depreciation (including depreciation of Co-60 used in our operations) and income tax provision applicable to Adjusted Net Income.

We use Adjusted Net Income and Adjusted EBITDA, non-GAAP financial measures, as the principal measures of our operating performance. Management believes Adjusted Net Income and Adjusted EBITDA are useful because they allow management to more effectively evaluate our operating performance and compare the results of our operations from period to period without the impact of certain non-cash items and non-routine items that we do not expect to continue at the same level in the future and other items that are not core to our operations. We believe that these measures are useful to our investors because they provide a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. In addition, we believe Adjusted Net Income and Adjusted EBITDA will assist investors in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. Our management also uses Adjusted Net Income and Adjusted EBITDA in their financial analysis and operational decision-making, and Adjusted EBITDA serves as the basis for the metric we utilize to determine attainment of our primary annual incentive program. Adjusted Net Income and Adjusted EBITDA may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.

Adjusted Net Income and Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted Net Income and Adjusted EBITDA rather than net income (loss), the nearest GAAP equivalent. For example, Adjusted Net Income and Adjusted EBITDA primarily exclude:

•certain recurring non-cash charges such as depreciation of fixed assets, although these assets may have to be replaced in the future, as well as amortization of acquired intangible assets and asset retirement obligations (“ARO”);

•costs of acquiring and integrating businesses, which will continue to be a part of our growth strategy;

•non-cash gains or losses from fluctuations in foreign currency exchange rates, and the mark-to-fair value of derivatives not designated as hedging instruments, which includes the embedded derivatives relating to certain customer and supply contracts at Nordion;

•impairment charges on long-lived assets, intangible assets and investments accounted for under the equity method;

•loss on refinancing of debt incurred in connection with refinancing or early extinguishment of long-term debt;

•expenses incurred in connection with the secondary offering of our common stock and other shareholder activities;

•expenses and charges related to the litigation, settlement agreements, and other activities associated with our EO sterilization facilities, including those related to Willowbrook, Illinois, Atlanta, Georgia, Santa Teresa, New Mexico and Vernon, California;

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•in the case of Adjusted EBITDA, interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; and

•share-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense and an important part of our compensation strategy.

In evaluating Adjusted Net Income and Adjusted EBITDA, you should be aware that, in the future, we will incur expenses similar to the adjustments in this presentation. Our presentations of Adjusted Net Income and Adjusted EBITDA should not be construed as suggesting that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider Adjusted Net Income and Adjusted EBITDA alongside other financial performance measures, including our net income and other GAAP measures.

The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP to Adjusted Net Income and Adjusted EBITDA, for each of the periods indicated:

(a)Represents share-based compensation expense to employees and Non-Employee Directors. See Note 15, “Share-Based Compensation” for further information.

(b)Represents the write-off of unamortized debt issuance costs and discounts, as well as certain other costs incurred related to the Refinancing Term Loans and the Secured Notes. The year ended December 31, 2024 also includes $0.7 million of debt refinancing costs related to Amendment No. 3 to the Senior Secured Credit Facilities.

(c)Represents the effects of (i) fluctuations in foreign currency exchange rates and (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion.

(d)Represents (i) certain costs related to acquisitions and the integration of recent acquisitions, (ii) the earnings impact of fair value adjustments (excluding those recognized within amortization expense) resulting from the businesses acquired, (iii) transition services income and non-cash deferred lease income associated with the terms of the divestiture of the Medical Isotopes business in 2018, (iv) professional fees and other costs associated with business optimization, cost saving and other process enhancement projects, and (v) professional fees, payroll costs, and other costs, including ongoing lease and utility expenses associated with the closure of the Willowbrook, Illinois facility. The year ended December 31, 2023 includes a $1.0 million cancellation fee received from a tenant in connection with the termination of an office space lease at the Nordion facility.

(e)Represents litigation and other professional fees associated with our EO sterilization facilities. Amounts presented for the year ended December 31, 2023 have been adjusted to exclude interest expense, net associated with Term Loan B due 2026 attributable to the loan proceeds that were used to fund the $408.0 million Illinois EO litigation settlement.

(f)Represents the cost to settle 79 pending EO claims in Georgia under a settlement entered into on December 21, 2023. See Note 19, “Commitments and Contingencies.”

(g)Represents expenses incurred in connection with secondary offerings of our common stock that closed on March 4, 2024 and September 6, 2024 and legal, consulting, and other fees associated with shareholder engagement.

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(h)Represents non-cash accretion of ARO related to Co-60 gamma and EO processing facilities, which are based on estimated site remediation costs for any future decommissioning of these facilities and are accreted over the life of the asset.

(i)Represents the income tax impact of adjustments calculated based on the tax rate applicable to each item. We eliminate the effect of tax rate changes as applied to tax assets and liabilities and unusual items from our presentation of adjusted net income.

(j)Interest expense, net presented in this reconciliation for the year ended December 31, 2023 has been adjusted to conform to the current year presentation to include interest expense, net on Term Loan B due 2026 attributable to the loan proceeds that were used to fund the $408.0 million Illinois EO litigation settlement.

(k)Includes depreciation of Co-60 held at gamma irradiation sites. The year ended December 31, 2024 excludes accelerated depreciation associated with business optimization activities.

(l)Represents the difference between the income tax provision/benefit as determined under U.S. GAAP and the income tax benefit associated with pre-tax adjustments described in footnote (i).

(m)$97.1 million and $94.1 million of the adjustments for the year ended December 31, 2024 and 2023, respectively, are included in cost of revenues, primarily consisting of amortization of intangible assets, depreciation, and accretion of ARO.

SEGMENT RESULTS OF OPERATIONS

We have three reportable segments: Sterigenics, Nordion and Nelson Labs. Our chief operating decision maker evaluates performance and allocates resources within our business based on segment income, which excludes certain items which are included in income (loss) before tax as determined in our Consolidated Statements of Operations and Comprehensive Income (Loss). The accounting policies for our reportable segments are the same as those for the consolidated Company.

Our Segments

Sterigenics

Our Sterigenics business provides outsourced terminal sterilization and irradiation services for the medical device, pharmaceutical, food safety and advanced applications markets using three major technologies: gamma irradiation, EO processing and E-beam irradiation.

Nordion

Our Nordion business is a leading global provider of Co-60 used in the sterilization and irradiation processes for the medical device, pharmaceutical, food safety, and high-performance materials industries, as well as in the treatment of cancer. In addition, Nordion is a leading global provider of gamma irradiation systems.

As a result of the time required to meet regulatory and logistics requirements for delivery of radioactive products, combined with accommodations that we make to our customers to minimize disruptions to their operations during the installation of Co-60, Nordion sales patterns can often vary significantly from one quarter to the next. In most cases, however, timing-related impacts on our sales performance tend to be resolved within several quarters, resulting in more consistent performance over longer periods of time. In addition, sales of gamma irradiation systems occur infrequently and tend to be for larger amounts.

Nelson Labs

Our Nelson Labs business provides outsourced microbiological and analytical chemistry testing and advisory services for the medical device and pharmaceutical industries.

For more information regarding our reportable segments please refer to Item 1. “Business” and Note 21, “Segment and Geographic Information” to our consolidated financial statements.

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Segment Results for the Years Ended December 31, 2024 and 2023

The following section summarizes the segment results for the years ended December 31, 2024 and 2023. The discussion of the segment results for the years ended December 31, 2023 and 2022 are presented within our Annual Report on Form 10-K for the year ended December 31, 2023 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Segment Results for the years ended December 31, 2023 and 2022.”

The following tables compare segment net revenue and segment income for the year ended December 31, 2024 to the year ended December 31, 2023:

Net Revenues

Sterigenics net revenues were $697.9 million for the year ended December 31, 2024, an increase of $30.7 million, or 4.6%, as compared to the prior year. The increase was attributable to a favorable impact from pricing of 4.6% and changes in volume and mix of 0.3%, partially offset by unfavorable changes in foreign currency exchange rates of 0.3%.

Nordion net revenues were $173.4 million for the year ended December 31, 2024, an increase of $12.9 million, or 8.0%, as compared to the prior year. The increase was driven by growth from volume and mix and pricing of 4.9% and 5.2%, respectively, partially offset by unfavorable changes in foreign currency exchange rates of 2.1%.

Nelson Labs net revenues were $229.2 million for the year ended December 31, 2024, an increase of $7.5 million, or 3.4%, as compared to the prior year. The increase was attributable to a 3.0% favorable impact from pricing and 0.4% from changes in volume and mix.

Segment Income

Sterigenics segment income was $378.2 million for the year ended December 31, 2024, an increase of $16.0 million, or 4.4%, as compared to the prior year. The increase in segment income was driven mainly by favorable pricing, partially offset by inflation and certain facility repairs and maintenance costs.

Nordion segment income was $101.2 million for the year ended December 31, 2024, an increase of $4.5 million, or 4.7%, as compared to the prior year. The increase in segment income was driven primarily by favorable pricing and higher volumes and mix, partially offset by supplier mix. The decrease in segment income margin was driven by higher employee compensation costs and unfavorable mix.

Nelson Labs segment income was $69.2 million for the year ended December 31, 2024, an increase of 0.1%, as compared to the prior year. Pricing and labor productivity improvements resulted in a favorable impact to segment income during the year ended December 31, 2024 compared to the prior year. Partially offsetting this and negatively impacting segment income margin were increases in employee compensation costs and unfavorable mix.

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LIQUIDITY AND CAPITAL RESOURCES

Sources of Cash

The primary sources of liquidity for our business are cash flows from operations and borrowings under our credit facilities. As of December 31, 2024, we had $278.9 million of cash and cash equivalents. This is a decrease of $22.8 million from the balance at December 31, 2023. The decrease in cash and cash equivalents was attributable to $179.0 million of purchases of property, plant and equipment, $50.6 million of cash used in financing activities and a $17.4 million decline due to changes in foreign currency exchange rates, partially offset by $224.2 million of cash provided by operating activities. Our foreign subsidiaries held cash of approximately $259.8 million at December 31, 2024 and $224.1 million at December 31, 2023. No material restrictions exist to accessing cash held by our foreign subsidiaries notwithstanding any potential tax consequences.

Refer to “Debt Facilities” below within this Item, Note 9, “Long-Term Debt”, and Item 1A, “Risk Factors” - “Risks Related to Our Indebtedness and Liquidity” for additional information.

As described in more detail below, on March 1, 2024, the Company and SHH entered into Amendment No. 3 to the Revolving Credit Facility. Amendment No. 3 did not materially change the terms and conditions of the Credit Agreement, including

with respect to the amount of commitments under the Revolving Credit Facility, which remain $423.8 million.

As discussed below, on May 30, 2024 the Company and SHH closed on the Refinancing Term Loans in an aggregate principal amount of $1,509.4 million as well as an issuance of Secured Notes in an aggregate principal amount of $750.0 million, both of which mature in 2031. The Company used the net proceeds from the Refinancing Term Loans and Secured Notes, along with cash on hand, to refinance its previously outstanding $1,763.1 million and $496.3 million Term Loans due 2026.

Uses of Cash

We expect that cash on hand, operating cash flows and amounts available under our credit facilities will provide sufficient working capital to operate our business, meet foreseeable liquidity requirements (inclusive of debt service on our long-term debt), make expected capital expenditures including investments in fixed assets to build and/or expand existing facilities, and meet litigation costs that we expect to continue to incur for at least the next twelve months. Our primary long-term liquidity requirements beyond the next twelve months will be to service our debt, make capital expenditures, and fund suitable business acquisitions. As of December 31, 2024, there were no outstanding borrowings on the Revolving Credit Facility. We expect any excess cash provided by operations will be allocated to fund capital expenditures, potential acquisitions, or for other general corporate purposes. Our ability to meet future working capital, capital expenditures and debt service requirements will depend on our future financial performance, which will be affected by a range of macroeconomic, competitive and business factors, including interest rate changes and changes in our industry, many of which are outside of our control. As of December 31, 2024, our interest rate derivatives limit our cash flow exposure of our variable rate borrowings under the Term Loans. Refer to Note 20, “Financial Instruments and Financial Risk”, “Derivative Instruments” for additional information regarding the interest rate limits used to manage economic risks associated with our variable rate borrowings. Refer to Item 7A., “Quantitative and Qualitative Disclosures About Market Risk” for additional information about changes in interest rate risk.

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, Co-60 used by Sterigenics at its gamma irradiation facilities, cobalt development projects and information technology enhancements. During the year ended December 31, 2024, our capital expenditures amounted to $179.1 million, compared to $215.0 million in the year ended December 31, 2023. Our capital expenditures for the year ended December 31, 2024 included approximately $32 million related to environmental facility enhancements.

In 2024, we expect to continue to invest in facility expansions, ongoing routine maintenance for existing facilities, and acquisition of Co-60 for use by our Sterigenics segment in its gamma irradiation facilities. In addition, we expect to invest in special projects related to development of new Co-60 supply sources and facility enhancements at our EO sterilization facilities. For 2025, it is estimated that approximately $46 million of capital expenditures will relate to environmental facility enhancements.

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Debt Facilities

Senior Secured Credit Facilities

On December 13, 2019, 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 (as amended through Amendment No. 4, the “Credit Agreement”). 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.

On May 30, 2024, the Company and SHH entered into Amendment No. 4 (“Amendment No. 4”) to the Senior Secured Credit Facilities. Among other changes, Amendment No. 4 provides for Refinancing Term Loans to SHH in an aggregate principal amount of $1,509.4 million. Pursuant to Amendment No. 4, the Refinancing Term Loans shall have an applicable interest rate margin per annum equal to (i) ABR plus 2.25% for ABR Loans (as defined in the Credit Agreement), (ii) daily simple Secured Overnight Financing Rate (“SOFR”) plus 3.25% for RFR Loans (as defined in the Credit Agreement) and (iii) Term SOFR plus 3.25% for Term Benchmark Loans (as defined in the Credit Agreement), in each case with a 0% applicable floor and the applicable interest rate margin shall be subject to a pricing step-down of 0.25% when the Senior Secured Leverage Ratio (as defined in the Credit Agreement) is less than or equal to 3.30:1.00. The Refinancing Term Loans amortize at a rate of 1.00% per annum and mature on May 30, 2031. The weighted average interest rate on borrowings under the Refinancing Term Loans for the year ended December 31, 2024 was 8.29%.

On May 30, 2024, SHH, the Company, certain subsidiaries of the Company (the “Guarantors”), and Wilmington Trust, National Association, as trustee, paying agent, registrar, transfer agent and notes collateral agent, entered into an Indenture (the “Indenture”) governing SHH’s $750.0 million aggregate principal amount of 7.375% senior secured notes due 2031 (the “Secured Notes”) issued in May 2024. The Secured Notes will pay interest semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2024, at a rate of 7.375% per year, and will mature on June 1, 2031. The Secured Notes may be redeemed, at any time or from time to time, in whole or in part, on or after June 1, 2027 at the redemption prices specified in the Indenture, together with accrued and unpaid interest, if any, thereon to, but excluding, the redemption date. At any time or from time to time, prior to June 1, 2027, the Secured Notes may be redeemed, in whole or in part, at a redemption price equal to 100% of the aggregate principal amount thereof plus a make-whole premium, together with accrued and unpaid interest, if any, thereon to, but excluding, the redemption date. In addition, at any time or from time to time, prior to June 1, 2027, SHH may redeem up to 40% of the aggregate principal amount of the Secured Notes (including any additional Secured Notes issued under the Indenture) with an amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 107.375% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, thereon to, but excluding, the redemption date. Further, at any time or from time to time, on or before June 1, 2027, SHH may redeem up to 10% of the then outstanding aggregate principal amount of Secured Notes (including any additional Secured Notes issued under the Indenture) during each of the twelve-month periods ending after the issue date, at a redemption price equal to 103% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, thereon to, but excluding, the redemption date.

The obligations under the Indenture are secured on a first-lien basis by security interests in substantially all of the assets of SHH, the Company and the Guarantors (other than any excluded assets) that secure the Credit Agreement on a pari passu basis, subject to certain limitations, exceptions and permitted liens. These obligations are secured pursuant to a security agreement, dated as of May 30, 2024, by and among SHH, the Company, the other grantors party thereto, and Wilmington Trust, National Association (the “Security Agreement”), as may be amended from time to time, and related financing statements.

The Company used the combined net proceeds from the Refinancing Terms Loans and Secured Notes, along with cash on hand, to refinance its previously outstanding $1,763.1 million Term Loan due 2026 and $496.3 million Term Loan B due 2026.

On March 1, 2024, the Company and SHH entered into Amendment No. 3 (“Amendment No. 3”) to the Revolving Credit Facility. Among other changes, Amendment No. 3 provides (i) for new commitments under the existing Revolving Credit Facility to replace the existing revolving commitments in an aggregate principal amount of $83.0 million, (ii) that certain of the lenders providing revolving credit commitments shall also provide additional commitments for the issuance of letters of credit under the Revolving Credit Facility in an aggregate principal amount of $37.5 million and (iii) for the extension of the maturity date of the Revolving Credit Facility to March 1, 2029.

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The Senior Secured Credit Facilities and the Indenture contain additional covenants that, among other things, restrict, subject to certain exceptions, limitations and qualifications, our ability and the ability of our restricted subsidiaries to engage in certain activities, such as incur additional 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 the Indenture. The Senior Secured Credit Facilities and the Indenture also contain certain customary affirmative covenants and events of default, including upon a change of control. In addition, an event of default under the Senior Secured Credit Facilities and the Indenture 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 the greater of (i) $162.6 million or (ii) 30.0% of consolidated EBITDA or LTM EBITDA (as defined in the Credit Agreement and the Indenture, respectively) and the judgments were not stayed or remained undischarged for a period of 60 consecutive days. As of December 31, 2024, we were in compliance with all of the covenants under the Senior Secured Credit Facilities and the Indenture.

All of SHH’s obligations under the Senior Secured Credit Facilities and the Indenture 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 the Indenture, and the guarantees of such obligations, are secured by substantially all assets of SHH and the guarantors, subject to permitted liens and other exceptions and exclusions, as outlined in the Senior Secured Credit Facilities, the Indenture and the Security 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 December 31, 2024, the Company had $14.0 of letters of credit issued against the Revolving Credit Facility, resulting in total availability under the Revolving Credit Facility of $409.8 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 SOFR. For additional information on the derivative instruments described above, refer to Note 20, “Financial Instruments and Financial Risk”, “Derivative Instruments.”

Cash Flow Information

The following section summarizes cash flow information for the years ended December 31, 2024 and 2023. Cash flow information for the years ended December 31, 2023 and 2022 are presented within our Annual Report on Form 10-K for the year ended December 31, 2023 under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

Year Ended December 31, 2024 compared to the Year Ended December 31, 2023

Operating activities

Net cash provided by operating activities increased $371.9 million to net cash provided of $224.2 million for the year ended December 31, 2024 as compared to net cash used in operating activities of $147.7 million for the prior year. The increase in net cash provided by operating activities in 2024 compared to the prior year was due mainly to the timing of cash outflows for the Illinois and Georgia EO litigation settlements. Approximately $407.7 million was paid in June 2023 for the settlements of the Illinois EO claims, whereas $35.0 million was paid in January 2024 for settlement of the Georgia EO claims.

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Investing activities

Net cash used in investing activities decreased $35.9 million to net cash used of $179.0 million in the year ended December 31, 2024 as compared to $214.9 million for the prior year. The variance was mainly driven by a decrease in capital expenditures of $35.9 million in the year ended December 31, 2024 compared to the prior year.

Financing activities

For the year ended December 31, 2024, net cash used in financing activities was $50.6 million compared to net cash provided by financing activities of $266.0 million for the year ended December 31, 2023 resulting in a net change of $316.5 million. The difference was mainly attributable to $5.0 million of debt repayments (net of debt proceeds) in the year ended December 31, 2024 as compared to $297.5 million of debt proceeds (net of repayments) in the year ended December 31, 2023 resulting in a $302.5 million net change in cash outflow. Cash outflows for debt issuance costs also increased $6.4 million during the year ended December 31, 2024 as compared to the prior year. In addition, a purchase option for a leased facility was exercised in the first quarter of 2024 resulting in a $6.7 million cash outflow.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table describes our significant contractual and other cash obligations as of December 31, 2024:

(a)Represents principal and interest payments on the Senior Secured Credit Facilities and Secured Notes. We have calculated the interest payments on the Senior Secured Credit Facilities using an assumed range of 6.91% to 7.84% based on anticipated forward movements in SOFR and the fixed rate of 7.375% for the Secured Notes. In addition, interest payments include the impact of existing interest rate swaps described in Note 20, “Financial Instruments and Financial Risk” in the notes to consolidated financial statements.

(b)Consists of payments under our finance leases for various facilities and equipment.

(c)Represents minimum lease payments under our operating leases for several of our facilities and other property and equipment.

(d)Consists of our best estimate of our obligations under various supply and service agreements, primarily Co-60, that are enforceable and legally binding on us.

(e)Consists of our best estimate of our obligations to purchase EO gas under commitments that are enforceable and legally binding on us. We have excluded contracts to purchase energy and other supplies, which generally have terms of one year or less. Our contract to purchase EO gas in the U.S. requires us to purchase all our requirements from our supplier, and our contracts to purchase EO gas outside the U.S. generally require that we purchase a specified percentage of our requirements for our operations in the countries covered by those contracts. Although our EO gas contracts generally do not contain fixed minimum purchase volumes, we have calculated the amounts set forth in the table above based on the percentage of our requirements specified in the contracts and our budgeted purchase volumes for those periods.

At December 31, 2024 and 2023, we had $58.5 million and $67.3 million, respectively, of standby letters of credit, surety bonds and other bank guarantees outstanding, primarily in favor of local and state licensing authorities for future decommissioning costs, and to support the unfunded portion of our pension obligation. We are obligated to provide financial assurance to local and state licensing authorities for possible future decommissioning costs associated with the various facilities that hold Co-60. At December 31, 2024 and 2023, $49.1 million and $48.2 million, respectively, of the standby letters of credit and surety bonds referenced above were outstanding in favor of the various local and state licensing authorities in the event we defaulted on our decommissioning obligation.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The following subsections describe our most critical accounting policies, estimates, and assumptions. Our discussion of critical accounting policies and estimates is intended to supplement, not duplicate, our summary of significant accounting policies so that readers will have greater insight into the uncertainties involved in these areas. Our accounting policies are more fully described in Note 1, “Significant Accounting Policies” to our consolidated financial statements.

The preparation of consolidated financial statements and related disclosures in conformity with GAAP requires management to make judgments, estimates and assumptions at a specific point in time and in certain circumstances that affect amounts reported in the accompanying consolidated financial statements. In preparing these consolidated financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. The application of accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

Revenue Recognition. The majority of our sales agreements contain performance obligations satisfied at a point in time when control of promised goods or services have transferred to our customers. Revenues recognized over time are generally accounted for using an input measure to determine progress completed as of the end of the period.

Refunds, returns, warranties and other related obligations are not material to any of our business units and we do not incur material incremental costs to secure customer contracts.

The Sterigenics segment provides outsourced terminal sterilization and irradiation services for the medical device, pharmaceutical, food safety and advanced applications markets. We typically have multi-year service contracts with our significant customers, and these sales contracts are primarily based on customers’ purchase orders. Given the relatively short turnaround times, performance obligations are generally satisfied at a point-in-time upon the completion of sterilization or irradiation processing and the approval of our quality assurance process, at which time the service is complete.

The Nordion segment is a provider of Co-60 and gamma irradiation systems, which are key components to the gamma sterilization process. Revenue from the sale of Co-60 radiation sources is recognized at a point-in-time upon satisfaction of our performance obligations for delivery/installation and disposal of existing sources. Revenue from the sale of gamma irradiation systems in our Nordion segment is recognized over time using an input measure of costs incurred and is immaterial to the overall business.

The Nelson Labs segment provides outsourced microbiological and analytical chemistry testing and advisory services for the medical device and pharmaceutical industries. We provide our customers mission-critical lab testing services, which assess the product quality, effectiveness, patient safety and end-to-end sterility of products. These services are necessary for our customers’ regulatory approvals, product releases and ongoing product performance evaluations. Nelson Labs services are generally provided on a fee-for-service or project basis, and we recognize revenues over time generally using an input measure of time incurred to determine progress completed at the end of the period. Revenue recognized over time in excess of the amount billed to the customer is recorded as a customer contract asset. 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. We utilize our customer relationship management system to assess time incurred and the extent of project completion at the end of the period.

We do not capitalize sales commissions because substantially all of our sales commission programs have an amortization period of one year or less. Furthermore, costs to fulfill a contract are not material.

Provisions for discounts, rebates to customers, and other adjustments are provided for as reductions in net revenues in the period the related sale was recorded. Shipping and handling charges billed to customers are included in net revenues, and the related shipping and handling costs are included in cost of net revenues on the Consolidated Statements of Operations and Comprehensive Income (Loss). Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from net revenue.

Payment terms vary by the type and location of the customer and the products or services offered. Generally, the time between when revenue is recognized and when payment is due is not significant. We do not evaluate whether the selling price contains a financing component for contracts that have a duration of less than one year.

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Goodwill and Other Indefinite-Lived Intangibles. Assets and liabilities of a 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 generally 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 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.

Goodwill and other indefinite-lived intangible assets, primarily certain regulatory licenses and trade names, are tested for impairment annually as of October 1. If circumstances change during interim periods between annual tests that indicate that the carrying amount of such assets may not be recoverable, the Company tests such assets at an interim date for impairment. Factors which would necessitate an interim impairment assessment include prolonged negative industry or economic trends and significant underperformance relative to historical or projected future operating results.

At December 31, 2024, goodwill and intangible assets totaled $1,398.7 million, or 45.5% of our total assets. We consider the impairment analyses of these assets critical because of their quantitative significance to the Company and our segments.

Goodwill is assigned to our segments at December 31, 2024 as follows:

We performed a quantitative assessment of all reporting units (Sterigenics, Nordion and Nelson Labs) as of October 1, 2024. The fair value of each reporting unit was calculated using a discounted cash flow analysis which was dependent on subjective market participant assumptions determined by management. Assumptions used in the analyses included discount rates, revenue growth rates and projected operating cash flows. Estimates of future cash flows are based upon relevant data at a point-in-time, are subject to change, and could vary from actual results. Cash flows are based on recent historical results and are consistent with the Company’s near-term financial forecasts and long-term strategic plans. The estimated fair value of Sterigenics, Nordion and Nelson Labs each exceeded its carrying amount (including goodwill) by an adequate margin to support a positive assertion that goodwill is not impaired as of October 1, 2024. No factors were identified that would result in the potential impairment to the indefinite-lived intangible assets. There have been no other significant events or circumstances that occurred since the annual assessment date of October 1 that would change the conclusions reached above. We provide additional information about our goodwill and other indefinite-lived intangible assets in Note 7, “Goodwill and Other Intangible Assets” to our consolidated financial statements.

Income Taxes. We use the liability method of accounting for income taxes whereby we recognize deferred tax assets and liabilities for the future tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Measurements of deferred taxes requires the use of judgment with respect to the realization of tax basis. We periodically review our deferred tax assets for recoverability and establish a valuation allowance based on historical taxable income, projected future taxable income, expected timing of reversals of existing temporary timing differences and the implementation of tax planning strategies. Deferred tax assets will be reduced by a valuation allowance if, based on management’s estimate, it is more likely than not that a portion of the deferred tax assets will not be realized in a future period. The estimates used in the recognition of deferred tax assets are subject to revision in future periods based on new facts and circumstances. At December 31, 2024 and 2023, we maintained a valuation allowance of $160.6 million and $125.4 million, respectively, against our deferred tax assets, primarily attributable to the excess interest expense on our long-term debt in the United States, as well as state and foreign net operating loss carryforwards. 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 or results of operations. Changes in our judgment related to the measurement of deferred tax assets and liabilities could materially impact our results of operations.

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 meets 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% likely of being

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realized upon ultimate settlement. Determining what constitutes an individual tax position and whether the more likely-than-not recognition threshold is met for a tax position are matters of judgment based on the individual facts and circumstances of that position evaluated in light of all available evidence. We review and adjust 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. Changes in our judgment related to the assessment of uncertain tax positions could materially impact our results of operations.

We are subject to taxation from federal, state, local, and foreign jurisdictions. Tax positions are settled primarily through the completion of audits within each individual tax jurisdiction or the closing of a statute of limitation. Changes in applicable tax law or other events may also require us to revise past estimates. The United States Internal Revenue Service routinely conducts audits of our federal income tax returns. Additional information regarding income taxes is included in Note 10, “Income Taxes” to our consolidated financial statements.

Commitments and Contingencies. We are, and will likely continue to be, involved in a number of legal proceedings, government investigations and claims, which we believe generally arise in the course of our business, given our size, history, complexity and the nature of our business, products, customers, regulatory environment and industries in which we participate. These legal proceedings, investigations and claims generally involve a variety of legal theories and allegations, including, without limitation, personal injury (e.g., slip and falls, burns, vehicle accidents, mass tort), regulation (e.g., failure to meet specification or failure to comply with regulatory requirements), commercial claims (e.g., breach of contract, economic loss, misrepresentation), financial (e.g., taxes, reporting), employment (e.g., wrongful termination, discrimination, benefits matters) and other claims for damage and relief.

We record a liability for such contingencies to the extent we conclude that their occurrence is both probable and estimable. If a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability is disclosed within our consolidated financial statements, together with an estimate of the range of possible loss if the range is determinable and material. We consider many factors in making these assessments, including the professional judgment of experienced members of management and our legal counsel. For legal proceedings and claims described within our consolidated financial statements, we have made estimates as to the likelihood of unfavorable outcomes and the amounts of such potential losses, if a range is determinable. While it is not possible to determine the ultimate disposition of each of these matters, the ultimate resolution of pending regulatory and legal matters in future periods may have a material adverse effect on our financial condition, results of operations and/or liquidity. The Company may also incur material defense and settlement costs, diversion of management resources and other adverse effects on our business, financial condition, and/or results of operations. We record gain contingencies when realized and expected recoveries under applicable insurance contracts when we are assured of recovery. Refer to Note 19, “Commitments and Contingencies,” to our consolidated financial statements.

The Company reached agreements to settle approximately 880 pending and threatened EO claims in the State of Illinois on January 9, 2023. Under the binding Settlement Agreements, the Company paid $407.7 million to settle the claims.

On October 16, 2023, the Company reached an agreement to resolve 79 EO claims in the State of Georgia. Under the terms of the agreements, the Company paid $35.0 million to settle the claims.

NEW ACCOUNTING PRONOUNCEMENTS

For a description of recent accounting pronouncements applicable to our business, see Note 2, “Recent Accounting Standards” to our consolidated financial statements.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of various factors, including the factors we describe in Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

OVERVIEW

We are a leading global provider of mission-critical end-to-end sterilization solutions, lab testing and advisory services for the healthcare industry. We are driven by our mission: Safeguarding Global Health®. We provide end-to-end sterilization as well as microbiological and analytical lab testing and advisory services to help ensure that medical, pharmaceutical and food products are safe for healthcare practitioners, patients and consumers in the United States and around the world. Our customers include over 40 of the top 50 medical device companies and nine of the top ten global pharmaceutical companies (based on revenue). Our services are an essential aspect of our customers’ manufacturing processes and supply chains, helping to ensure sterilized medical products reach healthcare practitioners and patients. Most of these services are necessary for our customers to satisfy applicable government requirements.

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We are a trusted partner to approximately 5,000 customers in over 50 countries. We give our customers confidence that their products meet regulatory, safety and effectiveness requirements. With our industry-recognized scientific and technological expertise, we help to ensure the safety of millions of patients and healthcare practitioners around the world every year. Across our 63 facilities worldwide, we have over 3,000 employees who are dedicated to safety and quality.

We serve our customers throughout their product lifecycles, from product design to manufacturing and delivery, helping to ensure the sterility, effectiveness and safety of their products for the end user. We operate across two core businesses: sterilization services and lab services. Each of our businesses has a longstanding record and is a leader in its respective market, supported and connected by our core capabilities including deep end market, regulatory, technical and logistics expertise. The combination of Sterigenics, our terminal sterilization business, and Nordion, our Co-60 supply business, makes us the only vertically integrated global gamma sterilization provider in the sterilization industry. This provides us with additional insights and allows us to better serve our customers. For financial reporting purposes, our sterilization services business breaks out into two reportable segments, Sterigenics and Nordion, and our lab services business constitutes a third reportable segment, Nelson Labs.

For the year ended December 31, 2023, we recorded net revenues of $1,049.3 million, net income of $51.4 million, Adjusted Net Income of $230.1 million and Adjusted EBITDA of $528.0 million. Adjusted Net Income and Adjusted EBITDA are financial measures not based on any standardized methodology prescribed by U.S. Generally Accepted Accounting Principles (“GAAP”). For the definition of Adjusted Net Income and Adjusted EBITDA and the reconciliation of these non-GAAP measures from net income (loss), please see “Non-GAAP Financial Measures.”

TRENDS AND KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS

We expect that our performance and financial condition will continue to be driven by the key trends impacting our industries, customers and their end markets as outlined in Item 1, “Business”. In addition, we believe the following trends and key factors have underpinned our recent operating results and may continue to affect our performance and financial condition in future periods.

•Business and market conditions. Consolidated revenue and total segment income for the year ended December 31, 2023 increased from the year ended December 31, 2022, which was primarily a result of favorable pricing across all three segments, partially offset by volume decline and an unfavorable business mix.

As discussed in Item 1A, “Risk Factors”, a portion of our supply of Co-60 is generated by Russian nuclear reactors. We continue to monitor the potential for disruption in the supply of Co-60 from Russian nuclear reactors. There was no impact to our supply or revenue in the year ended December 31, 2023.

•Investment initiatives. We continue to advance our growth-related investments, including our three active capacity expansion projects within the Sterigenics segment and Co-60 development projects in the Nordion segment. In addition, Nelson Labs has progressed with expansion efforts to support pharma testing services alongside enhancements to its lab information management system. For the year ended December 31, 2023, capital expenditures increased by $32.6 million compared to the year ended December 31, 2022.

•Disciplined and strategic M&A activity. We remain committed to our highly disciplined acquisition strategy and continue to seek suitable acquisition targets.

•Litigation costs. We are currently the subject of tort lawsuits alleging personal injury by purported exposure to EO used, emitted or released by current facilities in Atlanta, Georgia and Santa Teresa, New Mexico and our former facility in Willowbrook, Illinois. In addition, we are defendants in a lawsuit brought by the State of New Mexico Attorney General alleging that emissions of EO from our Santa Teresa facility have deteriorated the air quality in Santa Teresa and surrounding communities and materially contributed to increased health risks suffered by residents of those communities. We maintain that these facilities did not pose and do not pose any safety risk to their surrounding communities. We deny the allegations in these lawsuits and are vigorously defending against these claims. See Item 3, “Legal Proceedings” and Note 20, “Commitments and Contingencies” to our consolidated financial statements.

For the years ended December 31, 2023 and 2022 and 2021, we recorded costs of $72.1 million, $72.6 million and $45.7 million, respectively, representing professional fees and other expenses related to litigation associated with our EO sterilization facilities (including $26.8 million of interest expense, net on Term Loan B for the year ended December 31, 2023 attributable to the loan proceeds that were used to fund the $408.0 million Illinois EO litigation settlement).

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With respect to the litigation related to our Atlanta, Georgia facility, in October 2023, two subsidiaries of Sotera Health Company, Sotera Health LLC and Sterigenics U.S., LLC (together with Sotera Health LLC, the “Settling Defendants”), agreed to pay $35.0 million to settle 79 of the Atlanta Cases, including a personal injury case that was scheduled to begin trial in the State Court of Gwinnett County that month, and 78 other cases being pursued by the same Plaintiff’s counsel in the personal injury case that was scheduled to begin trial in October 2023 (the “Atlanta Settlement”). The Atlanta Settlement was completed in January 2024, with the settling plaintiffs agreeing to file the necessary dismissals and, where required, motions for court approval.

The Company denies any liability and the Atlanta Settlement explicitly provides that the settlement is not to be construed as an admission of any liability or that emissions from Sterigenics’ Atlanta facility have ever

posed any safety hazard to the surrounding communities.

With respect to the litigation related to our former Willowbrook, Illinois facility, in 2023, the Settling Defendants completed a settlement resolving 880 Willowbrook Cases for $408.0 million, including the two cases in which there were jury trials during 2022 (the “Willowbrook Settlement”). On July 6, 2023, the settled claims were dismissed with prejudice, with the Circuit Court of Cook County retaining jurisdiction to adjudicate disputes over liens on settlement proceeds to be paid to settling plaintiffs and to oversee the administration of the settlements of wrongful death cases.

The Willowbrook Settlement Agreements provided a pathway to comprehensively resolve the claims pending and threatened against the Company in Illinois and thereby enabled the Company to focus its attention on operating the business. The Company denies any liability and maintains that its Willowbrook, Illinois operations did not pose a safety risk to the community in which it operated and believes the evidence ultimately would have compelled the rejection of the plaintiffs’ claims.

See Note 20, “Commitments and Contingencies” to our consolidated financial statements for additional information on EO tort litigation.

•Borrowings, financing costs and financial leverage. On February 23, 2023 the Company successfully closed on a new senior secured Term Loan B facility in an aggregate principal amount of $500.0 million. The Company used the proceeds of this debt to pay down existing borrowings under the Company’s Revolving Credit Facility, to fund the $408.0 million EO litigation settlement in Cook County, Illinois and for other general corporate purposes.

On March 21, 2023, the Company also entered into an Incremental Facility Amendment to the First Lien 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. The Revolving Credit Facility Amendment also provides additional commitments for the issuance of letters of credit under the Revolving Credit Facility Amendment, and the aggregate amount of the revolving commitments under the Revolving Credit Facility is $423.8 million.

COMPONENTS OF OUR RESULTS OF OPERATIONS

Net Revenues

Service revenues consist of revenue generated from contract sterilization and lab testing and advisory services within our Sterigenics and Nelson Labs segments, respectively. Service revenues also consist of Co-60 installation and disposal revenues and gamma irradiation system refurbishments and installation services within our Nordion segment. Product revenues consist of revenues generated from sales of Co-60 radiation sources and gamma irradiation systems. Provisions for discounts, rebates to customers, and other adjustments are provided for as reductions in net revenues. Refunds, returns, warranties and other related obligations are not material to any of our business units, nor do we incur material incremental costs to secure customer contracts.

Cost of Revenues

Our cost of revenues consists primarily of direct materials, utilities, labor and related benefit costs, and depreciation and amortization. Although the cost of utilities and direct materials can fluctuate, the remaining components of cost of revenues are generally more stable. Direct material costs relating to service revenues primarily includes EO gas, nitrogen gas and Co-60. The physical decay of Co-60 assets is included within depreciation expense as a cost of revenue. Direct material costs relating to product revenues also include the costs associated with acquiring Co-60 in finished or semi-finished form, acquiring Co-59 in a form ready for insertion into reactors for conversion into Co-60, the reactor time and associated services to convert Co-59 into Co-60, and parts and equipment associated with building and maintaining gamma irradiation systems.

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Operating Expenses

SG&A Expenses

SG&A primarily consists of compensation and benefits costs and general operating and administrative expenses, including professional service fees (which include finance and legal costs), travel and entertainment expenses, and other general and administrative expenses. Share-based compensation expense is also included in SG&A.

Amortization of Intangible Assets

Amortization of intangible assets primarily consists of expense associated with customer relationship intangibles, the majority of which relate to the fair values attributed to these assets upon the recapitalization of the Company in connection with the acquisition by the Sponsors in 2015. These customer relationship intangibles were initially assigned a weighted average useful life of ten years and have a remaining useful life of approximately two years. These customer relationship intangible assets account for $49.0 million of our current annual amortization expense and are expected to be fully amortized in 2025. Amortization expense fluctuates when we have an acquisition, disposition, impairment charge, or as their useful lives expire. We expect intangible assets related to future acquisitions and the associated amortization expense to increase over time as we execute on our strategy to pursue acquisition targets that are complementary to our businesses.

Impairment

We review tangible and intangible assets for impairment on a regular basis.

Operating Income

Operating income represents gross profit, less SG&A, amortization of intangible assets and impairment charges.

Interest Expense, Net

Interest expense, net, represents interest paid or accruing on our outstanding indebtedness and the amortization of debt discount and debt issuance costs. Interest expense is affected by changes in average outstanding indebtedness (including finance lease obligations) and variable interest rates. We present interest expense net of interest income, which primarily consists of interest earned on cash on hand.

Illinois EO litigation settlement

On January 9, 2023, the Company reached agreements to settle approximately 880 pending and threatened EO claims against the Settling Defendants in the Circuit Court of Cook County, Illinois, and US District Court for the Northern District of Illinois. Under the terms of the agreements, the Company paid $407.7 million to settle the claims.

Georgia EO litigation settlement

On October 16, 2023, the Company reached an agreement to resolve 79 EO claims against the Settling Defendant in the State of Georgia. Under the terms of the agreements, the Company paid $35.0 million to settle the claims.

Impairment of investment in unconsolidated affiliate

During the year ended December 31, 2022, we recorded an impairment charge of $9.6 million related to a joint venture investment, which was acquired as part of the 2020 acquisition of Iotron Industries Canada, Inc. (“Iotron”). Due to a shift in business strategy, the joint venture will not proceed, and our joint venture partner will continue to rely on our other existing operating facilities. Based on these facts and circumstances, we concluded that the investment was impaired.

Other Income, Net

Other income, net primarily consists of changes in the fair value of the embedded derivatives in Nordion’s contracts, the net impact of pension related benefits and income related to deferred income on a lease associated with the 2018 divestiture of the Medical Isotopes business.

Provision (Benefit) for Income Taxes

Provision (benefit) for income taxes consists primarily of income taxes in foreign jurisdictions and U.S. federal and state income taxes.

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Net Income (Loss) Attributable to Noncontrolling Interests

We conduct our operations through our subsidiaries. As of December 31, 2023, our consolidated subsidiaries were wholly owned by us. In the second quarter of 2021, we purchased the outstanding noncontrolling interests of 15% and 33% in our two China subsidiaries. Prior to our acquisition of these noncontrolling interests, we consolidated the results of operations of these subsidiaries with our results of operations and reflected the noncontrolling interests on our Consolidated Statements of Operations and Comprehensive Income (Loss) as net income (loss) attributable to noncontrolling interests.

On March 11, 2021, we purchased the 15% noncontrolling interest that remained from the August 2018 acquisition of Gibraltar Laboratories, Inc. (known as 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.

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. Refer to Note 4, “Acquisitions” of our consolidated financial statements for additional information. We have determined this to be an investment in a variable interest entity (“VIE”). The investment is not consolidated as the Company has 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 affiliate” on the Consolidated Balance Sheets within our consolidated financial statements. During the year ended December 31, 2022, we recorded an impairment charge of $9.6 million related to this joint venture investment as described in “Consolidated Results of Operations” below. 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.

Constant Currency Sales Growth (Non-GAAP)

“Constant currency” is a non-GAAP financial measure we use to assess performance excluding the impact of foreign currency exchange rate changes. Constant currency sales growth is calculated by translating prior year sales in local currency at the average exchange rates applicable for the current period. The translated results are then used to determine year-over-year percentage increases or decreases. We generally refer to such amounts calculated on a constant currency basis as excluding the impact of foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with U.S. GAAP.

Adjusted Net Income and Adjusted EBITDA (Non-GAAP)

We use Adjusted Net Income and Adjusted EBITDA, non-GAAP financial measures, as the principal measures of our operating performance. Management believes Adjusted Net Income and Adjusted EBITDA are useful because they allow management to more effectively evaluate our operating performance and compare the results of our operations from period to period without the impact of certain non-cash items and non-routine items that we do not expect to continue at the same level in the future and other items that are not core to our operations. We believe that these measures are useful to our investors because they provide a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. In addition, we believe Adjusted Net Income and Adjusted EBITDA will assist investors in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. Our management also uses Adjusted Net Income and Adjusted EBITDA in their financial analysis and operational decision-making and Adjusted EBITDA serves as the metric for attainment of our primary annual incentive program. Adjusted Net Income and Adjusted EBITDA may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.

For more information regarding our definition and calculation of Adjusted Net Income and Adjusted EBITDA, including information about its limitations as a tool for analysis and reconciliation to the most directly comparable financial measures calculated in accordance with GAAP, please see “Non-GAAP Financial Measures” within this Item.

Segment Income

Segment income is the primary earnings measure we use to evaluate the performance of our reportable segments, as disclosed in Note 22, “Segment and Geographic Information” to our consolidated financial statements. Costs associated with support functions that are not directly associated with one of the three reportable segments, such as corporate operating expenses for executive management, accounting, information technology, legal, human resources, treasury, investor relations, corporate development, tax, purchasing, and marketing, are allocated to the segments based on net revenue. Corporate operating expenses that are directly incurred by a segment are reflected in each segment’s income. Segment income excludes certain items which

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are included in “Income (loss) before taxes” as determined in our Consolidated Statements of Operations and Comprehensive Income (Loss).

CONSOLIDATED RESULTS OF OPERATIONS

The following section summarizes the consolidated results of operations for the years ended December 31, 2023 and 2022. The discussion of the consolidated results of operation for the years ended December 31, 2022 and 2021 are presented within our Annual Report on Form 10-K for the year ended December 31, 2022 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Consolidated Results of Operations.”

Year Ended December 31, 2023 as compared to Year Ended December 31, 2022

The following table sets forth the components of our results of operations for the years ended December 31, 2023 and 2022.

(1)Adjusted Net Income and Adjusted EBITDA are non-GAAP financial measures. For more information regarding our calculation of Adjusted Net Income and Adjusted EBITDA, including information about their limitations as tools for analysis and a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted Net Income and Adjusted EBITDA, please see the reconciliation included below in “Non-GAAP Financial Measures.”

Total Net Revenues

The following table compares our revenues by type for the year ended December 31, 2023 to the year ended December 31, 2022.

Net revenues were $1,049.3 million in the year ended December 31, 2023, an increase of $45.6 million, or 4.5%, as compared with the prior year. Net revenues in the year ended December 31, 2023 increased approximately 4.2% compared with the same period in 2022 on a constant currency basis.

Service revenues

Service revenues increased $40.8 million, or 4.7%, to $905.6 million in 2023 as compared to $864.8 million in 2022. The increase in net service revenue was driven by favorable pricing of $39.0 million and $8.5 million in the Sterigenics and Nelson Labs segments, respectively, a $6.7 million favorable impact from changes in foreign currency exchange rates across all segments and an increase in service revenue of $2.4 million in the Nordion segment. These growth factors were partially offset by unfavorable service revenue volume and mix of $15.8 million in the Nelson Labs and Sterigenics segments.

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Product revenues

Product revenues increased $4.8 million, or 3.5%, to $143.7 million in the year ended December 31, 2023 as compared to $138.9 million in the year ended December 31, 2022. The increase in product revenues was attributable to favorable pricing of $16.4 million, partially offset by a decline in overall sales volumes of $8.1 million and an unfavorable change in foreign currency exchange rates of $3.5 million. The volume decline stemmed mainly from a decline in demand for industrial-use Co-60 compared to the prior year.

Total Cost of Revenues

The following table compares our cost of revenues by type for the year ended December 31, 2023 to the year ended December 31, 2022.

Total cost of revenues accounted for approximately 45.0% and 44.5% of our consolidated net revenues for the year ended December 31, 2023 and 2022, respectively.

Cost of service revenues

Cost of service revenues increased $27.8 million for the year ended December 31, 2023 as compared to the prior year. The growth in cost of service revenues was partially driven by higher employee compensation costs of $12.2 million. In addition, cost of services revenues was impacted by an increase of $12.0 million of depreciation related to capital assets recently placed in service and a $2.5 million unfavorable impact from changes in foreign currency exchange rates.

Cost of product revenues

Cost of product revenues decreased $2.3 million, or 4.1%, for the year ended December 31, 2023 as compared to the prior year. The decrease was primarily driven by a favorable impact from foreign currency exchange rates coupled with lower direct costs attributable to the decline in industrial-use Co-60 volumes as described above in “Product revenues.”

Operating Expenses

The following table compares our operating expenses for the year ended December 31, 2023 to the year ended December 31, 2022:

Operating expenses accounted for approximately 28.6% and 30.8% of our consolidated net revenues for the year ended December 31, 2023 and 2022, respectively.

SG&A

SG&A decreased $9.0 million, or 3.7%, for the year ended December 31, 2023 as compared to the prior year. The decrease stemmed from a $27.0 million decline in litigation and other professional services expenses associated with EO sterilization facilities, partially offset by an $11.2 million increase in share-based compensation expense, a $3.3 million increase in selling

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and administrative compensation-related costs and a $2.0 million increase in professional services fees in support of various business enhancement and compliance efforts.

Amortization of intangible assets

Amortization of intangible assets increased $0.9 million or 1.4% for the year ended December 31, 2023, compared to the prior year, due mainly to changes in foreign currency exchange rates.

Interest Expense, Net

Interest expense, net increased $62.7 million, or 78.3%, for the year ended December 31, 2023 as compared to the prior year. The increase was driven by a higher variable interest rate on borrowings previously outstanding in the same period of the prior year, resulting in $59.0 million of incremental interest expense coupled with interest expense of $38.7 million on incremental borrowings. In addition, amortization of debt issuance costs and debt discounts increased by $3.3 million. Partially offsetting the increase was a $16.1 million reduction to interest expense arising from a net favorable change in interest rate derivative activity, an $8.5 million reduction to interest expense for interest capitalized on fixed assets and a $13.7 million increase in interest income on cash and cash equivalents on deposit at financial institutions. The weighted average interest rate on our outstanding debt was 8.55% and 7.16% at December 31, 2023 and 2022, respectively.

Illinois EO litigation settlement

On January 9, 2023, the Company reached agreements to settle approximately 880 pending and threatened EO claims against the Settling Defendants in the Circuit Court of Cook County, Illinois, and US District Court for the Northern District of Illinois. Under the binding Term Sheets, the Company paid $407.7 million to settle the claims. As this event provided additional evidence of conditions that existed as of December 31, 2022, we recorded a $407.7 million charge to expense on December 31, 2022.

Georgia EO litigation settlement

On October 16, 2023, the Company reached an agreement to resolve 79 EO claims against the Settling Defendants in the State of Georgia. Under the terms of the agreement, the Company paid $35.0 million in January 2024 to settle the claims.

Impairment of investment in unconsolidated affiliate

During the year ended December 31, 2022, we recorded an impairment charge of $9.6 million related to a joint venture investment, which was acquired as part of the 2020 Iotron acquisition. Due to a shift in business strategy, the joint venture did not proceed. Based on these facts and circumstances, we concluded that the investment was impaired as of June 30, 2022.

Foreign Exchange Loss

Foreign exchange loss was $0.2 million for the year ended December 31, 2023 as compared to $0.1 million in the prior year. The change in foreign exchange loss in our Consolidated Statements of Operations and Comprehensive Income (Loss) mainly relates to short-term gains and losses on transactions denominated in currencies other than the functional currency of our operating entities. As described in Note 21, “Financial Instruments and Financial Risk”, we enter into monthly U.S. dollar-denominated foreign currency forward contracts to manage foreign currency exchange rate risk related to our international subsidiaries.

Other Income, Net

Other income, net was $7.4 million for the year ended December 31, 2023, an increase of $0.9 million or 14.5% as compared to the prior year. The fluctuation was primarily driven by $3.0 million of favorable changes in the fair value of embedded derivatives in Nordion’s purchase contracts, partially offset by a $1.5 million decline in pension income at Nordion.

Provision (Benefit) for Income Taxes

Provision for income tax was $54.7 million for the year ended December 31, 2023 as compared to a benefit of $9.5 million in the prior year. The change was primarily attributable to the recognition of pre-tax income of $106.0 million in the year ended

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December 31, 2023 compared to pretax loss of $243.1 million for the year ended December 31, 2022, which was driven by the $408.0 million Illinois EO litigation settlement accrual.

Provision for income taxes for the year ended December 31, 2023 differed from the statutory rate of 21% primarily due to an increase in the partial valuation allowance against our excess interest expense as well as federal and state net operating loss carryforward balances, the impact of the foreign rate differential and nondeductible equity compensation, partially offset by state taxes (net of federal benefit). The provision for income taxes for the year ended December 31, 2022 differed from the statutory rate of 21% primarily due to an increase in the partial valuation allowance against our excess interest expense carryforward balance, $8.0 million of state tax attributes, the impact of the foreign rate differential, partially offset by state taxes (net of federal benefit).

Net Income (Loss), Adjusted Net Income and Adjusted EBITDA

Net income for the year ended December 31, 2023 was $51.4 million, as compared to net loss of $233.6 million for the year ended December 31, 2022 driven largely by the Illinois EO litigation settlement reserve. Adjusted Net Income was $230.1 million for the year ended December 31, 2023, as compared to $270.2 million for the year ended December 31, 2022, due to the factors described above. Adjusted EBITDA was $528.0 million for the year ended December 31, 2023, as compared to $506.2 million for the year ended December 31, 2022, due to the factors described above. Please see “Non-GAAP Financial Measures” below for a reconciliation of Adjusted Net Income and Adjusted EBITDA to their most directly comparable financial measure calculated and presented in accordance with GAAP.

NON-GAAP FINANCIAL MEASURES

To supplement our consolidated financial statements presented in accordance with GAAP, we consider Adjusted Net Income and Adjusted EBITDA, financial measures that are not based on any standardized methodology prescribed by GAAP.

We define Adjusted Net Income as net income (loss) before amortization and certain other adjustments that we do not consider in our evaluation of our ongoing operating performance from period to period as discussed further below. We define Adjusted EBITDA as Adjusted Net Income before interest expense, depreciation (including depreciation of Co-60 used in our operations) and income tax provision applicable to Adjusted Net Income.

We use Adjusted Net Income and Adjusted EBITDA, non-GAAP financial measures, as the principal measures of our operating performance. Management believes Adjusted Net Income and Adjusted EBITDA are useful because they allow management to more effectively evaluate our operating performance and compare the results of our operations from period to period without the impact of certain non-cash items and non-routine items that we do not expect to continue at the same level in the future and other items that are not core to our operations. We believe that these measures are useful to our investors because they provide a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. In addition, we believe Adjusted Net Income and Adjusted EBITDA will assist investors in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. Our management also uses Adjusted Net Income and Adjusted EBITDA in their financial analysis and operational decision-making and Adjusted EBITDA serves as the basis for the metric we utilize to determine attainment of our primary annual incentive program. Adjusted Net Income and Adjusted EBITDA may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.

Adjusted Net Income and Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted Net Income and Adjusted EBITDA rather than net income (loss), the nearest GAAP equivalent. For example, Adjusted Net Income and Adjusted EBITDA primarily exclude:

•certain recurring non-cash charges such as depreciation of fixed assets, although these assets may have to be replaced in the future, as well as amortization of acquired intangible assets and asset retirement obligations;

•costs of acquiring and integrating businesses, which will continue to be a part of our growth strategy;

•non-cash gains or losses from fluctuations in foreign currency exchange rates, and the mark-to-fair value of derivatives not designated as hedging instruments, which includes embedded derivatives relating to certain customer and supply contracts at Nordion;

•impairment charges on long-lived assets, intangible assets and investments accounted for under the equity method;

•loss on extinguishment of debt incurred in connection with refinancing or early extinguishment of long-term debt;

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•expenses and charges related to the litigation, settlement agreements, and other activities associated with our EO sterilization facilities, including those in Willowbrook, Illinois, Atlanta, Georgia and Santa Teresa, New Mexico, even though that litigation remains ongoing;

•in the case of Adjusted EBITDA, interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; and

•share-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense and an important part of our compensation strategy.

In evaluating Adjusted Net Income and Adjusted EBITDA, you should be aware that, in the future, we will incur expenses similar to the adjustments in this presentation. Our presentations of Adjusted Net Income and Adjusted EBITDA should not be construed as suggesting that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider Adjusted Net Income and Adjusted EBITDA alongside other financial performance measures, including our net income and other GAAP measures.

The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP to Adjusted Net Income and Adjusted EBITDA, for each of the periods indicated:

(a)Represents share-based compensation expense to employees and non-employee directors. See Note 16, “Share-Based Compensation” for further information.

(b)Represents the effects of (i) fluctuations in foreign currency exchange rates, (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion, and (iii) unrealized gains and losses on interest rate derivatives not designated as hedging instruments.

(c)Represents (i) certain direct and incremental costs related to the acquisitions of RCA and BioSciences Labs and certain related integration efforts as a result of those acquisitions, (ii) the earnings impact of fair value adjustments (excluding those recognized within amortization expense) resulting from the businesses acquired, (iii) transition services income and non-cash deferred lease income associated with the terms of the divestiture of the Medical Isotopes business in 2018.

(d)Represents professional fees exit costs, severance and other payroll costs, and other costs associated with business optimization and cost savings projects, operating structure realignment and other process enhancement projects.

(e)Represents professional fees, severance and other payroll costs, and other costs including ongoing lease and utility expenses associated with the closure of the Willowbrook, Illinois facility. The year ended December 31, 2023 also includes a $1.0 million cancellation fee received from a tenant in connection with the termination of an office space lease at the Nordion facility.

(f)Represents an impairment charge on an equity method investment in a joint venture. Refer to Note 1, “Significant Accounting Policies” for further information.

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(g)Represents litigation and other professional fees associated with our EO sterilization facilities. This includes $26.8 million of interest expense, net for the year ended December 31, 2023 associated with Term Loan B that was issued to finance the $408.0 million settlement of 880 pending and threatened EO claims against the Defendant Subsidiaries in Illinois under Settlement Agreements entered into on March 28, 2023. See Note 20, “Commitments and Contingencies”.

(h)Represents the cost to settle 880 pending and threatened EO claims against the Defendant Subsidiaries in Illinois pursuant to Settlement Agreements entered into on March 28, 2023. See Note 20, “Commitments and Contingencies”.

(i)Represents the cost to settle 79 pending EO claims against the Settling Defendants in Georgia under a settlement term sheet entered into on December 21, 2023. See Note 20, “Commitments and Contingencies”.

(j)Represents non-cash accretion of asset retirement obligations related to Co-60 gamma and EO processing facilities, which are based on estimated site remediation costs for any future decommissioning of these facilities and are accreted over the life of the asset.

(k)Represents non-recurring costs associated with the COVID-19 pandemic, including incremental costs to implement workplace health and safety measures.

(l)Represents the income tax impact of adjustments calculated based on the tax rate applicable to each item. We eliminate the effect of tax rate changes as applied to tax assets and liabilities, and unusual items from our presentation of adjusted net income.

(m)The year ended December 31, 2023 excludes $26.8 million of interest expense, net, on Term Loan B attributable to the loan proceeds that were used to fund the $408.0 million cost of the Illinois EO litigation settlement. The year ended December 31, 2022 excludes $1.7 million of unrealized loss on interest rate derivatives not designated as hedging instruments.

(n)Includes depreciation of Co-60 held at gamma irradiation sites.

(o)Represents the difference between the income tax provision/benefit as determined under U.S. GAAP and the income tax benefit associated with pre-tax adjustments described in footnote (l).

(p)$94.1 million and $83.6 million of the adjustments for the year ended December 31, 2023 and 2022, respectively, are included in cost of revenues, primarily consisting of amortization of intangible assets, depreciation, and accretion of asset retirement obligations.

SEGMENT RESULTS OF OPERATIONS

We have three reportable segments: Sterigenics, Nordion and Nelson Labs. Our chief operating decision maker evaluates performance and allocates resources within our business based on segment income, which excludes certain items which are included in income (loss) before tax as determined in our Consolidated Statements of Operations and Comprehensive Income (Loss). The accounting policies for our reportable segments are the same as those for the consolidated Company.

Our Segments

Sterigenics

Our Sterigenics business provides outsourced terminal sterilization and irradiation services for the medical device, pharmaceutical, food safety and advanced applications markets using three major technologies: gamma irradiation, EO processing and E-beam irradiation.

Nordion

Our Nordion business is a leading global provider of Co-60 used in the sterilization and irradiation processes for the medical device, pharmaceutical, food safety, and high-performance materials industries and for the treatment of cancer. In addition, Nordion is a leading global provider of gamma irradiation systems.

As a result of the time required to meet regulatory and logistics requirements for delivery of radioactive products, combined with accommodations that we make to our customers to minimize disruptions to their operations during the installation of Co-60, Nordion sales patterns can often vary significantly from one quarter to the next. In most cases, however, timing-related impacts on our sales performance tend to be resolved within several quarters, resulting in more consistent performance over longer periods of time. In addition, sales of gamma irradiation systems occur infrequently and tend to be for larger amounts.

Results for our Nordion segment are impacted by Co-60 mix, harvest schedules, and customer, product and service mix.

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Nelson Labs

Our Nelson Labs business provides outsourced microbiological and analytical chemistry testing and advisory services for the medical device and pharmaceutical industries.

For more information regarding our reportable segments please refer to Item 1. “Business” and Note 22, “Segment and Geographic Information” to our consolidated financial statements.

Segment Results for the Years Ended December 31, 2023 and 2022

The following section summarizes the segment results for the years ended December 31, 2023 and 2022. The discussion of the segment results for the years ended December 31, 2022 and 2021 are presented within our Annual Report on Form 10-K for the year ended December 31, 2022 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Segment Results for the years ended December 31, 2022 and 2021.”

The following tables compare segment net revenue and segment income for the year ended December 31, 2023 to the year ended December 31, 2022:

Net Revenues

Sterigenics net revenues were $667.1 million for the year ended December 31, 2023, an increase of $40.5 million, or 6.5%, as compared to the prior year. The increase was attributable to favorable pricing and changes in foreign currency exchange rates of 6.2% and 0.9%, respectively, partially offset by unfavorable sales volume and mix of 0.6%.

Nordion net revenues were $160.5 million for the year ended December 31, 2023, an increase of $6.8 million, or 4.4%, as compared to the prior year. The increase was driven by a favorable impact from pricing of 10.8%, partially offset by unfavorable impacts to volume and mix and changes in foreign currency exchange rates of 3.9% and 2.5%, respectively.

Nelson Labs net revenues were $221.7 million for the year ended December 31, 2023, a decrease of $1.7 million, or 0.8%, as compared to the prior year. The decrease was attributable to unfavorable volume and mix of 5.3%, partially offset by favorable impacts from pricing and changes in foreign currency exchange rates of 3.8% and 0.7%, respectively.

Segment Income

Sterigenics segment income was $362.2 million for the year ended December 31, 2023, an increase of $23.1 million, or 6.8%, as compared to the prior year. The increase in segment income was fueled mainly by favorable pricing, as referenced above, partially offset by higher costs and unfavorable volume and mix.

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Nordion segment income was $96.7 million for the year ended December 31, 2023, an increase of $7.2 million, or 8.0%, as compared to the prior year. The increase in segment income and segment income margin was driven mainly by favorable pricing and higher volumes of medical-use Co-60, partially offset by lower volumes of industrial-use Co-60.

Nelson Labs segment income was $69.1 million for the year ended December 31, 2023, a decrease of $8.5 million, or 10.9%, as compared to the prior year. The decrease in segment income and segment income margin was primarily a result of unfavorable volume and mix coupled with the ongoing impact of inflation, partially offset by favorable pricing.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Cash

The primary sources of liquidity for our business are cash flows from operations and borrowings under our credit facilities. As of December 31, 2023, we had $301.7 million of cash and cash equivalents. This is a decrease of $94.6 million from the balance at December 31, 2022. The decrease in cash and cash equivalents was mainly attributable to the release of approximately $407.7 million to settle the EO claims against the Settling Defendants in Cook County, Illinois and a $200.0 million paydown of the outstanding balance on the Revolving Credit Facility. Partially offsetting this decrease was $500.0 million in proceeds from the issuance of Term Loan B on February 23, 2023 (as detailed below). Our foreign subsidiaries held cash of approximately $224.1 million at December 31, 2023 and $158.3 million at December 31, 2022. No material restrictions exist to accessing cash held by our foreign subsidiaries notwithstanding any potential tax consequences.

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) 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 by 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 this debt to fund a previously announced $408.0 million EO litigation settlement in Cook County, Illinois on May 1, 2023 and pay down existing borrowings under the Company’s revolving credit facility. The Company used the remaining proceeds to further enhance liquidity and for general corporate purposes. Refer to “Debt Facilities” below within this Item, Note 10, “Long-Term Debt”, and Item 1A, “Risk Factors” - “Risks Related to Our Indebtedness and Liquidity.” for additional information.

Uses of Cash

We expect that cash on hand, operating cash flows and amounts available under our credit facilities will provide sufficient working capital to operate our business, meet foreseeable liquidity requirements (inclusive of debt service on our long-term debt) make expected capital expenditures including investments in fixed assets to build and/or expand existing facilities, and meet litigation costs that we expect to continue to incur for at least the next twelve months. Our primary long-term liquidity requirements beyond the next 12 months will be to service our debt, make capital expenditures, and fund suitable business acquisitions. As of December 31, 2023, there were no outstanding borrowings on the Revolving Credit Facility. We expect any excess cash provided by operations will be allocated to fund capital expenditures, potential acquisitions, or for other general corporate purposes. Our ability to meet future working capital, capital expenditure and debt service requirements will depend on our future financial performance, which will be affected by a range of macroeconomic, competitive and business factors, including interest rate changes and changes in our industry, many of which are outside of our control. As of December 31, 2023, our interest rate derivatives limit the cash flow exposure of our variable rate borrowings under the Term Loans. Refer to Note 21, “Financial Instruments and Financial Risk”, “Derivative Instruments” for additional information regarding the interest rate caps used to manage economic risks associated with our variable rate borrowings. Refer to Item 7A., "Quantitative and Qualitative Disclosures About Market Risk" for additional information about changes in interest rate risk.

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, Co-60 used by Sterigenics at its gamma irradiation facilities, cobalt development projects and information technology enhancements. During the year ended December 31, 2023, our capital expenditures amounted to $215.0 million, compared to $182.4 million in the year ended December 31, 2022. This amount includes approximately $35.5 million related to environmental facility enhancements.

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In 2024, we expect to continue to invest in facility expansions, ongoing routine maintenance for existing facilities, and acquisition of Co-60 for use by our Sterigenics segment in its gamma irradiation facilities. In addition, we expect to invest in special projects related to development of new Co-60 supply sources and facility enhancements at our EO sterilization facilities. We currently expect the amount of capital expenditures in 2024 to be similar to 2023 as we execute on those special projects in addition to our normal growth and maintenance related investments. For 2024, it is estimated that approximately $40.0 million and $47.0 million of capital expenditures will relate to environmental facility enhancements and cobalt development projects, respectively. We expect a gradual decline in capital expenditures beginning in 2025.

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 December 31, 2023 and 2022, total borrowings under the Term Loan were $1,763.1 million. As of December 31, 2023 and 2022 total borrowings outstanding on the Revolving Credit Facility were $0 and $200.0 million, respectively. The weighted average interest rate on borrowings under the Term Loan for the year ended December 31, 2023 and 2022 was 7.95% and 4.63%, 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 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) 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 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 year ended December 31, 2023 was 8.90%.

On March 21, 2023, the Company entered into an Incremental Facility Amendment to the First Lien 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 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 of December 31, 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 would occur if the Company or certain of its subsidiaries were subject to one or more enforceable judgments in an aggregate amount in excess of $100.0 million and the judgments were not stayed or remained undischarged for sixty consecutive days or, if, such judgments, judgment creditors were to attach liens on assets that are material to the Company’s business and operations taken as a whole. As of December 31, 2023, we were in compliance with all the Senior Secured Credit Facilities and 2023 Credit Agreement covenants.

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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 December 31, 2023, the Company had $23.7 million of letters of credit issued against the Revolving Credit Facility, resulting in total availability under the Revolving Credit Facility of $400.1 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 21, “Financial Instruments and Financial Risk”, “Derivative Instruments.”

Cash Flow Information

The following section summarizes cash flow information for the years ended December 31, 2023 and 2022. Cash flow information for the years ended December 31, 2022 and 2021 are presented within our Annual Report on Form 10-K for the year ended December 31, 2022 under Item 7.,. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

Year Ended December 31, 2023 compared to the Year Ended December 31, 2022

Operating activities

Cash flows provided by operating activities decreased $425.7 million to net cash used of $147.7 million for the year ended December 31, 2023 compared to net cash provided of $278.0 million for the prior year. The decrease in cash flows from operating activities in 2023 compared to the prior year was primarily due to the release of the settlement funds of approximately $407.7 million on June 30, 2023 to fund the settlements of the EO claims in Cook County, Illinois.

Investing activities

Cash used in investing activities increased $33.0 million to net cash used of $214.9 million in the year ended December 31, 2023 compared to $181.9 million for the prior year. The variance was primarily driven by an increase in capital expenditures of $32.6 million in the year ended December 31, 2023 compared to the prior year.

Financing activities

For the year ended December 31, 2023, net cash provided by financing activities increased $266.0 million compared to net cash provided of $197.8 million for the year ended December 31, 2022. The difference was mainly attributable to $500.0 million in proceeds from the issuance of Term Loan B on February 23, 2023 partially offset by the $200.0 million paydown of the outstanding balance on the revolving credit facility, payment of $25.6 million of debt issuance costs incurred in connection with the issuance of Term Loan B and the revolving credit facility amendment during the year ended December 31, 2023, as

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described in “Debt Facilities” above, and $2.5 million of principal repayments on Term Loan B. For the year ended December 31, 2022 the primary source of cash was a $200.0 million borrowing on the Revolving Credit Facility.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table describes our significant contractual cash obligations as of December 31, 2023:

(a)Represents principal and interest payments on the Senior Secured Credit Facilities and 2023 Credit Agreement. We have calculated the interest payments on the Senior Secured Credit Facilities and 2023 Credit Agreement using an assumed range of 5.99% to 8.39% and 6.87% and 9.10%, respectively, based on anticipated forward movements in SOFR. In addition, interest payments include the impact of existing interest rate caps and interest rate swap described in Note 21, “Financial Instruments and Financial Risk” in the notes to consolidated financial statements.

(b)Consists of payments under our finance leases for various facilities and equipment.

(c)Represents minimum lease payments under our operating leases for several of our facilities and other property and equipment.

(d)Consists of our best estimate of our obligations under various supply and service agreements, primarily Co-60, that are enforceable and legally binding on us.

(e)Consists of our best estimate of our obligations to purchase EO gas under commitments that are enforceable and legally binding on us. We have excluded contracts to purchase energy and other supplies, which generally have terms of one year or less. Our contract to purchase EO gas in the U.S. requires us to purchase all our requirements from our supplier, and our contracts to purchase EO gas outside the U.S. generally require that we purchase a specified percentage of our requirements for our operations in the countries covered by those contracts. Although our EO gas contracts generally do not contain fixed minimum purchase volumes, we have calculated the amounts set forth in the table above based on the percentage of our requirements specified in the contracts and our budgeted purchase volumes for those periods.

(f)Represents the cost to settle 79 pending EO claims against the Settling Defendants in Georgia under a settlement term sheet entered into on December 21, 2023. See Note 20, “Commitments and Contingencies”.

At December 31, 2023 and 2022, we had $67.3 million and $101.5 million, respectively, of standby letters of credit, surety bonds and other bank guarantees outstanding, primarily in favor of local and state licensing authorities for future decommissioning costs, and to support the unfunded portion of our pension obligation. We are obligated to provide financial assurance to local and state licensing authorities for possible future decommissioning costs associated with the various facilities that hold Co-60. At December 31, 2023 and 2022, $48.2 million and $54.1 million, respectively, of the standby letters of credit and surety bonds referenced above were outstanding in favor of the various local and state licensing authorities in the event we defaulted on our decommissioning obligation.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The following subsections describe our most critical accounting policies, estimates, and assumptions. Our discussion of critical accounting policies and estimates is intended to supplement, not duplicate, our summary of significant accounting policies so that readers will have greater insight into the uncertainties involved in these areas. Our accounting policies are more fully described in Note 1, “Significant Accounting Policies” to our consolidated financial statements.

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The preparation of consolidated financial statements and related disclosures in conformity with GAAP requires management to make judgments, estimates and assumptions at a specific point in time and in certain circumstances that affect amounts reported in the accompanying consolidated financial statements. In preparing these consolidated financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. The application of accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

Revenue Recognition. The majority of our sales agreements contain performance obligations satisfied at a point in time when control of promised goods or services have transferred to our customers. Revenues recognized over time are generally accounted for using an input measure to determine progress completed as of the end of the period.

Refunds, returns, warranties and other related obligations are not material to any of our business units and we do not incur material incremental costs to secure customer contracts.

The Sterigenics segment provides outsourced terminal sterilization and irradiation services for the medical device, pharmaceutical, food safety and advanced applications markets. We typically have multi-year service contracts with our significant customers, and these sales contracts are primarily based on customers’ purchase orders. Given the relatively short turnaround times, performance obligations are generally satisfied at a point-in-time upon the completion of sterilization or irradiation processing and the approval of our quality assurance process, at which time the service is complete.

The Nordion segment is a provider of Co-60 and gamma irradiation systems, which are key components to the gamma sterilization process. Revenue from the sale of Co-60 radiation sources is recognized at a point-in-time upon satisfaction of our performance obligations for delivery/installation and disposal of existing sources. Revenue from the sale of gamma irradiation systems in our Nordion segment is recognized over time using an input measure of costs incurred and is immaterial to the overall business.

The Nelson Labs segment provides outsourced microbiological and analytical chemistry testing and advisory services for the medical device and pharmaceutical industries. We provide our customers mission-critical lab testing services, which assess the product quality, effectiveness, patient safety and end-to-end sterility of products. These services are necessary for our customers’ regulatory approvals, product releases and ongoing product performance evaluations. Nelson Labs services are generally provided on a fee-for-service or project basis, and we recognize revenues over time using an input measure of time incurred to determine progress completed at the end of the period. Revenue recognized over time in excess of the amount billed to the customer is recorded as a customer contract asset. 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. We utilize our customer relationship management system to assess time incurred and the extent of project completion at the end of the period.

We do not capitalize sales commissions because substantially all of our sales commission programs have an amortization period of one year or less. Furthermore, costs to fulfill a contract are not material.

Provisions for discounts, rebates to customers, and other adjustments are provided for as reductions in net revenues in the period the related sale was recorded. Shipping and handling charges billed to customers are included in net revenues, and the related shipping and handling costs are included in cost of net revenues on the Consolidated Statements of Operations and Comprehensive Income (Loss). Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from net revenue.

Payment terms vary by the type and location of the customer and the products or services offered. Generally, the time between when revenue is recognized and when payment is due is not significant. We do not evaluate whether the selling price contains a financing component for contracts that have a duration of less than one year.

Long-Lived Assets Other than Goodwill. We review long-lived assets, including finite-lived intangible assets, for impairment whenever events or circumstances indicate that the carrying amount of the assets may be impaired. Events or circumstances which would prompt an impairment assessment include operating losses, a significant change in the use of an asset, or the planned disposal or sale of the asset. 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. The asset or asset group would be considered impaired when the future net undiscounted cash flows generated by the asset or asset group are less than its carrying value.

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An impairment loss is recognized based on the amount by which the carrying value of the asset or asset group exceeds its estimated fair value. We provide additional information about our long-lived assets other than goodwill in Notes 7, “Property, Plant and Equipment” and 8, “Goodwill and Other Intangible Assets” to our consolidated financial statements.

Goodwill and Other Indefinite-Lived Intangibles. Assets and liabilities of a 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 generally 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 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.

Goodwill and other indefinite-lived intangible assets, primarily certain regulatory licenses and trade names, are tested for impairment annually as of October 1. If circumstances change during interim periods between annual tests that indicate that the carrying amount of such assets may not be recoverable, the company tests such assets at an interim date for impairment. Factors which would necessitate an interim impairment assessment include prolonged negative industry or economic trends and significant underperformance relative to historical or projected future operating results.

At December 31, 2023, goodwill and intangible assets totaled $1,527.5 million, or 48.8% of our total assets. We consider the impairment analyses of these assets critical because of their quantitative significance to the Company and our segments.

Goodwill is assigned to our segments at December 31, 2023 as follows:

We performed a quantitative assessment of all reporting units (Sterigenics, Nordion and Nelson Labs) as of October 1, 2023. The fair value of each reporting unit was calculated using a discounted cash flow analysis which was dependent on subjective market participant assumptions determined by management. Assumptions used in the analyses included discount rates, revenue growth rates and projected operating cash flows. Estimates of future cash flows are based upon relevant data at a point-in-time, are subject to change, and could vary from actual results. Cash flows are based on recent historical results and are consistent with the Company’s near-term financial forecasts and long-term strategic plans. The estimated fair value of Sterigenics, Nordion and Nelson Labs each exceeded its carrying amount (including goodwill) by an adequate margin to support a positive assertion that goodwill is not impaired as of October 1, 2023. No factors were identified that would result in the potential impairment to the indefinite-lived intangible assets. There have been no other significant events or circumstances that occurred since the annual assessment date of October 1 that would change the conclusions reached above. We provide additional information about our goodwill and other indefinite-lived intangible assets in Note 8, “Goodwill and Other Intangible Assets” to our consolidated financial statements.

Income Taxes. We use the liability method of accounting for income taxes whereby we recognize deferred tax assets and liabilities for the future tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Measurements of deferred taxes requires the use of judgment with respect to the realization of tax basis. We periodically review our deferred tax assets for recoverability and establish a valuation allowance based on historical taxable income, projected future taxable income, expected timing of reversals of existing temporary timing differences and the implementation of tax planning strategies. Deferred tax assets will be reduced by a valuation allowance if, based on management’s estimate, it is more likely than not that a portion of the deferred tax assets will not be realized in a future period. The estimates used in the recognition of deferred tax assets are subject to revision in future periods based on new facts and circumstances. At December 31, 2023 and 2022 we maintained a valuation allowance of $125.4 million and $105.6 million, respectively, against our deferred tax assets, primarily attributable to the excess interest expense on our long-term debt in the United States as well as federal, state and foreign net operating loss carryforwards. 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 or results of operations. Changes in our judgment related to the measurement of deferred tax assets and liabilities could materially impact our results of operations.

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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 meets 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% likely of being realized upon ultimate settlement. Determining what constitutes an individual tax position and whether the more likely-than-not recognition threshold is met for a tax position are matters of judgment based on the individual facts and circumstances of that position evaluated in light of all available evidence. We review and adjust 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. Changes in our judgment related to the assessment of uncertain tax positions could materially impact our results of operations.

We are subject to taxation from federal, state and local, and foreign jurisdictions. Tax positions are settled primarily through the completion of audits within each individual tax jurisdiction or the closing of a statute of limitation. Changes in applicable tax law or other events may also require us to revise past estimates. The United States Internal Revenue Service routinely conducts audits of our federal income tax returns. Additional information regarding income taxes is included in Note 11, “Income Taxes” to our consolidated financial statements.

Commitments and Contingencies. We are, and will likely continue to be, involved in a number of legal proceedings, government investigations and claims, which we believe generally arise in the course of our business, given our size, history, complexity and the nature of our business, products, customers, regulatory environment and industries in which we participate. These legal proceedings, investigations and claims generally involve a variety of legal theories and allegations, including, without limitation, personal injury (e.g., slip and falls, burns, vehicle accidents, mass tort), regulation (e.g., failure to meet specification or failure to comply with regulatory requirements), commercial claims (e.g., breach of contract, economic loss, misrepresentation), financial (e.g., taxes, reporting), employment (e.g., wrongful termination, discrimination, benefits matters) and other claims for damage and relief.

We record a liability for such contingencies to the extent we conclude that their occurrence is both probable and estimable. If a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability is disclosed within our consolidated financial statements, together with an estimate of the range of possible loss if the range is determinable and material. We consider many factors in making these assessments, including the professional judgment of experienced members of management and our legal counsel. For legal proceedings and claims described within our consolidated financial statements, we have made estimates as to the likelihood of unfavorable outcomes and the amounts of such potential losses, if a range is determinable. While it is not possible to determine the ultimate disposition of each of these matters, the ultimate resolution of pending regulatory and legal matters in future periods may have a material adverse effect on our financial condition, results of operations and/or liquidity. The Company may also incur material defense and settlement costs, diversion of management resources and other adverse effects on our business, financial condition, and/or results of operations. We record gain contingencies when realized and expected recoveries under applicable insurance contracts when we are assured of recovery. Refer to Note 20, “Commitments and Contingencies” to our consolidated financial statements.

As described in Note 20, “Commitments and Contingencies”, the Company reached agreements to settle approximately 880 pending and threatened EO claims against the Defendant Subsidiaries in the Circuit Court of Cook County, Illinois, and US District Court for the Northern District of Illinois on January 9, 2023. Under the binding Settlement Agreements, the Company paid $407.7 million to settle the claims.

On October 16, 2023, the Company reached an agreement to resolve 79 EO claims against the Settling Defendant in the State of Georgia. Under the terms of the agreements, the Company paid $35.0 million to settle the claims.

NEW ACCOUNTING PRONOUNCEMENTS

For a description of recent accounting pronouncements applicable to our business, see Note 2, “Recent Accounting Standards” to our consolidated financial statements.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of various factors, including the factors we describe in Item 1A, ““Risk Factors”” and elsewhere in this Annual Report on Form 10-K.

OVERVIEW

We are a leading global provider of mission-critical end-to-end sterilization solutions and lab testing and advisory services for the healthcare industry. We are driven by our mission: Safeguarding Global Health®. We provide end-to-end sterilization as well as microbiological and analytical lab testing and advisory services to help ensure that medical, pharmaceutical and food products are safe for healthcare practitioners, patients and consumers in the United States and around the world. Our customers include more than 40 of the top 50 medical device companies and nine of the top ten global pharmaceutical companies (based on revenue). Our services are an essential aspect of our customers’ manufacturing process and supply chains, helping to ensure sterilized medical products reach healthcare practitioners and patients. Most of these services are necessary for our customers to satisfy applicable government requirements. We give our customers confidence that their products meet regulatory, safety and effectiveness requirements. With our industry-recognized scientific and technological expertise, we help to ensure the safety of millions of patients and healthcare practitioners around the world every year. Across our 65 facilities worldwide, we have over

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3,000 employees who are dedicated to safety and quality. We are a trusted partner to approximately 5,000 customers in over 50 countries.

We serve our customers throughout their product lifecycles, from product design to manufacturing and delivery, helping to ensure the sterility, effectiveness and safety of their products for the end user. We operate across two core businesses: sterilization services and lab services. Each of our businesses has a longstanding record and is a leader in its respective market, supported and connected by our core capabilities including deep end market, regulatory, technical and logistics expertise. The combination of Sterigenics, our terminal sterilization business, and Nordion, our Co-60 supply business, makes us the only vertically integrated global gamma sterilization provider in the sterilization industry. This provides us with additional insights and allows us to better serve our customers. For financial reporting purposes, our sterilization services business consists of two reportable segments, Sterigenics and Nordion, and our lab services business consists of one reportable segment, Nelson Labs.

For the year ended December 31, 2022, we recorded net revenues of $1,003.7 million, net loss of $233.6 million, Adjusted Net Income of $270.2 million and Adjusted EBITDA of $506.2 million. Adjusted Net Income and Adjusted EBITDA are financial measures not based on any standardized methodology prescribed by U.S. Generally Accepted Accounting Principles (“GAAP”). For the definition of Adjusted Net Income and Adjusted EBITDA and the reconciliation of these non-GAAP measures from net income (loss), please see “Non-GAAP Financial Measures.”

TRENDS AND KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS

We expect that our performance and financial condition will continue to be driven by the key trends impacting our industries, customers and their end markets as outlined in Item 1, “Business”. In addition, we believe the following trends and key factors have underpinned our recent operating results and may continue to affect our performance and financial condition in future periods.

•Business and market conditions. During the year ended December 31, 2022, Sterigenics and Nordion continued to see sustained demand for sterilization services. Nelson Labs’ net revenues increased for the year ended December 31, 2022 compared to the prior year; however, reduced demand for pandemic-related testing coupled with slower than expected growth of certain laboratory testing categories impacted Nelson Labs’ growth for the year ended December 31, 2022. The Company as a whole faced ongoing macroeconomic pressures during the year ended December 31, 2022, particularly related to inflation, including higher energy and labor costs, partially offset through pricing and other actions. Our results of operations were also impacted by fluctuations in foreign currency exchange rates, specifically the strengthening of the U.S. dollar against the currencies of other major economies.

Additionally, a portion of our supply of Co-60 is generated by Russian nuclear reactors. We continue to monitor the potential for disruption in the supply of Co-60 from Russian nuclear reactors but we do not expect a material impact in 2023 on our supply or revenue.

•Investment initiatives. We continue to make significant investments in capacity expansions and facility improvements as well as in our efforts to strengthen our Co-60 supply chain. For the year ended December 31, 2022, capital expenditures increased by $80.2 million compared to the year ended December 31, 2021.

•Disciplined and strategic M&A activity. We remain committed to our highly disciplined acquisition strategy and continue to seek suitable acquisition targets.

•Litigation related costs and exit activities. We are currently the subject of tort lawsuits alleging personal injury by purported exposure to EO emitted by our former facility in Willowbrook, Illinois and current facility in Atlanta, Georgia. In addition, we are defendants in a lawsuit brought by the State of New Mexico Attorney General alleging that emissions of EO from our Santa Teresa facility constitute a public nuisance and materially contributed to increased health risks suffered by residents in the area. The Company maintains that its former Willowbrook, Illinois operations and current Atlanta, Georgia and Santa Teresa, New Mexico operations did not pose and do not pose any safety risk to their surrounding communities. We deny these allegations and are vigorously defending against these claims. See Item 3, “Legal Proceedings” and Note 20 “Commitments and Contingencies” to our consolidated financial statements.

For the years ended December 31, 2022 and 2021 and 2020, we recorded costs of $72.6 million, $45.7 million and $36.7 million, respectively, representing professional fees related to litigation associated with our EO sterilization facilities and other related professional fees.

Although the per occurrence limit of our environmental liability insurance was reached for the Willowbrook, Illinois litigation in the second quarter of 2020, we are pursuing insurance coverage for our legal expenses related to the EO tort litigation. In 2021, Sterigenics U.S., LLC filed an insurance coverage lawsuit in the U.S. District Court for the

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Northern District of Illinois relating to two commercial general liability policies issued in the 1980s. On August 3, 2022, the Court issued a Memorandum Opinion and Order concluding that the insurance company owes Sterigenics U.S., LLC and another party a duty to defend the Willowbrook, Illinois litigation, which may allow us to recover defense costs related to that litigation.

On January 9, 2023, the Company reached agreements to settle more than 870 pending and threatened EO claims against the Defendant Subsidiaries in the Circuit Court of Cook County, Illinois, and US District Court for the Northern District of Illinois. Under the terms of the binding Term Sheets (“Term Sheets”), the Company will pay $408.0 million to settle the claims, subject to substantially all of the plaintiffs providing opt-in consents to their individual settlement allocations and dismissing their claims with prejudice. As this event provides additional evidence about conditions that existed as of December 31, 2022, we recorded a $408.0 million charge to expense on December 31, 2022. The Term Sheets provide a pathway to comprehensively resolve the claims pending against the Company in Illinois and thereby enable the Company to focus its full attention on operating the business. The Company denies any liability and maintains that its Willowbrook, Illinois operations did not pose a safety risk to the community in which it operated and believes the evidence ultimately would have compelled the rejection of the plaintiffs’ claims. See Note 20 “Commitments and Contingencies” to our consolidated financial statements.

We continue to incur certain transitional costs in connection with the exit of our EO sterilization operations in Willowbrook, Illinois including lease costs, payroll and utility expenses. For the years ended December 31, 2022, 2021 and 2020, we recorded costs of $4.7 million, $2.3 million and $2.6 million, respectively, relating to the closure of our Willowbrook facility.

•Borrowings, financing costs and financial leverage. During the fourth quarter of 2022, to enhance liquidity in connection with litigation needs, the Company borrowed $200.0 million under its existing Revolving Credit Facility, which was held as cash as of December 31, 2022. On February 23, 2023 the Company successfully closed on a new senior secured Term Loan B facility in an aggregate principal amount of $500.0 million. The Company plans to use proceeds of this debt, along with available cash, to a) fund the $408.0 million EO litigation settlement in Cook County, Illinois, subject to the satisfaction or waiver by the Company of the various conditions for the settlement, b) pay down existing borrowings under the Company’s revolving credit facility, c) further enhance liquidity, and d) for other general corporate purposes.

For the year ended December 31, 2022, we paid $75.8 million of cash for interest on long-term debt compared to $58.8 million for the year ended December 31, 2021. This $17.0 million increase stemmed from the steady rise in the LIBOR benchmark interest rate during the year ended December 31, 2022 combined with the $200.0 million borrowing on the Revolving Credit Facility.

COMPONENTS OF OUR RESULTS OF OPERATIONS

Net Revenues

Service revenues consist of revenue generated from contract sterilization and lab testing and advisory services within our Sterigenics and Nelson Labs segments, respectively. Service revenues also consist of Co-60 installation and disposal revenues and gamma irradiation system refurbishments and installation services within our Nordion segment. Product revenues consist of revenues generated from sales of Co-60 radiation sources and gamma irradiation systems. Provisions for discounts, rebates to customers, and other adjustments are provided for as reductions in net revenues. Refunds, returns, warranties and other related obligations are not material to any of our business units, nor do we incur material incremental costs to secure customer contracts.

Cost of Revenues

Our cost of revenues consists primarily of direct materials, utilities, labor and related benefit costs, and depreciation and amortization. Although the cost of utilities and direct materials can fluctuate, the remaining components of cost of revenues are generally more stable. Direct material costs relating to service revenues primarily includes EO gas, nitrogen gas and Co-60. The physical decay of Co-60 assets is included within depreciation expense as a cost of revenue. Direct material costs relating to product revenues also include the costs associated with acquiring Co-60 in finished or semi-finished form, acquiring Co-59 in a form ready for insertion into reactors for conversion into Co-60, the reactor time and associated services to convert Co-59 into Co-60, and parts and equipment associated with building and maintaining gamma irradiation systems.

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Operating Expenses

SG&A Expenses

SG&A primarily consists of compensation and benefits costs and general operating and administrative expenses, including professional service fees (which include finance and legal costs), travel and entertainment expenses, and other general and administrative expenses. Share-based compensation expense is also included in SG&A.

Amortization of Intangible Assets

Amortization of intangible assets primarily consists of expense associated with customer relationship intangibles, the majority of which relate to the fair values attributed to these assets upon the recapitalization of the Company in connection with the acquisition by the Sponsors in 2015. These customer relationship intangibles were initially assigned a weighted average useful life of ten years and have a remaining useful life of approximately three years. These customer relationship intangible assets account for $48.9 million of our current annual amortization expense and are expected to be fully amortized in 2025. Amortization expense fluctuates when we have an acquisition, disposition, impairment charge, or as their useful lives expire. We expect intangible assets related to future acquisitions and the associated amortization expense to increase over time as we execute on our strategy to pursue acquisition targets that are complementary to our businesses.

Impairment

We review tangible and intangible assets for impairment on a regular basis.

Operating Income

Operating income represents gross profit, less SG&A, amortization of intangible assets and impairment charges.

Interest Expense, Net

Interest expense, net, represents interest paid or accruing on our outstanding indebtedness and the amortization of debt discount and debt issuance costs. Interest expense is affected by changes in average outstanding indebtedness (including finance lease obligations) and variable interest rates. We present interest expense net of interest income, which primarily consists of interest earned on cash on hand.

Illinois EO litigation settlement

On January 9, 2023, the Company reached agreements to settle more than 870 pending and threatened EO claims against the Defendant Subsidiaries in the Circuit Court of Cook County, Illinois, and US District Court for the Northern District of Illinois. Under the terms of the agreements, the Company will pay $408.0 million to settle the claims, subject to substantially all of the plaintiffs providing opt-in consents to their individual settlement allocations and dismissing their claims with prejudice.

Impairment of investment in unconsolidated affiliate

During the year ended December 31, 2022, we recorded an impairment charge of $9.6 million related to a joint venture investment, which was acquired as part of the 2020 acquisition of Iotron Industries Canada, Inc. (“Iotron”). Due to a shift in business strategy, the joint venture will not proceed, and our joint venture partner will continue to rely on our other existing operating facilities. Based on these facts and circumstances, we concluded that the investment was impaired.

Other Income, Net

Other income, net primarily consists of changes in the fair value of the embedded derivatives in Nordion’s contracts, the net impact of pension related benefits and income related to deferred income on a lease associated with the 2018 divestiture of the Medical Isotopes business.

Provision (Benefit) for Income Taxes

Provision (benefit) for income taxes consists primarily of income taxes in foreign jurisdictions and U.S. federal and state income taxes.

Net Income (Loss) Attributable to Noncontrolling Interests

We conduct our operations through our subsidiaries. As of December 31, 2022, our consolidated subsidiaries were wholly owned by us. In the second quarter of 2021, we purchased the outstanding noncontrolling interests of 15% and 33% in our two

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China subsidiaries. Prior to our acquisition of these noncontrolling interests, we consolidated the results of operations of these subsidiaries with our results of operations and reflected the noncontrolling interests on our Consolidated Statements of Operations and Comprehensive Income (Loss) as net income (loss) attributable to noncontrolling interests.

On March 11, 2021, we purchased the 15% noncontrolling interest that remained from the August 2018 acquisition of Gibraltar Laboratories, Inc. (now known as 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.

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. Refer to Note 4, “Acquisitions” of our consolidated financial statements for additional information. We have determined this to be an investment in a variable interest entity (“VIE”). The investment is not consolidated as the Company has 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 affiliate” on the Consolidated Balance Sheets within our consolidated financial statements. During the year ended December 31, 2022, we recorded an impairment charge of $9.6 million related to this joint venture investment as described in “Consolidated Results of Operations” below.

Constant Currency Sales Growth (Non-GAAP)

“Constant currency” is a non-GAAP financial measure we use to assess performance excluding the impact of foreign currency exchange rate changes. Constant currency sales growth is calculated by translating prior year sales in local currency at the average exchange rates applicable for the current period. The translated results are then used to determine year-over-year percentage increases or decreases. We generally refer to such amounts calculated on a constant currency basis as excluding the impact of foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with U.S. GAAP.

Adjusted Net Income and Adjusted EBITDA (Non-GAAP)

We use Adjusted Net Income and Adjusted EBITDA, non-GAAP financial measures, as the principal measures of our operating performance. Management believes Adjusted Net Income and Adjusted EBITDA are useful because they allow management to more effectively evaluate our operating performance and compare the results of our operations from period to period without the impact of certain non-cash items and non-routine items that we do not expect to continue at the same level in the future and other items that are not core to our operations. We believe that these measures are useful to our investors because they provide a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. In addition, we believe Adjusted Net Income and Adjusted EBITDA will assist investors in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. Our management also uses Adjusted Net Income and Adjusted EBITDA in their financial analysis and operational decision-making and Adjusted EBITDA serves as the metric for attainment of our primary annual incentive program. Adjusted Net Income and Adjusted EBITDA may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.

For more information regarding our definition and calculation of Adjusted Net Income and Adjusted EBITDA, including information about its limitations as a tool for analysis and reconciliation to the most directly comparable financial measures calculated in accordance with GAAP, please see “Non-GAAP Financial Measures” within this Item.

Segment Income

Segment income is the primary earnings measure we use to evaluate the performance of our reportable segments, as disclosed in Note 22, “Segment and Geographic Information” to our consolidated financial statements. Costs associated with support functions that are not directly associated with one of the three reportable segments, such as corporate operating expenses for executive management, accounting, information technology, legal, human resources, treasury, investor relations, corporate development, tax, purchasing, and marketing, are allocated to the segments based on net revenue. Corporate operating expenses that are directly incurred by a segment are reflected in each segment’s income. Segment income excludes certain items which are included in “Income (loss) before taxes” as determined in our Consolidated Statements of Operations and Comprehensive Income (Loss).

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CONSOLIDATED RESULTS OF OPERATIONS

The following section summarizes the consolidated results of operations for the years ended December 31, 2022 and 2021. The discussion of the consolidated results of operation for the years ended December 31, 2021 and 2020 are presented within our Annual Report on Form 10-K for the year ended December 31, 2021 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Consolidated Results of Operations.”

Year Ended December 31, 2022 as compared to Year Ended December 31, 2021

The following table sets forth the components of our results of operations for the years ended December 31, 2022 and 2021.

(1)Adjusted Net Income and Adjusted EBITDA are non-GAAP financial measures. For more information regarding our calculation of Adjusted Net Income and Adjusted EBITDA, including information about their limitations as tools for analysis and a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted Net Income and Adjusted EBITDA, please see the reconciliation included below in “Non-GAAP Financial Measures.”

Total Net Revenues

The following table compares our revenues by type for the year ended December 31, 2022 to the year ended December 31, 2021. Results from the BioScience Labs and RCA acquisitions are included in the Nelson Labs segment for the post-acquisition periods beginning March 8, 2021 and November 4, 2021, respectively.

Net revenues were $1,003.7 million in the year ended December 31, 2022, an increase of $72.2 million, or 7.8%, as compared with the prior year. Net revenues in the year ended December 31, 2022 increased approximately 10.2% compared with the same period in 2021 on a constant currency basis.

Service revenues

Service revenues increased $59.3 million, or 7.4%, to $864.8 million in 2022 as compared to $805.5 million in 2021. The increase in net service revenues was driven by volume growth of $35.6 million in the Sterigenics segment and $12.1 million from the incremental contribution of Nelson Labs’ recent acquisitions. In addition, service revenue growth stemmed from favorable pricing of $33.0 million and $11.7 million in the Sterigenics and Nelson Labs segments, respectively. Partially offsetting these factors was a $19.8 million unfavorable impact from changes in foreign currency exchange rates across all segments and an overall decline of $11.3 million in revenue related to personal protective equipment testing in the Nelson Labs segment.

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Product revenues

Product revenues increased $12.9 million, or 10.2%, to $138.9 million in the year ended December 31, 2022 as compared to $126.0 million in the year ended December 31, 2021. The increase in product revenues was attributable to higher sales volumes of $5.6 million, largely driven by shipments of industrial use Co-60 in our Nordion segment, and the contribution of favorable pricing of $10.7 million. Partially offsetting these increases was an unfavorable change in foreign currency exchange rates of $3.4 million.

Total Cost of Revenues

The following table compares our cost of revenues by type for the year ended December 31, 2022 to the year ended December 31, 2021. Results from the BioScience Labs and RCA acquisitions are included in the Nelson Labs segment for the post-acquisition periods beginning March 8, 2021 and November 4, 2021, respectively.

Total cost of revenues accounted for approximately 44.5% and 44.3% of our consolidated net revenues for the year ended December 31, 2022 and 2021, respectively.

Cost of service revenues

Cost of service revenues increased $33.7 million for the year ended December 31, 2022 as compared to the prior year. The growth in cost of service revenues was largely driven by increased labor costs of $17.6 million resulting from both the addition of new personnel to support volume growth and higher compensation costs in response to inflationary pressures. Our Nelson Labs’ recent acquisitions accounted for $8.9 million of the increase in cost of service revenues. In addition, higher energy and direct material costs of $8.1 million, due mainly to the impacts of inflation, coupled with a $5.5 million increase in depreciation and other miscellaneous direct costs contributed to the increase in cost of revenues. Partially offsetting these factors was a $10.1 million favorable impact from changes in foreign currency exchange rates.

Cost of product revenues

Cost of product revenues increased $0.2 million, or 0.4%, for the year ended December 31, 2022 as compared to the prior year. The increase was primarily driven by a $4.0 million increase in Co-60 supply costs and a $2.1 million increase in cost of revenues related to gamma irradiation systems, due to a combination of higher sales volumes and an unfavorable supplier mix. Partially offsetting this increase was a favorable impact from foreign currency exchange rates of $5.9 million.

Operating Expenses

The following table compares our operating expenses for the year ended December 31, 2022 to the year ended December 31, 2021:

Operating expenses accounted for approximately 30.8% and 28.1% of our consolidated net revenues for the year ended December 31, 2022 and 2021, respectively.

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SG&A

SG&A increased $47.6 million, or 24.0%, for the year ended December 31, 2022 as compared to the prior year. The increase was driven primarily by the following:

•a $27.0 million increase in litigation and other professional services expenses associated with EO sterilization facilities;

•a $7.3 million increase in selling and administrative personnel costs in support of company-wide growth and business enhancement efforts;

•a $7.3 million increase in share-based compensation expense attributable to awards granted under the 2020 Omnibus Incentive Plan; and

•a $3.4 million favorable settlement related to an insurance claim for Nordion in year ended December 31, 2021 that did not recur in the year ended December 31, 2022.

Amortization of intangible assets

Amortization of intangible assets was $62.9 million for the year ended December 31, 2022, a decrease of $0.8 million or 1.3% compared to the year ended December 31, 2021. The change was due mainly to a reduction in amortization expense related to certain intangible assets that were fully amortized by December 31, 2021 combined with changes in foreign currency exchange rates, partially offset by additional amortization expense for intangible assets acquired in connection with the RCA acquisition.

Interest Expense, Net

Interest expense, net increased $6.0 million, or 8.0%, for the year ended December 31, 2022 as compared to the prior year. The increase stemmed from the steady rise in the LIBOR benchmark interest rate during the year ended December 31, 2022 coupled with a $200.0 million draw on the Revolving Credit Facility in the fourth quarter of 2022, which in combination resulted in $18.2 million of additional interest expense. Partially offsetting this increase was a $12.2 million reduction to interest expense attributable to the favorable change in the fair value of interest rate caps not designated as hedging instruments and the related periodic settlement payments. The weighted average interest rate on our outstanding debt was 7.16% and 3.25% at December 31, 2022 and 2021, respectively.

Illinois EO litigation settlement

On January 9, 2023, the Company reached agreements to settle more than 870 pending and threatened EO claims against the Defendant Subsidiaries in the Circuit Court of Cook County, Illinois, and US District Court for the Northern District of Illinois. Under the binding Term Sheets, the Company will pay $408.0 million to settle the claims, subject to substantially all of the plaintiffs providing opt-in consents to their individual settlement allocations and dismissing their claims with prejudice. As this event provides additional evidence of conditions that existed as of December 31, 2022, we recorded a $408.0 million charge to expense on December 31, 2022.

Impairment of investment in unconsolidated affiliate

During the year ended December 31, 2022, we recorded an impairment charge of $9.6 million related to a joint venture investment, which was acquired as part of the 2020 Iotron acquisition. Due to a shift in business strategy, the joint venture will not proceed, and our joint venture partner will continue to rely on our other existing operating facilities. Based on these facts and circumstances, we concluded that the investment was impaired as of June 30, 2022.

Foreign Exchange Loss (Gain)

Foreign exchange loss was $0.1 million for the year ended December 31, 2022 as compared to $1.3 million in the prior year. Beginning in the fourth quarter of 2020, we entered into monthly U.S. dollar-denominated foreign currency forward contracts to manage this foreign currency exchange rate risk. The foreign currency forward contracts expire and renew on a monthly basis. As a result, the majority of our foreign exchange loss recorded in the years ended December 31, 2022 and 2021 related to short-term losses (offset by short-term gains) on sales denominated in currencies other than the functional currency of our operating entities.

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Other Income, Net

Other income, net was $6.4 million for the year ended December 31, 2022, a decrease of $8.8 million as compared to the prior year. The fluctuation was primarily driven by two significant events in the year ended December 31, 2021 that did not recur in the year ended December 31, 2022:

•a $5.1 million non-cash gain arising from derecognition of an asset retirement obligation (“ARO”) liability no longer attributable to Nordion pursuant to the terms of the sale of the Medical Isotopes business in 2018; and

•a $1.2 million gain on our purchase of the 15% mandatorily redeemable noncontrolling interest of Nelson Labs Fairfield.

Additionally, $2.5 million of the decline in other income was the result of unfavorable changes in the fair value of embedded derivatives in Nordion’s purchase contracts.

Provision (Benefit) for Income Taxes

Benefit for income taxes was $9.5 million for the year ended December 31, 2022 as compared to a provision of $58.6 million in the prior year. The change was attributable to a pre-tax loss of $243.1 million (driven by the $408.0 million Illinois EO litigation settlement accrual) in the year ended December 31, 2022 compared to pretax income of $175.7 million for the year ended December 31, 2021.

Provision for income taxes for the year ended December 31, 2022 differed from the statutory rate of 21% primarily due to an increase in the partial valuation allowance against our excess interest expense carryforward balance, $8.0 million of state tax attributes, the impact of the foreign rate differential, partially offset by state taxes (net of federal benefit). The provision for income taxes for the year ended December 31, 2021 differed from the statutory rate of 21% primarily due to an increase in the partial valuation allowance against our excess interest expense carryforward balance, the addition of valuation allowances against certain foreign net operating loss carryforward balances, the impact of the foreign rate differential, and tax on GILTI.

Net Income (Loss), Adjusted Net Income and Adjusted EBITDA

Net loss for the year ended December 31, 2022 was $233.6 million, as compared to net income of $117.1 million for the year ended December 31, 2021 largely driven by the Illinois EO litigation settlement reserve. Adjusted Net Income was $270.2 million for the year ended December 31, 2022, as compared to $245.8 million for the year ended December 31, 2021, due to the factors described above. Adjusted EBITDA was $506.2 million for the year ended December 31, 2022, as compared to $481.2 million for the year ended December 31, 2021, due to the factors described above. Please see “Non-GAAP Financial Measures” below for a reconciliation of Adjusted Net Income and Adjusted EBITDA to their most directly comparable financial measure calculated and presented in accordance with GAAP.

NON-GAAP FINANCIAL MEASURES

To supplement our consolidated financial statements presented in accordance with GAAP, we consider Adjusted Net Income and Adjusted EBITDA, financial measures that are not based on any standardized methodology prescribed by GAAP.

We define Adjusted Net Income as net income (loss) before amortization and certain other adjustments that we do not consider in our evaluation of our ongoing operating performance from period to period as discussed further below. We define Adjusted EBITDA as Adjusted Net Income before interest expense, depreciation (including depreciation of Co-60 used in our operations) and income tax provision applicable to Adjusted Net Income.

We use Adjusted Net Income and Adjusted EBITDA, non-GAAP financial measures, as the principal measures of our operating performance. Management believes Adjusted Net Income and Adjusted EBITDA are useful because they allow management to more effectively evaluate our operating performance and compare the results of our operations from period to period without the impact of certain non-cash items and non-routine items that we do not expect to continue at the same level in the future and other items that are not core to our operations. We believe that these measures are useful to our investors because they provide a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. In addition, we believe Adjusted Net Income and Adjusted EBITDA will assist investors in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. Our management also uses Adjusted Net Income and Adjusted EBITDA in their financial analysis and operational decision-making and Adjusted EBITDA serves as the basis for the metric we utilize to determine attainment of our primary annual incentive program.

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Adjusted Net Income and Adjusted EBITDA may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.

Adjusted Net Income and Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted Net Income and Adjusted EBITDA rather than net income (loss), the nearest GAAP equivalent. For example, Adjusted Net Income and Adjusted EBITDA primarily exclude:

•certain recurring non-cash charges such as depreciation of fixed assets, although these assets may have to be replaced in the future, as well as amortization of acquired intangible assets and asset retirement obligations;

•costs of acquiring and integrating businesses, which will continue to be a part of our growth strategy;

•non-cash gains or losses from fluctuations in foreign currency exchange rates, and the mark-to-fair value of derivatives not designated as hedging instruments, which includes embedded derivatives relating to certain customer and supply contracts at Nordion;

•impairment charges on long-lived assets, intangible assets and investments accounted for under the equity method;

•loss on extinguishment of debt incurred in connection with refinancing or early extinguishment of long-term debt;

•expenses and charges related to the litigation, settlement agreements, and other activities associated with our ethylene oxide sterilization facilities, including those in Willowbrook, Illinois, Atlanta, Georgia and Santa Teresa, New Mexico, even though that litigation remains ongoing;

•in the case of Adjusted EBITDA, interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; and

•share-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense and an important part of our compensation strategy.

In evaluating Adjusted Net Income and Adjusted EBITDA, you should be aware that in the future, we will incur expenses similar to the adjustments in this presentation. Our presentations of Adjusted Net Income and Adjusted EBITDA should not be construed as suggesting that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider Adjusted Net Income and Adjusted EBITDA alongside other financial performance measures, including our net income and other GAAP measures.

The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP to Adjusted Net Income and Adjusted EBITDA, for each of the periods indicated:

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(a)Represents non-cash share-based compensation expense. See Note 16, “Share-Based Compensation” for further information.

(b)Represents the effects of (i) fluctuations in foreign currency exchange rates, (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion, and (iii) unrealized gains and losses on interest rate caps not designated as hedging instruments.

(c)Represents (i) certain direct and incremental costs related to the acquisitions of RCA, the noncontrolling interests in our China subsidiaries, BioScience Labs in 2021, and the first quarter 2021 gain on the mandatorily redeemable noncontrolling interest in Nelson Labs Fairfield (as described in Note 4, “Acquisitions”), and certain related integration efforts as a result of those acquisitions, (ii) the earnings impact of fair value adjustments (excluding those recognized within amortization expense) resulting from the businesses acquired, (iii) transition services income and non-cash deferred lease income associated with the terms of the divestiture of the Medical Isotopes business in 2018, (iv) a $3.4 million gain recognized in the third quarter of 2021 related to the settlement of an insurance claim for Nordion that existed at the time of our acquisition of the business in 2014, and (v) a $5.1 million non-cash gain recognized in the fourth quarter of 2021 arising from the derecognition of an ARO liability no longer attributable to Nordion pursuant to the terms of the sale of the Medical Isotopes business in 2018.

(d)Represents professional fees, contract termination and exit costs, severance and other payroll costs, and other costs associated with business optimization and cost savings projects relating to the integration of recent acquisitions, operating structure realignment and other process enhancement projects.

(e)Represents decommissioning costs, professional fees, severance and other payroll costs, and other costs including ongoing lease and utility expenses associated with the closure of the Willowbrook, Illinois facility.

(f)Represents an impairment charge on our equity method investment in a joint venture. Refer to Note 1, “Significant Accounting Policies” for further information.

(g)Represents expenses incurred in connection with the repricing of our Term Loan in January 2021 and full redemption of the First Lien Notes in August 2021, including a prepayment premium and accelerated amortization of prior debt issuance and discount costs.

(h)Represents litigation and other professional fees associated with our EO sterilization facilities. See Note 20 “Commitments and Contingencies”.

(i)Represents the cost to settle 870+ pending and threatened EO claims against the Defendant Subsidiaries in Illinois under settlement term sheets entered into on January 9, 2023, subject to substantially all of the plaintiffs providing opt-in consents to their individual settlement allocations and dismissing their claims with prejudice. See Note 20 “Commitments and Contingencies”.

(j)Represents non-cash accretion of asset retirement obligations related to gamma and EO processing facilities, which are based on estimated site remediation costs for any future decommissioning of these facilities (without regard for whether the decommissioning services would be performed by employees of Nordion, instead of by a third party) and are accreted over the life of the asset.

(k)Represents non-recurring costs associated with the COVID-19 pandemic, including incremental costs to implement workplace health and safety measures.

(l)Represents the income tax impact of adjustments calculated based on the tax rate applicable to each item. We eliminate the effect of tax rate changes as applied to tax assets and liabilities, and unusual items from our presentation of adjusted net income.

(m)The year ended December 31, 2022 excludes a $1.7 million net decrease in the fair value of interest rate derivatives not designated as hedging instruments recorded to interest expense.

(n)Includes depreciation of Co-60 held at gamma irradiation sites.

(o)Represents the difference between income tax expense or benefit as determined under U.S. GAAP and the income tax benefit associated with pre-tax adjustments described in footnote (l).

(p)$83.6 million and $85.3 million of the adjustments for the year ended December 31, 2022 and 2021 , respectively, are included in cost of revenues, primarily consisting of amortization of intangible assets, depreciation, and accretion of asset retirement obligations.

SEGMENT RESULTS OF OPERATIONS

We have three reportable segments: Sterigenics, Nordion and Nelson Labs. Our chief operating decision maker evaluates performance and allocates resources within our business based on segment income, which excludes certain items which are

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included in income (loss) before tax as determined in our Consolidated Statements of Operations and Comprehensive Income (Loss). The accounting policies for our reportable segments are the same as those for the consolidated Company.

Our Segments

Sterigenics

Our Sterigenics business provides outsourced terminal sterilization and irradiation services for the medical device, pharmaceutical, food safety and advanced applications markets using three major technologies: gamma irradiation, EO processing and E-beam irradiation.

Nordion

Our Nordion business is a leading global provider of Co-60 used in the sterilization and irradiation processes for the medical device, pharmaceutical, food safety, and high-performance materials industries, as well as in the treatment of cancer. In addition, Nordion is a leading global provider of gamma irradiation systems.

As a result of the time required to meet regulatory and logistics requirements for delivery of radioactive products, combined with accommodations made to our customers to minimize disruptions to their operations during the installation of Co-60, Nordion sales patterns can often vary significantly from one quarter to the next. However, timing-related impacts on our sales performance tend to be resolved within several quarters, resulting in more consistent performance over longer periods of time. In addition, sales of gamma irradiation systems occur infrequently and tend to be for larger amounts.

Results for our Nordion segment are impacted by Co-60 mix, harvest schedules, as well as customer, product and service mix.

Nelson Labs

Our Nelson Labs business provides outsourced microbiological and analytical chemistry testing and advisory services for the medical device and pharmaceutical industries.

For more information regarding our reportable segments please refer to Item 1. “Business” and Note 22, “Segment and Geographic Information” to our consolidated financial statements.

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Segment Results for the Years Ended December 31, 2022 and 2021

The following section summarizes the segment results for the years ended December 31, 2022 and 2021. The discussion of the segment results for the years ended December 31, 2021 and 2020 are presented within our Annual Report on Form 10-K for the year ended December 31, 2021 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Segment Results for the years ended December 31, 2021 and 2020.”

The following tables compare segment net revenue and segment income for the year ended December 31, 2022 to the year ended December 31, 2021:

Net Revenues

Sterigenics net revenues were $626.6 million for the year ended December 31, 2022, an increase of $54.8 million, or 9.6%, as compared to the prior year. The increase reflects organic volume growth of 6.2%, a favorable impact from pricing of 5.8%, partially offset by unfavorable impacts from changes in foreign currency exchange rates of 2.4%.

Nordion net revenues were $153.6 million for the year ended December 31, 2022, an increase of $13.1 million, or 9.3%, as compared to the prior year. The increase was driven by favorable pricing of 7.7% and higher volume of 4.4%, partially offset by a 2.8% impact from the strengthening of the US dollar compared to the Canadian dollar during 2022.

Nelson Labs net revenues were $223.4 million for the year ended December 31, 2022, an increase of $4.3 million, or 1.9%, as compared to the prior year. The net revenue increase was driven primarily by 5.5% of revenue growth from the 2021 acquisitions and positive impacts from pricing of 5.4%. Partially offsetting these growth factors was a 5.2% decline in revenue related to the testing of personal protective equipment and a 2.5% unfavorable impact from changes in foreign currency exchange rates.

Segment Income

Sterigenics segment income was $339.1 million for the year ended December 31, 2022, an increase of $28.7 million, or 9.2%, as compared to the prior year. The increase in segment income was primarily a result of volume growth and favorable pricing, as referenced above. The slight decline in segment income margin as compared to the prior year was due to timing of pricing actions versus realized inflation.

Nordion segment income was $89.5 million for the year ended December 31, 2022, an increase of $6.8 million, or 8.2%, as compared to the prior year. The increase in segment income was due to the favorable impacts of customer pricing and volume growth, as referenced above. The decrease in segment income margin was due to unfavorable mix partially offset by favorable pricing.

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Nelson Labs segment income was $77.6 million for the year ended December 31, 2022, a decrease of $10.5 million, or 11.9%, as compared to the prior year. The decrease in segment income was primarily driven by unfavorable revenue mix driven by a reduction in pandemic-related testing, increased staffing in anticipation of incremental volume, and inflationary pressures, partially offset by favorable pricing as mentioned above. The 5.5% decrease in segment income margin is a result of the aforementioned factors coupled with dilution resulting from the margin profile of recent acquisitions.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Cash

The primary sources of liquidity for our business are cash flows from operations and borrowings under our credit facilities. As of December 31, 2022, we had $396.3 million of cash and cash equivalents. This is an increase of $289.4 million from the balance at December 31, 2021. Our foreign subsidiaries held cash of approximately $158.3 million at December 31, 2022 and $87.9 million at December 31, 2021, to meet their liquidity needs. No material restrictions exist to accessing cash held by our foreign subsidiaries notwithstanding any potential tax consequences.

On February 23, 2023 the Company successfully closed on a new senior secured Term Loan B facility in an aggregate principal amount of $500.0 million. The Company plans to use proceeds of this debt, along with available cash, to a) fund a previously announced $408.0 million EO litigation settlement in Cook County, Illinois, subject to the satisfaction or waiver by the Company of the various conditions for the settlement, b) pay down existing borrowings under the Company’s revolving credit facility, c) further enhance liquidity, and d) for general corporate purposes. Refer to “Debt Facilities” below within this Item, Note 10, “Long-Term Debt”, and Item 1A, “Risk Factors” - “Risks Related to Our Indebtedness and Liquidity.” for additional information.

Uses of Cash

We expect that cash on hand, operating cash flows and amounts available under our credit facilities will provide sufficient working capital to operate our business, meet foreseeable liquidity requirements, inclusive of debt service on our long-term debt, and capital expenditures including investments in fixed assets to build and/or expand existing facilities. As of December 31, 2022, there was $200.0 million outstanding borrowings on the Revolving Credit Facility. Our ability to meet future working capital, capital expenditure and debt service requirements will depend on our future financial performance, which will be affected by a range of macroeconomic, competitive and business factors, including interest rate changes and changes in our industry, many of which are outside of our control. As of December 31, 2022, our interest rate caps limit our cash flow exposure related to LIBOR (or its successor) for the majority of the principal amount outstanding on our variable rate borrowings under the Term Loan. Refer to Note 21, “Financial Instruments and Financial Risk” under the heading “Derivative Instruments” for additional information regarding the interest rate caps used to manage economic risks associated with our variable rate borrowings. Refer to Item 7A., "Quantitative and Qualitative Disclosures About Market Risk" for additional information about changes in interest rate risk.

In addition to our operations, our primary long-term liquidity requirements include servicing our debt, investing in capital expenditures, funding suitable business acquisitions, and making expenditures for other general corporate purposes. Our significant categories of contractual cash obligations required to operate our business that extend beyond December 31, 2022 are described in “Contractual Obligations and Commercial Commitments” below.

Capital Expenditures

Our capital expenditure program is a component of our long-term strategy. This program includes, among other things, investments in new facilities and enhancements in controls and other critical aspects of our existing facilities, business expansion projects, Co-60 used by Sterigenics at its gamma irradiation facilities, Co-60 development projects and information technology enhancements. During the year ended December 31, 2022, our capital expenditures amounted to $182.4 million, compared to $102.2 million in the year ended December 31, 2021. This amount includes approximately $31.6 million related to environmental facility enhancements.

In 2023, we expect to continue to invest in facility expansions, ongoing routine maintenance for existing facilities, and acquisition of Co-60 for use by our Sterigenics segment in its gamma irradiation facilities. In addition, we expect to invest in special projects related to development of new Co-60 supply sources and facility enhancements at our EO sterilization facilities. We currently expect our capital expenditures to be higher in 2023 than in recent years and remain elevated over the next several years as we execute on those special projects in addition to our normal growth and maintenance related investments. For 2023,

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considering our typical growth and maintenance projects, along with the special projects, we expect capital expenditures to be in the range of approximately $185.0 million to $215.0 million, of which approximately $33.2 million and $31.6 million relate to environmental facility enhancements and cobalt development projects, respectively. We expect similar investments in environmental facility enhancements and cobalt development projects in subsequent years.

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 “2019 Credit Agreement”). The Revolving Credit Facility and Term Loan mature on June 13, 2026, and December 13, 2026, respectively. The total borrowing capacity under the Revolving Credit Facility is $347.5 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 December 31, 2022 and 2021, total borrowings under the Term Loan were $1,763.1 million and $1,763.1 million, respectively, As of December 31, 2022 and 2021 total borrowings outstanding on the Revolving Credit Facility were $200.0 million and $0, respectively. The weighted average interest rate on borrowings under the Term Loan for the year ended December 31, 2022 and 2021 was 4.63% and 3.44%, 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 in an aggregate principal amount of $500.0 million and bears interest, at the Company’s option, at a per annum rate equal to either (x) the Term SOFR Rate (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 penalty at any time six months after the closing date. The principal balance shall be paid at 1% of the total, or $5.0 million per year, with the balance due at the end of 2026.

On January 20, 2021, we closed on an amendment repricing our Term Loan. The interest rate spread over the London Interbank Offered Rate (“LIBOR”) on the facility was reduced from 450 basis points to 275 basis points, and the facility’s LIBOR floor was reduced from 100 basis points to 50 basis points. The change resulted in an effective reduction in current interest rates of 225 basis points. In connection with this amendment, we wrote off $11.3 million of unamortized debt issuance and discount costs and incurred an additional $2.9 million of expense related to debt issuance costs attributable to the refinancing. These costs were recorded to “Loss on extinguishment of debt” in our Consolidated Statements of Operations and Comprehensive Income (Loss). Subsequent to the IPO, the remaining principal balance matures on December 13, 2026.

Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to an applicable margin, plus, at our option, either (a) an alternative base rate “ABR” or (b) a LIBOR rate. In addition to paying interest on any outstanding borrowings under the Revolving Credit Facility, SHH is required to pay a commitment fee to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder and customary letter of credit fees. The Revolving Credit Facility contains a maximum senior secured first lien net leverage ratio covenant of 9.00 to 1.00, tested on the last day of each fiscal quarter if, on the last day of such fiscal quarter, the sum of (i) the aggregate principal amount of the revolving loans then outstanding under the Revolving Credit Facility, plus (ii) the aggregate amount of letter of credit disbursements that have not been reimbursed within two business days following the end of the fiscal quarter, exceeds the greater of $139.0 million and 40.0% of the aggregate principal amount of the revolving commitments then in effect.

On March 26, 2021, we amended the Revolving Credit Facility, to (i) decrease the Applicable Rate (as defined in the 2019 Credit Agreement) related to any Revolving Loans (as defined in the 2019 Credit Agreement) from a rate per annum that ranged from an alternative base rate (“ABR”) plus 2.50% to ABR plus 3.00% depending on SHH’s Senior Secured First Lien Net Leverage Ratio to ABR plus 1.75%; and in the case of Eurodollar Loans (as defined in the 2019 Credit Agreement) from a rate per annum which ranged from the Adjusted LIBOR plus 3.50% to the Adjusted LIBOR plus 4.00% depending on SHH’s Senior Secured First Lien Net Leverage Ratio (as defined in the 2019 Credit Agreement), to the Adjusted LIBOR (as defined in the 2019 Credit Agreement) plus 2.75%, and (ii) extend the maturity date of the Revolving Facility from December 13, 2024 to June 13, 2026. The other material terms of the 2019 Credit Agreement are unchanged and the amendment does not change the capacity of our Revolving Credit Facility. No unamortized debt issuance costs associated with the Revolving Credit Facility were written off and direct fees and costs incurred in connection with the amendment were immaterial.

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The Senior Secured Credit Facilities 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. The Senior Secured Credit Facilities 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 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 sixty 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 December 31, 2022, we were in compliance with all the Senior Secured Credit Facilities covenants.

All of SHH’s obligations under the Senior Secured Credit Facilities 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 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.

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 December 31, 2022, the Company had $66.0 million of letters of credit issued against the Revolving Credit Facility, resulting in total availability under the Revolving Credit Facility of $81.5 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 the Term Loan due to changes in LIBOR (or its successor). For additional information on the derivative instruments described above, refer to Note 21, “Financial Instruments and Financial Risk, Derivatives Instruments.”

First Lien Notes

On July 31, 2020, SHH issued $100.0 million aggregate principal amount of senior secured first lien notes due 2026 (the “First Lien Notes”), which were scheduled to mature on December 13, 2026. On August 27, 2021 SHH redeemed in full the $100.0 million aggregate principal amount of the First Lien Notes. In connection with this redemption, the Company paid a $3.0 million early redemption premium, in accordance with the terms of the First Lien Notes Indenture, and wrote off $3.4 million of debt issuance and discount costs. The Company recognized these expenses within “Loss on extinguishment of debt” in our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2021.

Prior to the redemption, the First Lien Notes bore interest at a rate equal to LIBOR subject to a 1.00% floor plus 6.00% per annum. Interest was payable on a quarterly basis with no principal due until maturity. The weighted average interest rate on the First Lien Notes during 2021 up to the August 27, 2021 redemption date was 7.00%.

Second Lien Notes

On December 13, 2019, SHH issued $770.0 million of Second Lien Senior Secured Notes (the “Second Lien Notes”), which had a maturity date of December 13, 2027. The Second Lien Notes bore interest at a rate equal to LIBOR subject to a 1.00% floor plus 8.00% per annum. On December 14, 2020, SHH redeemed in full all of the $770.0 million aggregate principal amount of the First Lien Notes (as described below in “2020 Debt Repayments”). The weighted average interest rate on the Second Lien Notes through the redemption date of December 14, 2020 was 9.35%.

SHH was entitled to redeem all or a portion of the Second Lien Notes, at any time and from time to time, subject to certain premiums depending on the date of redemption. Any time prior to December 13, 2020, a customary make-whole premium applied and, thereafter, specified premiums that declined to zero applied (in each case as described in the indenture governing the Second Lien Notes). In addition, under certain circumstances, such as an initial public offering or certain changes of control, SHH had certain additional redemption rights (as described in the indenture governing the First Lien Notes).

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2020 Debt Repayments

Almost all of the net proceeds of the Company’s IPO were used to redeem all of the outstanding aggregate principal amount of the Second Lien Notes and to repay a portion of the outstanding indebtedness under our Term Loan. In November 2020, the Company repaid $341.0 million aggregate principal amount of the Term Loan. In December 2020, the Company redeemed in full all of the $770.0 million aggregate principal amount of its then outstanding Second Lien Notes. For these two transactions combined, we wrote off $28.9 million of debt issuance and discount costs and recognized $15.4 million in premiums paid in connection with the early extinguishment of the Second Lien Notes. We recognized these costs within “Loss on extinguishment of debt” in our Consolidated Statements of Operations and Comprehensive Income (Loss).

Cash Flow Information

The following section summarizes cash flow information for the years ended December 31, 2022 and 2021. Cash flow information for the years ended December 31, 2021 and 2020 are presented within our Annual Report on Form 10-K for the year ended December 31, 2021 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

Year Ended December 31, 2022 compared to the Year Ended December 31, 2021

Operating activities

Cash flows provided by operating activities decreased $3.6 million to net cash provided of $278.0 million in the year ended December 31, 2022 compared to $281.5 million for the prior year. The decrease in cash flows from operating activities in 2022 compared to the prior year was largely driven by a decrease in operating income of $8.4 million.

Investing activities

Cash used in investing activities increased $22.1 million to net cash used of $181.9 million in the year ended December 31, 2022 compared to $159.8 million for the prior year. Capital expenditures increased $80.2 million in the year ended December 31, 2022 compared to the prior year. The year ended December 31, 2021 included cash paid for acquisitions of $57.0 million which did not recur in 2022. In the year ended December 31, 2021, we acquired BioScience Labs for a net purchase price of approximately $13.5 million, completed the acquisition of the remaining 15% ownership of Nelson Labs Fairfield for $12.4 million, and acquired RCA for approximately $31.0 million.

Financing activities

For the year ended December 31, 2022, net cash provided by financing activities was $197.8 million compared to net cash used of $117.3 million for the year ended December 31, 2021. For the year ended December 31, 2022 the primary source of cash was a $200.0 million borrowing on the Revolving Credit Facility. For the year ended December 31, 2021 the principal uses of cash in financing activities were $100.0 million for the full redemption of the First Lien Notes, $8.4 million for the acquisition of the noncontrolling interests in our China subsidiaries and $6.8 million of debt issuance costs and prepayment premium incurred in connection with our refinancing of the Senior Secured Credit Facilities and the early redemption of the First Lien Notes.

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CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table describes our significant contractual cash obligations as of December 31, 2022:

(a)Represents principal and interest payments on the Senior Secured Credit Facilities. We have calculated the interest payments on the Senior Secured Credit Facilities using an assumed range of 2.71% to 5.00% based on anticipated forward movements in LIBOR (and SOFR after July 31, 2023). In addition, interest payments include the impact of existing interest rate caps described in Note 21, “Financial Instruments and Financial Risk” in the notes to consolidated financial statements.

(b)Consists of payments under our finance leases for various equipment and facilities.

(c)Represents minimum lease payments under our operating leases for several of our facilities and other property and equipment, net of sublease payments.

(d)Consists of our best estimate of our obligations under various supply and service agreements, primarily Co-60, that are enforceable and legally binding on us.

(e)Consists of our best estimate of our obligations to purchase EO gas under commitments that are enforceable and legally binding on us. We have excluded contracts to purchase energy and other supplies, which generally have terms of one year or less. Our contract to purchase EO gas in the U.S. requires us to purchase all our requirements from our supplier, and our contracts to purchase EO gas outside the U.S. generally require that we purchase a specified percentage of our requirements for our operations in the countries covered by those contracts. Although our EO gas contracts generally do not contain fixed minimum purchase volumes, we have calculated the amounts set forth in the table above based on the percentage of our requirements specified in the contracts and our budgeted purchase volumes for those periods.

(f)Represents the cost to settle 870+ pending and threatened EO claims against the Defendant Subsidiaries in Illinois under settlement term sheets entered into on January 9, 2023, subject to substantially all of the plaintiffs providing opt-in consents to their individual settlement allocations and dismissing their claims with prejudice. See Note 20 “Commitments and Contingencies”.

At December 31, 2022 and 2021, we had $101.5 million and $144.7 million, respectively, of standby letters of credit, surety bonds and other bank guarantees outstanding, primarily in favor of local and state licensing authorities for future decommissioning costs, and to support the unfunded portion of our pension obligation. We are obligated to provide financial assurance to local and state licensing authorities for possible future decommissioning costs associated with the various facilities that hold Co-60. At December 31, 2022 and 2021, $54.1 million and $50.5 million, respectively, of the standby letters of credit and surety bonds referenced above were outstanding in favor of the various local and state licensing authorities in the event we defaulted on our decommissioning obligation.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The following subsections describe our most critical accounting policies, estimates, and assumptions. Our discussion of critical accounting policies and estimates is intended to supplement, not duplicate, our summary of significant accounting policies so that readers will have greater insight into the uncertainties involved in these areas. Our accounting policies are more fully described in Note 1, “Significant Accounting Policies” to our consolidated financial statements.

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions at a specific

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point in time and in certain circumstances that affect amounts reported in the accompanying consolidated financial statements. In preparing these consolidated financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. The application of accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

Revenue Recognition. The majority of our sales agreements contain performance obligations satisfied at a point in time when control of promised goods or services have transferred to our customers. For agreements with multiple performance obligations, judgment is required to determine whether performance obligations specified in these agreements are distinct and should be accounted for as separate revenue transactions for recognition purposes. In these types of agreements, we generally allocate sales price to each distinct obligation based on the relative price of each item sold in stand-alone transactions. Revenues recognized over time are generally accounted for using an input measure to determine progress completed as of the end of the period.

Refunds, returns, warranties and other related obligations are not material to any of our business units, nor do we incur material incremental costs to secure customer contracts.

The Sterigenics segment provides outsourced terminal sterilization and irradiation services for the medical device, pharmaceutical, food safety and advanced applications markets. We typically have multi-year service contracts with our significant customers, and these sales contracts are primarily based on a customer’s purchase order. Given the relatively short turnaround times, performance obligations are generally satisfied at a point-in-time upon the completion of sterilization or irradiation processing once approved by our quality assurance process, at which time the service is complete.

The Nordion segment is a provider of Co-60 and gamma irradiation systems, which are key components to the gamma sterilization process. Revenue from the sale of Co-60 radiation sources is recognized at a point-in-time upon satisfaction of our performance obligations for delivery/installation and disposal of existing sources. Revenue from the sale of gamma irradiation systems in our Nordion segment is recognized over time using an input measure of costs incurred and is immaterial to the overall business.

The Nelson Labs segment provides outsourced microbiological and analytical chemistry testing and advisory services for the medical device and pharmaceutical industries. We provide our customers mission-critical lab testing services, which assess the product quality, effectiveness, patient safety and end-to-end sterility of products. These services are necessary for our customers’ regulatory approvals, product releases and ongoing product performance evaluations. Nelson Labs services are generally provided on a fee-for-service or project basis, and we recognize revenues over time using an input measure of time incurred to determine progress completed at the end of the period. Revenue recognized over time in excess of the amount billed to the customer is recorded as a customer contract asset. 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. We utilize our customer relationship management system to assess time incurred and the extent of project completion at the end of the period.

We do not capitalize sales commissions as substantially all of our sales commission programs have an amortization period of one year or less. Furthermore, costs to fulfill a contract are not material.

Provisions for discounts, rebates to customers, and other adjustments are provided for as reductions in net revenues in the period the related sale was recorded. Shipping and handling charges billed to customers are included in net revenues, and the related shipping and handling costs are included in cost of net revenues on the Consolidated Statements of Operations and Comprehensive Income (Loss). Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from net revenue.

Payment terms vary by the type and location of the customer and the products or services offered. Generally, the time between when revenue is recognized and when payment is due is not significant. We do not evaluate whether the selling price contains a financing component for contracts that have a duration of less than one year.

Long-Lived Assets Other than Goodwill. We review long-lived assets, including finite-lived intangibles for impairment whenever events or circumstances indicate that the carrying amount of the assets may be impaired. Events or circumstances which would result in an impairment assessment include operating losses, a significant change in the use of an asset, or the planned disposal or sale of the asset. 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

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unexpected events occur, our operating results could be materially affected. The asset or asset group would be considered impaired when the future net undiscounted cash flows generated by the asset or asset group are less than its carrying value.

An impairment loss would be recognized based on the amount by which the carrying value of the asset or asset group exceeds its estimated fair value. We provide additional information about our long-lived assets other than goodwill in Notes 7, “Property, Plant and Equipment” and 8, “Goodwill and Other Intangible Assets” to our consolidated financial statements.

Goodwill and Other Indefinite-Lived Intangibles. Assets and liabilities of a 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 generally 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 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.

Goodwill and other indefinite-lived intangible assets, primarily certain regulatory licenses and trade names, are tested for impairment annually as of October 1. If circumstances change during interim periods between annual tests that would indicate that the carrying amount of such assets may not be recoverable, the company would test such assets at an interim date for impairment. Factors which would necessitate an interim impairment assessment include prolonged negative industry or economic trends and significant underperformance relative to historical or projected future operating results.

At December 31, 2021, goodwill and intangible assets totaled $1,593.0 million, or 51.1% of our total assets. We consider the impairment analysis of these assets critical due to their quantitative significance to the Company and our segments.

Goodwill is assigned to our segments at December 31, 2022 as follows:

We performed a quantitative assessment of all reporting units (Sterigenics, Nordion and Nelson Labs) as of October 1, 2022. The fair value of each reporting unit was calculated using a discounted cash flow analysis which was dependent on subjective market participant assumptions determined by management. Assumptions used in the analyses included discount rates, revenue growth rates and projected operating cash flows. Estimates of future cash flows are based upon relevant data at a point-in-time, are subject to change, and could vary from actual results. Cash flows are based on recent historical results and are consistent with the Company’s near-term financial forecasts and long-term strategic plans. The estimated fair value of Sterigenics, Nordion and Nelson Labs each exceeded its carrying amount (including goodwill) by an adequate margin to support a positive assertion that goodwill is not impaired as of October 1, 2022. No factors were identified that would result in the potential impairment to the indefinite-lived intangible assets. We performed a qualitative update to our annual goodwill impairment assessment in response to the announcement of the Illinois EO litigation settlement on January 9. The updated assessment resulted in no change to our conclusion. There have been no other significant events or circumstances that occurred since the annual assessment date of October 1 that would change the conclusions reached above. We provide additional information about our goodwill and other indefinite-lived intangible assets in Note 8, “Goodwill and Other Intangible Assets” to our consolidated financial statements.

Income Taxes. We use the liability method of accounting for income taxes whereby we recognize deferred tax assets and liabilities for the future tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Measurements of deferred taxes requires the use of judgment with respect to the realization of tax basis. We periodically review our deferred tax assets for recoverability and establish a valuation allowance based on historical taxable income, projected future taxable income, expected timing of reversals of existing temporary timing differences and the implementation of tax planning strategies. Deferred tax assets will be reduced by a valuation allowance if, based on management’s estimate, it is more likely than not that a portion of the deferred tax assets will not be realized in a future period. The estimates used in the recognition of deferred tax assets are subject to revision in future periods based on new facts and circumstances. At December 31, 2022 and 2021 a valuation allowance of $90.2 million and $44.8 million, respectively, was established against excess interest expense on our long-term debt in the United States as well as $8.0 million against state tax attributes. In addition, at December 31, 2022 and 2021, a valuation allowance was established against foreign net operating loss carryforwards for $3.0 million and $3.2 million, respectively. 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

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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 or results of operations. Changes in our judgment related to the measurement of deferred tax assets and liabilities could materially impact our results of operations.

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% likely of being realized upon ultimate settlement. Determining what constitutes an individual tax position and whether the more likely-than-not recognition threshold is met for a tax position are matters of judgment based on the individual facts and circumstances of that position evaluated in light of all available evidence. We review and adjust 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. Changes in our judgment related to the assessment of uncertain tax positions could materially impact our results of operations.

We are subject to taxation from federal, state and local, and foreign jurisdictions. Tax positions are settled primarily through the completion of audits within each individual tax jurisdiction or the closing of a statute of limitation. Changes in applicable tax law or other events may also require us to revise past estimates. The United States Internal Revenue Service routinely conducts audits of our federal income tax returns. Additional information regarding income taxes is included in Note 11, “Income Taxes” to our consolidated financial statements.

Commitments and Contingencies. We are, and will likely continue to be, involved in a number of legal proceedings, government investigations and claims, which we believe generally arise in the course of our business, given our size, history, complexity and the nature of our business, products, customers, regulatory environment and industries in which we participate. These legal proceedings, investigations and claims generally involve a variety of legal theories and allegations, including, without limitation, personal injury (e.g., slip and falls, burns, vehicle accidents, mass tort), regulation (e.g., failure to meet specification or failure to comply with regulatory requirements), commercial claims (e.g., breach of contract, economic loss, misrepresentation), financial (e.g., taxes, reporting), employment (e.g., wrongful termination, discrimination, benefits matters) and other claims for damage and relief.

We record a liability for such contingencies to the extent we conclude that their occurrence is both probable and estimable. 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. In our opinion, the ultimate outcome of these proceedings and claims is not anticipated to have a material adverse effect on our consolidated financial position, results of operations, or cash flows. However, the ultimate outcome of proceedings, government investigations and claims is unpredictable and actual results could be materially different from our estimates. We record gain contingencies when realized, and expected recoveries under applicable insurance contracts when we are assured of recovery. Refer to Note 20 “Commitments and Contingencies” to our consolidated financial statements.

As described in Note 20 “Commitments and Contingencies”, the Company reached agreements to settle more than 870 pending and threatened EO claims against the Defendant Subsidiaries in the Circuit Court of Cook County, Illinois, and US District Court for the Northern District of Illinois on January 9, 2023. Under the binding Term Sheets, the Company will pay $408.0 million to settle the claims, subject to substantially all of the plaintiffs providing opt-in consents to their individual settlement allocations and dismissing their claims with prejudice. Based on our assessment of the facts and circumstances that existed as of December 31, 2022, we concluded that this agreement amount was probable and estimable at December 31, 2022. Accordingly, we recorded a $408.0 million charge to expense for the year ended December 31, 2022.

NEW ACCOUNTING PRONOUNCEMENTS

For a description of recent accounting pronouncements applicable to our business, see Note 2, “Recent Accounting Standards” to our consolidated financial statements.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of various factors, including the factors we describe in Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

OVERVIEW

We are a leading global provider of mission-critical end-to-end sterilization solutions and lab testing and advisory services for the healthcare industry. We are driven by our mission: Safeguarding Global Health®. We provide end-to-end sterilization as well as microbiological and analytical lab testing and advisory services to help ensure that medical, pharmaceutical and food products are safe for healthcare practitioners, patients and consumers in the United States and around the world. Our customers include more than 40 of the top 50 medical device companies and nine of the top ten global pharmaceutical companies (based on revenue). Our services are an essential aspect of our customers’ manufacturing process and supply chains, helping to ensure sterilized medical products reach healthcare practitioners and patients. Most of these services are necessary for our customers to satisfy applicable government requirements. We give our customers confidence that their products meet regulatory, safety and effectiveness requirements. With our industry-recognized scientific and technological expertise, we help to ensure the safety of millions of patients and healthcare practitioners around the world every year. Across our 65 facilities worldwide, we have over 3,000 employees who are dedicated to safety and quality. We are a trusted partner to approximately 5,500 customers in over 50 countries.

We serve our customers throughout their product lifecycles, from product design to manufacturing and delivery, helping to ensure the sterility, effectiveness and safety of their products for the end user. We operate across two core businesses: sterilization services and lab services. Each of our businesses has a longstanding record and is a leader in its respective market, supported and connected by our core capabilities including deep end market, regulatory, technical and logistics expertise. The combination of Sterigenics, our terminal sterilization business, and Nordion, our Co-60 supply business, makes us the only vertically integrated global gamma sterilization provider in the sterilization industry. This provides us with additional insights and allows us to better serve our customers. For financial reporting purposes, our sterilization services business consists of two reportable segments, Sterigenics and Nordion, and our lab services business consists of one reportable segment, Nelson Labs.

For the year ended December 31, 2021, we recorded net revenues of $931.5 million, net income of $117.1 million, Adjusted Net Income of $245.8 million and Adjusted EBITDA of $481.2 million. Adjusted Net Income and Adjusted EBITDA are financial measures not based on any standardized methodology prescribed by U.S. Generally Accepted Accounting Principles (“GAAP”). For the definition of Adjusted Net Income and Adjusted EBITDA and the reconciliation of these non-GAAP measures from net income (loss), please see “Non-GAAP Financial Measures.”

TRENDS AND KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS

We expect that our performance and financial condition will continue to be driven by the key trends impacting our industries, customers and their end markets as outlined in Item 1, “Business”. In addition, we believe the following trends and key factors have underpinned our recent operating results and may continue to affect our performance and financial condition in future periods.

•Continue to drive organic growth. During the year ended December 31, 2021, we continued to drive organic growth through increasing utilization of our existing capacity and expanding our capacity and service offerings. In our Sterigenics business, we made strategic investments to expand capacity at existing facilities and build new facilities. In our Nordion business, we remain focused on developing new supply relationships and expanding our capabilities to source Co-60 from additional reactors. In our Nelson Labs business, we continue to expand capacity to meet demand for microbiological testing and extractables and leachables testing. We are making investments to expand our geographic reach, technical expertise and regulatory know-how to stay ahead of the dynamic and increasingly stringent

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regulatory landscape in the healthcare industry. Nelson Labs and Sterigenics also launched an Expert Advisory Services organization designed to drive growth in our advisory services offering.

•Disciplined and strategic M&A activity. During the year ended December 31, 2021, we completed two business acquisitions that expanded our addressable market and enhanced our global capabilities and footprint. In March 2021, we acquired BioScience Laboratories, LLC based in Bozeman, Montana, bringing expertise in antimicrobial and virology testing to our Nelson Labs segment. On November 4, 2021 we acquired Regulatory Compliance Associates Inc. (“RCA”) headquartered in Pleasant Prairie, Wisconsin. RCA is an industry leader in providing life sciences consulting focused on quality, regulatory, and technical consulting for the pharmaceutical, medical device and combination device industries. RCA will expand and further strengthen the technical consulting and expert advisory capabilities of Nelson Labs. We are continuing to pursue strategic acquisitions to grow our footprint and expand our capabilities.

•Litigation related costs and exit activities. We are currently the subject of a series of tort lawsuits alleging personal injury by purported exposure to EO emitted by our facilities in Willowbrook, Illinois and Atlanta, Georgia. We are also the subject of litigation with local officials in Georgia to allow us to resume operations at our Atlanta EO facility. In addition, we are defendants in a lawsuit brought by the State of New Mexico Attorney General alleging that emissions of EO from our Santa Teresa facility constitute a public nuisance and materially contributed to increased health risks suffered by residents in the area. We deny these allegations and are vigorously defending against these claims. We expect that our litigation costs will increase during the pendency of these cases, particularly as the per occurrence limit of our environmental liability insurance was reached for the Willowbrook litigation in the second quarter of 2020 and as we prepare for the commencement of the first personal injury trials for the Willowbrook litigation currently scheduled to occur in 2022. See Item 3, “Legal Proceedings” and Note 20, “Commitments and Contingencies” to our consolidated financial statements. For the years ended December 31, 2021 and 2020 and 2019, we recorded costs of $45.7 million, $36.7 million and $11.2 million, respectively, representing professional fees related to litigation associated with our EO sterilization facilities and other related professional fees. On September 30, 2019, we announced plans to exit our EO sterilization operations in Willowbrook and recorded a fixed asset impairment and have continued to incur certain transitional costs during the closure process including lease costs, payroll and utility expenses. For the years ended December 31, 2021, 2020 and 2019, we recorded costs of $2.3 million, $2.6 million and $1.7 million, respectively, relating to the closure of our Willowbrook facility.

•Impacts of our IPO and other public company costs. We completed the initial public offering of our common stock in November 2020. The IPO generated net proceeds of $1.2 billion after deducting underwriting discounts, commissions and other offering costs. As a newly public company we incurred significant expenses during the year ended December 31, 2021 that we did not incur as a private company. Those costs include additional board fees and director and officer liability insurance expenses, as well as third-party and internal resources related to accounting, auditing, Sarbanes-Oxley Act compliance, legal, and investor and public relations expenses. These costs are generally classified as Selling, General & Administrative (“SG&A”) expenses. Additionally, in connection with our IPO, we implemented the 2020 Plan (as previously defined in Item 1A, “Risk Factors”), a long-term equity incentive plan to align our equity compensation program with public company plans and practices. We expect to grant additional stock-based awards to employees under the 2020 Plan in the first quarter of 2022.

•Borrowings, financing costs and financial leverage. We paid $58.8 million of cash for interest on long-term debt for the year ended December 31, 2021 compared to $211.3 million for the year ended December 31, 2020. A combination of lower outstanding borrowings and reduced pricing on our debt resulted in this reduction of $152.5 million year over year. On January 20, 2021 we amended our Term Loan to reduce the interest rate spread over LIBOR from 4.50% to 2.75%, and the LIBOR floor from 1.00% to 0.50%. For 2021, the changes resulted in an effective reduction in current interest rates of 2.25%. Interest savings in 2021 were offset by cash and non-cash charges associated with the repricing amendment. On March 26, 2021, we amended our Revolving Credit Facility to reduce the interest rate spread over LIBOR applicable to revolving loans from 3.50% to 2.75%. In addition, on August 27, 2021, we redeemed in full all of the $100.0 million aggregate principal amount of the First Lien Notes.

In connection with this activity, we incurred total costs of $20.7 million, which includes the write-off of debt discounts and issuance costs and an early redemption premium. Based on the current principal balance of our long-term debt and current market interest rates, we expect cash interest in 2022 to be approximately $58.4 million.

•Foreign currency exchange rates. As a result of our global operations, we generate a significant portion of our revenue and incur a significant portion of our expenses in currencies other than the U.S. dollar. We translate the assets, liabilities, net revenues and expenses of all of our operations into U.S. dollars at applicable exchange rates, and therefore we experience gains and losses related to exchange rate fluctuations. See Item 7A. “Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Risk.” From time to time, as and when we determine it

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is appropriate and advisable to do so, we may seek to mitigate the effect of exchange rate fluctuations through the use of derivative financial instruments. In the fourth quarter of 2020 we began to enter into foreign currency forward contracts to manage foreign currency exchange rate risk of our intercompany loans in certain of our European and Canadian subsidiaries. The foreign currency forward contracts expire and renew on a monthly basis. The fair value of the outstanding foreign currency forward contracts was zero as of December 31, 2021 and December 31, 2020.

•Impact of COVID-19 pandemic. We remain subject to risks and uncertainties as a result of the COVID-19 pandemic. Our business continuity plans remain in effect and we have maintained certain measures to decrease exposure risk and manage our supply chain for critical materials. The extent to which our operations will continue to be impacted by the pandemic will largely depend on future developments, which still remain uncertain and cannot be predicted.

COMPONENTS OF OUR RESULTS OF OPERATIONS

Net Revenues

Service revenues consist of revenue generated from contract sterilization and lab testing and advisory services within our Sterigenics and Nelson Labs segments, respectively. Service revenues also consist of Co-60 installation and disposal revenues and gamma irradiation system refurbishments and installation services within our Nordion segment. Product revenues consist of revenues generated from sales of Co-60 radiation sources and gamma irradiation systems. Provisions for discounts, rebates to customers, and other adjustments are provided for as reductions in net revenues. Refunds, returns, warranties and other related obligations are not material to any of our business units, nor do we incur material incremental costs to secure customer contracts.

Cost of Revenues

Our cost of revenues consists primarily of direct materials, utilities, labor and related benefit costs, and depreciation and amortization. Although the cost of utilities and direct materials can fluctuate, the remaining components of cost of revenues are generally more stable. Direct material costs relating to service revenues primarily includes EO gas, nitrogen gas and Co-60. The physical decay of Co-60 assets is included within depreciation expense as a cost of revenue. Direct material costs relating to product revenues also include the costs associated with acquiring Co-60 in finished or semi-finished form, acquiring Co-59 in a form ready for insertion into reactors for conversion into Co-60, the reactor time and associated services to convert Co-59 into Co-60, and parts and equipment associated with building and maintaining gamma irradiation systems.

Operating Expenses

SG&A Expenses

SG&A primarily consists of compensation and benefits costs and general operating and administrative expenses, including professional service fees (which include finance and legal costs), travel and entertainment expenses, and other general and administrative expenses. Share-based compensation expense is also included in SG&A.

Amortization of Intangible Assets

Amortization of intangible assets primarily consists of expense associated with customer relationship intangibles, the majority of which relate to the fair values attributed to these assets upon the recapitalization of the Company in connection with the acquisition by the Sponsors in 2015. These customer relationship intangibles were initially assigned a weighted average useful life of ten years and have a remaining useful life of approximately four years. These customer relationship intangible assets account for $49.3 million of our current annual amortization expense and are expected to be fully amortized in 2025. Amortization expense fluctuates when we have an acquisition, disposition, impairment charge, or as their useful lives expire. We expect intangible assets related to future acquisitions and the associated amortization expense to increase over time as we execute on our strategy to pursue acquisition targets that are complementary to our businesses.

Impairment

We review tangible and intangible assets for impairment on a regular basis. Impairment charges recorded in 2019 were incurred primarily in connection with the closure of the Willowbrook facility.

Operating Income

Operating income represents gross profit, less SG&A, amortization of intangible assets and impairment charges.

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Interest Expense, Net

Interest expense, net, represents interest paid or accruing on our outstanding indebtedness and the amortization of debt discount and debt issuance costs. Interest expense is affected by changes in average outstanding indebtedness (including finance lease obligations) and variable interest rates. We present interest expense net of interest income, which primarily consists of interest earned on cash on hand.

Other Income, Net

Other income, net primarily consists of changes in the fair value of the embedded derivatives in Nordion’s contracts, the net impact of pension related benefits and income related to deferred income on a lease associated with the 2018 divestiture of the Medical Isotopes business.

Provision (Benefit) for Income Taxes

Provision (benefit) for income taxes consists primarily of income taxes in foreign jurisdictions and U.S. federal and state income taxes.

Net Income (Loss) Attributable to Noncontrolling Interests

We conduct our operations through our subsidiaries. As of December 31, 2021, our consolidated subsidiaries were wholly owned by us. In the second quarter of 2021, we purchased the outstanding noncontrolling interests of 15% and 33% in our two China subsidiaries. Prior to our acquisition of these noncontrolling interests, we consolidated the results of operations of these subsidiaries with our results of operations and reflected the noncontrolling interests on our Consolidated Statements of Operations and Comprehensive Income (Loss) as net income (loss) attributable to noncontrolling interests.

On March 11, 2021, we purchased the 15% noncontrolling interest that remained from the August 2018 acquisition of Gibraltar Laboratories, Inc. (now known as 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.

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”). Refer to Note 4, “Acquisitions” of our consolidated financial statements for additional information. We have determined this to be an investment in a variable interest entity (“VIE”). The investment is not consolidated as the Company has 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 affiliate” on the Consolidated Balance Sheets within our consolidated financial statements.

Constant Currency Sales Growth (Non-GAAP)

“Constant currency” is a non-GAAP financial measure we use to assess performance excluding the impact of foreign currency exchange rate changes. Constant currency sales growth is calculated by translating prior year sales in local currency at the average exchange rates applicable for the current period. The translated results are then used to determine year-over-year percentage increases or decreases. We generally refer to such amounts calculated on a constant currency basis as excluding the impact of foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with U.S. GAAP.

Adjusted Net Income and Adjusted EBITDA (Non-GAAP)

We use Adjusted Net Income and Adjusted EBITDA, non-GAAP financial measures, as the principal measures of our operating performance. Management believes Adjusted Net Income and Adjusted EBITDA are useful because they allow management to more effectively evaluate our operating performance and compare the results of our operations from period to period without the impact of certain non-cash items and non-routine items that we do not expect to continue at the same level in the future and other items that are not core to our operations. We believe that these measures are useful to our investors because they provide a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. In addition, we believe Adjusted Net Income and Adjusted EBITDA will assist investors in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. Our management also uses Adjusted Net Income and Adjusted EBITDA in their financial analysis and operational decision-making and Adjusted EBITDA serves as the metric for attainment of our primary annual incentive program. Adjusted Net Income and Adjusted

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EBITDA may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.

For more information regarding our definition and calculation of Adjusted Net Income and Adjusted EBITDA, including information about its limitations as a tool for analysis and reconciliation to the most directly comparable financial measures calculated in accordance with GAAP, please see “Non-GAAP Financial Measures” within this Item.

Segment Income

Segment income is the primary earnings measure we use to evaluate the performance of our reportable segments, as disclosed in Note 22, “Segment and Geographic Information” to our consolidated financial statements. Costs associated with support functions that are not directly associated with one of the three reportable segments, such as corporate operating expenses for executive management, accounting, information technology, legal, human resources, treasury, corporate development, tax, purchasing, and marketing, are allocated to the segments based on net revenue. Corporate operating expenses that are directly incurred by a segment are reflected in each segment’s income. Segment income excludes certain items which are included in “Income (loss) before taxes” as determined in our Consolidated Statements of Operations and Comprehensive Income (Loss).

CONSOLIDATED RESULTS OF OPERATIONS

The following section summarizes the consolidated results of operations for the years ended December 31, 2021 and 2020. The discussion of the consolidated results of operation for the years ended December 31, 2020 and 2019 are presented within our Annual Report on Form 10-K for the year ended December 31, 2020 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Consolidated Results of Operations.”

Year Ended December 31, 2021 as compared to Year Ended December 31, 2020

The following table sets forth the components of our results of operations for the years ended December 31, 2021 and 2020.

(1)Adjusted Net Income and Adjusted EBITDA are non-GAAP financial measures. For more information regarding our calculation of Adjusted Net Income and Adjusted EBITDA, including information about their limitations as tools for analysis and a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted Net Income and Adjusted EBITDA, please see the reconciliation included below in “Non-GAAP Financial Measures.”

Total Net Revenues

The following table compares our revenues by type for the year ended December 31, 2021 to the year ended December 31, 2020. Results from Iotron are included in the Sterigenics segment for the post-acquisition period beginning July 31, 2020. Results from the BioScience Labs and RCA acquisitions are included in the Nelson Labs segment for the post-acquisition periods beginning March 8, 2021 and November 4, 2021, respectively.

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Net revenues were $931.5 million in the year ended December 31, 2021, an increase of $113.3 million, or 13.9%, as compared with the prior year. Net revenues in the year ended December 31, 2021 increased approximately 12.2% compared with the same period in 2020 on a constant currency basis.

Service revenues

Service revenues increased $92.0 million, or 12.9%, to $805.5 million in 2021 as compared to $713.5 million in 2020. The growth in net service revenues was driven by volume growth of $34.1 million in the Sterigenics segment and a $27.7 million increase from the incremental contribution of the Iotron, BioScience Labs and RCA acquisitions. In addition, service revenue growth stemmed from favorable pricing of $18.7 million and $7.0 million in the Sterigenics and Nelson Labs segments, respectively, and a $7.7 million benefit from changes in foreign currency exchange rates across all segments. The remainder of the increase was largely attributable to an increase in service revenue volume in the Nordion segment. Offsetting these factors was an overall decline of $8.0 million in revenue related to personal protective equipment testing in the Nelson Labs segment.

Product revenues

Product revenues increased $21.3 million, or 20.4%, to $126.0 million in the year ended December 31, 2021 as compared to $104.6 million in the year ended December 31, 2020. The increase in product revenues was attributable to higher organic sales volumes of $7.9 million, largely driven by shipments of industrial use Co-60 in our Nordion segment, and the contribution of favorable pricing and changes in foreign currency exchange rates of $7.3 million and $6.2 million, respectively.

Total Cost of Revenues

The following table compares our cost of revenues by type for the year ended December 31, 2021 to the year ended December 31, 2020. Results from Iotron are included in the Sterigenics segment for the post-acquisition period beginning July 31, 2020. Results from the BioScience Labs and RCA acquisitions are included in the Nelson Labs segment for the post-acquisition periods beginning March 8, 2021 and November 4, 2021, respectively.

Total cost of revenues accounted for approximately 44.3% and 45.8% of our consolidated net revenues for the year ended December 31, 2021 and 2020, respectively.

Cost of service revenues

Cost of service revenues increased $23.8 million for the year ended December 31, 2021 as compared to the prior year. The increase was attributable to an incremental contribution of $11.6 million from the Iotron, BioScience Labs, and RCA acquisitions and approximately $10.2 million of incremental costs associated with increased sales volumes, primarily in the Sterigenics segment, as referenced above.

Cost of product revenues

Cost of product revenues increased $14.4 million, or 34.9%, for the year ended December 31, 2021 as compared to the prior year. The increase was primarily driven by an $8.1 million increase in Co-60 supply costs, driven by higher sales volumes. An unfavorable impact from foreign currency exchange rates of $3.0 million also contributed to the increase in cost of product revenues.

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Operating Expenses

The following table compares our operating expenses for the year ended December 31, 2021 to the year ended December 31, 2020:

Operating expenses accounted for approximately 28.1% and 29.0% of our consolidated net revenues for the year ended December 31, 2021 and 2020, respectively.

SG&A

SG&A increased $19.6 million, or 11.0%, for the year ended December 31, 2021 as compared to the prior year. The increase was driven primarily by the following:

•an $11.5 million increase in corporate expenses largely attributed to costs associated with being a public company. This includes $7.2 million in incremental costs attributable to public company director and officer liability insurance;

•a $9.0 million increase in litigation and other professional services expenses associated with EO sterilization facilities; and

•a $2.9 million increase in share-based compensation expense attributable to awards granted under the 2020 Omnibus Incentive Plan.

Partially offsetting the above increases was a $3.4 million favorable settlement related to an insurance claim for Nordion.

Amortization of intangible assets

Amortization of intangible assets was $63.8 million for the year ended December 31, 2021, an increase of $4.8 million or 8.1% above the prior year. The change was attributable to a full year of amortization of Iotron’s intangible assets in 2021, compared to five months of amortization in 2020, as well as the amortization of the intangible assets acquired in 2021 in connection with the BioScience and RCA acquisitions.

Interest Expense, Net

Interest expense, net decreased $141.1 million, or 65.5%, for the year ended December 31, 2021 as compared to the prior year. The decrease was driven largely by the paydown of the Term Loan and Second Lien Notes with IPO proceeds in the fourth quarter of 2020, the redemption of the First Lien Notes in August 2021, and lower interest rates subsequent to the January 2021 Term Loan refinancing. The weighted average interest rate on our outstanding debt was 3.25% and 5.58% at December 31, 2021 and 2020, respectively.

Foreign Exchange Loss (Gain)

Foreign exchange loss was $1.3 million for the year ended December 31, 2021 as compared to a gain of $5.2 million in the prior year period. In the year ended December 31, 2020, foreign exchange loss (gain) related primarily to U.S. dollar denominated intercompany indebtedness with certain of our European and Canadian subsidiaries. Beginning in the fourth quarter of 2020, we entered into monthly U.S. dollar-denominated foreign currency forward contracts to manage this foreign currency exchange rate risk. The foreign currency forward contracts expire and renew on a monthly basis. As a result, the majority of our foreign exchange loss recorded in the year ended December 31, 2021 relates to short-term losses (offset by short-term gains) on sales denominated in currencies other than the functional currency of our operating entities.

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Other Income, Net

Other income, net was $15.2 million for the year ended December 31, 2021 and $9.4 million for the year ended December 31, 2020. The fluctuation was primarily driven by a $5.1 million non-cash gain arising from derecognition of an asset retirement obligation (“ARO”) liability no longer attributable to Nordion pursuant to the terms of the sale of the Medical Isotopes business in 2018. A $1.2 million gain on our purchase of the 15% mandatorily redeemable noncontrolling interest of Nelson Labs Fairfield in the second quarter of 2021 also contributed to this fluctuation.

Provision (Benefit) for Income Taxes

Provision for income taxes was $58.6 million for the year ended December 31, 2021 as compared to a $1.4 million benefit in the prior year. The change was principally attributable to pre-tax income of $175.7 million in the year ended December 31, 2021 compared to a pretax loss of $38.9 million for the year ended December 31, 2020.

Provision for income taxes for the year ended December 31, 2021 differed from the statutory rate of 21% primarily due to an increase in the partial valuation allowance against our excess interest expense carryforward balance, the addition of valuation allowances against certain foreign net operating loss carryforward balances, the impact of the foreign rate differential, and tax on Global Intangible Low Taxed Income (“GILTI”). The benefit for income taxes for the year ended December 31, 2020 differed from the statutory rate of 21% primarily due to impact of the CARES Act and final 951A regulations, the partial valuation allowance against our excess interest expense carryforward balance, the foreign rate differential, state tax benefits and the removal of valuation allowances against certain foreign net operating loss carryforward balances.

Net Income (Loss), Adjusted Net Income and Adjusted EBITDA

Net income for the year ended December 31, 2021 was $117.1 million, as compared to a net loss of $37.5 million for the year ended December 31, 2020 largely driven by the decrease in interest expense. Adjusted Net Income was $245.8 million for the year ended December 31, 2021, as compared to $99.1 million for the year ended December 31, 2020, due to the factors described above. Adjusted EBITDA was $481.2 million for the year ended December 31, 2021, as compared to $419.9 million for the year ended December 31, 2020, due to the factors described above. Please see “Non-GAAP Financial Measures” below for a reconciliation of Adjusted Net Income and Adjusted EBITDA to their most directly comparable financial measure calculated and presented in accordance with GAAP.

NON-GAAP FINANCIAL MEASURES

To supplement our consolidated financial statements presented in accordance with GAAP, we consider Adjusted Net Income and Adjusted EBITDA, financial measures that are not based on any standardized methodology prescribed by GAAP.

We define Adjusted Net Income as net income (loss) before amortization and certain other adjustments that we do not consider in our evaluation of our ongoing operating performance from period to period as discussed further below. We define Adjusted EBITDA as Adjusted Net Income before interest expense, depreciation (including depreciation of Co-60 used in our operations) and income tax provision applicable to Adjusted Net Income.

We use Adjusted Net Income and Adjusted EBITDA, non-GAAP financial measures, as the principal measures of our operating performance. Management believes Adjusted Net Income and Adjusted EBITDA are useful because they allow management to more effectively evaluate our operating performance and compare the results of our operations from period to period without the impact of certain non-cash items and non-routine items that we do not expect to continue at the same level in the future and other items that are not core to our operations. We believe that these measures are useful to our investors because they provide a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. In addition, we believe Adjusted Net Income and Adjusted EBITDA will assist investors in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. Our management also uses Adjusted Net Income and Adjusted EBITDA in their financial analysis and operational decision-making and Adjusted EBITDA serves as the key metric for attainment of our primary annual incentive program. Adjusted Net Income and Adjusted EBITDA may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.

Adjusted Net Income and Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted Net Income

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and Adjusted EBITDA rather than net income (loss), the nearest GAAP equivalent. For example, Adjusted Net Income and Adjusted EBITDA exclude:

•certain recurring non-cash charges such as depreciation of fixed assets, although these assets may have to be replaced in the future, as well as amortization of acquired intangible assets and asset retirement obligations;

•costs of acquiring and integrating businesses, which will continue to be a part of our growth strategy;

•non-cash gains or losses from fluctuations in foreign currency exchange rates, and the mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion;

•impairment charges on long-lived assets and intangible assets;

•expenses and charges related to the litigation and other activities associated with our ethylene oxide sterilization facilities, including those in Willowbrook, Illinois, Atlanta, Georgia and Santa Teresa, New Mexico, even though that litigation remains ongoing;

•in the case of Adjusted EBITDA, interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; and

•share-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense and an important part of our compensation strategy.

In evaluating Adjusted Net Income and Adjusted EBITDA, you should be aware that in the future, we will incur expenses similar to the adjustments in this presentation. Our presentations of Adjusted Net Income and Adjusted EBITDA should not be construed as suggesting that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider Adjusted Net Income and Adjusted EBITDA alongside other financial performance measures, including our net income (loss) and other GAAP measures.

The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP to Adjusted Net Income and Adjusted EBITDA, for each of the periods indicated:

(a)Impairment charges related to the decision to not reopen the Willowbrook, Illinois facility in September 2019

(b)Includes non-cash share-based compensation expense. 2019 also includes $10.0 million of one-time cash share-based compensation expense related to the pre-IPO Class C Units, which vested in the third quarter of 2019. See Note 16, “Share-Based Compensation” for further information.

(c)Represents cash bonuses for members of management relating to the IPO and the December 2019 refinancing.

(d)Represents the effects of (i) fluctuations in foreign currency exchange rates, and (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion.

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(e)Represents (i) certain direct and incremental costs related to the acquisitions of RCA, the noncontrolling interests in our China subsidiaries, and BioScience Labs in 2021; Iotron in July 2020; Nelson Labs Fairfield in 2018 (including the first quarter 2021 gain on the mandatorily redeemable noncontrolling interest), and certain related integration efforts as a result of those acquisitions, (ii) the earnings impact of fair value adjustments (excluding those recognized within amortization expense) resulting from the businesses acquired, (iii) transition services income and non-cash deferred lease income associated with the terms of the divestiture of the Medical Isotopes business in 2018, (iv) a $3.4 million gain recognized in the third quarter of 2021 related to the settlement of an insurance claim for Nordion, and (v) a $5.1 million non-cash gain arising from the derecognition of an ARO liability no longer attributable to Nordion pursuant to the terms of the sale of the Medical Isotopes business in 2018.

(f)Represents professional fees, contract termination and exit costs, severance and other payroll costs, and other costs associated with business optimization and cost savings projects relating to the integration of acquisitions, the Sotera Health rebranding, operating structure realignment and other process enhancement projects.

(g)Represents professional fees, severance and other payroll costs, and other costs including ongoing lease and utility expenses associated with the closure of the Willowbrook, Illinois facility.

(h)Represents expenses incurred in connection with the repricing of our Term Loan in January 2021, full redemption of the First Lien Notes in August 2021, paydown of debt following the November 2020 IPO, and refinancing of our debt capital structure in December 2019, including accelerated amortization of prior debt issuance and discount costs, premiums paid in connection with early extinguishment and debt issuance and discount costs incurred for the new debt.

(i)Represents professional fees related to litigation associated with our EO sterilization facilities and other related professional fees. See Note 20, “Commitments and Contingencies”.

(j)Represents non-cash accretion of asset retirement obligations related to Co-60 and gamma processing facilities, which are based on estimated site remediation costs for any future decommissioning of these facilities (without regard for whether the decommissioning services would be performed by employees of Nordion, instead of by a third party) and are accreted over the life of the asset.

(k)Represents non-recurring costs associated with the COVID-19 pandemic, including incremental costs to implement workplace health and safety measures. For the year ended December 31, 2020, costs also included donations to related charitable causes and special bonuses for front-line personnel working on-site during lockdown periods.

(l)Represents the income tax impact of adjustments calculated based on the tax rate applicable to each item. We eliminate the effect of significant changes to income tax valuation allowances, tax rate changes as applied to tax assets and liabilities, and unusual items from our presentation of adjusted net income.

(m)Includes depreciation of Co-60 held at gamma irradiation sites.

(n)Represents the difference between income tax expense or benefit as determined under U.S. GAAP and the income tax benefit associated with pre-tax adjustments described in footnote (l).

(o)$85.3 million, $82.6 million and $86.7 million of the adjustments for the year ended December 31, 2021, 2020 and 2019, respectively, are included in cost of revenues, primarily consisting of amortization of intangible assets, depreciation, and accretion of asset retirement obligations.

SEGMENT RESULTS OF OPERATIONS

We have three reportable segments: Sterigenics, Nordion and Nelson Labs. Our chief operating decision maker evaluates performance and allocates resources within our business based on segment income, which excludes certain items which are included in income (loss) before tax as determined in our consolidated statement of operations and comprehensive income (loss). The accounting policies for our reportable segments are the same as those for the consolidated Company.

Our Segments

Sterigenics

Our Sterigenics business provides outsourced terminal sterilization and irradiation services for the medical device, pharmaceutical, food safety and advanced applications markets using three major technologies: gamma irradiation, EO processing and E-beam irradiation.

Nordion

Our Nordion business is a leading global provider of Co-60 used in the sterilization and irradiation processes for the medical device, pharmaceutical, food safety, and high-performance materials industries, as well as in the treatment of cancer. In addition, Nordion is a leading global provider of gamma irradiation systems.

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As a result of the time required to meet regulatory and logistics requirements for delivery of radioactive products, combined with accommodations made to our customers to minimize disruptions to their operations during the installation of Co-60, Nordion sales patterns can often vary significantly from one quarter to the next. However, timing-related impacts on our sales performance tend to be resolved within several quarters, resulting in more consistent performance over longer periods of time. In addition, sales of gamma irradiation systems occur infrequently and tend to be for larger amounts.

Results for our Nordion segment are impacted by Co-60 mix, harvest schedules, as well as customer, product and service mix.

Nelson Labs

Our Nelson Labs business provides outsourced microbiological and analytical chemistry testing and advisory services for the medical device and pharmaceutical industries.

For more information regarding our reportable segments please refer to Item 1. “Business” and Note 22, “Segment and Geographic Information” to our consolidated financial statements.

Segment Results for the Years Ended December 31, 2021 and 2020

The following section summarizes the segment results for the years ended December 31, 2021 and 2020. The discussion of the segment results for the years ended December 31, 2020 and 2019 are presented within our Annual Report on Form 10-K for the year ended December 31, 2020 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Segment Results for the years ended December 31, 2020 and 2019.”

The following tables compare segment net revenue and segment income for the year ended December 31, 2021 to the year ended December 31, 2020:

Net Revenues

Sterigenics net revenues were $571.8 million for the year ended December 31, 2021, an increase of $73.1 million, or 14.6%, as compared to the prior year. The increase reflects organic volume growth of 6.8%, a favorable impact from pricing of 3.8%, a 2.9% increase in revenues from the July 31, 2020 acquisition of Iotron, and favorable impacts from changes in foreign currency exchange rates of 1.1%.

Nordion net revenues were $140.5 million for the year ended December 31, 2021, an increase of $25.8 million, or 22.5%, as compared to the prior year. The increase was driven by higher volume of 10.4%, favorable pricing of 6.3% and a 5.8% impact from the strengthening of the Canadian dollar compared to the U.S. dollar during 2021.

Nelson Labs net revenues were $219.1 million for the year ended December 31, 2021, an increase of $14.5 million, or 7.1%, as compared to the prior year. The net revenue increase was driven primarily by 6.3% of revenue growth from the acquisitions of

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BioScience Labs and RCA in 2021 and positive impacts from pricing of 3.4%. Offsetting these growth factors was a 3.9% decline in revenue related to the testing of personal protective equipment.

Segment Income

Sterigenics segment income was $310.5 million for the year ended December 31, 2021, an increase of $43.8 million, or 16.4%, as compared to the prior year. The increase in segment income was primarily a result of organic volume growth coupled with the contributions of the Iotron acquisition and favorable pricing, as referenced above. This was partially offset by incremental overhead costs associated with being a public company.

Nordion segment income was $82.7 million for the year ended December 31, 2021, an increase of $15.9 million, or 23.8%, as compared to the prior year. The increase in segment income was due to the favorable impacts of sales volume, customer pricing and changes in foreign currency exchange rates, as referenced above.

Nelson Labs segment income was $88.1 million for the year ended December 31, 2021, an increase of $1.7 million, or 1.9%, as compared to the prior year, primarily attributable to the incremental contribution of BioScience Labs and favorable pricing. This increase was partially offset by declines in the testing of personal protective equipment. The 2.0% decrease in segment income margin was attributable to the aforementioned decline in personal protective equipment testing, which generated favorable margins in 2020.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Cash

The primary sources of liquidity for our business are cash flows from operations and borrowings under our credit facilities. As of December 31, 2021, we had $106.9 million of cash and cash equivalents. This is an increase of $4.5 million from the balance at December 31, 2020. Our foreign subsidiaries held cash of approximately $87.9 million at December 31, 2021 and $88.8 million at December 31, 2020, to meet their liquidity needs. No material restrictions exist to accessing cash held by our foreign subsidiaries notwithstanding any potential tax consequences.

Uses of Cash

We expect that cash on hand, operating cash flows and amounts available under our credit facilities will provide sufficient working capital to operate our business, meet foreseeable liquidity requirements, including debt service on our long-term debt, make expected capital expenditures including investments in fixed assets to build and/or expand existing facilities, and meet litigation costs for at least the next twelve months.

Our primary long-term liquidity requirements beyond the next twelve months will be to service our debt, to make capital expenditures, and fund selective business acquisitions. Our significant categories of contractual cash obligations required to operate our business that extend beyond December 31, 2021 are described in “Contractual Obligations and Commercial Commitments” below.

We expect to use cash provided by operations in excess of amounts needed for capital expenditures, to fund potential acquisitions, or for other general corporate purposes. Our ability to meet future working capital, capital expenditures and debt service requirements will depend on our future financial performance, which will be affected by a range of macroeconomic, competitive and business factors, particularly interest rates and changes in our industry, many of which are outside of our control.

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, Co-60 used by Sterigenics at its gamma irradiation facilities and information technology enhancements. During the year ended December 31, 2021, our capital expenditures amounted to $102.2 million, compared to $53.5 million in 2020. This amount includes approximately $10.1 million related to environmental facility enhancements.

In 2022, we expect to continue to invest in facility expansions, ongoing routine maintenance for existing facilities, and acquisition of Co-60 for use by our Sterigenics segment in its gamma irradiation facilities. In addition, we expect to invest in

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special projects related to development of new Co-60 supply sources and facility enhancements at our EO sterilization facilities. We currently expect our capital expenditures to be higher in 2022 than in recent years and remain elevated over the next several years as we execute on those special projects in addition to our normal growth and maintenance related investments. For 2022, considering our typical growth and maintenance projects, along with the special projects, we expect capital expenditures to exceed $140.0 million, of which approximately $30.0 million and $32.0 million relate to environmental facility enhancements and cobalt development projects, respectively. We expect similar investments in environmental facility enhancements and cobalt development projects in subsequent years.

We may choose to temporarily defer planned capital expenditures due to fluctuations in demand for our products and services resulting from the COVID-19 pandemic and the needs of our customers.

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 the Term Loan mature on June 13, 2026 and December 13, 2026, respectively. On December 17, 2020, we increased the capacity of our Revolving Credit Facility from $190.0 million to $347.5 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 December 31, 2021 and 2020, total borrowings under the Term Loan were $1,763.1 million and $1,763.1 million, respectively, and there were no borrowings outstanding on the Revolving Credit Facility. The weighted average interest rate on borrowings under the Term Loan for the year ended December 31, 2021 and 2020 was 3.44% and 5.67%, respectively.

On January 20, 2021, we closed on an amendment repricing our Term Loan. The interest rate spread over the London Interbank Offered Rate (“LIBOR”) on the facility was reduced from 450 basis points to 275 basis points, and the facility’s LIBOR floor was reduced from 100 basis points to 50 basis points. The changes result in an effective reduction in current interest rates of 225 basis points. In connection with this amendment, we wrote off $11.3 million of unamortized debt issuance and discount costs and incurred an additional $2.9 million of expense related to debt issuance costs attributable to the refinancing. These costs were recorded to “Loss on extinguishment of debt” in our Consolidated Statements of Operations and Comprehensive Income (Loss).

Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to an applicable margin, plus, at our option, either (a) an alternative base rate “ABR” or (b) a LIBOR rate. In addition to paying interest on any outstanding borrowings under the Revolving Credit Facility, SHH is required to pay a commitment fee to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder and customary letter of credit fees. The Revolving Credit Facility contains a maximum senior secured first lien net leverage ratio covenant of 9.00 to 1.00, tested on the last day of each fiscal quarter if, on the last day of such fiscal quarter, the sum of (i) the aggregate principal amount of the revolving loans then outstanding under the Revolving Credit Facility, plus (ii) the aggregate amount of letter of credit disbursements that have not been reimbursed within two business days following the end of the fiscal quarter, exceeds the greater of $139.0 million and 40.0% of the aggregate principal amount of the revolving commitments then in effect.

On March 26, 2021, we amended the Revolving Credit Facility, to (i) decrease the Applicable Rate (as defined in the Credit Agreement) related to any Revolving Loans (as defined in the Credit Agreement) from a rate per annum that ranged from an ABR plus 2.50% to ABR plus 3.00% depending on SHH’s Senior Secured First Lien Net Leverage Ratio to ABR plus 1.75%; and in the case of Eurodollar Loans (as defined in the Credit Agreement) from a rate per annum which ranged from the Adjusted LIBOR plus 3.50% to the Adjusted LIBOR plus 4.00% depending on SHH’s Senior Secured First Lien Net Leverage Ratio (as defined in the Credit Agreement), to the Adjusted LIBOR (as defined in the Credit Agreement) plus 2.75%, and (ii) extend the maturity date of the Revolving Facility from December 13, 2024 to June 13, 2026. The other material terms of the Credit Agreement are unchanged and the amendment does not change the capacity of our Revolving Credit Facility, which is $347.5 million. No unamortized debt issuance costs associated with the Revolving Credit Facility were written off and direct fees and costs incurred in connection with the amendment were immaterial.

As of December 31, 2021 and 2020, there were no borrowings outstanding on the Revolving Credit Facility. SHH borrowed $50.0 million on the Revolving Credit Facility during the first quarter of 2020 which was repaid in the second quarter of 2020. The interest rate on the borrowings under the Revolving Credit Facility during 2020 averaged approximately 5.0%.

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As of December 31, 2021 and 2020 capitalized debt issuance costs totaled $2.7 million and $3.4 million, respectively, and debt discounts totaled $17.3 million and $31.6 million, respectively, related to the Senior Secured Credit Facilities. Such costs are recorded as a reduction of debt on our Consolidated Balance Sheets and amortized as a component of interest expense over the term of the debt agreement.

The Senior Secured Credit Facilities 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. The Senior Secured Credit Facilities also contain certain customary affirmative covenants and events of default, including upon a change of control. As of December 31, 2021, we were in compliance with all the Senior Secured Credit Facilities covenants.

All of SHH’s obligations under the Senior Secured Credit Facilities 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 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.

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 December 31, 2021, the Company had $113.8 million of letters of credit issued against the Revolving Credit Facility, resulting in total availability under the Revolving Credit Facility of $233.7 million. Due to the overlap of a letter of credit with a termination date of January 6, 2022 and its replacement with a letter of credit with a commencement date of December 16, 2021 in similar amount, our availability under the Revolving Credit Facility was abnormally low for a brief period including December 31, 2021 and continuing through January 6, 2022. As of January 6, 2022, our availability under the Revolving credit facility increased to $278.4 million.

Term Loan Interest Rate Risk Management

The Company utilizes interest rate derivatives to eliminate the variability of cash flows in the interest payments associated with the Term Loan due to changes in LIBOR (or its successor). For additional information on the derivative instruments described above, refer to Note 21, “Financial Instruments and Financial Risk”, “Derivatives Instruments.”

First Lien Notes

On July 31, 2020, SHH issued $100.0 million aggregate principal amount of senior secured first lien notes due 2026 (the “First Lien Notes”), which were scheduled to mature on December 13, 2026. On August 27, 2021 SHH redeemed in full the $100.0 million aggregate principal amount of the First Lien Notes. In connection with this redemption, the Company paid a $3.0 million early redemption premium, in accordance with the terms of the First Lien Notes Indenture, and wrote off $3.4 million of debt issuance and discount costs. The Company recognized these expenses within “Loss on extinguishment of debt” in our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2021.

Prior to the redemption, the First Lien Notes bore interest at a rate equal to LIBOR subject to a 1.00% floor plus 6.00% per annum. Interest was payable on a quarterly basis with no principal due until maturity. The weighted average interest rate on the First Lien Notes during 2021 up to the August 27, 2021 redemption date was 7.00%.

Second Lien Notes

On December 13, 2019, SHH issued $770.0 million of Second Lien Senior Secured Notes (the “Second Lien Notes”), which had a maturity date of December 13, 2027. The Second Lien Notes bore interest at a rate equal to LIBOR subject to a 1.00% floor plus 8.00% per annum. On December 14, 2020, SHH redeemed in full all of the $770.0 million aggregate principal amount of the First Lien Notes (as described below in “2020 Debt Repayments”). The weighted average interest rate on the Second Lien Notes through the redemption date of December 14, 2020 was 9.35%.

SHH was entitled to redeem all or a portion of the Second Lien Notes, at any time and from time to time, subject to certain premiums depending on the date of redemption. Any time prior to December 13, 2020, a customary make-whole premium applied and, thereafter, specified premiums that declined to zero applied (in each case as described in the indenture governing the Second Lien Notes). In addition, under certain circumstances, such as an initial public offering or certain changes of control, SHH had certain additional redemption rights (as described in the indenture governing the First Lien Notes).

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2020 Debt Repayments

Almost all of the net proceeds of the Company’s IPO were used to redeem all of the outstanding aggregate principal amount of the Second Lien Notes and to repay a portion of the outstanding indebtedness under our Term Loan. In November 2020, the Company repaid $341.0 million aggregate principal amount of the Term Loan. In December 2020, the Company redeemed in full all of the $770.0 million aggregate principal amount of its then outstanding Second Lien Notes. For these two transactions combined, we wrote off $28.9 million of debt issuance and discount costs and recognized $15.4 million in premiums paid in connection with the early extinguishment of the Second Lien Notes. We recognized these costs within “Loss on extinguishment of debt” in our Consolidated Statements of Operations and Comprehensive Income (Loss).

2019 Refinancing

In conjunction with the December 2019 refinancing, the Company redeemed, in full, the previously outstanding $1,659.0 million aggregate Term Loan due 2022, its $450.0 million Senior Notes due 2023 and $425.0 million Senior PIK (“paid in kind”) Toggle Notes due 2021. In total, we wrote off $13.5 million of debt issuance and discount costs and recognized $14.6 million representing premiums paid in connection with the early extinguishment of the Senior Notes. In connection with the refinancing, we also recognized an additional $2.1 million of expense related to debt issuance and discount costs. We recognized these costs within “Loss on extinguishment of debt” in our Consolidated Statements of Operations and Comprehensive Income (Loss). Any additional proceeds were used to fund a dividend to shareholders of $275.0 million.

Cash Flow Information

The following section summarizes cash flow information for the years ended December 31, 2021 and 2020. Cash flow information for the years ended December 31, 2020 and 2019 are presented within our Annual Report on Form 10-K for the year ended December 31, 2020 under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

Year Ended December 31, 2021 compared to the Year Ended December 31, 2020

Operating activities

Cash flows provided by operating activities increased $161.0 million to net cash provided of $281.5 million in the year ended December 31, 2021 compared to $120.6 million for the prior year. Higher cash flows from operating activities in 2021 compared to the prior year were principally driven by a decrease in cash paid for interest of $152.5 million and an increase in operating income of $50.7 million, offset by an increase in cash paid for income taxes of $28.0 million.

Investing activities

Cash used in investing activities increased $1.1 million to net cash used of $159.8 million in the year ended December 31, 2021 compared to $158.7 million for the prior year. An increase in cash paid for capital expenditures of $48.7 million offset by a decrease in cash paid for business acquisitions of $48.2 million resulted in an insignificant change in net cash outflows used in investing activities in the year ended December 31, 2021 compared to the prior year.

Financing activities

For the year ended December 31, 2021, net cash used in financing activities was $117.3 million compared to net cash provided of $73.4 million for the year ended December 31, 2020. For the year ended December 31, 2021, the principal uses of cash in financing activities were $100.0 million for the full redemption of the First Lien Notes, $8.4 million for the acquisition of the noncontrolling interests in our China subsidiaries and $6.8 million of debt issuance costs and prepayment premium incurred in

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connection with our refinancing of the Senior Secured Credit Facilities and the early redemption of the First Lien Notes, respectively.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table describes our significant contractual cash obligations as of December 31, 2021:

(a)Represents principal and interest payments on the Senior Secured Credit Facilities. We have calculated the interest payments on the Senior Secured Credit Facilities at an average of 3.25% (LIBOR plus 2.75% subject to a LIBOR floor of 0.50%) thereafter. This reflects the current incremental margin on the Senior Secured Credit Facilities as amended on January 20, 2021. Refer to Note 10, “Long-Term Debt” of our consolidated financial statements.

(b)Consists of payments under our finance leases for various equipment and facilities.

(c)Represents minimum lease payments under our operating leases for several of our facilities and other property and equipment, net of sublease payments.

(d)Consists of our best estimate of our obligations under various supply and service agreements, primarily Co-60, that are enforceable and legally binding on us.

(e)Consists of our best estimate of our obligations to purchase EO gas under commitments that are enforceable and legally binding on us. We have excluded contracts to purchase energy and other supplies, which generally have terms of one year or less. Our contract to purchase EO gas in the U.S. requires us to purchase all our requirements from our supplier, and our contracts to purchase EO gas outside the U.S. generally require that we purchase a specified percentage of our requirements for our operations in the countries covered by those contracts. Although our EO gas contracts generally do not contain fixed minimum purchase volumes, we have calculated the amounts set forth in the table above based on the percentage of our requirements specified in the contracts and our budgeted purchase volumes for those periods.

At December 31, 2021 and 2020, we had $144.7 million and $94.0 million, respectively, of standby letters of credit, surety bonds and other bank guarantees outstanding, primarily in favor of local and state licensing authorities for future decommissioning costs, and to support the unfunded portion of our pension obligation. We are obligated to provide financial assurance to local and state licensing authorities for possible future decommissioning costs associated with the various facilities that hold Co-60. At December 31, 2021 and 2020, $50.5 million and $49.5 million, respectively, of the standby letters of credit and surety bonds referenced above were outstanding in favor of the various local and state licensing authorities in the event we defaulted on our decommissioning obligation.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The following subsections describe our most critical accounting policies, estimates, and assumptions. Our discussion of critical accounting policies and estimates is intended to supplement, not duplicate, our summary of significant accounting policies so that readers will have greater insight into the uncertainties involved in these areas. Our accounting policies are more fully described in Note 1, “Significant Accounting Policies” to our consolidated financial statements.

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions at a specific point in time and in certain circumstances that affect amounts reported in the accompanying consolidated financial statements. In preparing these consolidated financial statements, management has made its best estimates and judgments of certain

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amounts, giving due consideration to materiality. The application of accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

Revenue Recognition. The majority of our sales agreements contain performance obligations satisfied at a point in time when control of promised goods or services have transferred to our customers. For agreements with multiple performance obligations, judgment is required to determine whether performance obligations specified in these agreements are distinct and should be accounted for as separate revenue transactions for recognition purposes. In these types of agreements, we generally allocate sales price to each distinct obligation based on the relative price of each item sold in stand-alone transactions. Revenues recognized over time are generally accounted for using an input measure to determine progress completed as of the end of the period.

Refunds, returns, warranties and other related obligations are not material to any of our business units, nor do we incur material incremental costs to secure customer contracts.

The Sterigenics segment provides outsourced terminal sterilization and irradiation services for the medical device, pharmaceutical, food safety and advanced applications markets. We typically have multi-year service contracts with our significant customers, and these sales contracts are primarily based on a customer’s purchase order. Given the relatively short turnaround times, performance obligations are generally satisfied at a point-in-time upon the completion of sterilization or irradiation processing once approved by our quality assurance process, at which time the service is complete.

The Nordion segment is a provider of Co-60 and gamma irradiation systems, which are key components to the gamma sterilization process. Revenue from the sale of Co-60 radiation sources is recognized at a point-in-time upon satisfaction of our performance obligations for delivery/installation and disposal of existing sources. Revenue from the sale of gamma irradiation systems in our Nordion segment is recognized over time using an input measure of costs incurred and is immaterial to the overall business.

The Nelson Labs segment provides outsourced microbiological and analytical chemistry testing and advisory services for the medical device and pharmaceutical industries. We provide our customers mission-critical lab testing services, which assess the product quality, effectiveness, patient safety and end-to-end sterility of products. These services are necessary for our customers’ regulatory approvals, product releases and ongoing product performance evaluations. Nelson Labs services are generally provided on a fee-for-service or project basis, and we recognize revenues over time using an input measure of time incurred to determine progress completed at the end of the period. Revenue recognized over time in excess of the amount billed to the customer is recorded as a customer contract asset. 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. We utilize our customer relationship management system to assess time incurred and the extent of project completion at the end of the period.

We do not capitalize sales commissions as substantially all of our sales commission programs have an amortization period of one year or less. Furthermore, costs to fulfill a contract are not material.

Provisions for discounts, rebates to customers, and other adjustments are provided for as reductions in net revenues in the period the related sale was recorded. Shipping and handling charges billed to customers are included in net revenues, and the related shipping and handling costs are included in cost of net revenues on the Consolidated Statements of Operations and Comprehensive Income (Loss). Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from net revenue.

Payment terms vary by the type and location of the customer and the products or services offered. Generally, the time between when revenue is recognized and when payment is due is not significant. We do not evaluate whether the selling price contains a financing component for contracts that have a duration of less than one year.

Long-Lived Assets Other than Goodwill. We review long-lived assets, including finite-lived intangibles for impairment whenever events or circumstances indicate that the carrying amount of the assets may be impaired. Events or circumstances which would result in an impairment assessment include operating losses, a significant change in the use of an asset, or the planned disposal or sale of the asset. 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. The asset or asset group would be considered impaired when the future net undiscounted cash flows generated by the asset or asset group are less than its carrying value.

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An impairment loss would be recognized based on the amount by which the carrying value of the asset or asset group exceeds its estimated fair value. We provide additional information about our long-lived assets other than goodwill in Notes 7, “Property, Plant and Equipment” and 8, “Goodwill and Other Intangible Assets” to our consolidated financial statements.

Goodwill and Other Indefinite-Lived Intangibles. Assets and liabilities of a 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 generally 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 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.

Goodwill and other indefinite-lived intangible assets, primarily certain regulatory licenses and trade names, are tested for impairment annually as of October 1. If circumstances change during interim periods between annual tests that would indicate that the carrying amount of such assets may not be recoverable, the company would test such assets at an interim date for impairment. Factors which would necessitate an interim impairment assessment include prolonged negative industry or economic trends and significant underperformance relative to historical or projected future operating results.

At December 31, 2021, goodwill and intangible assets totaled $1,719.2 million, or 61.6% of our total assets. We consider the impairment analysis of these assets critical due to their quantitative significance to the Company and our segments.

Goodwill is assigned to our segments at December 31, 2021 as follows:

We performed a quantitative assessment of all reporting units (Sterigenics, Nordion and Nelson Labs) as of October 1, 2021. The fair value of each reporting unit was calculated using a discounted cash flow analysis which was dependent on subjective market participant assumptions determined by management. Assumptions used in the analyses included discount rates, revenue growth rates and projected operating cash flows. Estimates of future cash flows are based upon relevant data at a point-in-time, are subject to change, and could vary from actual results. Cash flows are based on recent historical results and are consistent with the Company’s near-term financial forecasts and long-term strategic plans. The estimated fair value of Sterigenics, Nordion and Nelson Labs each exceeded its carrying amount (including goodwill) by a minimum of 50% as of October 1, 2021. No factors were identified that would result in the potential impairment to the indefinite-lived intangible assets. In addition, there have been no significant events or circumstances that occurred since the annual assessment date of October 1 that would change the conclusions reached above. We provide additional information about our goodwill and other indefinite-lived intangible assets in Note 8, “Goodwill and Other Intangible Assets” to our consolidated financial statements.

Income Taxes. We use the liability method of accounting for income taxes whereby we recognize deferred tax assets and liabilities for the future tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Measurements of deferred taxes requires the use of judgment with respect to the realization of tax basis. We periodically review our deferred tax assets for recoverability and establish a valuation allowance based on historical taxable income, projected future taxable income, expected timing of reversals of existing temporary timing differences and the implementation of tax planning strategies. Deferred tax assets will be reduced by a valuation allowance if, based on management’s estimate, it is more likely than not that a portion of the deferred tax assets will not be realized in a future period. The estimates used in the recognition of deferred tax assets are subject to revision in future periods based on new facts and circumstances. At December 31, 2021 and 2020 a valuation allowance of $44.8 million and $36.0 million, respectively, was established against excess interest expense on our long-term debt in the United States. In addition, at December 31, 2021 and 2020, a valuation allowance was established against foreign net operating loss carryforwards for $3.2 million and $2.6 million, respectively. 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 or results of operations. Changes in our judgment related to the measurement of deferred tax assets and liabilities could materially impact our results of operations.

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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% likely of being realized upon ultimate settlement. Determining what constitutes an individual tax position and whether the more likely-than-not recognition threshold is met for a tax position are matters of judgment based on the individual facts and circumstances of that position evaluated in light of all available evidence. We review and adjust 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. Changes in our judgment related to the assessment of uncertain tax positions could materially impact our results of operations.

We are subject to taxation from federal, state and local, and foreign jurisdictions. Tax positions are settled primarily through the completion of audits within each individual tax jurisdiction or the closing of a statute of limitation. Changes in applicable tax law or other events may also require us to revise past estimates. The United States Internal Revenue Service routinely conducts audits of our federal income tax returns. Additional information regarding income taxes is included in Note 11, “Income Taxes” to our consolidated financial statements.

Commitments and Contingencies. We are, and will likely continue to be, involved in a number of legal proceedings, government investigations and claims, which we believe generally arise in the course of our business, given our size, history, complexity and the nature of our business, products, customers, regulatory environment and industries in which we participate. These legal proceedings, investigations and claims generally involve a variety of legal theories and allegations, including, without limitation, personal injury (e.g., slip and falls, burns, vehicle accidents, mass tort), regulation (e.g., failure to meet specification or failure to comply with regulatory requirements), commercial claims (e.g., breach of contract, economic loss, misrepresentation), financial (e.g., taxes, reporting), employment (e.g., wrongful termination, discrimination, benefits matters) and other claims for damage and relief.

We record a liability for such contingencies to the extent we conclude that their occurrence is both probable and estimable. 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. In our opinion, the ultimate outcome of these proceedings and claims is not anticipated to have a material adverse effect on our consolidated financial position, results of operations, or cash flows. However, the ultimate outcome of proceedings, government investigations and claims is unpredictable and actual results could be materially different from our estimates. We record gain contingencies when realized, and expected recoveries under applicable insurance contracts when we are assured of recovery. Refer to Note 20, “Commitments and Contingencies” to our consolidated financial statements.

NEW ACCOUNTING PRONOUNCEMENTS

For a description of recent accounting pronouncements applicable to our business, see Note 2, “Recent Accounting Standards” to our consolidated financial statements.