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What changed in Sotera Health Co's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Sotera Health Co's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+494 added−534 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-27)

Top changes in Sotera Health Co's 2024 10-K

494 paragraphs added · 534 removed · 404 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

59 edited+6 added−3 removed110 unchanged
Biggest changeThe US EPA has also proposed updated National Emission Standards for Hazardous Air Pollutants (“NESHAP”) air emission regulations for EO commercial sterilization facilities that a consent order requires be finalized by March 2024. Additional regulatory requirements and obligations exist in certain other states, including requirements for the provision of notices regarding the release of or exposure to EO.
Biggest changeAdditional regulatory requirements and obligations exist in certain other states, including requirements for the provision of notices regarding the release of or exposure to EO. Some states are considering changes that would impose new requirements for EO commercial sterilization facilities.
Nordion also 11 Table of Contents competes indirectly with other developing modalities of sterilization, such as X-ray technology, that use electricity to generate radiation and therefore do not require Co-60 sources. Nordion’s main competitors in the HSA Co-60 industry include suppliers in China, Sweden and North America that have capability to produce medical Co-60.
Nordion also 11 Table of Contents competes indirectly with other developing modalities of sterilization, such as X-ray technology, that use electricity to generate radiation and therefore do not require Co-60 sources. Nordion’s main competitors in the HSA Co-60 industry include suppliers in China, Sweden and North America that have the capability to produce medical Co-60.
Nelson Labs performs bacterial endotoxin testing or quarterly dose audits for devices sterilized using irradiation, and biological indicator testing for devices sterilized with EO. Nelson also provides testing for producers of non-sterile products to ensure they are free of objectionable organisms.
Nelson Labs performs bacterial endotoxin testing or quarterly dose audits for devices sterilized using irradiation, and biological indicator testing for devices sterilized with EO. Nelson Labs also provides testing for producers of non-sterile products to ensure they are free of objectionable organisms.
We employ approximately 600 scientists, technicians and service specialists, creating a substantial 13 Table of Contents competitive advantage in terms of expertise. Our experts serve in predominant roles on a number of standards writing organizations, including the United States Pharmacopeia, AAMI, American Society of Testing and Materials and ISO.
We employ approximately 600 scientists, technicians and service specialists, creating a substantial 13 Table of Contents competitive advantage in terms of expertise. Our experts serve in predominant roles on a number of standards writing organizations, including the United States Pharmacopeia, AAMI, American Society of Testing and Materials and the ISO.
Sterigenics We are a leading global provider of outsourced terminal sterilization and irradiation services and have provided sterilization services for over 90 years. We offer a globally integrated platform for our customers in the medical device, pharmaceutical, food safety, and advanced applications markets, with facilities strategically located to be convenient to our customers’ manufacturing sites or distribution hubs.
Sterigenics We are a leading global provider of outsourced terminal sterilization and irradiation services and have provided sterilization services for over 90 years. We offer a globally integrated platform for our customers in the medical device, pharmaceutical, food safety, and advanced applications markets, with facilities strategically located to be convenient to our customers’ manufacturing sites and distribution hubs or routes.
Although sterilization services are an essential element in our customers’ manufacturing processes, they generally represent a small fraction of the total end-product cost of medical devices. We believe this means that our customers choose our services based on quality and consistency of service rather than solely on the cost.
Although sterilization services are an essential element in our customers’ manufacturing processes, they generally represent a small fraction of the total end-product cost of medical devices. We believe this means that our customers choose our services based on quality, consistency of service and location rather than solely on the cost.
In particular, recent global regulatory changes, such as the enactment of the European Union Medical Device Regulation 2017/745 (MDR) and the FDA’s modernization of the premarket notification process under Section 510(k) of the Federal Food, Drug and Cosmetic Act, have increased the requirements for the testing and sterilization of medical devices.
In particular, recent global regulatory changes, such as the enactment of the European Union Medical Device Regulation 2017/745 and the FDA’s modernization of the premarket notification process under Section 510(k) of the Federal Food, Drug and Cosmetic Act, have increased the requirements for the testing and sterilization of medical devices.
Most of our services are necessary for our customers to satisfy applicable government requirements. 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.
Most of our services are necessary for our customers to satisfy applicable government requirements. 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.
For additional information, please see Item 1A, “ Risk Factors ” —Risks Related to the Company. We are subject to extensive regulatory requirements and routine regulatory audits in our operations. We must receive permits, licenses and/or regulatory clearance or approval for our operations.
For additional information, please see Item 1A, “ Risk Factors ” —Risks Related to the Company. We are subject to extensive regulatory requirements and routine regulatory audits in our operations. We must receive certain permits, licenses and/or regulatory clearance or approval for our operations.
The COVID-19 pandemic also increased testing demand due to new FDA Emergency Use Authorizations (EUAs), which define testing criteria necessary for the direct release of masks and respirators to hospitals and clinics without FDA submission.
The COVID-19 pandemic also increased testing demand due to new FDA Emergency Use Authorizations, which define testing criteria necessary for the direct release of masks and respirators to hospitals and clinics without FDA submission.
Available Information Our Annual Report, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available free of charge through the Investor Relations page of our internet website at https://investors.soterahealth.com , as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).
Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are made available free of charge through the Investor Relations page of our internet website at https://investors.soterahealth.com , as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).
More than 90% of Sterigenics’ revenues for the year ended December 31, 2023 were from customers under multi-year contracts. 8 Table of Contents Sterigenics Competition We compete globally with Applied Sterilization Technologies, a segment of STERIS plc, as well as other smaller or regional outsourced sterilization companies. In addition, some manufacturers have invested or are investing in in-house sterilization capabilities.
More than 90% of Sterigenics’ revenues for the year ended December 31, 2024 were from customers under multi-year contracts. 8 Table of Contents Sterigenics Competition We compete globally with Applied Sterilization Technologies, a segment of STERIS plc, as well as other smaller or regional outsourced sterilization companies. In addition, some manufacturers have invested or are investing in in-house sterilization capabilities.
This dynamic contributes to low customer churn and long-term relationships. In addition, Sterigenics has achieved high historical customer retention and renewal rates—Sterigenics has 100% renewal rates of its top ten customers for more than five consecutive years, and an average tenure of over a decade with its top 25 customers over the last five years—and minimal customer concentration.
This dynamic contributes to low customer turnover and long-term relationships. In addition, Sterigenics has achieved high historical customer retention and renewal rates—Sterigenics has 100% renewal rates of its top ten customers for more than five consecutive years, and an average tenure of over a decade with its top 25 customers over the last five years—and minimal customer concentration.
A broad range of single-use, prepackaged medical products, as well as certain consumer products, are required by government regulations to be sterile, or meet certain acceptable microbial levels when sold. These products are not manufactured in a “sterile” or “clean” environment and are thereby inhabited by potentially harmful microbes.
A broad range of single-use, prepackaged medical products, as well as certain consumer products, are required by government regulations to be sterile, or meet certain acceptable microbial levels when sold. These products are not manufactured in a “sterile” or “clean” environment and are therefore inhabited by potentially harmful microbes.
Many of our business names are the subject of trademark registrations or applications in the United States or certain other jurisdictions, or part of registered domain names. Human Capital Resources One of our values is People. We value a global team that is talented, experienced, diverse, respectful, passionate and collaborative.
Many of our business names are the subject of trademark registrations or applications in the United States or certain other jurisdictions, or part of registered domain names. Human Capital Resources One of our values is People. We value a global team that is talented, experienced, inclusive, respectful, passionate and collaborative.
Nordion currently has access to Co-60 supply at multiple nuclear reactors pursuant to multi-year contracts with three operators that cover 13 reactors at five generating stations, that extend to dates between 2025 and 2064, with our largest supplier under contract until 2064.
Nordion currently has access to Co-60 supply at multiple nuclear reactors pursuant to multi-year contracts with three operators that cover 13 reactors at five generating stations, that extend to dates between 2026 and 2064, with our largest supplier under contract until 2064.
We continue to evaluate opportunities to increase Co-60 production, including through partnerships with CANDU reactor operators in Canada and Romania that would involve investing in their reactor infrastructure to enable long-term production of Co-60. Nordion Customers Nordion supplies products and services to approximately 40 customers, including medical device manufacturers and gamma sterilization service providers.
We continue to evaluate opportunities to increase Co-60 production, including through partnerships with CANDU reactor operators in Canada and Romania that would involve investing in their reactor infrastructure to enable long-term production of Co-60. Nordion Customers In 2024, Nordion supplied products and services to approximately 40 customers, including medical device manufacturers and gamma sterilization service providers.
We serve many of our sterilization customers at more than one facility, with approximately 80% of Sterigenics’ net revenues attributable to customers using more than one of our facilities and more than 50% of Sterigenics’ net revenues attributable to customers using five or more of our facilities in 2023.
We serve many of our sterilization customers at more than one facility, with approximately 80% of Sterigenics’ net revenues attributable to customers using more than one of our facilities and more than 50% of Sterigenics’ net revenues attributable to customers using five or more of our facilities in 2024.
Compliance with these regulations is costly, and failure to comply with all laws and regulations or to receive or maintain permits, licenses, clearances or approvals may hurt our revenues, profitability, financial condition or value.
Compliance with these regulations is costly, and failure to comply with all laws and regulations or to receive or maintain permits, licenses, clearances or approvals may impact our revenues, profitability, financial condition or value.
This database allows us to provide analytical data that differentiates our capabilities from our competitors’. We provide microbiological and analytical chemistry laboratory tests across the medical device and pharmaceutical industries.
This database allows us to provide analytical data that differentiates our capabilities from our competitors. We provide microbiological and analytical chemistry laboratory tests across the medical device and pharmaceutical industries.
With our industry-recognized scientific and technological expertise, we help to ensure the safety of millions of patients and healthcare practitioners around the world. Across our 63 facilities worldwide, we have over 3,000 employees who are dedicated to safety and quality. Sotera Health Company was incorporated in Delaware in November 2017 as the parent company for Sterigenics, Nordion and Nelson Labs.
With our industry-recognized scientific and technological expertise, we help promote the safety of millions of patients and healthcare practitioners around the world. Across our 62 facilities worldwide, we have over 3,000 employees who are dedicated to safety and quality. Sotera Health Company was incorporated in Delaware in November 2017 as the parent company for Sterigenics, Nordion and Nelson Labs.
Because we provide product development and validation testing services to clients launching new products or altering existing products, this business benefits from the ongoing technological advances and increasing complexity of medical and pharmaceutical products. Nelson Labs Customers Nelson Labs serves approximately 3,000 customers, including many leading medical device manufacturers and pharmaceutical companies.
Because we provide product development and validation testing services to clients launching new products or altering existing products, this business benefits from the ongoing technological advances and increasing complexity of medical and pharmaceutical products. Nelson Labs Customers In 2024, Nelson Labs served approximately 3,000 customers, including many leading medical device manufacturers and pharmaceutical companies.
In Canada and Europe, where recreational cannabis, medical cannabis, or both, are legal, we provide commercial gamma and E-beam irradiation services for decontamination of cannabis. Sterigenics Customers Sterigenics serves more than 2,000 customers.
In Canada and Europe, where recreational cannabis, medical cannabis, or both, are legal, we provide commercial gamma and E-beam irradiation services for decontamination of cannabis. Sterigenics Customers In 2024, Sterigenics served more than 2,000 customers.
We 16 Table of Contents consistently meet and outperform regulatory emissions control requirements, although we have periodically experienced isolated instances of emissions exceeding applicable standards or other non-compliance, none of which we believe were material.
We 16 Table of Contents consistently meet or exceed regulatory emissions control requirements, although we have periodically experienced isolated instances of emissions exceeding applicable standards or other non-compliance, none of which we believe were material.
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.
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.
In addition to the nuclear aspect of our products, many of the products that we process are medical devices directed for human use or products used in the manufacture of medical devices that are directed for human use. Our facilities hold various International Organization for Standardization’s (“ISO”) certifications including ISO 9002, 9001, 13485, 14001, 45001 and 17025.
In addition to the nuclear aspect of our products, many of the products that we process are medical devices directed for human use or products used in the manufacture of medical devices that are directed for human use. Our facilities hold various ISO certifications including ISO 9002, 9001, 13485, 14001, 45001 and 17025.
Most of the proprietary technologies used in our businesses are unpatented. Some of our technologies, including certain processes, methods, algorithms and proprietary databases, are maintained by the business as trade secrets, which we seek to protect through a combination of physical and technological security measures and contractual measures, such as nondisclosure and confidentiality agreements.
Some of our technologies, including certain processes, methods, algorithms and proprietary databases, are maintained by the business as trade secrets, which we seek to protect through a combination of physical and technological security measures and contractual measures, such as nondisclosure and confidentiality agreements.
We utilize X-ray irradiation at one of our sterilization facilities for bio-hazard reduction for the United States Postal Service, or USPS. We are also investing in NO2-based sterilization, which has been effective in sterilizing of prefilled syringes, drug-device combination products and custom implants. Sterilization Applications Sterigenics primarily provides sterilization services for medical device manufacturers and the pharmaceutical industry.
We utilize X-ray irradiation at one of our sterilization facilities for bio-hazard reduction for the United States Postal Service (“USPS”). We are also investing in NO2-based sterilization and other technologies, which have been effective in sterilizing of prefilled syringes, drug-device combination products and custom implants. Sterilization Applications Sterigenics primarily provides sterilization services for medical device manufacturers and the pharmaceutical industry.
We face liability and reputational risks even if we comply with all laws and regulations” and Item 3, “Legal Proceedings.” EO Regulatory Overview In addition to general environmental laws and regulations, EO facilities and the EO sterilization process are subject to specific regulatory requirements under federal laws in the United States and the laws of the countries in which we operate, including European Union regulations.
We may face liability and reputational risks even if we comply with all laws and regulations.” EO Regulatory Overview In addition to general environmental laws and regulations, EO facilities and the EO sterilization process are subject to specific regulatory requirements under federal laws in the United States and the laws of the countries in which we operate, including European Union regulations.
We have a proactive environmental health and safety (“EH&S”) program and a culture of safety and quality across all business units, and employ a Senior Vice President of Environmental, Health and Safety who reports directly to the Chief Executive Officer and has a team of more than 45 employees.
We have a proactive environmental health and safety (“EH&S”) program and a culture of safety and quality across all business units, and we employ a Senior Vice President of Environmental, Health and Safety who reports directly to the Chief Executive Officer and has a team of approximately 50 employees.
Most countries in which we operate have varying emission control requirements for EO emissions from our facilities. We are investing in additional voluntary controls on EO emissions at our facilities to outperform current and expected future regulatory requirements and further reduce facility emissions.
Most countries in which we operate have varying emission control requirements for EO emissions from our facilities. We are investing in additional controls on EO emissions at our facilities to meet or exceed current and expected future regulatory requirements and further reduce facility emissions.
We completed our initial public offering and listed our shares on the Nasdaq Global Select Market (“Nasdaq”) in November 2020 under the ticker symbol “SHC”. Our Businesses Sterilization Services Our sterilization services business is comprised of Sterigenics and Nordion.
We completed our initial public offering and listed our shares of common stock on the Nasdaq Global Select Market (“Nasdaq”) in November 2020 under the ticker symbol “SHC.” Our Businesses Sterilization Services Our sterilization services business is comprised of Sterigenics and Nordion.
For many products, our customers are required to include the specific facility used to validate a product’s listing in the Food and Drug Administration (“FDA”) (or foreign equivalent) product registration and are typically required to re-register if they switch facilities, which makes switching locations for a particular product a difficult and expensive process for our customers.
For many products, our customers are required to include the specific chamber or chambers at which the product was validated to validate a product’s listing in the Food and Drug Administration (“FDA”) (or foreign equivalent) product registration and are typically required to re-register if they switch facilities, which makes switching locations for a particular product a difficult and expensive process for our customers.
There is a significant regulatory burden in the production, management and transportation of fleets of containers of Co-60 sources. Our transportation routes and carriers are highly controlled, and we provide regular and comprehensive training for employees and carriers who are involved in moving the Co-60 globally.
We believe we have the most extensive expertise in Co-60 logistics. There is a significant regulatory burden in the production, management and transportation of fleets of containers of Co-60 sources. Our transportation routes and carriers are highly controlled, and we provide regular and comprehensive training for employees and carriers who are involved in moving the Co-60 globally.
Our customers typically buy low specific activity Co-60 (“LSA Co-60”) for industrial sterilization use and HSA Co-60 for medical use. At our Ottawa facility, we receive and process the targets to form the final Co-60 source product with the desired amount of radioactivity for each customer order. The Co-60 sources undergo stringent and sophisticated quality assurance testing at our facility.
Our customers typically buy low specific activity Co-60 (“LSA Co-60”) for industrial sterilization use and HSA Co-60 for medical use. At our Ottawa facility, we receive and process the targets to form the final Co-60 source product with the desired amount of radioactivity for each customer order.
We also face competition from other technologies, such as chemical cross-linking of polymers. Our services generally compete on the basis of the quality of technology and services offered, level of expertise in each of the major sterilization methods, level of expertise in the applicable regulatory requirements, proximity to customers and the cost of services.
We also face competition from other technologies. Our services generally compete on the basis of the quality of technology and services offered, level of expertise in each of the major sterilization methods, level of expertise in the applicable regulatory requirements, proximity to customers and the cost of services.
For 2024, we expect capital expenditures of approximately $40.0 million related to environmental facility enhancements across all facilities within our business, and we anticipate continuing to invest in environmental facility enhancements in the future.
For 2025, we expect capital expenditures of approximately $46 million related to environmental facility enhancements across all facilities within our business, and we anticipate continuing to invest in environmental facility enhancements in the future.
We estimate that the cost to replicate the facilities in our network alone could be as high as $1.9 billion, in addition to investments required to meet associated technical and regulatory requirements. Our global facility network, built and expanded over several decades, is strategically located convenient to customers’ manufacturing sites and distribution hubs or routes.
We estimate that the cost to replicate the facilities in our network alone could exceed $2.0 billion, in addition to investments required to meet associated technical and regulatory requirements. Our global facility network, built and expanded over several decades, is strategically located convenient to customers’ manufacturing sites and distribution hubs or routes.
Some states are considering changes that would impose new requirements for EO commercial sterilization facilities. For example, in December 2023, regulators in California imposed a number of new requirements with which our EO sterilization facilities will need to comply. Bills have been introduced in the U.S. Congress to further regulate EO sterilization activity.
For example, in December 2023, regulators in California imposed a number of new requirements with which our EO sterilization facilities will need to comply. Bills have been introduced in the U.S. Congress to further regulate EO sterilization activity.
All our facilities are either ISO 13485 certified, ISO 9001 certified, or both, as well as licensed and registered in all necessary jurisdictions to comply with government required regulations.
Most of our facilities are either International Organization for Standardization (“ISO”) 13485 certified, ISO 9001 certified, or both, as well as licensed and registered in all necessary jurisdictions to comply with government required regulations.
Extensive capital, technical expertise and regulatory knowledge are required to build and maintain facilities like ours. We estimate that building a new facility can cost over $50 million on average, in addition to requiring extensive and complex licensing approval and regulatory compliance processes.
Extensive capital, technical expertise and regulatory knowledge are required to build and maintain our facilities. We estimate that building a new facility may cost over $50 million and the cost may vary depending on sterilization modality, in addition to requiring extensive and complex licensing approval and regulatory compliance processes.
In addition to government regulation, there are standards, guidelines and requirements established by industry organizations and other non-governmental bodies that may impact our operations, such as the ISO’s limit on the permissible levels of residual EO on sterilized medical devices.
We may face liability and reputational risks even if we comply with all laws and regulations.” In addition to government regulation, there are standards, guidelines and requirements established by industry organizations and other non-governmental bodies that may impact our operations, such as the ISO’s limit on the permissible levels of residual EO on sterilized medical devices.
The SEC maintains an Internet site, www.sec.gov , that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
The SEC maintains an internet website, https://www.sec.gov , that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 17 Table of Contents
Our human capital strategy is aligned with our strategy and priorities and focuses on developing and delivering global solutions to attract, develop, engage and retain top talent. On an annual basis, we review our employees to assess performance and leadership potential. We also create succession plans and individual development plans to ensure we have the team needed for the future.
Our human capital strategy is aligned with our business strategy and priorities and focuses on developing and delivering global solutions to attract, develop, engage and retain top talent. On an annual basis, we review our employees to assess performance and leadership potential.
The final product is then placed in specialized containers, which Nordion uses to transport Co-60 to our customers. We transport the Co-60 sources via proprietary lead and steel containers that are licensed to meet all applicable international shipping requirements. We believe we have the most extensive expertise in Co-60 logistics.
The Co-60 sources undergo stringent and sophisticated quality assurance testing at our Ottawa facility. The final product is then placed in specialized containers, which Nordion uses to transport Co-60 to our customers. We transport the Co-60 sources via proprietary lead and steel containers that are licensed to meet all applicable international shipping requirements.
Our Nuclear Substance Processing Facility Operating License, CNSC Export license and CNSC Device servicing licenses for our Kanata facility were renewed in October 2015 for a 10-year period.
Our Nuclear Substance Processing Facility Operating license, CNSC Export license and CNSC Device servicing licenses for our Kanata facility were renewed in October 2015 for a 10-year period, and Nordion is currently engaged in the renewal process for these licenses set to expire in 2025.
We are also regulated by other health regulatory authorities in other countries. Specifically, these operations include some of our sterilization and product testing activities that may constitute “manufacturing” activities and are subject to FDA requirements. These requirements include site, contract drug manufacturer and supplier of active pharmaceutical ingredients registration and listing and manufacturing requirements.
Specifically, these operations include some of our sterilization and product testing activities that may constitute “manufacturing” activities and are subject to FDA requirements. These requirements include site, contract drug manufacturer and supplier of active pharmaceutical ingredients registration and listing and manufacturing requirements. Regulations issued by the Occupational Safety and Health Administration (“OSHA”), the U.S.
We expect to be able to satisfy any changes to applicable regulatory requirements as they evolve and are committed to doing so, although there can be no assurance that we will always be able to do so.
We expect to be able to satisfy any changes to applicable regulatory requirements as they evolve and are committed to doing so, although there can be no assurance that we will always be able to meet new regulatory requirements. See related Risk Factor “—We are subject to extensive regulatory requirements and routine regulatory audits in our operations.
Nordion developed the first Co-60 based tele-therapy unit for cancer treatment in 1951 and the first panoramic irradiator in 1964.
Nordion has a long history in gamma technologies. Nordion designs, installs and maintains gamma irradiation systems. Nordion developed the first Co-60 based tele-therapy unit for cancer treatment in 1951 and the first panoramic irradiator in 1964.
These regulators exert oversight through requirements for a product registration and direct audit of our operations. 15 Table of Contents Additionally, our operations in the United States and the majority of our facilities outside the United States (to the extent we are processing or testing a product that will end up in the U.S. market) are regulated by the FDA.
Additionally, our operations in the United States and the majority of our facilities outside the United States (to the extent we are processing or testing a product that will end up in the U.S. market) are regulated by the FDA. We are also regulated by other health regulatory authorities in other countries.
As of December 31, 2023, we employed over 3,000 employees worldwide. Certain of our employees, primarily outside the United States, are represented by labor unions or work councils and are negotiating or working under collective bargaining or similar agreements, some of which are subject to periodic renegotiation.
Certain of our employees, primarily outside of the United States, are represented by labor unions or work councils and are negotiating or working under collective bargaining or similar agreements, some of which are subject to periodic renegotiation. One labor union within the U.S., representing approximately 40 employees, is covered under a collective bargaining agreement.
We have device, facility, and specific product registrations with North American (Health Canada and the FDA) and European Drug and Device health regulators.
We have device, facility, and specific product registrations with North American (Health Canada and the FDA) and European Drug and Device health regulators. These regulators exert oversight through requirements for a product registration and direct audit of our operations.
Without this radioactive material, gamma sterilization would not be possible on the global scale at which it is used today. We are integral to our customers’ operations due to highly coordinated and complex installation processes. Nordion has a long history in gamma technologies. Nordion designs, installs and maintains gamma irradiation systems.
We also provide regulatory and technical service expertise to improve the risk profiles and enhance effectiveness of gamma processing operations. Without this radioactive material, gamma sterilization would not be 9 Table of Contents possible on the global scale at which it is used today. We are integral to our customers’ operations due to highly coordinated and complex installation processes.
We also have facilities in Itasca, Illinois; Leuven, 14 Table of Contents Belgium; Bozeman, Montana; Pleasant Prairie, Wisconsin; Wiesbaden, Germany, and seven other laboratories embedded in our Sterigenics sterilization facilities in North America, Europe and Asia. Nelson Labs Recent Acquisitions On March 8, 2021, we acquired BioScience Laboratories, LLC (“BioScience”) located in Bozeman, Montana.
We also have facilities in Itasca, Illinois; Leuven, 14 Table of Contents Belgium; Pleasant Prairie, Wisconsin; Wiesbaden, Germany, and seven other laboratories embedded in our Sterigenics sterilization facilities in North America, Europe and Asia. Intellectual Property Our businesses rely on certain proprietary technologies. Most of the proprietary technologies used in our businesses are unpatented.
Nordion’s customers include both outsourced contract sterilizers, including Sterigenics, and medical device manufacturers that sterilize their products in-house. More than 90% of Nordion’s revenues for the year ended December 31, 2023 were from customers under multi-year contracts. We provide our customers with high quality, reliable, safe and secure Co-60 source supply at each stage of the source’s life cycle.
Nordion’s customers include outsourced contract sterilizers, including Sterigenics, medical device manufacturers that sterilize their products in-house and other specialized medical device manufacturers. Approximately 90% of Nordion’s revenues for the year ended December 31, 2024 were from customers under multi-year contracts.
Regulations issued by the Occupational Safety and Health Administration (“OSHA”), the U.S. Nuclear Regulatory Commission (the “NRC”) and other agencies also require that equipment used at our facilities be designed and operated in a manner that is safe and with proper safety precautions and practices when handling, monitoring and storing EO and Co-60.
Nuclear Regulatory Commission (“NRC”) and other agencies also require that equipment used at our facilities be designed and operated in a manner that is safe and with proper safety precautions and practices when handling, monitoring and storing EO and Co-60. 15 Table of Contents We strive to comply with these regulatory requirements and could be subject to significant civil and criminal fines and penalties for non-compliance.
We are committed to providing a safe work environment for our employees and contractors. We have implemented a health and safety program to manage workplace safety hazards and to protect employees. The program encompasses performance, practices and awareness. We are driven to fulfill our customers’ needs with highest quality and care to enable their success.
We are committed to providing a safe work environment for our employees and contractors. We have implemented a health and safety program to manage workplace safety hazards and to protect employees. The program includes periodic reviews of our work practices by external third parties as inputs for continuous improvement.
We support our customers with handling and processing of Co-60, recycling of depleted sources and global logistics enabled by our licensed container fleet. We also provide regulatory and technical service expertise to improve the risk profiles 9 Table of Contents and enhance effectiveness of gamma processing operations.
We provide our customers with high quality, reliable, safe and secure Co-60 source supply at each stage of the source’s life cycle. We support our customers with handling and processing of Co-60, recycling of depleted sources and global logistics enabled by our licensed container fleet.
In the United States, our supplier maintains FIFRA registrations for EO as a medical device sterilant for users of EO across the United States. The US EPA is in the process of reviewing EO’s FIFRA re-registration eligibility and will likely require enhancements to the processes and equipment for use of EO as a medical device sterilant.
In the United States, our supplier maintains FIFRA registrations for EO as a medical device sterilant for users of EO across the United States. On March 14, 2024, the US EPA announced final rules under the National Emission Standards for Hazardous Air Pollutants (“NESHAP”) to govern EO sterilization facilities in the United States.
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BioScience is a provider of outsourced topical antimicrobial product testing in the pharmaceutical, medical device, and consumer industries. BioScience’s expertise in analytical testing and clinical trial services complements Nelson Labs’ existing strengths in antimicrobial and virology testing. On November 4, 2021, we acquired Regulatory Compliance Associates Inc. (“RCA”), which is headquartered in Pleasant Prairie, Wisconsin.
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We also create succession plans and individual development plans to ensure we have the team needed for the future. As of December 31, 2024, we employed over 3,000 employees worldwide.
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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 expands and further strengthens the technical consulting and expert advisory services capabilities of Nelson Labs. Intellectual Property Our businesses rely on certain proprietary technologies.
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Additionally, as part of our corporate governance practices, we review the outcomes of our safety program at the highest levels of the Company, including our board of directors. We are committed to creating a positive employee experience for our teams. We work to achieve this through our focus on the inclusion, well-being and development of all of our team members.
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While we strive to comply with these regulatory requirements, we may not at all times be in full compliance and, as a result, could be subject to significant civil and criminal fines and penalties.
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The final regulation requires EO sterilization facilities to implement additional air pollution technologies, practices and procedures designed to further reduce EO emissions. For facilities like ours, the final NESHAP regulation imposes new requirements such as higher efficiencies for EO emission controls, implementation of permanent total enclosure capture technology, and use of continuous emissions monitoring systems (“CEMS”).
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Our operations are required to comply with the final NESHAP EO sterilizer regulation by April 6, 2026 and to conduct a compliance test and demonstrate compliance within 180 days after that date. In January 2025, the US EPA announced its final Interim Decision (“ID”) under FIFRA relating to the registration of EO for medical device sterilization.
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Over the next one to ten years, the FIFRA ID requires users of EO, including EO sterilization facilities like ours in the United States, to reach and maintain reduced employee exposure levels of EO; implement heightened worker protection practices, particularly in those areas of sterilization facilities where workers do not regularly wear respiratory protective equipment; and implement further facility design, increased employee exposure monitoring, additional indoor EO monitoring practices, sterilization cycle concentration limits, and other worker protection and training practices.
Added
We must receive certain permits, licenses and/or regulatory clearance or approval for our operations. Compliance with these regulations is costly, and failure to comply with all laws and regulations or to receive or maintain permits, licenses, clearances or approvals may impact our revenues, profitability, financial condition or value.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

162 edited+37 added−41 removed245 unchanged
Biggest changeThese provisions include: • limiting the liability of, and providing indemnification to, our directors and officers; • establishing a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors; 42 Table of Contents • providing that directors may be removed only for cause by the affirmative vote of the holders of at least 75% of the voting power of our outstanding common stock; provided that so long as investment funds and entities affiliated with either Warburg Pincus or GTCR, collectively, hold at least 50% of the outstanding shares of our common stock, a director designated by investment funds and entities affiliated with either Warburg Pincus or GTCR, respectively, may be removed with or without cause by the affirmative vote of the holders of at least a majority of the votes that all the stockholders would be entitled to cast in any annual election of directors or class of directors and with the consent of Warburg Pincus or GTCR, respectively; • limiting the determination of the number of directors on our board of directors and the filling of vacancies or newly created seats on the board to our board of directors then in office; provided that for so long as investment funds and entities affiliated with either Warburg Pincus or GTCR have the right to designate at least one director for election to our board of directors, (i) any vacancies will be filled in accordance with the designation provisions set forth in the Stockholders’ Agreement and (ii) the number of directors shall not exceed eleven without the consent of Warburg Pincus or GTCR; • advance notice requirements applicable to stockholders for matters to be brought before a meeting of stockholders and requirements as to the form and content of a stockholders’ notice; provided that no advance notice shall be required for nominations of candidates for election to our board of directors pursuant to the Stockholders’ Agreement; • requiring the affirmative vote of at least 66 2/3% of the voting power of our outstanding common stock to amend certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws; provided that so long as investment funds and entities affiliated with either Warburg Pincus or GTCR, collectively, hold at least a majority of our outstanding capital stock, only a majority stockholder vote requirement would apply to such matters; • providing that for so long as investment funds and entities affiliated with either Warburg Pincus or GTCR have the right (individually) to designate at least three directors for election to our board of directors, certain board approvals, including amendments to our amended and restated certificate of incorporation or amended and restated bylaws and certain specified corporate transactions, including certain acquisitions, mergers, other business combination transactions and dispositions, may be effected only with the affirmative vote of 75% of our board of directors, in addition to any other vote required by applicable law; • providing that for so long as investment funds and entities affiliated with Warburg Pincus have the right to designate at least one director for election to our board of directors and for so long as investment funds and entities affiliated with GTCR have the right to designate one director for election to our board of directors, in each case, a quorum of our board of directors (and committees of the board of directors on which a director designated by Warburg Pincus or GTCR will serve) will not exist without at least one director designee of each of Warburg Pincus and GTCR present at such meeting; provided that if a meeting of our board of directors (or a committee of the board of directors) fails to achieve a quorum due to the absence of a director designee of Warburg Pincus or GTCR, as applicable, the presence of a director designee of Warburg Pincus or GTCR, as applicable, will not be required in order for a quorum to exist at the next duly noticed meeting of our board of directors (or a committee thereof); • the right to issue blank check preferred stock without stockholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer or adopt a stockholder rights plan; • a requirement that our stockholders may only take action at annual or special meetings of our stockholders and may not act by written consent; provided that, for so long as investment funds and entities affiliated with either Warburg Pincus or GTCR, collectively, beneficially own a majority of our outstanding capital stock, a meeting and vote of stockholders may be dispensed with, and the action may be taken without prior notice and without such meeting and vote if a written consent is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at the meeting of stockholders; • limiting the ability of stockholders to call and bring business before special meetings; provided that for so long as investment funds and entities affiliated with either Warburg Pincus or GTCR, collectively, beneficially own a majority of our outstanding capital stock, special meetings of our stockholders may be called by the affirmative vote of the holders of a majority of our outstanding voting stock; and • limiting the forum to the Delaware Court of Chancery or Federal Court for certain types of actions and proceedings that may be initiated against us by stockholders.
Biggest changeThese provisions include: • limiting the liability of, and providing indemnification to, our directors and officers; • establishing a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors; • providing that directors may be removed only for cause by the affirmative vote of the holders of at least 75% of the voting power of our outstanding common stock; • limiting the determination of the number of directors on our board of directors and the filling of vacancies or newly created seats on the board to our board of directors then in office; provided that for so long as investment funds and entities affiliated with either Warburg Pincus or GTCR have the right to designate at least one director for election to our board of directors, (i) any vacancies will be filled in accordance with the designation provisions set forth in the 42 Table of Contents Stockholders Agreement and (ii) the number of directors shall not exceed eleven without the consent of Warburg Pincus or GTCR; • advance notice requirements applicable to stockholders for matters to be brought before a meeting of stockholders and requirements as to the form and content of a stockholders’ notice; provided that no advance notice shall be required for nominations of candidates for election to our board of directors pursuant to the Stockholders Agreement; • requiring the affirmative vote of at least 66 2/3% of the voting power of our outstanding common stock to amend certain provisions of our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws; • providing that for so long as investment funds and entities affiliated with either Warburg Pincus or GTCR have the right (individually) to designate at least three directors for election to our board of directors, certain board approvals, including amendments to our Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws and certain specified corporate transactions, including certain acquisitions, mergers, other business combination transactions and dispositions, may be effected only with the affirmative vote of 75% of our board of directors, in addition to any other vote required by applicable law; • providing that for so long as investment funds and entities affiliated with Warburg Pincus have the right to designate at least one director for election to our board of directors and for so long as investment funds and entities affiliated with GTCR have the right to designate one director for election to our board of directors, in each case, a quorum of our board of directors (and committees of the board of directors on which a director designated by Warburg Pincus or GTCR will serve) will not exist without at least one director designee of each of Warburg Pincus and GTCR present at such meeting; provided that if a meeting of our board of directors (or a committee of the board of directors) fails to achieve a quorum due to the absence of a director designee of Warburg Pincus or GTCR, as applicable, the presence of a director designee of Warburg Pincus or GTCR, as applicable, will not be required in order for a quorum to exist at the next duly noticed meeting of our board of directors (or a committee thereof); • the right to issue blank check preferred stock without stockholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer or adopt a stockholder rights plan; • a requirement that our stockholders may only take action at annual or special meetings of our stockholders and may not act by written consent; • limiting the ability of stockholders to call and bring business before special meetings; and • limiting the forum to the Court of Chancery of the State of Delaware or federal court located within the State of Delaware for certain types of actions and proceedings that may be initiated against us by stockholders.
Despite our belief that these claims are not supported by the science and otherwise without merit, we have entered and may in the future enter into agreements to settle claims relating to our use, emissions and releases of EO.
Despite our belief that these claims are not supported by the science and are otherwise without merit, we have entered and may in the future enter into agreements to settle claims relating to our use, emissions and releases of EO.
To the extent Nordion in the future ceases to operate its facility in Kanata, Canada, Nordion will be responsible for the radiological decommissioning of such facility, including in respect of the portion leased by BWX Technologies, Inc. in connection with its 2018 acquisition of the Medical Isotopes business to the extent any contamination precedes such transaction.
To the extent Nordion ceases to operate its facility in Kanata, Canada in the future, Nordion will be responsible for the radiological decommissioning of such facility, including in respect of the portion leased by BWX Technologies, Inc. in connection with its 2018 acquisition of the Medical Isotopes business to the extent any contamination precedes such transaction.
Compliance with these regulations, as well as our own voluntary programs that relate to maintaining the safety of our employees and facilities as well as the environment, and the safety and competitiveness of our equipment, systems and facilities, may be difficult, burdensome or expensive.
Compliance with these regulations, our own voluntary programs that relate to maintaining the safety of our employees and facilities as well as the environment, and the safety and competitiveness of our equipment, systems and facilities, may be difficult, burdensome or expensive.
Reactions or anticipated reactions by our customers and competitors to our price increases could cause us to reevaluate and possibly reverse or reduce such price increases. We also may not be able to accurately predict the volume impact of price increases, especially if our competitors are able to more successfully adjust to such input cost volatility.
Reactions or anticipated reactions by our customers and competitors to our price increases could cause us to reevaluate and possibly reverse or reduce such price increases. We also may not be able to accurately predict the volume impact of price increases, especially if our competitors are able to adjust to such input cost volatility more successfully.
We operate in a number of tax jurisdictions globally, including in the United States at the federal, state and local levels, and in many other countries, and we therefore are subject to review and potential audit by tax authorities in these various jurisdictions.
We operate in a number of tax jurisdictions globally, including in the United States at the federal, state and local levels, and in many other countries, and we are therefore subject to review and potential audit by tax authorities in these various jurisdictions.
Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain additional debt financing. Additionally, we enter into various forms of hedging arrangements against currency, interest rates or commodity price fluctuations.
Any future lowering of our ratings would likely make it more difficult or more expensive for us to obtain additional debt financing. Additionally, we enter into various forms of hedging arrangements against currency, interest rates or commodity price fluctuations.
We currently expect to use any cash flow generated by operations to pay for our operations, repay existing indebtedness and grow our business.
We currently expect to use any cash flow generated by operations to pay for our operations, grow our business and repay existing indebtedness.
See Item 1, “ Business—Our Businesses—Sterilization Services—Nordion—Nuclear Reactor Operators.” If there is a decrease in output from any of these reactors (including as a result of a natural disaster or other adverse occurrence), the counterparties fail to perform under their agreements with us or decline to enter into renewal contracts with us for our future supply needs and we are unable to obtain supply from other sources, or if such sources begin to compete with us in one or more geographies, this could have a material adverse effect on our business.
See Item 1, “Business—Our Businesses—Sterilization Services—Nordion—Nuclear Reactor Operators.” If there is a decrease in output from any of these reactors (including as a result of a natural disaster or other adverse occurrence), the counterparties fail to perform under their agreements with us or decline to enter into renewal contracts with us for our future supply needs and we are unable to obtain supply from other sources, or if such sources begin to compete with us in one or more geographies, this could have a material adverse effect on our business.
If present or future sanctions against Russia directly or indirectly impede the shipment of Co-60 from Russia to North America, if we or our logistics providers are unable to secure or renew licenses under existing or future sanctions, if we are unable to identify international logistics providers needed for the supply of Co-60 from Russia or if Russia responds with further countersanctions, it may generally become more difficult to do business with Russian entities, which could have a material adverse effect on our business, prospects, financial condition or results of operations.
If present or future sanctions against Russia directly or indirectly impede the shipment of Co-60 from Russia to North America or targets from North America to Russia, if we or our logistics providers are unable to secure or renew licenses under existing or future sanctions, if we are unable to identify international logistics providers needed for the supply of Co-60 or if Russia responds with further countersanctions, it may generally become more difficult to do business with Russian entities, which could have a material adverse effect on our business, prospects, financial condition or results of operations.
We face liability and reputational risks even if we comply with all laws and regulations.” Reconfiguring a gamma irradiation or EO processing plant so that it is suitable for a different sterilization technology, in response to changes in demand, regulations or other factors, would require significant capital investment and require us to suspend operations at the affected facility during the conversion.
We may face liability and reputational risks even if we comply with all laws and regulations.” Reconfiguring a gamma irradiation or EO processing plant so that it is suitable for a different sterilization technology, in response to changes in demand, regulations or other factors, would require significant capital investment and require us to suspend operations at the affected facility during the conversion.
We do not believe the damages award in the first trial in Illinois is predictive of potential future damage awards in the other EO tort cases, or that the settlement amounts reflected in the Willowbrook or Atlanta settlements described above are predictive of potential future settlements, but there can be no assurance that any cases proceeding to trial will not result in significant judgments adverse to the Defendant Subsidiaries and future settlements of EO cases are reasonably possible.
We do not believe the damages award in the first trial in Illinois is predictive of potential future damage awards in the other EO tort cases, or that the settlement amounts reflected in the Willowbrook or Atlanta settlements described above are predictive of potential future settlements, but there can be no assurance that any cases proceeding to trial will not result in significant judgments adverse to us, the Defendant Subsidiaries or other subsidiaries and future settlements of EO cases are reasonably possible.
Our amended and restated certificate of incorporation further provides that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”).
Our amended and restated certificate of incorporation further provides that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall, to the fullest extent permitted by law, be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”).
A product recall or seizure or a partially or completely uninsured judgment against us could have a material adverse effect on our business, prospects, financial condition or results of operations. We are subject to extensive regulatory requirements and routine regulatory audits in our operations. We must receive permits, licenses and/or regulatory clearance or approval for our operations.
A product recall or seizure or a partially or completely uninsured judgment against us could have a material adverse effect on our business, prospects, financial condition or results of operations. We are subject to extensive regulatory requirements and routine regulatory audits in our operations. We must receive certain permits, licenses and/or regulatory clearance or approval for our operations.
As a result, capital appreciation, if any, of our common stock will be the sole source of potential gain for the foreseeable future, and stockholders will have to sell some or all of their common stock holdings to generate cash flow from their investment. Item 1B. Unresolved Staff Comments Not applicable. 44
As a result, capital appreciation, if any, of our common stock will be the sole source of potential gain for the foreseeable future, and our stockholders will have to sell some or all of their common stock holdings to generate cash flow from their investment. Item 1B. Unresolved Staff Comments Not applicable.
If our significant suppliers or service providers were unable to meet their obligations under present arrangements, direct materials or equipment were to become unavailable within the geographic area from which they are now sourced, or supplies were otherwise constrained or disrupted for any reason (including as a result of a natural disaster, the unavailability or short-supply of raw materials or services, changes in regulatory requirements, delays in securing required regulatory approvals, geopolitical instability, sanctions or other adverse occurrences), we may incur increased costs for our direct materials or equipment and may be unable to accommodate new business or meet our current customer commitments.
If our significant suppliers or service providers were unable to meet their obligations under present arrangements, direct materials or equipment were to become unavailable within the geographic area from which they are now sourced, or supplies were otherwise constrained or disrupted for any reason (including as a result of a natural disaster, the unavailability or short-supply of raw materials or services, labor disruptions, changes in regulatory requirements, delays in securing required regulatory approvals, geopolitical instability, sanctions or other adverse occurrences), we may incur increased costs for our direct materials or equipment and may be unable to accommodate new business or meet our current customer commitments.
The European Union has also been reviewing current regulations for the use of EO in EO sterilization facilities and in 2023, decided that EO as a sterilizing agent for medical devices will fall under the scope of the European Union Medical Devices Regulation, which may impose new and different regulatory requirements for the use of EO in the European Union.
The European Union has also been reviewing current regulations for the use of EO in EO sterilization facilities and has decided that EO as a sterilizing agent for medical devices will fall under the scope of the European Union Medical Devices Regulation, which may impose new and different regulatory requirements for the use of EO in the European Union.
Our high degree of leverage could have important consequences, including: • making it more difficult for us to satisfy our obligations; • increasing our vulnerability to general economic and industry conditions; • requiring a substantial portion of cash flow from operations to be used to pay off principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities; • exposing us to the risk of increased interest rates as our indebtedness is at variable interest rates; • restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; • limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, appellate litigation bonding expenses and general corporate or other purposes; 37 Table of Contents • limiting our ability to adjust to changing market conditions and placing us at a disadvantage compared to our competitors that are less highly leveraged; and • causing us to pay higher rates if we need to refinance our indebtedness at a time when prevailing market interest rates are unfavorable.
Our high degree of leverage could have important consequences, including: • making it more difficult for us to satisfy our obligations; • increasing our vulnerability to general economic and industry conditions; • requiring a substantial portion of cash flow from operations to be used to pay off principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities; • exposing us to the risk of increased interest rates as our indebtedness is at variable interest rates; • restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; • limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, appellate litigation bonding expenses and general corporate or other purposes; • limiting our ability to adjust to changing market conditions and placing us at a disadvantage compared to our competitors that are less highly leveraged; and • causing us to pay higher rates if we need to refinance our indebtedness at a time when prevailing market interest rates are unfavorable.
These risk factors may change from time to time and may be amended, supplemented or superseded by updates to the risk factors contained in our future periodic reports on Form 10-Q and reports on other forms we file with the SEC.
These risk factors may change from time to time and may be amended, supplemented or superseded by updates to the risk factors contained in our future periodic reports, Quarterly Reports on Form 10-Q and reports on other forms we file with the SEC.
Any such breakdown, breach or incident could adversely affect our business, prospects, financial condition or results of operations, and our cyber insurance may not cover such risks or may be insufficient to compensate us for losses that may occur.
Any such breakdown, breach or cybersecurity incident could adversely affect our business, prospects, financial condition or results of operations, and our cyber insurance may not cover such risks or may be insufficient to compensate us for losses that may occur.
In addition, this concentration of ownership, together with the Sponsors’ rights under our Stockholders’ Agreement, may adversely affect the trading price of our common stock because investors may perceive disadvantages in owning shares in a company with significant stockholders with correspondingly significant voting rights.
In addition, this concentration of ownership, together with the Sponsors’ rights under the Stockholders Agreement, may adversely affect the trading price of our common stock because investors may perceive disadvantages in owning shares in a company with significant stockholders with correspondingly significant voting rights.
Any changes in these regulations, the interpretation of such regulations or our customers’ perception of such changes will require us to make adaptations that may subject us to additional costs, and ultimate costs and the timing of such costs may be difficult to accurately predict and could be material.
Any changes in these regulations, the interpretation of such regulations or our customers’ perception of such changes could require us to make adaptations that may subject us to additional costs, and ultimate costs and the timing of such costs may be difficult to accurately predict and could be material.
In connection with our initial public offering (“IPO”), we entered into a stockholders’ agreement with certain holders of our common stock, including investment funds and entities affiliated with either Warburg Pincus or GTCR and members of our management team, which we refer to as the “Stockholders’ Agreement.” Under the Stockholders’ Agreement, individual stockholders who were members of our management before the IPO, and other persons related to these individuals, are subject to contractual restrictions on transfer of shares of our common stock until November 19, 2026.
In connection with our initial public offering (“IPO”), we entered into a stockholders’ agreement with certain holders of our common stock, including investment funds and entities affiliated with either Warburg Pincus or GTCR and members of our management team, which we refer to as the “Stockholders Agreement.” Under the Stockholders Agreement, individual stockholders who were members of our management before the IPO, and other persons related to these individuals, are subject to contractual restrictions on transfer of shares of our common stock until November 19, 2026.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum, to the fullest extent permitted by law, for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers or other employees or stockholders to us or our stockholders, (3) any action asserting a claim against us or any of our directors or officers or other employees or stockholders arising pursuant to, any action to interpret, apply, enforce any right, obligation or remedy under, any provision of the DGCL our amended and restated certificate of incorporation or amended and restated bylaws, (4) any action asserting a claim that is governed by the internal affairs doctrine, or (5) any other action asserting an “internal corporate claim” under the DGCL shall be the Court of Chancery of the State of Delaware (or any state or federal court located within the State of Delaware if the Court of Chancery does not have jurisdiction) (the “Delaware Forum Provision”).
Our Amended and Restated Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum, to the fullest extent permitted by law, for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers or other employees or stockholders to us or our stockholders, (3) any action asserting a claim against us or any of our directors or officers or other employees or stockholders arising pursuant to, any action to interpret, apply, enforce any right, obligation or remedy under, any provision of the DGCL our amended and restated certificate of incorporation or amended and restated bylaws, (4) any action asserting a claim that is governed by the internal affairs doctrine, or (5) any 43 Table of Contents other action asserting an “internal corporate claim” under the DGCL shall be the Court of Chancery of the State of Delaware (or any state or federal court located within the State of Delaware if the Court of Chancery does not have jurisdiction) (the “Delaware Forum Provision”).
This concentration of ownership, together with the Sponsors’ rights under our Stockholders’ Agreement, may delay, deter or prevent acts that would be favored by our other stockholders. The interests of the Sponsors may not always coincide with our interests or the interests of our other stockholders.
This concentration of ownership, together with the Sponsors’ rights under the Stockholders Agreement, may delay, deter or prevent acts that would be favored by our other stockholders. The interests of the Sponsors may not always coincide with our interests or the interests of our other stockholders.
Expanded sanctions could target additional government- and privately-owned operations in Russia, including nuclear reactor operators, banks and logistics providers, and could prevent us from doing business with them.
Expanded sanctions could target additional government- and privately-owned operations in Russia, including nuclear reactor operators, banks and logistics providers, and these expanded sanctions could prevent us from doing business with them.
See related Risk Factor “—We are subject to extensive regulatory requirements and routine regulatory audits in our operations. We must receive permits, licenses and/or regulatory clearance or approval for our operations.
See related Risk Factor “—We are subject to extensive regulatory requirements and routine regulatory audits in our operations. We must receive certain permits, licenses and/or regulatory clearance or approval for our operations.
See related Risk Factor “—Our significant leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to challenges facing our Company or broader changes in our industry or the economy, expose us to interest rate risk and prevent us from meeting our obligations under our existing and future indebtedness.” 33 Table of Contents Recent and future acquisitions could also result in the assumption of contingent liabilities, material expenses related to certain intangible assets, increased operating expenses and compliance issues under international laws and regulations, including antitrust laws, anti-corruption laws, the FCPA and similar anti-bribery laws, which could adversely affect our business, prospects, financial condition or results of operations.
See related Risk Factor “—Our significant leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to challenges facing our Company or broader changes in our industry or the economy, expose us to interest rate risk and prevent us from meeting our obligations under our existing and future indebtedness.” Recent and future acquisitions could also result in the assumption of contingent liabilities, material expenses related to certain intangible assets, increased operating expenses and compliance issues under international laws and regulations, including antitrust laws, anti-corruption laws, the FCPA and similar anti-bribery laws, which could adversely affect our business, prospects, financial condition or results of operations.
In addition, under the Stockholders’ Agreement we have agreed, subject to certain exceptions, to indemnify the Sponsors, and various affiliated persons and indirect equity holders of the Sponsors, from losses arising out of any threatened or actual litigation by reason of the fact that the indemnified person is or was a holder of our common stock or of equity interests in Sotera Health Company.
In addition, under the Stockholders Agreement, we have agreed, subject to certain exceptions, to indemnify the Sponsors, and various affiliated persons and indirect equity holders of the Sponsors, from losses arising out of any threatened or actual litigation by reason of the fact that the indemnified person is or was a holder of our common stock or of equity interests in Sotera Health Company.
In addition, our amended and restated certificate of incorporation contains a provision that provides us with protections similar to Section 203 of the Delaware General Corporation Law (“DGCL”), and prevents us from engaging in a business combination with a person (excluding the Sponsors and any of their respective direct or indirect transferees and any group as to which such 43 Table of Contents persons are a party) who acquires at least 15% of our common stock for a period of three years from the date such person acquired such common stock, unless board or stockholder approval is obtained prior to the acquisition.
In addition, our Amended and Restated Certificate of Incorporation contains a provision that provides us with protections similar to Section 203 of the Delaware General Corporation Law (“DGCL”), and prevents us from engaging in a business combination with a person (excluding the Sponsors and any of their respective direct or indirect transferees and any group as to which such persons are a party) who acquires at least 15% of our common stock for a period of three years from the date such person acquired such common stock, unless board or stockholder approval is obtained prior to the acquisition.
Repurposings in the past of a government-owned reactors have decreased the availability of Co-60 and potential repurposings in the future could decrease the availability of Co-60, which could have a material adverse effect on our business, prospects, financial condition or results of operations. We estimate approximately 20% of our long-term supply of Co-60 will be generated by Russian nuclear reactors.
Shutdowns in the past of a government-owned reactors have decreased the availability of Co-60 and potential shutdowns in the future could decrease the availability of Co-60, which could have a material adverse effect on our business, prospects, financial condition or results of operations. We estimate approximately 20% of our long-term supply of Co-60 will be generated by Russian nuclear reactors.
Thus, if the Defendant Subsidiaries are unable to meet collateral requirements to post an appellate bond to stay the enforceability of a judgment, absent judicial relief, we may be required to negotiate with our current lenders to avert a default under our senior secured credit facilities and the success of such negotiations cannot be assured.
Thus, if we or our subsidiaries are unable to meet collateral requirements to post an appellate bond to stay the enforceability of a judgment, absent judicial relief, we may be required to negotiate with our current lenders to avert a default under our senior secured credit facilities and the success of such negotiations cannot be assured.
Such incidents could compromise our trade secrets or other confidential information and result in such information being disclosed to third parties and becoming less valuable.
Such cybersecurity incidents could compromise our trade secrets or other confidential information and result in such information being disclosed to third parties and becoming less valuable.
For more information, see Risk Factor “— Severe health events or environmental events, including impacts from climate change, and natural disasters, could have adverse effects on our business, financial condition and results of operations, which could be material.” Demand for our products and services may also be affected by changes from time to time in the laws and regulations that govern our operations and industry, including the Patient Protection and Affordable Care Act, as amended by the Health Care and Education 27 Table of Contents Reconciliation Act, which in turn may impact industry trends.
For more information, see Risk Factor “— Severe health events or environmental events, including impacts from climate change, and natural disasters, could have material adverse effects on our business, financial condition and results of operations.” Demand for our products and services may also be affected by changes from time to time in the laws and regulations that govern our operations and industry, including the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, which in turn may impact industry trends.
We face liability and reputational risks even if we comply with all laws and regulations.” We are currently subject to lawsuits in Illinois, Georgia and New Mexico alleging personal injury, property devaluation and other claims related to our use of EO at, or emissions and releases of EO from our facilities.
We may face liability and reputational risks even if we comply with all laws and regulations.” We are currently subject to lawsuits in California, Georgia, Illinois and New Mexico alleging personal injury, property devaluation and other claims related to our use of EO at, or emissions and releases of EO from our facilities.
Our operations and our supplier and customers’ operations are subject to business continuity hazards and risks that include explosions, fires, earthquakes, inclement weather and other natural disasters; utility, equipment or other mechanical failures; unscheduled downtime; labor difficulties; disruption of communications; security breaches or other workplace violence events; changes in regulations, including sanctions, export and import controls and other trade restrictions; changes in the use of government-owned reactors, including repurposing nuclear facilities; other governmental action; and pandemics or other public health crises.
Our operations and our supplier and customers’ operations are subject to business continuity hazards and risks that include explosions, fires, earthquakes, inclement weather and other natural disasters; utility, equipment or other mechanical failures; 28 Table of Contents unscheduled downtime; labor difficulties; disruption of communications; security breaches or other workplace violence events; changes in regulations, including sanctions, export and import controls and other trade restrictions; changes in the use of government-owned reactors, including repurposing nuclear facilities; other governmental action; and pandemics or other public health crises.
Our amended and restated certificate of incorporation and amended and restated bylaws, our Stockholders’ Agreement and Delaware law contain provisions that might discourage, delay or prevent a merger, acquisition, or other change in control that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for shares of our common stock.
Our Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, the Stockholders Agreement and Delaware law contain provisions that might discourage, delay or prevent a merger, acquisition, or other change in control that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for shares of our common stock.
We are regulated by national and local agencies with jurisdiction over a number of areas directly or indirectly related to our businesses, including environmental, nuclear safety, homeland or national security, worker safety and health, food, drug and device manufacturing, fire protection, research, and marketing, transportation, drug enforcement (governing the handling of controlled substances), protection against infectious diseases and pathogens and agriculture, fish and wildlife.
We are regulated by national and local agencies with jurisdiction over a number of areas directly or indirectly related to our businesses, including environmental, nuclear safety, homeland or national security, worker safety and health, food, drug and device manufacturing, fire protection, research, marketing, transportation, drug enforcement (governing the handling of controlled substances), protection against infectious diseases and pathogens and 24 Table of Contents agriculture, fish and wildlife.
Additionally, certain regulators, including the FDA, have started initiatives to encourage development of sterilization alternatives to EO processing. For example, the FDA approved vaporized hydrogen peroxide (VHP) as a Category-A sterilization methodology in January 2024. We have taken part in some of these initiatives.
Additionally, certain regulators, including the FDA, have started initiatives to encourage development of sterilization alternatives to EO processing. For example, the FDA approved vaporized hydrogen peroxide as a Category-A sterilization methodology in 2024. We have taken part in some of these initiatives.
Term SOFR and certain other interest “benchmarks” are subject to regulatory guidance and reform that will cause interest rates under our current or future debt agreements to perform differently than in the past or could cause other unanticipated consequences.
Term SOFR and certain other interest “benchmarks” are subject to regulatory guidance and reform that we expect will cause interest rates under our current or future debt agreements to perform differently than in the past or could cause other unanticipated consequences.
If our failure to adequately secure these materials leads to their being stolen or materially damaged, our licenses to operate could be suspended, resulting in a material adverse effect to our business, prospects, financial condition or results of operations.
If our failure to adequately secure these materials leads to them being stolen or materially damaged, our licenses to operate could be suspended, resulting in a material adverse effect to our business, prospects, financial condition or results of operations.
Material increases in the price of labor, raw materials, or energy could have a material adverse effect on our business, prospects, financial condition or results of operations, particularly if we are unable to increase the prices to our customers of our products or services to offset 28 Table of Contents inflationary cost trends or if we are unable to achieve cost savings to offset such cost increases, our profits and operating results could be adversely affected.
Material increases in the price of labor, raw materials, or energy could have a material adverse effect on our business, prospects, financial condition or results of operations, particularly if we are unable to increase the prices to our customers of our products or services to offset inflationary cost trends or if we are unable to achieve cost savings to offset such cost increases, our profits and operating results could be adversely affected.
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Our ability to meet those financial ratios and tests can be affected by events beyond our control, including prevailing economic, financial market and industry conditions, and we cannot give assurance that we will be able to satisfy such ratios and tests when required.
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Our ability to 38 Table of Contents meet those financial ratios and tests can be affected by events beyond our control, including prevailing economic, financial market and industry conditions, and we cannot give assurance that we will be able to satisfy such ratios and tests when required.
Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
Our internal control over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
Public stockholders will not benefit from this indemnification provision. This concentration of ownership, together with the Sponsors’ rights under our Stockholders’ Agreement, may also have the effect of delaying, preventing or deterring a change in control.
Public stockholders will not benefit from this indemnification provision. This concentration of ownership, together with the Sponsors’ rights under the Stockholders Agreement, may also have the effect of delaying, preventing or deterring a change in control.
Clean-up and disposal costs for damaged Co-60 rods and radioactive contamination could be significant. If any liability claims are made against us in the future, we could be liable for damages that are alleged to have resulted from such exposure or contamination. Potentially hazardous materials must be handled and disposed of properly.
Clean-up and disposal costs for damaged Co-60 rods and radioactive contamination could be significant. If any liability claims are made against us in the future, we could be liable for damages that are alleged to have resulted from such exposure or contamination. 20 Table of Contents Potentially hazardous materials must be handled and disposed of properly.
In the United States, marijuana (all parts of the cannabis plant other than those parts that are exempt) presently remains a Schedule I controlled substance under federal law. In other countries in which the cultivation and use of marijuana is legalized, most notably in Canada, our operations include irradiation services for recreational and medical marijuana.
In the United States, marijuana (all parts of the cannabis plant other than those parts that are exempt) presently remains a Schedule I controlled substance under federal law. In other countries in 36 Table of Contents which the cultivation and use of marijuana is legalized, most notably in Canada, our operations include irradiation services for recreational and medical marijuana.
Regulatory agencies may refuse to grant approval or clearance or may require the provision of additional data, and regulatory processes may be time consuming and costly, and their outcome may be uncertain in certain of the countries in which we operate.
Regulatory agencies may refuse to grant approval or clearance or may require the provision of additional data, and regulatory processes may be time consuming and costly, and their outcome may be uncertain in some of the countries in which we operate.
Further, 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, including the euro, the Brazilian real, the British pound sterling, the 31 Table of Contents Chinese yuan, the Thai baht, the Mexican peso, the Danish krone, the Costa Rica colon and the Canadian dollar.
Further, 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, including the euro, the Brazilian real, the British pound sterling, the Chinese yuan, the Thai baht, the Mexican peso, the Danish krone, the Costa Rica colon and the Canadian dollar.
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include those listed in the related Risk Factor “—Risks Related to the Company,” “—Risks Related to Our Indebtedness and Liquidity” and the following, some of which are beyond our control: • volatility or economic downturns in the markets in which we, our suppliers or our customers are located caused by pandemics, including the COVID-19 pandemic, and related policies and restrictions undertaken to contain the spread of such pandemics or potential pandemics; • developments in our litigation matters and governmental investigations or additional significant lawsuits or governmental investigations relating to our services or facilities, including our susceptibility as a publicly-traded company to enforcement proceedings and civil litigation alleging that our disclosures have not complied with federal and state securities laws and regulations; 39 Table of Contents • regulatory or legal developments in the jurisdictions in which we operate; • adverse publicity about us or the industries in which we participate; • variations in our quarterly or annual results of operations, or in those of our competitors or of companies in the medical device and pharmaceutical industries; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • sales of our common stock by us or our stockholders in the future or the perception that such sales may occur; • publication of research reports about the industries in which we participate; • changes in analysts’ estimates, investors’ perceptions, recommendations by securities analysts, our failure to achieve analysts’ estimates or failure of analysts to maintain coverage of us; • volatility in the trading prices and trading volumes of companies similar to us; • changes in operating performance and stock market valuations of companies in our industry; • changes in accounting principles, policies, guidance, interpretations or standards; and • general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors.
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include those listed in the related Risk Factor “—Risks Related to the Company,” “—Risks Related to Our Indebtedness and Liquidity” and the following, some of which are beyond our control: • developments in our litigation matters and governmental investigations or additional significant lawsuits or governmental investigations relating to our services or facilities, including our susceptibility as a publicly-traded company to enforcement proceedings and civil litigation alleging that our disclosures have not complied with federal and state securities laws and regulations; • regulatory or legal developments in the jurisdictions in which we operate; • adverse publicity about us or the industries in which we participate; • variations in our quarterly or annual results of operations, or in those of our competitors or of companies in the medical device and pharmaceutical industries; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • sales of our common stock by us or our stockholders in the future or the perception that such sales may occur; • publication of research reports about the industries in which we participate; • changes in analysts’ estimates, investors’ perceptions, recommendations by securities analysts, our failure to achieve analysts’ estimates or failure of analysts to maintain coverage of us; • volatility in the trading prices and trading volumes of companies similar to us; • changes in operating performance and stock market valuations of companies in our industry; • changes in accounting principles, policies, guidance, interpretations or standards; • volatility or economic downturns in the markets in which we, our suppliers or our customers are located caused by pandemics, such as the COVID-19 pandemic, and related policies and restrictions undertaken to contain the spread of such pandemics or potential pandemics; • time and costs associated with potential shareholder activism campaigns and outreach efforts; and • general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors.
If transfers or other distributions from our subsidiaries to SHH were eliminated, delayed, reduced or otherwise impaired, our ability to make payments on the obligations under our credit agreements would be substantially impaired.
If transfers or other distributions from our subsidiaries to SHH were eliminated, delayed, reduced or otherwise impaired, our ability to make payments on the obligations under our credit agreements could be substantially impaired.
Actions required to secure appellate bonds may create a substantial strain on the Defendant Subsidiaries’ and our liquidity and financial condition. There is no assurance that the Defendant Subsidiaries or we will meet the requirements to provide an appellate bond(s) for appeals of any future adverse judgments.
Actions required to secure appellate bonds may create a substantial strain on our and our subsidiaries’ liquidity and financial condition. There is no assurance that our subsidiaries or the Company will meet the requirements to provide an appellate bond(s) for appeals of any future adverse judgments.
Compliance with these regulations is costly, and failure to comply with all laws and regulations or to receive or maintain permits, licenses, clearances or approvals may hurt our revenues, profitability, financial condition or value.
Compliance with these regulations is costly, and failure to comply with all laws and regulations or to receive or maintain permits, licenses, clearances or approvals may impact our revenues, profitability, financial condition or value.
Compliance with these regulations is costly, and failure to comply with all laws and regulations or to receive or maintain permits, licenses, clearances or approvals may hurt our revenues, profitability, financial condition or value.
Compliance with these regulations is costly, and failure to comply with all laws and regulations or to receive or maintain permits, licenses, clearances or approvals may impact our revenues, profitability, financial condition or value.
Claims against us that result in entry of a judgment or that we settle that are not covered or not sufficiently covered by insurance policies, or which fall within retained liability under our policies, could have a material adverse impact on our business, prospects, financial condition or results of operations.
Claims against us that result in entry of a judgment or that we settle that are not 22 Table of Contents covered or not sufficiently covered by insurance policies, or which fall within retained liability under our policies, could have a material adverse impact on our business, prospects, financial condition or results of operations.
Any such relocation or closure could have a material adverse effect on our business, prospects, financial condition or results of operations. We conduct sales and distribution operations on a worldwide basis and are subject to a variety of risks associated with doing business outside the United States.
Any such relocation or closure could have a material adverse effect on our business, prospects, financial condition or results of operations. 30 Table of Contents We conduct sales and distribution operations on a worldwide basis and are subject to a variety of risks associated with doing business outside the United States.
These laws and regulations regulate our use of potentially hazardous materials, such as EO, Co-60 and E-beam, and can require us to carefully manage, control emissions of and/or limit human exposure to, these materials. For example, OSHA regulations and similar laws in other jurisdictions limit worker exposure to EO.
These laws and regulations regulate our use of potentially hazardous materials, such as EO, Co-60 and E-beam, and can require us to carefully manage, control emissions of and/or limit human exposure to, these materials. For example, OSHA and U.S. EPA regulations and similar laws in other jurisdictions limit worker exposure to EO.
See related Risk Factors “—We are currently defending certain litigation, and we are likely to be subject to additional litigation in the future” and “—Potential health risks associated with the use of EO may subject us to future liability claims and associated adverse effects.” Nordion contracts for the activation of Co-59 “targets” (cobalt pellets and slugs) into Co-60 in certain nuclear reactors in Canada and Russia.
See related Risk Factors “—We are currently defending certain litigation, and we are likely to be subject to additional litigation in the future” and “—Potential health risks associated with the use of EO may subject us to future liability claims and associated adverse effects.” Nordion contracts for the activation of Co-59 “targets,” such as cobalt pellets and slugs, into Co-60 in certain nuclear reactors in Canada and Russia.
Furthermore, legal proceedings to protect or enforce our intellectual property rights could result in narrowing the scope of our 34 Table of Contents intellectual property rights or substantial cost to us, and they may be time consuming and divert resources and the attention of management and key personnel, and the outcomes of such actions may be unpredictable.
Furthermore, legal proceedings to protect or enforce our intellectual property rights could result in narrowing the scope of our intellectual property rights or substantial cost to us, and they may be time consuming and divert resources and the attention of management and key personnel, and the outcomes of such actions may be unpredictable.
In addition, awards against and settlements by us or our competitors or publicity associated with EO-related litigation could incentivize parties to bring additional claims against us. The financial impact of litigation, particularly class action and mass action lawsuits, is difficult to assess or quantify.
In addition, awards against and settlements by us or our competitors or publicity associated with EO-related litigation or regulator activity could incentivize parties to bring additional claims against us. The financial impact of litigation, particularly mass action lawsuits, is difficult to assess or quantify.
But there can be no assurance that our efforts will prevent material breakdowns, system failures, breaches in our systems or other cyber incidents or otherwise be fully effective.
But there can be no assurance that our efforts will prevent material breakdowns, system failures, breaches in our systems or other cybersecurity incidents or otherwise be fully effective.
Thus, holders of our common stock bear the risk that our future offerings may reduce the market price of our common stock and dilute their stockholdings in us. 40 Table of Contents A sale of a substantial number of shares of our common stock, or the perception that such sales might occur, may cause the price of our common stock to decline.
Thus, holders of our common stock bear the risk that our future offerings may reduce the market price of our common stock and dilute their stockholdings in us. A sale of a substantial number of shares of our common stock, or the perception that such sales might occur, may cause the price of our common stock to decline.
Pursuant to the Sarbanes-Oxley Act, we furnished a report by our management on the effectiveness of our internal control over financial reporting as of December 31, 2023. This assessment is required to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
Pursuant to the Sarbanes-Oxley Act of 2002, we furnished a report by our management on the effectiveness of our internal control over financial reporting as of December 31, 2024. This assessment is required to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
The resolution of these matters by litigation or settlement may have a negative impact on our financial condition and liquidity in the near and long terms.
The resolution of these matters by litigation or settlement may have a negative impact on our financial condition and liquidity in the near and long term.
As detailed in Item 1C, “Cybersecurity”, we have taken steps to protect the security and integrity of the information we collect and have policies and procedures in place dealing with data privacy and security and have yet to experience any material cybersecurity incidents that have caused us to incur any material expenses or materially affected our business, results of operations or financial conditions.
As detailed in Item 1C, “Cybersecurity,” we have taken steps to protect the security and integrity of the information we collect and have policies and procedures in place dealing with data privacy and security and have yet to experience any material cybersecurity incidents that have caused us to incur any material expenses or materially affected our business strategy, results of operations or financial conditions.
New standards for commercial EO sterilization, such as new US EPA standards based on the 2016 IRIS Assessment, could also make it more difficult and expensive to raise capital for future investments in EO sterilization facilities. In the United States, our gamma irradiation facilities are heavily regulated, including by the NRC and state regulations.
New standards for commercial EO sterilization, such as the new US EPA standards based on the 2016 IRIS Assessment, could also make it more difficult and expensive to raise capital for future investments in EO sterilization facilities. 25 Table of Contents In the United States, our gamma irradiation facilities are heavily regulated, including by the NRC and state regulations.
See related Risk Factor “—Our operations are subject to a variety of business continuity hazards and risks, including supply chain disruptions due to geopolitical uncertainty and our reliance on the use and sale of products and services from single locations, any of which could interrupt production or operations or otherwise adversely affect our performance, results or value.” Our business may be subject to system interruptions, cyber security breaches and unauthorized data disclosures.
See related Risk Factor “—Our operations are subject to a variety of business continuity hazards and risks, including supply chain disruptions due to geopolitical uncertainty and our reliance on the use and sale of products and services from single locations, any of which could interrupt production or operations or otherwise adversely affect our performance, results or value.” Our business may be subject to system interruptions, cybersecurity incidents and unauthorized data disclosures.
Our Stockholders’ Agreement contains agreements with respect to certain other matters, including the election of directors; mergers, consolidations and acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; the amendment of our amended and restated certificate of incorporation and our amended and restated bylaws; the termination of our chief executive officer or designation of a new chief executive officer; changes in the composition of committees of our board of directors; entry into or changes to certain compensation agreements; and the issuance of additional shares of our common stock.
The Stockholders Agreement contains agreements with respect to certain other matters, including the election of directors; mergers, consolidations and acquisitions; the sale of all or substantially all of our 41 Table of Contents assets and other decisions affecting our capital structure; the amendment of our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws; the termination of our chief executive officer or designation of a new chief executive officer; changes in the composition of committees of our board of directors; entry into or changes to certain compensation agreements; and the issuance of additional shares of our common stock.
We do not anticipate paying any dividends on our common stock in the foreseeable future, and, consequently, stockholders’ ability to achieve a return on their investment will depend on appreciation in the price of our common stock. We do not expect to declare or pay dividends on our common stock in the foreseeable future.
We do not anticipate paying any dividends on our common stock in the foreseeable future, and, consequently, our stockholders’ ability to achieve a return on their investment depends on appreciation in the price of our common stock. We do not expect to declare or pay dividends on our common stock in the foreseeable future.
The commercial recreational cannabis industry is a relatively new industry in Canada and Canada’s Cannabis Regulations have been in effect in their current form since only October 2018. Likewise, laws and regulations governing cannabis in European countries have evolved rapidly over recent years.
The commercial recreational cannabis industry is a relatively new industry in Canada and Canada’s Cannabis Regulations have been in effect in their current form only in recent years. Likewise, laws and regulations governing cannabis in European countries have evolved rapidly over recent years.
As described elsewhere in Note 20, “Commitments and Contingencies” to our consolidated financial statements under the heading “Ethylene Oxide Tort Litigation,” we are subject to tort lawsuits alleging injuries caused by our use of EO and low-level environmental exposure to EO emissions and releases from certain of our sterilization facilities.
As described elsewhere in Note 19, “Commitments and Contingencies,” to our consolidated financial statements under the heading “Ethylene Oxide Tort Litigation,” we are subject to tort lawsuits alleging injuries caused by our use of EO and low-level environmental exposure to EO emissions and releases from certain of our sterilization facilities.
In addition, if Sterigenics in the future ceases to operate any of its irradiation facilities, it will be responsible for decommissioning costs in respect of such facilities. We currently provide financial assurance for approximately $48.2 million of such decommissioning liabilities in the aggregate in the form of letters of credit, surety bonds or other surety.
In addition, if Sterigenics in the future ceases to operate any of its irradiation facilities, it will be responsible for decommissioning costs in respect of such facilities. We currently provide financial assurance for approximately $49.1 million of such decommissioning liabilities in the aggregate in the form of letters of credit, surety bonds or other surety.
If the Defendant Subsidiaries are unable to meet those requirements and are not able to secure an appellate bond when and in the form and amount required by the courts for the appeal to proceed, the judgment(s) will become enforceable and may exceed the Defendant Subsidiaries’ ability to pay in cash.
If we or our subsidiaries are unable to meet those requirements and are not able to secure an appellate bond when and in the form and amount required by the courts for the appeal to proceed, the judgment(s) will become enforceable and may exceed our or our subsidiaries’ ability to pay in cash.
Any settlement or judgment against us arising out of pending or future claims related to EO would likely exceed any insurance recoveries available to us and could have a material adverse effect on our business, prospects, financial condition or results of operations. See Note 20, “Commitments and Contingencies” to our consolidated financial statements for more detail on our pending litigation.
Any settlement or judgment against us arising out of pending or future claims related to EO would likely exceed any insurance recoveries available to us and could have a material adverse effect on our business, prospects, financial condition or results of operations. See Note 19, “Commitments and Contingencies,” to our consolidated financial statements for more detail on our pending litigation.
Any disruption in the availability of, or increases in the price of, EO, Co-60 or our other direct materials, services and supplies, including as a result of geopolitical instability and sanctions against Russia by the United States, Canada, United Kingdom and European Union, may have a material adverse effect on our operating results.” While we maintain insurance policies covering, among other things, physical damage, premises liability, business interruptions and liability resulting from our services in amounts that we believe are customary for our industries, our insurance coverage may be inadequate or unavailable and we could incur uninsured losses and liabilities arising from such events. 29 Table of Contents We may be adversely affected by global and regional economic and political instability.
Any disruption in the availability of, or increases in the price of, EO, Co-60 or our other direct materials, services and supplies, including as a result of geopolitical instability and sanctions against Russia by the United States, Canada, United Kingdom and European Union, may have a material adverse effect on our operating results.” While we maintain insurance policies covering, among other things, physical damage, premises liability, business interruptions and liability resulting from our services in amounts that we believe are customary for our industries, our insurance coverage may be inadequate or unavailable and we could incur uninsured losses and liabilities arising from such events.
Anti-takeover provisions in our amended and restated certificate of incorporation, amended and restated bylaws and our Stockholders’ Agreement, as well as Delaware law, could discourage a change in control of our company or a change in our management.
Anti-takeover provisions in our Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws and the Stockholders Agreement, as well as Delaware law, could discourage a change in control of our company or a change in our management.
As detailed in Note 20, “Commitments and Contingencies” to our consolidated financial statements under the heading “Ethylene Oxide Tort Litigation,” we are currently subject to lawsuits in Illinois, Georgia and New Mexico brought by private plaintiffs and, in the case of New Mexico, a government entity, alleging personal injury, property devaluation and other claims related to our use, emissions and releases of EO.
As detailed in Note 19, “Commitments and Contingencies,” to our consolidated financial statements under the heading “Ethylene Oxide Tort Litigation,” we are currently subject to lawsuits in California, Georgia and Illinois brought by private plaintiffs and, in New Mexico, a government entity, alleging personal injury, property devaluation and other claims related to our use, emissions and releases of EO.
Our independent registered public accounting firm attested to the effectiveness of our internal controls as of December 31, 2023.
Our independent registered public accounting firm attested to the effectiveness of our internal controls as of December 31, 2024.
As laws in the United States, Canada, Europe and other jurisdictions evolve, our activities in these spaces may face additional regulations with which it may be costly or burdensome to comply. Government or private civil antitrust actions could harm our business, results of operations, financial condition and cash flows.
As laws in the United States, Canada, Europe and other jurisdictions evolve, our activities in these spaces may face additional regulations, and it may be costly or burdensome to comply. Government or private civil antitrust actions could harm our business, prospects, financial condition or results of operations.
If the Defendant Subsidiaries are unable to pay in cash, the Defendant Subsidiaries or we may be required to seek financing, sell assets or take other measures to address the judgments.
If we or our subsidiaries are unable to pay in cash, the Company or our subsidiaries may be required to seek financing, sell assets or take other measures to address the judgments.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Board and the Board’s Audit Committee oversee the Company’s enterprise risk management (“ERM”) program, including the Company’s assessments of cybersecurity risks and exposures and the Company’s processes to safeguard assets and manage material cybersecurity risks. On an annual basis, the Board reviews the Company’s principal current and future risk exposures, including cybersecurity risks and exposures.
Biggest changeThe board of directors bears principal responsibility for overseeing the Company’s principal current and future risk exposures, and, on an annual basis, the board of directors reviews them, including cybersecurity risks and exposures.
We also maintain insurance coverage for cyber and data security risks of an amount and subject to conditions and exceptions that we believe are customary for companies like ours, but there can be no assurance that our levels of coverage are adequate or that we will be able to continue to maintain our existing insurance or obtain comparable insurance at a reasonable cost.
We also maintain insurance coverage for cyber and data security risks of an amount and subject to conditions and exceptions that we believe are customary for companies like ours, but there can be no assurance that our levels of coverage are adequate or that we will be able to continue to maintain our existing insurance or obtain comparable insurance at a reasonable cost or at all.
Although we have taken and will continue to take significant steps to protect the security and integrity of our information and although we have implemented policies and procedures to enhance data privacy and security, there can be no assurance that our efforts will prevent breakdowns, system failures, breaches of our systems or other cyber incidents or otherwise be fully effective.
Although we have taken and will continue to take significant steps to protect the security and integrity of our information and although we have implemented policies and procedures to enhance data privacy and security, there can be no assurance that our efforts will prevent breakdowns, system failures, breaches of our systems or other cybersecurity incidents or otherwise be fully effective.
Any such breakdown, breach or incident could adversely affect our business, prospects, financial condition or results of operations, and any insurance that we may have for cyber incidents may not cover such risks or be sufficient to compensate us for losses that may occur.
Any such breakdown, breach or cybersecurity incident could adversely affect our business strategy, prospects, financial condition or results of operations, and any insurance that we may have for cybersecurity incidents may not cover such risks or be sufficient to compensate us for losses that may occur.
Item 1C. Cybersecurity We rely on information technology (“IT”) systems to conduct business, including but not limited to, interacting with customers and suppliers, fulfilling orders, generating invoices, collecting and making payments, fulfilling contractual obligations, communicating with internal and external stakeholders, and maintaining our business and financial records.
Item 1C. Cybersecurity We rely on IT systems to conduct business, including but not limited to, interacting with customers and suppliers, fulfilling orders, generating invoices, collecting and making payments, fulfilling contractual obligations, communicating with internal and external stakeholders, and maintaining our business and financial records.
As a result, the Company is subject to various risks related to vulnerabilities, threats and attacks on these IT systems. See Item 1A, “Risks Related to the Company – “Our business may be subject to system interruptions, cyber security breaches and unauthorized data disclosures.” under Item 1A. Risk Factors for additional discussion of these risks.
As a result, the Company is subject to various risks related to vulnerabilities, threats and attacks on these IT systems. See Item 1A, “Risks Related to the Company–“Our business may be subject to system interruptions, cybersecurity incidents and unauthorized data disclosures.” under Item 1A. Risk Factors for additional discussion of these risks.
The Company has adopted a risk-based strategy designed to achieve a targeted and cost-effective approach to managing cybersecurity risks that strengthens our abilities to prevent, detect, and respond to cyber-attacks, breaches, or threats. The Company has configured its IT environment, where possible, to restrict access using a least privileged methodology.
The Company has adopted a risk-based strategy designed to achieve a targeted and cost-effective approach to managing cybersecurity risks that strengthens our abilities to prevent, detect, and respond to cybersecurity incidents. The Company has configured its IT environment, where possible, to restrict access using a least privileged methodology.
The CIO then creates a Cybersecurity Incident Response Team (“CSIRT”) which, depending on the incident, comprises the incident coordinator, cybersecurity staff, legal counsel and other stakeholders as appropriate. The CSIRT investigates and manages the impact of cybersecurity incidents in accordance with our security incident response procedures.
When detected, suspected cybersecurity threats are escalated to the CIO and incident response team. The CIO then creates a Cybersecurity Incident Response Team (“CSIRT”) which, depending on the incident, comprises the incident coordinator, cybersecurity staff, legal counsel and other stakeholders as appropriate. The CSIRT investigates and manages the impact of cybersecurity incidents in accordance with our security incident response procedures.
Our cybersecurity program is designed to protect our infrastructure from potential threats, to allow us to assess, identify and manage material risks from cybersecurity threats and to endeavor to secure the integrity of our data systems using techniques, hardware, and software typical of companies of our size and scope, which are described further below.
Our cybersecurity program is designed to protect our infrastructure from potential threats, including threats associated with our third party business partners, to allow us to assess, identify and manage material risks from cybersecurity threats and to endeavor to secure the integrity of our data and IT systems using techniques, hardware, and software typical of companies of our size and scope, which are described further below.
Cybersecurity Governance Our Chief Information Officer (“CIO”) is responsible for assessing and managing cybersecurity risks in collaboration with the Senior Director of IT Governance, Service Delivery and the Senior Director of Global Infrastructure, and Senior Information Security Architect, who manage our day-to-day cybersecurity-related matters and keep abreast of cybersecurity news, events and incidents through regular course monitoring and updates.
The CIO is supported by the Senior Director of IT Governance, Security, and Service Delivery and the Senior Director of Global Infrastructure, and Senior Information Security Architect, who manage our day-to-day cybersecurity-related matters and keep abreast of cybersecurity news, events and incidents through regular course monitoring and updates.
Our IT specialists subscribe to threat intelligence feeds and are members of cybersecurity-related associations such as the Information Systems Audit and Control Association , the Computing Technology Industry Association and the Cloud Security Alliance. We also retain independent experts to assess our cybersecurity programs and the potential vulnerabilities of our IT systems to unauthorized access and other intrusions.
Our IT specialists subscribe to threat intelligence feeds and are members of cybersecurity-related associations such as the Information Systems Audit and Control Association, the Computing Technology Industry Association and the Cloud Security Alliance.
In performing these oversight functions, the Board and Audit Committee rely on advice, reports and opinions of management, counsel and our internal and external auditors, including mid-year and year-end cyber inquiries by our external auditors on various aspects of the Company’s cybersecurity program, processes and training.
In performing these oversight functions, the board of directors relies on advice, reports and opinions of management, counsel and our internal and external auditors, including mid-year and year-end cybersecurity inquiries by our external auditors on various aspects of the Company’s cybersecurity program, processes and training. 45 Use of Independent Experts The Company engages external resources in connection with our processes for assessing, identifying and managing material risks from cybersecurity threats.
The Company has not experienced any material cybersecurity incidents that caused us to incur any material expenses or materially affected our business, results of operations or financial condition, but we cannot assure that our business, results of operations and financial condition will not be materially affected in the future by cybersecurity risks or future incidents.
As of the date of this filing, we do not believe that any risks from cybersecurity threats, including as a result of past cybersecurity incidents have had, or are reasonably likely to have, a material effect on our business strategy, results of operations or financial condition, but we cannot assure that our business strategy, results of operations and financial condition will not be materially affected in the future by cybersecurity risks or future cybersecurity incidents.
The Audit Committee bears principal responsibility for overseeing the Company’s major financial risk and enterprise exposures and the steps management has taken to monitor and control such exposures, including an annual session with our CIO on the Company’s procedures and policies for assessing and managing cybersecurity risks and disclosing any material cybersecurity incidents.
The board of directors’ review includes an annual session with our CIO on the Company’s procedures and policies for assessing and managing cybersecurity risks and disclosing any material cybersecurity incidents.
These individuals average over 25 years of professional experience in various roles across multiple industries involving managing information security, developing cyber security strategy, implementing cybersecurity programs, and managing multiple industry and regulatory compliance environments (including over 15 years of collective experience working for public companies in similar roles prior to joining the Company).
Our Senior Director of IT Governance, Security, and Service Delivery has over 15 years of professional experience in various roles involving managing information security, developing cybersecurity strategy, implementing cybersecurity programs, and managing industry and regulatory compliance environments.
Cybersecurity Risk Management and Strategy Identifying and assessing cybersecurity risk is fully integrated into our overall risk management systems and processes. The Company is committed to developing and maintaining cybersecurity processes that protect the confidentiality, integrity and availability of Company, employee, customer and partner information against a growing number of increasingly sophisticated cybersecurity threats and threat actors.
These risks are identified, measured, monitored, and managed across key risk categories, which include the consideration of cybersecurity risks. The Company develops and maintains cybersecurity processes that protect the confidentiality, integrity and availability of Company, employee, customer and partner information against a growing number of cybersecurity threats and threat actors.
Use of Independent Experts The Company engaged an independent expert to conduct annual external and internal penetration tests beginning in the fourth quarter of 2021 and to assess our cybersecurity program against the NIST CSF in late 2022. We plan to continue to engage independent experts to periodically test our cybersecurity policies for their effectiveness. 46 Table of Contents
These resources include, but are not limited to, regular internal and external penetration tests and assessments of our cybersecurity program by third-party experts. We plan to continue to engage independent experts to periodically test our cybersecurity policies for their effectiveness.
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Material risks Although we believe that our resiliency planning and security controls are appropriate to our exposures to system outages, service interruptions, security incidents and breaches, our information technology systems remain vulnerable to attacks by increasingly sophisticated actors who attempt to cause harm to, or otherwise interfere with, the normal use of our systems.
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Cybersecurity Risk Management and Strategy The Company has an enterprise risk management (“ERM”) program that includes the processes used to identify assess, and manage our most significant enterprise risks and uncertainties that could materially impact the long-term health of the Company or prevent the achievement of strategic objectives.
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Like other companies with international operations, we have been subjected to targeted and non-targeted attacks and other cyber incidents and continue to face numerous cybersecurity threats on a regular basis, including regular attempts to penetrate our information technology infrastructure and breaches of our security systems by our employees, both accidental and intentional.
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However, this does not mean 44 that we meet any particular technical standards, specifications, or requirements, but rather that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks and threats relevant to our business.
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Our suppliers, contractors, service providers, and other third parties with whom we do business also experience cyber threats and attacks that are similar in frequency and sophistication.
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Cybersecurity Governance Our Chief Information Officer (“CIO”) is responsible for assessing and managing cybersecurity risks.
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Moreover, in many cases, the Company relies on controls put in place by our suppliers, contractors, service providers, and other third parties to defend against and otherwise respond to cyber threats and attacks, which may prove insufficient.
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Our CIO has over 12 years of professional experience in various roles involving managing information security, developing cybersecurity strategy, implementing cybersecurity programs, and managing multiple industry and regulatory compliance environments. Our CIO also holds a certificate in Cyber-Risk Oversight issued by the National Association of Corporate Directors.
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Our technology systems and infrastructure are also potentially vulnerable to computer viruses, breakdowns or other interruptions caused by fires, natural disasters, losses of power, system malfunctions or other disruptions.
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Our Senior Information Security Architect has over 20 years of professional experience designing secure architecture, conducting threat and risk assessments, incident response, cyber forensics, and teaching college and university level cybersecurity program courses. Our Senior Information Security Architect also holds a diverse set of certifications, including CISSP, CISCO Security +, CISA, CEH, CompTIA Sec +, and others.
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IT security breaches by third parties who are able to penetrate our systems without authorization or data privacy breaches by employees or others with authorized access pose the risk that sensitive data may be exposed to unauthorized persons or the public, rendered inaccessible or permanently lost.
Added
Our board of directors and its audit committee oversee the Company’s ERM program, and the steps management has taken to monitor and mitigate such risks, including the Company’s procedures and any related policies with respect to enterprise risk assessment and risk management.
Removed
The increasing use and evolution of technology creates additional opportunities for the intentional or unintentional dissemination or destruction of confidential or proprietary information stored in our systems or portable media or storage devices.
Removed
We may also experience business interruptions (including, but not limited to, the partial or complete shutdown of one or more of our facilities), thefts of information or reputational damage from industrial or nation-state espionage attacks, ransomware, other malware or other cyber incidents or data breaches, which may compromise our system 45 infrastructure or lead to data breaches, either internally or at our third-party providers or other business partners.
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Such incidents could compromise our trade secrets or other confidential information and result in such information being disclosed to third parties and becoming less valuable. Additionally, many of our employees continue to work remotely either part-time or full-time, which may increase the risk of data breaches or other types of cyber incidents.
Removed
Breaches in IT security, system interruptions and unauthorized disclosures of data, whether perceived or actual, could adversely affect our business, assets, revenues, results of operations, brands and reputation and result in fines, litigation, regulatory proceedings and investigations, increased insurance premiums, remediation efforts, indemnification expenditures, lost revenues and other potential liabilities.
Removed
Our Senior Information Security Architect has several information technology-related certifications, including as a Certified Information Systems Security Professional (“CISSP”). When detected, suspected cybersecurity threats are escalated to the CIO and incident response team.
Removed
The incident response plan provides for our CIO and our CIO’s team to work closely with our Chief Financial Officer, General Counsel and other key stakeholders, as appropriate, to assess the materiality of the incident and any impact to the Company’s operations or financial position.
Removed
Pursuant to the incident response plan and the Company’s Disclosure Controls and Procedures, potentially material cyber incidents are escalated to the Company’s Disclosure Committee to evaluate, in consultation with the Chair of the Audit Committee of our Board of Directors as needed, whether an incident is required to be reported on a Form 8-K.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters is in Broadview Heights, Ohio, our Sterigenics headquarters is in Oakbrook, Illinois, our Nordion headquarters is in Kanata, Ontario and our Nelson Labs headquarters is in Taylorsville, Utah. As of December 31, 2023, we operated 63 facilities in North America, South America, Europe and Asia.
Biggest changeItem 2. Properties Our corporate headquarters is in Broadview Heights, Ohio, our Sterigenics headquarters is in Oakbrook, Illinois, our Nelson Labs headquarters is in Taylorsville, Utah and our Nordion headquarters is in Kanata, Ontario. As of December 31, 2024, we operated 62 facilities in North America, South America, Europe and Asia.
The following table identified the number of owned and leased facilities, other than our headquarters listed above. We believe that our facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed to accommodate planned expansion of our operations.
The following table identified the number of owned and leased facilities, other than our headquarters listed above. We believe that our facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed to accommodate our operations.
Segment (1) Owned Facilities Owned/Leased Facilities (2) Leased Facilities Sterigenics 29 3 16 Nelson Labs 5 1 7 Nordion 1 — 1 (1) Seven of our Sterigenics and Nelson Labs facilities are located at the same address but are considered separate facilities because they require separate infrastructure.
Segment (1) Owned Facilities Owned/Leased Facilities (2) Leased Facilities Sterigenics 30 3 15 Nelson Labs 5 1 6 Nordion 1 — 1 (1) Seven of our Sterigenics and Nelson Labs facilities are located at the same address but are considered separate facilities because they require separate infrastructure.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeLegal Proceedings That Are Not Described in Note 20, “Commitments and Contingencies” to Our Consolidated Financial Statements In addition to the matters identified in Note 20, “Commitments and Contingencies” to our consolidated financial statements for the year ended December 31, 2023 contained in this Annual Report on Form 10-K, and incorporated into this item by reference, the following matters also constitute material pending legal proceedings, other than ordinary course litigation incidental to our business, to which we are or any of our subsidiaries is a party.
Biggest changeLegal Proceedings Not Described in Note 19, “Commitments and Contingencies,” to Our Consolidated Financial Statements In addition to the matters identified in Note 19, “Commitments and Contingencies,” to our consolidated financial statements for the year ended December 31, 2024 contained in this Annual Report on Form 10-K, and incorporated into this item by reference, we report matters, if any, that constitute material pending legal proceedings, other than ordinary course litigation incidental to our business, to which we are or any of our subsidiaries is a party.
At this time, and except as is noted herein, we are unable to predict the outcome of, and cannot reasonably estimate the impact of, any pending litigation matters, matters concerning allegations of non-compliance with laws or regulations and matters concerning other allegations of other improprieties, or the incidence of any such matters in the future.
At this time, and except as disclosed herein, we are unable to predict the outcome of, and cannot reasonably estimate the impact of, any pending litigation matters, matters concerning allegations of non-compliance with laws or regulations and matters concerning other allegations of other improprieties, or the incidence of any such matters in the future.
Legal Proceedings Described in Note 20, “Commitments and Contingencies” of Our Consolidated Financial Statements Note 20, “Commitments and Contingencies” t o our consolidated financial statements for the year ended December 31, 2023 contained in this Annual Report on Form 10-K includes information on legal proceedings that constitute material contingencies for financial reporting purposes that could have a material effect on our financial condition or results of operations.
Legal Proceedings Described in Note 19, “Commitments and Contingencies,” of Our Consolidated Financial Statements Note 19, “Commitments and Contingencies,” t o our consolidated financial statements for the year ended December 31, 2024 contained in this Annual Report on Form 10-K includes information on legal proceedings that constitute material contingencies for financial reporting purposes that could have a material effect on our financial condition or results of operations.
This item should be read in conjunction with Note 20, “Commitments and Contingencies” for information regarding the following legal proceedings, which information is incorporated into this item by reference: • Ethylene Oxide Tort Litigation – Illinois, Georgia and New Mexico; • Insurance Coverage for Environmental Liabilities; and • Sotera Health Company Securities Litigation and Related Matters.
This Item should be read in conjunction with Note 19, “Commitments and Contingencies,” for information regarding the following legal proceedings, which information is incorporated into this Item 3 by reference: • Ethylene Oxide Tort Litigation – California, Georgia, Illinois and New Mexico; • Insurance Coverage for Environmental Liabilities; and • Sotera Health Company Securities Litigation and Related Matters.
Removed
Zoetermeer, Holland Criminal Proceedings and Criminal Financial Investigation In 2010, the Dutch Public Prosecution Service started criminal proceedings against our subsidiary DEROSS Holding B.V. (“DEROSS”), in relation to alleged environmental permit violations for EO emissions in the period from 2004 to 2009 at its Zoetermeer processing facility.
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SEC regulations require disclosure of environmental proceedings that involve a government authority and potential monetary sanctions that the Company reasonably believes will 46 Table of Contents exceed a specified threshold.
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We agreed to defend and indemnify the two individuals overseeing environmental compliance during the time period of the alleged claims by the Public Prosecutor. In November 2010, the Public Prosecution Service also 47 Table of Contents started a criminal financial investigation against DEROSS to determine whether it obtained illegal advantages by committing the alleged criminal offenses noted above.
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The Company uses a threshold of $1.0 million to determine whether the disclosure of any such proceedings is required because we believe matters under this threshold are not material to the Company. Item 4. Mine Safety Disclosures Not applicable. 47 Part II
Removed
In February 2018, DEROSS and the two individuals received favorable judgments from the trial court, which did not hold any of them responsible for the alleged criminal offenses. In March 2018, the Public Prosecutor filed an appeal. In May 2023, the Public Prosecutor agreed to a resolution of the proceedings against DEROSS and the two individuals.
Removed
The resolution was completed in December 2023, with the Public Prosecutor not appealing further against the 2018 favorable judgments of the trial court, and DEROSS making a contribution of €990,000 to a charity, which was funded from an escrow established in 2011 to satisfy indemnity claims for losses related to this matter.
Removed
While we have received letters in past years from a small number of individuals claiming to live or work in the vicinity of the Zoetermeer facility, no civil claims have been filed against DEROSS or us.
Removed
There can be no assurance that individuals living in the vicinity of the Zoetermeer facility will not file civil claims at some time in the future.
Removed
Notice of Violation at Queensbury, New York Ethylene Oxide Sterilization Facility In late May 2023, Sterigenics’ Queensbury, New York facility experienced a power outage that resulted in a failure to restart the facility’s scrubber system (part of the facility’s emission control systems). The disruption of the facility’s scrubber lasted for approximately 48 hours.
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Upon discovering the disruption, the facility restarted the scrubber to control emissions within the system and then ceased operations. Operating without the scrubber resulted in nine intermittent releases of EO over a period of 48 hours from the 78-foot stack at the facility.
Removed
Sterigenics promptly notified the New York State Department of Environmental Conservation (“DEC”) and US EPA about the failure of the scrubber system and resulting releases of EO. Sterigenics implemented remedial measures to prevent a recurrence in the event of future power outages and, with the DEC’s approval, resumed operations at the Queensbury facility 12 days after ceasing operations.
Removed
In May 2023, Sterigenics received a Notice of Violation (“NOV”) from the DEC. In September 2023, the DEC offered to settle the NOV for an immaterial amount plus proposed requirements to implement additional emissions monitoring and back-up power capabilities at the facility. Settlement negotiations are continuing.
Removed
Notices of Violation at Vernon and Ontario, California Ethylene Oxide Sterilization Facilities In 2022, the South Coast Air Quality Management District (“SCAQMD”) in Southern California initiated an investigation into EO sterilization facilities located in the SCAQMD region, including Sterigenics’ facilities in Vernon and Ontario, California.
Removed
In connection with this investigation, SCAQMD issued NOVs to the Vernon and Ontario facilities alleging violations of SCAQMD operational, maintenance, permitting and reporting requirements and that levels of ambient EO detected by SCAQMD during 2022 caused a public nuisance for off-site workers around the facilities in violation of general prohibitions on emissions. Sterigenics disputes the allegations.
Removed
In December 2023, Sterigenics offered to settle the NOVs for an immaterial amount. Settlement negotiations are continuing. Item 4. Mine Safety Disclosures Not applicable. 48 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe timing and amount of future dividend payments will be at the discretion of our board of directors. Because we are a holding company and have no direct operations, we will only be able to pay dividends from our available cash on hand and any funds we receive from our subsidiaries.
Biggest changeBecause we are a holding company and have no direct operations, we will only be able to pay dividends from our available cash on hand and any funds we receive from our subsidiaries.
The returns shown are based on historical results and are not intended to suggest future performance. 49 The graph and other information furnished under this Part II Item 5 of this annual report on Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under, or to the liabilities of Section 18 of, the Exchange Act.
The returns shown are based on historical results and are not intended to suggest future performance. 48 The performance graph and other information furnished under this Part II Item 5 of this Annual Report on Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under, or to the liabilities of Section 18 of, the Exchange Act.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each index on November 20, 2020, the date our common stock began trading on the Nasdaq, and its relative performance is tracked through December 31, 2023.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each index on November 20, 2020, the date our common stock began trading on the Nasdaq, and its relative performance is tracked through December 31, 2024.
In addition, Delaware law imposes requirements that may restrict our ability to pay dividends. Stock Performance Graph The following graph compares the cumulative total return to stockholders on our common stock relative to the cumulative total returns of the Nasdaq Composite Index and the Standard and Poors (“S&P”) 500 Global Health Care Index.
In addition, Delaware law imposes requirements that may restrict our ability to pay dividends. Stock Performance Graph The following performance graph compares the cumulative total return to stockholders on our common stock relative to the cumulative total returns of the Nasdaq Composite Index and the Standard and Poor’s (“S&P”) 500 Health Care Index.
Future cash dividends, if any, will be at the discretion of our board of directors and will depend upon, among other things, our financial condition, earnings, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends and other considerations that our board of directors may deem relevant.
Future cash dividends on our common stock, if any, will be at the discretion of our board of directors and will depend upon, among other things, our financial condition, earnings, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends and other considerations that our board of directors may deem relevant.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock The Company’s common stock is listed on the Nasdaq under the ticker symbol “SHC.” Holders As of February 20, 2024, we had approximately 83 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock The Company’s common stock is listed on the Nasdaq under the ticker symbol “SHC.” Holders As of February 20, 2025, we had approximately 77 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

140 edited+37 added−59 removed52 unchanged
Biggest changeThe 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.
Biggest changeAmong 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. 61 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.
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.
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.
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.
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.
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.
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.
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.
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.
Changes in our judgment related to the measurement of deferred tax assets and liabilities could materially impact our results of operations. 67 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.
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.
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.
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.
Corporate operating expenses that are directly incurred by a segment are reflected in each segment’s income. Segment income excludes certain items which 54 are included in “Income (loss) before taxes” as determined in our Consolidated Statements of Operations and Comprehensive Income (Loss).
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).
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.
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.
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.
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.
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.
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 65 realized upon ultimate settlement.
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.
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 8, “Goodwill and Other Intangible Assets” to our consolidated financial statements. Income Taxes .
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 .
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.
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.
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.
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.
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.
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.
Most of these services are necessary for our customers to satisfy applicable government requirements. 50 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.
Most of these services are necessary for our customers to satisfy applicable government requirements. 49 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.
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.
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.
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.
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.
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.
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.
(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.
(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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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; 58 • 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.
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; 56 • 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.
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.
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.
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.
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.
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.
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 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 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.
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 .
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. 64 Goodwill and Other Indefinite-Lived Intangibles .
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.
The Senior Secured Credit Facilities and the Indenture also contain certain customary affirmative covenants and events of default, including upon a change of 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.
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.
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.
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.
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.
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.
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.
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.
As of December 31, 2023, we were in compliance with all the Senior Secured Credit Facilities and 2023 Credit Agreement covenants. 63 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 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.
This discussion and analysis contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations.
This MD&A contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations.
“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.
“Business” and Note 21, “Segment and Geographic Information” to our consolidated financial statements. 58 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.
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”).
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
(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.
(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.
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, 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.
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.
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.
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 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.
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”.
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.
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.
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. 53 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.
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 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.
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.
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. 52 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.
Our accounting policies are more fully described in Note 1, “Significant Accounting Policies” to our consolidated financial statements. 65 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.
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.
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 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”).
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.
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.
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.
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. 63 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The following subsections describe our most critical accounting policies, estimates, and assumptions.
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.
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.
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.
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.
(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).
(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).
This amount includes approximately $35.5 million related to environmental facility enhancements. 62 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.
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.
Results for our Nordion segment are impacted by Co-60 mix, harvest schedules, and customer, product and service mix. 60 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.
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.
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.
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.
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.
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.
(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”.
(f) Represents the cost to settle 79 pending EO claims in Georgia under a settlement entered into on December 21, 2023.
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.
Interest expense, net is primarily affected by changes in average outstanding indebtedness (including finance lease obligations) and variable interest rates.
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.
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.
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.
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.
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 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.
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.
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.
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.
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 .
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.
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.
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.
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.
Goodwill is assigned to our segments at December 31, 2023 as follows: (thousands of U.S. dollars) Sterigenics Nordion Nelson Labs Total Goodwill at December 31, 2023 $ 659,888 $ 276,929 $ 174,373 $ 1,111,190 We performed a quantitative assessment of all reporting units (Sterigenics, Nordion and Nelson Labs) as of October 1, 2023.
Goodwill is assigned to our segments at December 31, 2024 as follows: (thousands of U.S. dollars) Sterigenics Nordion Nelson Labs Total Goodwill at December 31, 2024 $ 653,222 $ 255,485 $ 172,366 $ 1,081,073 We performed a quantitative assessment of all reporting units (Sterigenics, Nordion and Nelson Labs) as of October 1, 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeQuantitative and Qualitative Disclosures About Market Risk We are exposed to market risks in the ordinary course of business, primarily changes in commodity prices, interest rates and foreign currency exchange rates and regulatory risk. 68 Commodity Price Risk We purchase our supply of EO gas from various suppliers around the world, but in the United States there is a sole supplier for EO gas used for applications relevant to our business.
Biggest changeCommodity Price Risk We purchase our supply of EO gas from various suppliers around the world, but in the United States there is a sole supplier for EO gas used for applications relevant to our business.
The interest rate swap’s effective date began on August 23, 2023 and expires on August 23, 2025. We have designated the interest rate swap as a cash flow hedge designed to hedge the variability of cash flows attributable to changes in the SOFR benchmark interest rate of our 2023 Term Loan.
The interest rate swap’s effective date began on August 23, 2023 and expires on August 23, 2025. We designated the interest rate swap as a cash flow hedge designed to hedge the variability of cash flows attributable to changes in the SOFR benchmark interest rate of our Term Loan.
We are exposed to market risk based on fluctuations in the price of EO gas. We actively seek to manage the risk of fluctuating prices through long-term supply and service contracts.
We are exposed to market risk based on fluctuations in the price of EO gas. 66 We actively seek to manage the risk of fluctuating prices through long-term supply and service contracts.
Under the current terms of the loan agreement, the benchmark interest rate index transitioned from LIBOR to Term SOFR on June 30, 2023. Accordingly, the interest rate cap agreements hedge the variability of cash flows attributable to changes in SOFR by limiting our cash flow exposure related to Term SOFR under a portion of our variable rate borrowings to 3.5%.
Under the current terms of the loan agreement, the benchmark interest rate index transitioned from LIBOR to Term SOFR on June 30, 2023. Accordingly, the interest rate cap agreements hedged the variability of cash flows attributable to changes in SOFR by limiting our cash flow exposure related to Term SOFR under a portion of our variable rate borrowings to 3.5%.
The failure to receive or maintain, or delays in the receipt of, relevant U.S. or international regulatory qualifications could have a material adverse effect on our business, prospects, financial condition or results of operations. 70
The failure to receive or maintain, or delays in the receipt of, relevant U.S. or international regulatory qualifications could have a material adverse effect on our business, prospects, financial condition or results of operations. 68
See Note 21, “Financial Instruments and Financial Risk” to our consolidated financial statements for a summary of the activity of the interest rate caps for the periods presented. Foreign Currency Risk We are exposed to market risk from fluctuations in foreign currencies. We present our consolidated financial statements in U.S. dollars.
See Note 20, “Financial Instruments and Financial Risk” to our consolidated financial statements for a summary of the activity of the interest rate caps for the periods presented. Foreign Currency Exchange Rate Risk We are exposed to market risk from fluctuations in foreign currencies. We present our consolidated financial statements in U.S. dollars.
Based on our indebtedness outstanding as of December 31, 2023, the interest rate under our Term Loans that was in effect on December 31, 2023, and after applying the effects of interest rate caps and the swap referenced above, a 1.0% increase in the interest rate under our outstanding debt obligations as of December 31, 2023, would increase interest expense by approximately $8.6 million per year.
Based on our indebtedness outstanding as of December 31, 2024, the interest rate under our Term Loans that was in effect on December 31, 2024, and after applying the effects of interest rate caps and the swap referenced above, a 1.0% increase in the interest rate under our outstanding debt obligations as of December 31, 2024, would increase interest expense by approximately $11.1 million per year.
The interest rate caps became effective as of July 31, 2023 and expire on July 31, 2024. We have designated these interest rate caps as cash flow hedges designed to hedge the variability of cash flows attributable to changes in the benchmark interest rate of our Term Loan.
The interest rate caps became effective as of July 31, 2023 and expired on July 31, 2024. We designated these interest rate caps as cash flow hedges that were designed to hedge the variability of cash flows attributable to changes in the benchmark interest rate of our Term Loan.
Holding other variables constant (such as interest rates and debt levels), if the U.S. dollar had appreciated by 10% against the foreign currencies used by our operations in the year ended December 31, 2023, revenues would have been reduced by approximately $45.8 million and gross profit by approximately $25.3 million.
Holding other variables constant (such as interest rates and debt levels), if the U.S. dollar had appreciated by 10% against the foreign currencies used by our operations in the year ended December 31, 2024, revenues would have been reduced by approximately $48.4 million and gross profit by approximately $26.1 million.
Translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within equity. 69 Our results of operations are impacted by currency exchange rate fluctuations to the extent that we are unable to match net revenues received in foreign currencies with expenses incurred in the same currency.
Our results of operations are impacted by currency exchange rate fluctuations to the extent that we are unable to match net revenues received in foreign currencies with expenses incurred in the same currency.
These translations could significantly affect the comparability of our results between financial periods and/or result in significant changes to the carrying value of our assets and liabilities.
These translations could significantly affect the comparability of our results between financial periods and/or result in significant changes to the carrying value of our assets and liabilities. Translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within equity.
Transaction gains and losses arising from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) as foreign exchange loss (gain).
Transaction gains and losses arising from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) as foreign exchange loss (gain). 67 The Company also routinely enters into foreign currency forward contracts to manage foreign currency exchange rate risk of our intercompany loans in certain of our international subsidiaries and non-functional currency assets and liabilities.
The fair value of the outstanding foreign currency forward contracts was $0.1 million and $0.3 million as of December 31, 2023 and 2022. Approximately 43.7% of our revenues and 48.0% of our consolidated total assets as of December 31, 2023 are derived from operations outside the United States.
Approximately 44.0% of our revenues and 47.3% of our consolidated total assets as of December 31, 2024 were derived from operations outside the United States.
Removed
The Company also routinely enters into foreign currency forward contracts to manage foreign currency exchange rate risk of our intercompany loans in certain of our international subsidiaries and non-functional currency assets and liabilities. The foreign currency forward contracts expire on a monthly basis.
Added
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risks in the ordinary course of business, primarily changes in commodity prices, interest rates and foreign currency exchange rates and regulatory risk.
Added
The foreign currency forward contracts expire on a monthly basis. The net fair value of the outstanding foreign currency forward contracts was $0.1 million as of each of the years ended December 31, 2024 and 2023.

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