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Sotera Health Reports Fourth-Quarter and Full-Year 2023 Results; Provides 2024 Outlook

Bay Street

CLEVELAND, Feb. 27, 2024 (GLOBE NEWSWIRE) — Sotera Health Company (“Sotera Health” or the “Company”) (Nasdaq: SHC), a leading global provider of mission-critical end-to-end sterilization solutions, lab testing and advisory services for the healthcare industry, today announced financial results for the fourth-quarter and full-year 2023 and its initial 2024 outlook.

For the fourth-quarter 2023, net revenues increased 23.3% to $310 million, compared with $252 million in the same period a year ago. Net revenues increased 21.9% on a constant currency basis. Net income attributable to the Company (“net income”) was $39 million, or $0.14 per diluted share, compared with a net loss attributable to the Company (“net loss”) of $320 million, or $1.14 per diluted share for the fourth-quarter 2022, which included a $408 million legal reserve. Adjusted EBITDA increased by 28.7% to $167 million compared to the prior-year quarter. Adjusted earnings per diluted share (“Adjusted EPS”) was $0.26, an increase of $0.01 per diluted share, compared to the fourth quarter of 2022.

For full-year 2023, net revenues increased 4.5% to $1.05 billion, compared with $1.00 billion for full-year 2022. Net revenues increased 4.2% on a constant currency basis. Net income was $51 million, or $0.18 per diluted share, compared with net loss of $234 million, or $0.83 per diluted share, for 2022. Adjusted EBITDA increased 4.3% to $528 million, compared to 2022. Adjusted EPS was $0.81 in 2023, a decrease of $0.15 from 2022.

“Today I am pleased to announce another year of top- and bottom-line growth,” said Chairman and Chief Executive Officer, Michael B. Petras, Jr. “Throughout 2023, the Sotera Health team demonstrated resilience, adaptability and an unwavering commitment to the Company’s core values in the face of continued macro-economic pressures. During the year, Sterigenics completed four capacity expansions, the Nordion team successfully navigated the complex Cobalt-60 supply chain, and Nelson Labs continued to provide our customers with world-class lab testing services and expert advisory support. We remain focused on our mission of Safeguarding Global Health© and are excited for continued growth in 2024.”

Fourth-Quarter and Full-Year 2023 Review by Business Segment

Sterigenics

For fourth-quarter 2023, net revenues were $172 million, an increase of 6.5% compared to the fourth quarter a year ago. Segment income was $95 million, an increase of 6.4%.

For full-year 2023, Sterigenics net revenues were $667 million, an increase of 6.5% compared to 2022. Segment income increased 6.8% to $362 million.

Net revenue growth for fourth-quarter 2023 was driven by favorable pricing and changes in foreign currency exchange rates, partially offset by unfavorable volume and mix.

Segment income growth for the quarter was also driven by favorable pricing and changes in foreign currency rates, partially offset by higher costs and unfavorable volume and mix.

Nordion

For fourth-quarter 2023 net revenues were $80 million, an increase of 134.2%, compared to the fourth quarter a year ago as Nordion generated 50% of its full-year revenue in the quarter, as expected. Segment income increased 162.7% to $53 million.

For full-year 2023, Nordion net revenues were $160 million, an increase of 4.4% compared to 2022. Segment income increased by 8.0% to $97 million.

The increase in net revenues, segment income and segment income margin for fourth-quarter 2023 was driven by favorable impacts from volume and pricing.

Nelson Labs

For fourth-quarter 2023, net revenues were $58 million, an increase of 4.3% compared to the fourth quarter a year ago. Segment income decreased 7.8% to $19 million.

For full-year 2023, Nelson Labs net revenues were $222 million, a decrease of 0.8% compared to 2022. Segment income decreased 10.9% to $69 million.

Net revenue growth for the fourth-quarter 2023 was driven by favorable pricing and changes in foreign currency exchange rates, partially offset by unfavorable volume and mix.

Segment income and margin decline for the fourth-quarter 2023 was driven by unfavorable volume and mix coupled with the impact of inflation, partially offset by favorable pricing.

Balance Sheet and Liquidity

As of December 31, 2023, Sotera Health had $2.3 billion in total debt, and $296 million in cash and cash equivalents, compared to $2.0 billion in total debt and $395 million in cash and cash equivalents as of December 31, 2022. As of December 31, 2023, the Company had no balance outstanding on its revolving credit facility. Material debt balances outstanding do not mature until 2026. Sotera Health’s Net Leverage Ratio(1) as of December 31, 2023 was 3.8x, compared to 3.2x at December 31, 2022.

Full-Year 2024 Outlook

Today, Sotera Health is providing its full-year 2024 outlook:

The Company does not provide a reconciliation for non-GAAP financial measures on a forward-looking basis where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items without unreasonable effort. The Company cannot reconcile its expected Adjusted EBITDA,

Adjusted Net Income, Adjusted EPS and Net Leverage Ratio without unreasonable effort because certain items that impact net income, earnings per share and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted at this time, including uncertainties caused by changes to the regulatory landscape, restructuring items and certain fair value measurements, all of which are potential adjustments for future earnings.

The outlook provided above contains a number of assumptions, including, among others, the Company’s current expectations regarding supply chain continuity, particularly for the supply of EO and Cobalt-60, the impact of inflationary trends including their impact on energy prices and the supply of labor, and the expectation that exchange rates as of January 31, 2024 remain constant for the remainder of 2024. Our outlook is based on current plans and expectations and is subject to several known and unknown risks and uncertainties, including those set forth below under “Cautionary Note Regarding Forward-Looking Statements.”

Earnings Webcast

Sotera Health management will host a conference call and webcast to discuss the Company’s operating highlights and financial results at 9:00 a.m. Eastern Time today. To participate in the live call, please dial 1-844-481-2916 if dialing in from the United States, or 1-412-317-0709 if dialing in from other locations. A live webcast of the conference call and accompanying materials may also be accessed via the Investor Relations section of the Company’s website at Presentation & Events | Sotera Health. A replay of the webcast will be archived on the Company’s website.

Updates on recent developments in matters relevant to investors can be found on the Investor Relations section of the Sotera Health website at Investor Relations | Sotera Health. For developments related to EO, updates can be found at Ethylene Oxide | Sotera Health.

Upcoming Investor Events

Cautionary Note Regarding Forward-Looking Statements

Unless expressly indicated or the context requires otherwise, the terms “Sotera Health,” “Company,” “we,” “us,” and “our” in this document refer to Sotera Health Company, a Delaware corporation, and, where appropriate, its subsidiaries on a consolidated basis. This release contains forward-looking statements that reflect management’s expectations about future events and the Company’s operating plans and performance and speak only as of the date hereof. You can identify these forward-looking statements by the use of forward-looking words such as “will,” “may,” “plan,” “estimate,” “project,” “believe,” “anticipate,” “expect,” “intend,” “should,” “would,” “could,” “target,” “goal,” “continue to,” “positioned to,” “are confident” or the negative versions of those words or other comparable words. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, are forward-looking statements. Any forward-looking statements contained in this release are based upon our historical performance and on our current plans, estimates and expectations of the Company’s future performance and the future performance of the markets in which the Company operates in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. These forward-looking statements are subject to various risks, uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. These risks and uncertainties include, without limitation, any disruption in the availability or supply of, or increases in the price of ethylene oxide (“EO”) or Cobalt-60, or our other direct materials, services and supplies, including as a result of geopolitical instability and/or sanctions arising from United States, Canadian, United Kingdom or European Union relations with Russia; fluctuations in foreign currency exchange rates; changes in industry trends, environmental, health and safety regulations or preferences, and general economic, social and business conditions; the impact and outcome of current and future legal proceedings and liability claims, including litigation related to use of EO and/or emission and releases of EO from our facilities in Illinois, Georgia and New Mexico and the possibility that other claims will be made in the future relating to these or other facilities; our ability to increase capacity at existing facilities, build new facilities in a timely and cost-effective manner and renew leases for our leased facilities; our ability to attract and retain qualified employees; the risks of doing business internationally, including global and regional economic and political instability and compliance with numerous and sometimes inconsistent laws and regulations in multiple jurisdictions; and an inability to pursue strategic transactions, find suitable acquisition targets, or integrate strategic acquisitions into our business successfully. For additional discussion of these risks and uncertainties, please refer to the Company’s filings with the SEC, such as its annual and quarterly reports. We do not undertake any obligation to publicly update or revise these forward-looking statements, except as otherwise required by law.

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with GAAP, we consider Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted EPS, Segment income margin, Net Debt and Net Leverage Ratio and constant currency, financial measures that are not based on any standardized methodology prescribed by GAAP.

We define Adjusted Net Income as net income (loss) before amortization and certain other adjustments that we do not consider in our evaluation of our ongoing operating performance from period to period.

We define Adjusted EBITDA as Adjusted Net Income before interest expense, depreciation (including depreciation of Co-60 used in our operations) and income tax provision applicable to Adjusted Net Income.

Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net revenues.

Segment income margin is equal to segment income divided by net segment revenues.

We define Adjusted EPS as Adjusted Net Income divided by the weighted average number of diluted shares outstanding.

Our Net Debt is equal to our total debt, plus unamortized debt issuance costs and debt discounts, less cash and cash equivalents.

Our Net Leverage Ratio is equal to Net Debt divided by Adjusted EBITDA.

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

We use these non-GAAP financial measures as the principal measures of our operating performance. Management believes these measures 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 without these measures and their disclosure. In addition, we believe these measures will assist investors in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. Our management also uses these measurements in their financial analysis and operational decision-making and Adjusted EBITDA serves as the key metric for the attainment of our primary annual incentive program. These measures may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.

About Sotera Health

Sotera Health Company is a leading global provider of mission-critical end-to-end sterilization solutions and lab testing and advisory services for the healthcare industry. Sotera Health goes to market through three businesses – Sterigenics®, Nordion® and Nelson Labs®. Sotera Health is committed to its mission, Safeguarding Global Health®.

INVESTOR RELATIONS CONTACTS
Jason Peterson
Vice President & Treasurer, Sotera Health
IR@soterahealth.com

MEDIA CONTACT

Kristin Gibbs
Chief Marketing Officer, Sotera Health
kgibbs@soterahealth.com

Source: Sotera Health Company

(1) This is a non-GAAP financial measure used throughout this press release; please refer to the section “Non-GAAP Financial Measures” for explanations of our Non-GAAP financial measures and the schedules provided later in this release for reconciliations of reported GAAP to Non-GAAP financial measures.

 
Sotera Health Company
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
  Three Months Ended
December 31,		   Year Ended
December 31,
    2023       2022       2023       2022  
Revenues:              
Service $ 237,918     $ 220,377     $ 905,598     $ 864,828  
Product   72,321       31,213       143,690       138,859  
Total net revenues   310,239       251,590       1,049,288       1,003,687  
Cost of revenues:              
Service   106,921       98,105       418,611       390,860  
Product   23,235       11,765       53,519       55,823  
Total cost of revenues   130,156       109,870       472,130       446,683  
Gross profit   180,083       141,720       577,158       557,004  
Operating expenses:              
Selling, general and administrative expenses   60,358       65,949       236,667       245,714  
Amortization of intangible assets   15,701       15,603       63,799       62,940  
Total operating expenses   76,059       81,552       300,466       308,654  
Operating income   104,024       60,168       276,692       248,350  
Interest expense, net   42,653       32,269       142,878       80,144  
Illinois EO litigation settlement   —       408,000       —       408,000  
Georgia EO litigation settlement   —       —       35,000       —  
Impairment of investment in unconsolidated affiliate   —       —       —       9,613  
Foreign exchange (gain) loss   (227 )     647       159       145  
Other income, net   (4,072 )     (2,246 )     (7,372 )     (6,441 )
Income (loss) before income taxes   65,670       (378,502 )     106,027       (243,111 )
Provision (benefit) for income taxes   26,989       (58,783 )     54,651       (9,541 )
Net income (loss)   38,681       (319,719 )     51,376       (233,570 )
               
Earnings (loss) per share:              
Basic $ 0.14     $ (1.14 )   $ 0.18     $ (0.83 )
Diluted   0.14       (1.14 )     0.18       (0.83 )
Weighted average number of shares outstanding:              
Basic   281,335       280,417       281,008       280,096  
Diluted   283,339       280,417       283,222       280,096  
 
Sotera Health Company
Segment Data
(in thousands)
(unaudited)
 
  Three Months Ended
December 31,		   Year Ended
December 31,
  2023     2022     2023     2022  
Segment revenues:              
Sterigenics 172,196     161,669     667,130     626,646  
Nordion 79,835     34,088     160,459     153,639  
Nelson Labs 58,208     55,833     221,699     223,402  
Total net revenues 310,239     251,590     1,049,288     1,003,687  
Segment income:              
Sterigenics 94,753     89,056     362,212     339,144  
Nordion 53,316     20,298     96,678     89,477  
Nelson Labs 18,679     20,259     69,139     77,628  
Total segment income 166,748     129,613     528,029     506,249  
Less adjustments:              
Interest expense, net(a) 33,793     24,516     116,068     78,490  
Depreciation and amortization(b) 40,722     36,462     157,925     145,554  
Share-based compensation(c) 8,229     6,256     32,364     21,211  
(Gain) loss on foreign currency and derivatives not designated as hedging instruments, net(d) (3,011 )   7,938     (1,552 )   3,150  
Acquisition and divestiture related charges, net(e) 120     420     937     1,398  
Business optimization project expenses(f) 217     617     7,310     2,226  
Plant closure expenses(g) 55     954     (585 )   4,730  
Impairment of investment in unconsolidated affiliate(h) —     —     —     9,613  
Professional services and other expenses relating to EO sterilization facilities(i) 20,222     22,401     72,122     72,639  
Georgia EO litigation settlement(j) —     —     35,000     —  
Illinois EO litigation settlement(k) —     408,000     —     408,000  
Accretion of asset retirement obligation(l) 731     550     2,413     2,194  
COVID-19 expenses(m) —     1     —     155  
Consolidated income (loss) before income taxes 65,670     (378,502 )   106,027     (243,111 )

(a)  The three and twelve months ended December 31, 2023 excludes $8.8 million and $26.8 million, respectively, of interest expense, net on Term Loan B attributable to the loan proceeds that were used to fund the $408.0 million Illinois EO litigation settlement. The three and twelve months ended December 31, 2022 exclude a $7.8 million and $1.7 million net decrease, respectively, in the fair value of interest rate derivatives not designated as hedging instruments recorded to interest expense.
(b)  Includes depreciation of Co-60 held at gamma irradiation sites.
(c)  Represents share-based compensation expense to employees and non-employee directors.
(d)  Represents the effects of (i) fluctuations in foreign currency exchange rates, (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion, and (iii) unrealized gains and losses on interest rate derivatives not designated as hedging instruments.
(e)  Represents (i) certain direct and incremental costs related to the acquisitions of RCA and BioSciences Labs and certain related integration efforts as a result of those acquisitions, (ii) the earnings impact of fair value adjustments (excluding those recognized within amortization expense) resulting from the businesses acquired, (iii) transition services income and non-cash deferred lease income associated with the terms of the divestiture of the Medical Isotopes business in 2018.
(f)  Represents professional fees, exit costs, severance and other payroll costs, and other costs associated with business optimization and cost savings projects relating to the integration of recent acquisitions, operating structure realignment and other process enhancement projects.
(g)  Represents professional fees, severance and other payroll costs, and other costs including ongoing lease and utility expenses associated with the closure of the Willowbrook, Illinois facility. The twelve months ended December 31, 2023 also includes a $1.0 million cancellation fee received from a tenant in connection with the termination of an office space lease at the Nordion facility.
(h)  Represents an impairment charge on an equity method investment in a joint venture.
(i)  Represents litigation and other professional fees associated with our EO sterilization facilities. This includes $8.8 million and $26.8 million, respectively, of interest expense, net for the three and twelve months ended December 31, 2023 associated with Term Loan B that was issued to finance the $408.0 million settlement of 880 pending and threatened EO claims against Sterigenics U.S., LLC and Sotera Health LLC (“the Defendant Subsidiaries”) in Illinois under Settlement Agreements entered into on March 28, 2023.
(j)  Represents the cost to settle 79 pending EO claims against the Defendant Subsidiaries in Georgia under a Settlement Term Sheet entered into on December 21, 2023.
(k)  Represents the cost to settle 880 pending and threatened EO claims against the Defendant Subsidiaries in Illinois under Settlement Agreements entered into on March 28, 2023.
(l)   Represents non-cash accretion of asset retirement obligations related to Co-60 gamma and EO processing facilities, which are based on estimated site remediation costs for any future decommissioning of these facilities and are accreted over the life of the asset.
(m)  Represents non-recurring costs associated with the COVID-19 pandemic, including incremental costs to implement workplace health and safety measures.

  

Sotera Health Company
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
    As of December 31,
      2023       2022  
Assets        
Current assets:        
Cash and cash equivalents, including restricted cash   $ 301,654     $ 396,294  
Accounts receivable, net     147,696       118,482  
Inventories, net     48,316       37,145  
Other current assets     59,578       93,089  
Total current assets     557,244       645,010  
Property, plant, and equipment, net     946,914       774,527  
Operating lease assets     24,037       26,481  
Other intangible assets, net     416,318       491,265  
Goodwill     1,111,190       1,101,768  
Other assets     74,717       78,654  
Total assets   $ 3,130,420     $ 3,117,705  
Liabilities and equity        
Total current liabilities   $ 230,654     $ 791,567  
Long-term debt, less current portion     2,223,674       1,747,115  
Other noncurrent liabilities     167,904       160,761  
Deferred income taxes     64,454       68,024  
Total liabilities     2,686,686       2,767,467  
Total equity     443,734       350,238  
Total liabilities and equity   $ 3,130,420     $ 3,117,705  
 
Sotera Health Company
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
  Year Ended December 31,
    2023       2022  
Operating activities:      
Net income (loss) $ 51,376     $ (233,570 )
Non-cash items   204,177       102,297  
Changes in operating assets and liabilities   (403,285 )     409,234  
Net cash provided by (used in) operating activities   (147,732 )     277,961  
Investing activities:      
Purchases of property, plant and equipment   (214,975 )     (182,378 )
Adjustment to purchase of Regulatory Compliance Associates Inc.   —       450  
Other investing activities   69       32  
Net cash used in investing activities   (214,906 )     (181,896 )
Financing activities:      
Proceeds from revolving credit facility and long-term borrowings   500,000       200,000  
Payment of revolving credit facility   (200,000 )     —  
Payment of long-term borrowings   (2,500 )     —  
Payments of debt issuance costs and prepayment premium   (25,645 )     (31 )
Shares withheld for employee taxes on equity awards   (4,089 )     (393 )
Other financing activities   (1,807 )     (1,815 )
Net cash provided by financing activities   265,959       197,761  
Effect of exchange rate changes on cash and cash equivalents   2,039       (4,456 )
Net increase in cash and cash equivalents, including restricted cash   (94,640 )     289,370  
Cash and cash equivalents, including restricted cash, at beginning of period   396,294       106,924  
Cash and cash equivalents, including restricted cash, at end of period $ 301,654     $ 396,294  
       
Supplemental disclosures of cash flow information:      
Cash paid during the period for interest $ 173,842     $ 75,849  
Cash paid during the period for income taxes, net of tax refunds received   50,210       75,496  
Purchases of property, plant and equipment included in accounts payable   16,720       16,413  
 
Sotera Health Company
Non-GAAP Financial Measures
(in thousands, except per share amounts)
(unaudited)
 
  Three Months Ended
December 31,		   Year Ended
December 31,
    2023       2022       2023       2022  
Net income (loss) $ 38,681     $ (319,719 )   $ 51,376     $ (233,570 )
Amortization of intangible assets   20,058       19,958       81,348       81,554  
Share-based compensation(a)   8,229       6,256       32,364       21,211  
(Gain) loss on foreign currency and derivatives not designated as hedging instruments, net(b)   (3,011 )     7,938       (1,552 )     3,150  
Acquisition and divestiture related charges, net(c)   120       420       937       1,398  
Business optimization project expenses(d)   217       617       7,310       2,226  
Plant closure expenses(e)   55       954       (585 )     4,730  
Impairment on investment in unconsolidated affiliate(f)   —       —       —       9,613  
Professional services and other expenses relating to EO sterilization facilities(g)   20,222       22,401       72,122       72,639  
Georgia EO litigation settlement(h)   —       —       35,000       —  
Illinois EO litigation settlement(i)   —       408,000       —       408,000  
Accretion of asset retirement obligations(j)   731       550       2,413       2,194  
COVID-19 expenses(k)   —       1       —       155  
Income tax benefit associated with pre-tax adjustments(l)   (11,166 )     (77,744 )     (50,617 )     (103,081 )
Adjusted Net Income   74,136       69,632       230,116       270,219  
Interest expense, net(m)   33,793       24,516       116,068       78,490  
Depreciation(n)   20,664       16,504       76,577       64,000  
Income tax provision applicable to Adjusted Net Income(o)   38,155       18,961       105,268       93,540  
Adjusted EBITDA(p) $ 166,748     $ 129,613     $ 528,029     $ 506,249  
               
Net Revenues $ 310,239     $ 251,590     $ 1,049,288     $ 1,003,687  
Adjusted EBITDA Margin   53.7 %     51.5 %     50.3 %     50.4 %
Weighted average number of shares outstanding              
Basic   281,335       280,417       281,008       280,096  
Diluted   283,339       280,417       283,222       280,096  
Earnings (loss) per share              
Basic $ 0.14     $ (1.14 )   $ 0.18     $ (0.83 )
Diluted   0.14       (1.14 )     0.18       (0.83 )
Adjusted earnings per share              
Basic $ 0.26     $ 0.25     $ 0.82     $ 0.96  
Diluted   0.26       0.25       0.81       0.96  

(a)  Represents share-based compensation expense to employees and non-employee directors.
(b)  Represents the effects of (i) fluctuations in foreign currency exchange rates, (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion, and (iii) unrealized gains and losses on interest rate derivatives not designated as hedging instruments.
(c)  Represents (i) certain direct and incremental costs related to the acquisitions of RCA and BioSciences Labs and certain related integration efforts as a result of those acquisitions, (ii) the earnings impact of fair value adjustments (excluding those recognized within amortization expense) resulting from the businesses acquired, (iii) transition services income and non-cash deferred lease income associated with the terms of the divestiture of the Medical Isotopes business in 2018.
(d)  Represents professional fees, exit costs, severance and other payroll costs, and other costs associated with business optimization and cost savings projects relating to the integration of recent acquisitions, operating structure realignment and other process enhancement projects.
(e)  Represents professional fees, severance and other payroll costs, and other costs including ongoing lease and utility expenses associated with the closure of the Willowbrook, Illinois facility. The twelve months ended December 31, 2023 also includes a $1.0 million cancellation fee received from a tenant in connection with the termination of an office space lease at the Nordion facility.
(f)  Represents an impairment charge on an equity method investment in a joint venture.
(g)  Represents litigation and other professional fees associated with our EO sterilization facilities. This includes $8.8 million and $26.8 million, respectively, of interest expense, net for the three and twelve months ended December 31, 2023 associated with Term Loan B that was issued to finance the $408.0 million settlement of 880 pending and threatened EO claims against the Defendant Subsidiaries in Illinois under Settlement Agreements entered into on March 28, 2023.
(h)  Represents the cost to settle 79 pending EO claims against the Defendant Subsidiaries in Georgia under a Settlement Term Sheet entered into on December 21, 2023.
(i)  Represents the cost to settle 880 pending and threatened EO claims against the Defendant Subsidiaries in Illinois pursuant to Settlement Agreements entered into on March 28, 2023.
(j)  Represents non-cash accretion of asset retirement obligations related to Co-60 gamma and EO processing facilities, which are based on estimated site remediation costs for any future decommissioning of these facilities and are accreted over the life of the asset.
(k)  Represents non-recurring costs associated with the COVID-19 pandemic, including incremental costs to implement workplace health and safety measures.
(l)  Represents the income tax impact of adjustments calculated based on the tax rate applicable to each item. We eliminate the effect of tax rate changes as applied to tax assets and liabilities, and unusual items from our presentation of adjusted net income.
(m)  The three and twelve months ended December 31, 2023 excludes $8.8 million and $26.8 million, respectively, of interest expense, net on Term Loan B attributable to the loan proceeds that were used to fund the $408.0 million Illinois EO litigation settlement. The three and twelve months ended December 31, 2022 exclude a $7.8 million and $1.7 million net decrease, respectively, in the fair value of interest rate derivatives not designated as hedging instruments recorded to interest expense.
(n)  Includes depreciation of Co-60 held at gamma irradiation sites.
(o)  Represents the difference between the income tax provision/benefit as determined under U.S. GAAP and the income tax benefit associated with pre-tax adjustments described in footnote (l).
(p)  $24.4 million and $20.9 million of the adjustments for the three months ended December 31, 2023 and 2022, respectively, and $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.

 
Sotera Health Company
Non-GAAP Financial Measures
(in thousands, except Net Leverage)
(unaudited)
 
  Year Ended December 31,
    2023       2022  
Current portion of long-term debt $ 4,797     $ 197,119  
Long-term debt $ 2,223,674     $ 1,747,115  
Current portion of finance leases   8,771       1,722  
Finance leases less current portion   63,793       56,955  
Total Debt $ 2,301,035     $ 2,002,911  
       
Less: cash and cash equivalents   (296,407 )     (395,214 )
Net Debt $ 2,004,628     $ 1,607,697  
       
Adjusted EBITDA $ 528,029     $ 506,249  
Net Leverage   3.8x       3.2x  


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