Sotera Health Co

Previous wording

You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2023 Form 10-K. This discussion and analysis contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of various factors, including the factors we describe in the section entitled Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q, as well as Part I, Item 1A, “Risk Factors” in our 2023 Form 10-K.

Current wording

You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2023 10-K. This discussion and analysis contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of various factors, including the factors we describe in the section entitled Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q, as well as Part I, Item 1A, “Risk Factors” in our 2023 10-K.

Previous wording

For the three months ended March 31, 2024, we recorded net revenues of $248.2 million, net income of $6.3 million, Adjusted Net Income of $35.6 million and Adjusted EBITDA of $111.9 million. For the definition of Adjusted Net Income and Adjusted EBITDA and the reconciliation of these non-GAAP measures from net income, please see “Non-GAAP Financial Measures.”

Current wording

For the three and six months ended June 30, 2024, respectively, we recorded net revenues of $276.6 million and $524.8 million, net income of $8.8 million and $15.1 million, Adjusted Net Income of $55.2 million and $90.8 million, and Adjusted EBITDA of $137.3 million and $249.3 million. For the definition of Adjusted Net Income and Adjusted EBITDA and the reconciliation of these non-GAAP measures from net income, please see “Non-GAAP Financial Measures.”

Previous wording

The following summarizes strategic developments and key factors that have impacted our operating results for the three months ended March 31, 2024 and may continue to affect our performance and financial condition in future periods.

Current wording

The following summarizes strategic developments and key factors that impacted our operating results for the three and six months ended June 30, 2024 and may continue to affect our performance and financial condition in future periods.

Previous wording

Three Months Ended March 31, 2024 compared to the Three Months Ended March 31, 2023

Current wording

•Business and market conditions. Consolidated net revenues for the three months ended June 30, 2024 increased 8.3% from the same period of the prior year, mainly driven by improved volumes and sustained favorability in pricing across all segments.

Previous wording

As discussed in more detail in our 2023 Form 10-K, 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 during the three months ended March 31, 2024.

Current wording

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 during the three and six months ended June 30, 2024.

Previous wording

For the three months ended March 31, 2024 and 2023, we recorded costs of $6.3 million and $14.0 million, respectively, representing professional fees and other expenses related to litigation associated with our EO sterilization facilities.

Current wording

For the three and six months ended June 30, 2024, we recorded costs of $7.8 million and $14.2 million, respectively, representing professional fees and other expenses related to litigation associated with our EO sterilization facilities.

Previous wording

•Borrowings, financing costs and financial leverage. On March 1, 2024, the Company entered into Amendment No. 3 to the First Lien Credit Agreement. Among other changes, the Amendment provides (i) for new commitments under the existing Revolving Credit Facility to replace existing revolving commitments in an aggregate principal amount of $83 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 the earlier of (a) March 1, 2029, and (b) the date that is 91 days prior to the maturity date of the Company’s existing term loans. The Amendment does not give effect to any other material changes to the terms and conditions of the Credit Agreement, including with respect to the amount of commitments under the Revolving Credit Facility which remains $423.8 million.

Current wording

On March 21, 2024, the Company entered into Amendment No. 3 to the Senior Secured Credit Facilities. Among other changes, the Amendment provides (i) for new commitments under the existing Revolving Credit Facility to replace existing revolving commitments in an aggregate principal amount of $83 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. Amendment No. 3 does not give effect to any other material changes to the terms and conditions of the Credit Agreement, including with respect to the amount of commitments under the Revolving Credit Facility Amendment, which remains $423.8 million.

Previous wording

Net revenues were $248.2 million in the three months ended March 31, 2024, an increase of $27.6 million, or 12.5%, as compared with the three months ended March 31, 2023. Excluding the impact of foreign currency exchange rates, net revenues in the three months ended March 31, 2024 increased approximately 11.8% compared with the three months ended March 31, 2023.

Current wording

Net revenues were $276.6 million in the three months ended June 30, 2024, an increase of $21.3 million, or 8.3%, as compared with the three months ended June 30, 2023. Excluding the impact of foreign currency exchange rates, net revenues in the three months ended June 30, 2024 increased approximately 8.8% compared with the three months ended June 30, 2023.

Previous wording

Total cost of revenues accounted for approximately 48.8% and 49.5% of our consolidated net revenues for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Total cost of revenues accounted for approximately 44.8% and 45.3% of our consolidated net revenues for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Cost of product revenues increased $5.3 million, or 109.3%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was primarily a result of higher volumes of Co-60 shipments, which resulted in increases in direct material and material transportation costs of $4.9 million.

Current wording

Cost of product revenues increased $2.9 million, or 24.4%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was primarily a result of higher volumes of Co-60 shipments, which resulted in increases in direct material and transportation costs of $2.9 million.

Previous wording

Operating expenses accounted for approximately 29.8% and 35.4% of our consolidated net revenues for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Operating expenses accounted for approximately 27.5% and 29.9% of our consolidated net revenues for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Amortization of intangible assets decreased $0.5 million, or 3.1% for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023 due to changes in foreign currency exchange rates.

Current wording

Amortization of intangible assets decreased $0.7 million to $15.4 million, or 4.2%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 due mainly to changes in foreign currency exchange rates.

Previous wording

Foreign exchange gain was $0.6 million for the three months ended March 31, 2024 compared to a loss of $0.3 million for the three months ended March 31, 2023. The change in foreign exchange loss mainly relates to short-term gains and losses on transactions denominated in currencies other than the functional currency of our operating entities. As described in Note 15, “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.

Current wording

Foreign exchange gain was $0.6 million for the three months ended June 30, 2024 as compared to a loss of $0.5 million in the three months ended June 30, 2023. The change in foreign exchange (gain) loss in our Consolidated Statements of Operations and Comprehensive Income (Loss) mainly relates to short-term losses (offset by short-term gains) on sales denominated in currencies other than the functional currency of our operating entities. As described in Note 15, “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.

Previous wording

Provision for income taxes increased $2.1 million to a net provision of $4.7 million for the three months ended March 31, 2024, as compared to $2.6 million for the three months ended March 31, 2023. The change was primarily attributable to higher pre-tax income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 combined with an increase in the valuation allowance against our excess interest expense carryforward balance and the foreign rate differential. The increase in the valuation allowance was a direct result of the EO litigation settlements in Illinois and Georgia. Both payments eliminated the deductibility of U.S. interest in the current year and the year ended December 31, 2023, which resulted in an increase to the valuation allowance against our excess interest expense carryforward balance.

Current wording

increase in the valuation allowance against our excess interest expense carryforward balance.

Previous wording

Provision for income taxes for the three months ended March 31, 2024 differed from the statutory rate primarily due to an increase in the valuation allowance against our excess interest expense carryforward balance and the impact of the foreign rate differential, partially offset by a benefit for state income taxes. Provision for income taxes for the three months ended March 31, 2023 differed from the statutory rate primarily due to an increase in the valuation allowance against our excess interest expense carryforward balance, the impact of the foreign rate differential and non-deductible compensation.

Current wording

Provision for income taxes for the three months ended June 30, 2024 differed from the statutory rate primarily due tothe impact of the valuation allowance attributable to the limitation on the deductibility of interest expense and the foreign rate differential, partially offset by a benefit for state income taxes. Provision for income taxes for the three months ended June 30, 2023 differed from the statutory rate primarily due to a net increase in the valuation allowance attributable to the limitation on the deductibility of interest expense, the impact of the foreign rate differential, and GILTI.

Previous wording

Net income for the three months ended March 31, 2024 was $6.3 million, as compared to $2.8 million for the three months ended March 31, 2023. Adjusted Net Income was $35.6 million for the three months ended March 31, 2024, as compared to $35.9 million for the three months ended March 31, 2023, due to the factors described above. Adjusted EBITDA was $111.9 million for the three months ended March 31, 2024, as compared to $98.5 million for the three months ended March 31, 2023, due to the factors described above. Please see “Non-GAAP Financial Measures” below for a reconciliation of Adjusted Net Income and Adjusted EBITDA to their most directly comparable financial measure calculated and presented in accordance with GAAP.

Current wording

Net income for the three months ended June 30, 2024 was $8.8 million, as compared to net income of $23.5 million for the three months ended June 30, 2023 due to the factors described above. Adjusted Net Income was $55.2 million for the three months ended June 30, 2024, as compared to $55.5 million for the three months ended June 30, 2023, and Adjusted EBITDA was $137.3 million for the three months ended June 30, 2024, as compared to $128.5 million for the three months ended June 30, 2023. Please see “Non-GAAP Financial Measures” below for a reconciliation of Adjusted Net Income and Adjusted EBITDA to their most directly comparable financial measure calculated and presented in accordance with GAAP.

Previous wording

Service revenues increased $12.0 million, or 5.6%, to $226.5 million for the three months ended March 31, 2024, as compared to $214.5 million for the three months ended March 31, 2023. The growth in net service revenues was driven by favorable pricing of $7.9 million and $1.6 million in the Sterigenics and Nelson Labs segments, respectively, favorable improvements in volume and mix of $3.9 million in the Nelson Labs segment and a $1.4 million favorable impact from changes in foreign currency exchange rates across all segments. Partially offsetting these growth factors was an unfavorable impact from volume and mix of $2.7 million in the Sterigenics segment.

Current wording

Service revenues increased $23.7 million, or 5.4%, to $464.2 million in the six months ended June 30, 2024 as compared to $440.6 million in the six months ended June 30, 2023. The growth in net service revenues was primarily driven by favorable pricing of $15.9 million and $3.3 million in the Sterigenics and Nelson Labs segments, respectively, a favorable change in service revenue volume and mix of $4.7 million in the Nelson Labs segment and a benefit from changes in foreign currency exchange rates of $0.6 million.

Previous wording

Cost of service revenues increased $6.6 million, or 6.4%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The growth in cost of service revenues was primarily driven by higher employee compensation costs of $3.7 million coupled with an increase of $1.3 million in repairs and maintenance costs, $1.0 million of depreciation related to capital assets recently placed in service, and a $0.7 million unfavorable impact from changes in foreign currency exchange rates.

Current wording

Cost of service revenues increased $11.9 million, or 5.7%, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The growth in cost of service revenues was primarily driven by higher employee compensation costs of $8.1 million, a $2.2 million increase in depreciation related to capital assets recently placed in service, and a $1.4 million increase in certain facility repairs and maintenance costs.

Previous wording

SG&A decreased $3.7 million, or 6.0%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The decrease was driven primarily by a $7.6 million decline in litigation and other professional services expense associated with EO sterilization facilities, partially offset by a $2.8 million increase in selling, general and administrative compensation-related costs and a $1.3 million increase in share-based compensation expense.

Current wording

SG&A expenses decreased $3.4 million, or 2.8%, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The decrease was driven primarily by a $9.6 million decline in legal and other professional services expenses. This decrease was partially offset by a $3.1 million increase in share-based compensation expense and $3.1 million of other incremental SG&A compensation-related costs.

Previous wording

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

Current wording

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

Previous wording

•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;

Current wording

•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;

Previous wording

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

Current wording

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

Previous wording

(d)The three months ended March 31, 2024 includes$1.1 million of expenses incurred in connection with the secondary offering of our common stock that closed on March 4, 2024 and write-off of unamortized debt issuance costs in connection with Amendment No. 3 to the Revolving Credit Facility.

Current wording

•expenses incurred in connection with the secondary offering of our common stock;

Previous wording

(a)Represents share-based compensation expense to employees and Non-Employee Directors.

Current wording

(a) Represents share-based compensation expense to employees and Non-Employee Directors.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

(d) Represents (i) certain costs related to acquisitions and the integration of recent acquisitions, (ii) the earnings impact of fair value adjustments (excluding those recognized within amortization expense) resulting from the businesses acquired, (iii) transition services income and non-cash deferred lease income associated with the terms of the divestiture of the Medical Isotopes business in 2018, (iv) professional fees and other costs associated with business optimization, cost saving and other process enhancement projects, and (v) professional fees, payroll costs, and other costs, including ongoing lease and utility expenses associated with the closure of the Willowbrook, Illinois facility. The six months ended June 30, 2023 includes a $1.0 million cancellation fee received from a tenant in connection with the termination of an office space lease at the Nordion facility.

Previous wording

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

Current wording

(e) Represents litigation and other professional fees associated with our EO sterilization facilities. Amounts presented for the three and six months ended June 30, 2023 have been adjusted to exclude interest expense, net associated with Term Loan B due 2026 attributable to the loan proceeds that were used to fund the $408.0 million Illinois EO litigation settlement.

Previous wording

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

Current wording

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

Previous wording

(h)Interest expense, net presented in this reconciliation for the three months ended March 31, 2023 has been adjusted to conform to the current year presentation to include 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.

Current wording

(i) Interest expense, net presented in this reconciliation for the three and six months ended June 30, 2023 has been adjusted to conform to the current year presentation to include interest expense, net on Term Loan B due 2026 attributable to the loan proceeds that were used to fund the $408.0 million Illinois EO litigation settlement.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

(k) $23.8 million and $22.9 million of the adjustments for the three months ended March 31, 2024 and 2023, respectively, are included in cost of revenues, primarily consisting of amortization of intangible assets, depreciation, and accretion of asset retirement obligations.

Current wording

(l) $23.4 million and $24.4 million of the adjustments for the three months ended June 30, 2024 and 2023, respectively, and $47.2 million of the adjustments for the six months ended June 30, 2024 and 2023, are included in cost of revenues, primarily consisting of amortization of intangible assets, depreciation, and accretion of asset retirement obligations.

Previous wording

The primary sources of liquidity for our business are cash flows from operations and borrowings under our credit facilities. As of March 31, 2024, we had $261.1 million of unrestricted cash and cash equivalents. This is a decrease of $35.3 million from the balance at December 31, 2023. The decrease in cash and cash equivalents was mainly attributable to the $35.0 million payment of the Atlanta settlement in January 2024. Our foreign subsidiaries held cash of approximately $249.6 million at March 31, 2024 and $224.1 million at December 31, 2023. No material restrictions exist to accessing cash held by our foreign subsidiaries notwithstanding any potential tax consequences.

Current wording

The primary sources of liquidity for our business are cash flows from operations and borrowings under our credit facilities. As of June 30, 2024, we had $246.1 million of unrestricted cash and cash equivalents. This is a decrease of $50.3 million from the balance at December 31, 2023. The decrease in unrestricted cash and cash equivalents is mainly attributable to the $35.0 million payment of the Atlanta settlement in January 2024 and the $30.2 million payment in debt issuance costs and discounts associated with the issuance of the Refinancing Term Loans and Secured Notes in May 2024. Our foreign subsidiaries held cash of approximately $238.1 million at June 30, 2024 and $224.1 million at December 31, 2023. No material restrictions exist to accessing cash held by our foreign subsidiaries notwithstanding any potential tax consequences.

Previous wording

As described in more detail below, on March 1, 2024, the Company and SHH entered into Amendment No. 3 to the Revolving Credit Facility. The Amendment did not materially change to the terms and conditions of the Credit Agreement, including with respect to the amount of commitments under the Revolving Credit Facility, which remains$423.8 million.

Current wording

As described in more detail below, on March 1, 2024, the Company and SHH entered into Amendment No. 3 to the Revolving Credit Facility. Amendment No. 3 did not materially change to the terms and conditions of the Credit Agreement, including with respect to the amount of commitments under the Revolving Credit Facility, which remains $423.8 million.

Previous wording

We expect that cash on hand, operating cash flows and amounts available under our credit facilities will provide sufficient working capital to operate our business, meet foreseeable liquidity requirements (inclusive of debt service on our long-term debt), make expected capital expenditures including investments in fixed assets to build and/or expand existing facilities, and meet litigation costs that we expect to continue to incur for at least the next twelve months. Our primary long-term liquidity requirements beyond the next 12 months will be to service our debt, make capital expenditures, and fund suitable business acquisitions. As of March 31, 2024, there were no outstanding borrowings on the Revolving Credit Facility. We expect any excess cash provided by operations will be allocated to fund capital expenditures, potential acquisitions, or for other general corporate purposes. Our ability to meet future working capital, capital expenditures and debt service requirements will depend on our future financial performance, which will be affected by a range of macroeconomic, competitive and business factors, including interest rate changes and changes in our industry, many of which are outside of our control. As of March 31, 2024, our interest rate derivatives limit our cash flow exposure of our variable rate borrowings under the Term Loans. Refer to Note 15, “Financial Instruments and Financial Risk” under the heading “Derivative Instruments” for additional information about changes in interest rate risk.

Current wording

We expect that cash on hand, operating cash flows and amounts available under our credit facilities will provide sufficient working capital to operate our business, meet foreseeable liquidity requirements (inclusive of debt service on our long-term debt), make expected capital expenditures including investments in fixed assets to build and/or expand existing facilities, and meet litigation costs that we expect to continue to incur for at least the next twelve months and the foreseeable future thereafter. 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 June 30, 2024, there were no outstanding borrowings on the Revolving Credit Facility. We expect any excess cash provided by operations will be allocated to fund capital expenditures, potential acquisitions, or for other general corporate purposes. Our ability to meet future working capital, capital expenditures and debt service requirements will depend on our future financial performance, which will be affected by a range of macroeconomic, competitive and business factors, including interest rate changes and changes in our industry, many of which are outside of our control. As of June 30, 2024, our interest rate derivatives limit our cash flow exposure of our variable rate borrowings under the Term Loans. Refer to Note 15, “Financial Instruments and Financial Risk”, “Derivative Instruments” for additional information about changes in interest rate risk.

Previous wording

Our capital expenditure program is a component of our long-term strategy. This program includes, among other things, investments in new and existing facilities, business expansion projects, Co-60 used by Sterigenics at its gamma irradiation facilities, cobalt development projects and information technology enhancements. During the three months ended March 31, 2024, our capital expenditures amounted to $34.9 million, compared to $45.0 million for the three months ended March 31, 2023.

Current wording

Our capital expenditure program is a component of our long-term strategy. This program includes, among other things, investments in new and existing facilities, business expansion projects, Co-60 used by Sterigenics at its gamma irradiation facilities, cobalt development projects and information technology enhancements. During the six months ended June 30, 2024, our capital expenditures amounted to $76.8 million, compared to $98.1 million for the six months ended June 30, 2023.

Previous wording

Cash flows provided by operating activities decreased $24.2 million to net cash provided of $9.7 million for the three months ended March 31, 2024 compared to $33.9 million for the three months ended March 31, 2023. The decrease in cash flows from operating activities in the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was driven primarily by the $35.0 million payment of the Atlanta settlement, partially offset by changes in working capital of approximately $12.1 million.

Current wording

Cash flows from operating activities increased $373.7 million to net cash provided of $71.0 million in the six months ended June 30, 2024 compared to $302.7 million of net cash used in operating activities for the six months ended June 30, 2023. The change in overall cash flows from operating activities was primarily due to the timing of the release of the $407.7 million Illinois settlement funds on June 30, 2023 and the release of the $35.0 million Atlanta settlement funds in January 2024.

Previous wording

Cash used in investing activities decreased $10.1 million to net cash used of $34.9 million for the three months ended March 31, 2024 compared to $45.0 million for the three months ended March 31, 2023. The variance was driven by a decrease in capital expenditures of $10.1 million in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Cash used by investing activities decreased $21.3 million to net cash used of $76.8 million in the six months ended June 30, 2024 compared to $98.1 million for the six months ended June 30, 2024. The variance was primarily driven by a decrease in cash paid for capital expenditures of $21.3 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Previous wording

Cash used in financing activities was $11.9 million for the three months ended March 31, 2024 compared to cash provided by financing activities of $273.9 million for the three months ended March 31, 2023. The difference was mainly attributable to $500.0 million in proceeds from the issuance of Term Loan B on February 23, 2023 and the $200.0 million paydown of the outstanding balance on the Revolving Credit Facility in February 2023. Additionally, the Company paid $24.5 million of debt issuance costs during the three months ended March 31, 2023 in connection with the issuance of Term Loan B compared to $1.3 million of issuance costs paid for Amendment No. 3 to the Revolving Credit Facility in the three months ended March 31, 2024, as described in “Debt Facilities” below. In addition, the Company paid $6.7 million in the three months ended March 31, 2024 to acquire certain facilities through the settlement of a finance lease.

Current wording

Cash used in financing activities was $41.4 million for the six months ended June 30, 2024 compared to $273.2 million of cash provided by financing activities for the six months ended June 30, 2023. The difference was mainly attributable to $500.0 million in proceeds from the issuance of Term Loan B due 2026 on February 23, 2023, partially offset by the $200.0 million paydown of the outstanding balance on the Revolving Credit Facility concurrent with the issuance of Term Loan B due 2026. Additionally, in the six months ended June 30, 2024, the Company paid $6.7 million to acquire certain facilities through the settlement of a finance lease and paid $5.5 million of incremental debt issuance costs as compared to the comparable period of the prior year.

Previous wording

On December 13, 2019, SHH, our wholly-owned subsidiary, entered into senior secured first lien credit facilities (the “Senior Secured Credit Facilities”), consisting of both a prepayable senior secured first lien term loan (the “Term Loan”) and a senior secured first lien revolving credit facility (the “Revolving Credit Facility”) pursuant to a first lien credit agreement (the “Credit Agreement”). The Term Loan matures on June 13, 2026. The total borrowing capacity under the Revolving Credit Facility is $423.8 million. The Senior Secured Credit Facilities also provide SHH the right at any time and under certain conditions to request incremental term loans or incremental revolving credit commitments based on a formula defined in the Senior Secured Credit Facilities. As of March 31, 2024 and December 31, 2023, total borrowings under the Term Loan were $1,763.1 million. The weighted average interest rate on borrowings under the Term Loan for the three months ended March 31, 2024 and March 31, 2023 was 8.26% and 7.44%, respectively.

Current wording

On December 13, 2019, SHH, our wholly-owned subsidiary, entered into the Senior Secured Credit Facilities, consisting of both the Term Loan and the Revolving Credit Facility pursuant to the Credit Agreement. The total borrowing capacity under the Revolving Credit Facility is $423.8 million. The Senior Secured Credit Facilities also provide SHH the right at any time and under certain conditions to request incremental term loans or incremental revolving credit commitments based on a formula defined in the Senior Secured Credit Facilities.