-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ESFmkbrYo1aAHq1R/DGw1vCahRQhP+xcUComo+dOkDY49MH09HwvQZ+ap94BQJwZ ZmQLOdLBOk3wso8og7019Q== 0000950137-00-002226.txt : 20000511 0000950137-00-002226.hdr.sgml : 20000511 ACCESSION NUMBER: 0000950137-00-002226 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERICYCLE INC CENTRAL INDEX KEY: 0000861878 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 363640402 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21229 FILM NUMBER: 625127 BUSINESS ADDRESS: STREET 1: 28161 NORTH KEITH DRIVE STREET 2: SUITE 410 CITY: LAKE FOREST STATE: IL ZIP: 60045 BUSINESS PHONE: 8479456550 MAIL ADDRESS: STREET 1: 1419 LAKE COOK RD STREET 2: STE 410 CITY: DEERFIELD STATE: IL ZIP: 60015 10-Q 1 FORM 10-Q 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2000 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934 for the transition period from to Commission file number: 0-21229 ----------------------------- STERICYCLE, INC. (exact name of registrant as specified in its charter) DELAWARE 36-3640402 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 28161 NORTH KEITH DRIVE LAKE FOREST, ILLINOIS 60045 (Address of principal executive offices) (Zip Code) (847) 367-5910 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] As of May 9, 2000 there were 14,809,108 shares of the Registrant's Common Stock outstanding. ================================================================================ 2 STERICYCLE, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q
PART I--FINANCIAL INFORMATION Page ---- Item 1. Financial Statements Condensed Consolidated Financial Statements of Stericycle, Inc. and Subsidiaries Condensed Consolidated Balance Sheets March 31, 2000 (unaudited) and December 31, 1999....................................... 3 Condensed Consolidated Statements of Operations Three months ended March 31, 2000 and 1999 (unaudited)................................. 4 Condensed Consolidated Statements of Cash Flows Three months ended March 31, 2000 and 1999 (unaudited)................................. 5 Notes to Condensed Consolidated Financial Statements................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................................... 13 PART II--OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.......................................................... 16
-2- 3 STERICYCLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
MARCH 31 DECEMBER 31 2000 1999 ------------ ----------- (unaudited) ASSETS Current assets: Cash and cash equivalents ........................................................ $ 20,770 $ 19,344 Short-term investments ........................................................... 278 285 Accounts receivable, less allowance for doubtful accounts of $1,153 in 2000 and $980 in 1999 .................................... 53,418 48,284 Parts and supplies ............................................................... 2,702 2,035 Prepaid expenses ................................................................. 1,205 863 Other ............................................................................ 6,136 6,729 --------- --------- Total current assets ........................................................... 84,509 77,540 --------- --------- Property, plant and equipment: Land ............................................................................. 7,308 7,308 Buildings and improvements ....................................................... 29,287 29,123 Machinery and equipment .......................................................... 51,185 50,011 Office equipment and furniture ................................................... 4,991 5,182 Construction in progress ......................................................... 632 386 --------- --------- 93,403 92,010 Less accumulated depreciation .................................................... (19,204) (16,898) --------- --------- Property, plant and equipment, net ............................................. 74,199 75,112 Other assets: Goodwill, less accumulated amortization of $11,521 in 2000 and $7,974 in 1999 ..................................................... 418,190 421,001 Other ............................................................................ 22,275 22,133 --------- --------- Total other assets ............................................................. 440,465 443,134 --------- --------- Total assets ................................................................. $ 599,173 $ 595,786 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long term debt ................................................ $ 7,080 $ 5,741 Accounts payable ................................................................. 11,308 14,347 Accrued compensation ............................................................. 7,499 7,569 Accrued transition expenses ...................................................... 5,866 7,101 Accrued liabilities .............................................................. 20,156 15,782 Deferred revenue ................................................................. 707 142 --------- --------- Total current liabilities ...................................................... 52,616 50,682 --------- --------- Long-term debt, net of current portion .............................................. 363,130 355,444 Long-term liabilities ............................................................... 2,161 2,351 Redeemable convertible preferred stock Series A convertible preferred stock (par value $.01 per share, 75,000 shares authorized and outstanding in 2000 and 1999, liquidation preference of $107,125 in 2000 and $80,625 in 1999 ........................................ 69,855 69,195 Common shareholders' equity Common stock (par value $.01 per share, 30,000,000 shares authorized, 14,758,604 issued and outstanding in 2000, 14,734,237 issued and outstanding in 1999) ............................ 147 147 Additional paid-in capital-common stock .......................................... 136,875 136,691 Accumulated deficit .............................................................. (15,611) (18,724) --------- --------- Total shareholders' equity ..................................................... 121,411 118,114 --------- --------- Total liabilities and shareholders' equity .......................................... $ 599,173 $ 595,786 ========= =========
The accompanying notes are an integral part of these financial statements. -3- 4 STERICYCLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA) (UNAUDITED)
FOR THE THREE MONTHS ENDED ---------------------------- MARCH 31, --------- 2000 1999 ------------- ------------- Revenues .................................... $ 77,668 $ 23,868 Costs and expenses: Cost of revenues ......................... 47,357 15,861 Selling, general and administrative ...... 14,484 5,084 ----------- ------------ Total costs and expenses ............... 61,841 20,945 ----------- ------------ Income from operations ...................... 15,827 2,923 Other income (expense): Interest income .......................... 196 77 Interest expense ......................... (9,855) (363) Other income, net ........................ 112 383 ----------- ------------ Total other income (expense) ........... (9,547) 97 ----------- ------------ Income before income taxes .................. 6,280 3,020 Income tax expense .......................... 2,507 593 ----------- ------------ Net income .................................. $ 3,773 $ 2,427 =========== ============ Earnings per share--Basic .................. $ 0.21 $ 0.19 =========== ============ Earnings per share--Diluted ................ $ 0.19 $ 0.18 =========== ============ Weighted average number of common shares outstanding--Basic ............... 14,746,603 13,068,931 =========== ============ Weighted average number of common shares outstanding--Diluted ............. 19,589,090 13,534,530 =========== ============
The accompanying notes are an integral part of these financial statements. -4- 5 STERICYCLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
FOR THE THREE MONTHS ENDED -------------------------- MARCH 31, --------- 2000 1999 --------- ---------- OPERATING ACTIVITIES: Net income ............................................................................. $ 3,773 $ 2,427 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Stock compensation expense ........................................................ 40 -- Depreciation and amortization ..................................................... 5,783 1,716 Change in operating assets and liabilities, net of effects of acquisitions: Accounts receivable ............................................................... (5,133) 478 Parts and supplies ................................................................ (667) 292 Prepaid expenses .................................................................. (342) (176) Other assets ...................................................................... 553 (637) Accounts payable .................................................................. (3,039) (3,574) Accrued liabilities ............................................................... 2,879 (30) Deferred revenue .................................................................. 565 (815) -------- -------- Net cash provided by (used in) operating activities .................................... 4,412 (319) -------- -------- INVESTING ACTIVITIES: Payments for acquisitions and international investments, net of cash acquired ............................................... (655) (5,399) Proceeds from maturity of short-term investments .................................. 7 -- Capital expenditures .............................................................. (1,158) (983) -------- -------- Net cash used in investing activities .................................................. (1,806) (6,382) -------- -------- FINANCING ACTIVITIES: Net proceeds and repayment from bank lines of credit .............................. -- (16,359) Net proceeds ad repayment from subordinated debt .................................. -- (2,750) Repayment of long term debt ....................................................... (844) (2,902) Payments of deferred financing costs .............................................. -- (35) Principal payments on capital lease obligations ................................... (479) (50) Net proceeds from secondary public offering of common stock ................................................................. -- 47,176 Proceeds from other issuances of common stock ..................................... 143 143 -------- -------- Net cash provided by (used in) financing activities .................................... (1,180) 25,223 -------- -------- Net increase in cash and cash equivalents .............................................. 1,426 18,522 Cash and cash equivalents at beginning of period ....................................... 19,344 1,283 -------- -------- Cash and cash equivalents at end of period ............................................. $ 20,770 $ 19,805 ======== ======== Non-cash activities: Net issuances of common stock for certain acquisitions .................................................................... $ -- $ 982
The accompanying notes are an integral part of these financial statements. -5- 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Unless the context requires otherwise, "we", "us" or "our" refers to Stericycle, Inc. and its subsidiaries on a consolidated basis. NOTE 1--BASIS OF PRESENTATION The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; but we believe the disclosures in the accompanying condensed consolidated financial statements are adequate to make the information presented not misleading. In our opinion, all adjustments necessary for a fair presentation for the periods presented have been reflected and are of a normal recurring nature. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the two years ended December 31, 1999, as filed with our 1999 Annual Report on Form 10-K. The results of operations for the three-month period ended March 31, 2000 are not necessarily indicative of the results that may be achieved for the entire year ending December 31, 2000. NOTE 2--ACQUISITIONS There were no material acquisitions during the quarter ended March 31, 2000. NOTE 3--STOCK OPTIONS During the quarter ended March 31, 2000, options to purchase common stock totaling 8,100 shares were granted to employees. These options vest ratably over a five year period and have an average exercise price of approximately $15.94 per share. The grant of options was made under our 2000 Stock Option Plan, which authorizes the grant of options for a total of 500,000 shares of our common stock. The 2000 Stock Option Plan was approved by our Board of Directors in February 2000. In addition, 32,256 options to purchase common stock were granted to outside directors under our 1996 Directors Stock Option Plan and 15,000 options to purchase common stock were granted under our 1997 Stock Option Plan. These options have an average exercise price of $15.94 per share. NOTE 4--STOCK ISSUANCES During the quarter ended March 31 2000, options to purchase 30,354 shares of common stock were exercised at prices ranging from $0.53 - $18.125 per share. In addition, warrants with rights to purchase 5,651 shares of common stock were exercised at a price of $1.59 per share. -6- 7 NOTE 5--INCOME TAXES At March 31, 2000, we had net operating loss carryforwards for federal income tax purposes of approximately $18,500,000, which expire beginning in 2006. During the fourth quarter of 1999, we reevaluated the estimated amount of the valuation allowance required. As a result, we reduced the valuation allowance on deferred tax assets in accordance with SFAS No. 109, "Accounting for Income Taxes" (SFAS No. 109), to an amount that we believe is more likely than not of being recovered. NOTE 6--CONDENSED CONSOLIDATING FINANCIAL INFORMATION Payments under our senior subordinated notes (the "notes") is unconditionally guaranteed, jointly and severally, by all of our wholly-owned domestic subsidiaries, which include Environmental Control Company, Inc., acquired in May 1997, Waste Systems, Inc., acquired October 1, 1998, Med-Tech Environmental, Inc., acquired December 31, 1998, BFI Medical Waste, Inc. and Browning-Ferris Industries of Connecticut, Inc., both acquired on November 12, 1999, and certain other subsidiaries which have insignificant assets and operations (collectively, the "guarantors"). Financial information concerning the guarantors as of March 31, 2000 and December 31, 1999 and for the three months ended March 31, 2000 and 1999 is presented below for purposes of complying with the reporting requirements of the guarantor subsidiaries. The financial information concerning the guarantors is being presented through condensed consolidating financial statements since we have more than minimal independent operations and the guarantees are full and unconditional and are joint and several. Guarantor financial statements have not been presented because management does not believe that such financial statements are material to investors. -7- 8 CONDENSED CONSOLIDATING BALANCE SHEET MARCH 31, 2000 UNAUDITED (IN THOUSANDS)
NON- GUARANTOR GUARANTOR STERICYCLE, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ---------------- ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 20,092 $ 222 $ 456 $ -- $ 20,770 Other current assets 56,536 9,643 5,613 (8,053) 63,739 --------- --------- --------- --------- --------- Total current assets 76,628 9,865 6,069 (8,053) 84,509 Property, plant and equipment, net 15,109 49,140 9,950 -- 74,199 Goodwill, net 38,673 367,276 12,241 -- 418,190 Investment in subsidiaries 440,905 3,754 -- (444,659) -- Other assets 18,694 13,200 121 (9,740) 22,275 --------- --------- --------- --------- --------- Total assets $ 590,009 $ 443,235 $ 28,381 $(462,452) $ 599,173 ========= ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 4,801 $ 998 $ 1,281 $ -- $ 7,080 Other current liabilities 44,054 5,133 4,044 (7,695) 45,536 --------- --------- --------- --------- --------- Total current liabilities 48,855 6,131 5,325 (7,695) 52,616 Long-term debt, net of current portion 347,727 4,502 10,959 (10,058) 353,130 Other liabilities 2,161 -- -- -- 2,161 Redeemable convertible preferred stock 69,855 -- -- -- 69,855 Common shareholders' equity 121,411 432,602 12,097 (444,699) 121,411 --------- --------- --------- --------- --------- Total liabilities and shareholders' equity $ 590,009 $ 443,235 $ 28,381 $(462,452) $ 599,173 ========= ========= ========= ========= =========
-8- 9 CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 1999 AUDITED (IN THOUSANDS)
NON- GUARANTOR GUARANTOR STERICYCLE, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ---------------- ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 18,808 $ 246 $ 290 $ -- $ 19,344 Other current assets 52,928 8,840 4,648 (8,220) 58,196 --------- --------- --------- --------- --------- Total current assets 71,736 9,086 4,938 (8,220) 77,540 Property, plant and equipment, net 15,029 49,932 10,151 -- 75,112 Goodwill, net 40,290 369,914 10,167 -- 421,001 Investment in subsidiaries 441,423 3,627 -- (445,050) -- Other assets 17,817 13,617 3,675 (12,976) 22,133 --------- --------- --------- --------- --------- Total assets $ 586,925 $ 446,176 $ 28,931 $(466,246) $ 595,786 ========= ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 3,954 $ 892 $ 895 $ -- $ 5,741 Other current liabilities 43,517 5,084 4,677 (8,337) 44,941 --------- --------- --------- --------- --------- Total current liabilities 47,471 5,976 5,572 (8,337) 50,682 Long-term debt, net of current portion 349,794 4,539 13,970 (12,859) 355,444 Other liabilities 2,351 -- -- -- 2,351 Redeemable convertible preferred stock 69,195 -- -- -- 69,195 Common shareholders' equity 118,114 435,661 9,389 (445,050) 118,114 --------- --------- --------- --------- --------- Total liabilities and shareholders' equity $ 586,925 $ 446,176 $ 28,931 $(466,246) $ 595,786 ========= ========= ========= ========= =========
-9- 10 CONDENSED CONSOLIDATING STATEMENT OF INCOME THREE MONTHS ENDED MARCH 31, 2000 UNAUDITED (IN THOUSANDS)
NON- GUARANTOR GUARANTOR STERICYCLE, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ---------------- ------------ ------------ ------------ ------------ Revenues $32,863 $38,104 $6,727 $ (26) $77,668 Cost of revenues 18,900 23,503 4,980 (26) 47,357 Selling, general, and administrative expense 8,870 4,408 1,206 - 14,484 -------- -------- ------ --------- ------- Total costs and expenses 27,770 27,911 6,186 (26) 61,841 ------- ------- ------ -------- ------- Income from operations 5,093 10,193 541 - 15,827 Equity in net income of subsidiaries 6,738 5 - (6,743) - Other income (expense), net (9,342) 138 (343) - (9,547) ------- --------- ------- --------- -------- Income before income taxes 2,489 10,336 198 (6,743) 6,280 Income tax (benefit) expense (1,284) 3,791 - - 2,507 -------- -------- --------- --------- -------- Net income (loss) $ 3,773 $ 6,545 $ 198 $(6,743) $ 3,773 ======= ======= ======= ======= =======
CONDENSED CONSOLIDATING STATEMENT OF INCOME THREE MONTHS ENDED MARCH 31, 1999 UNAUDITED (IN THOUSANDS)
NON- GUARANTOR GUARANTOR STERICYCLE, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ---------------- ------------ ------------ ------------ ------------ Revenues $14,965 $ 3,198 $ 5,739 $ (34) $23,868 Cost of revenues 9,488 1,978 4,429 (34) 15,861 Selling, general, and administrative expense 3,254 652 1,178 -- 5,084 ------- ------- ------- ------- ------- Total costs and expenses 12,742 2,630 5,607 (34) 20,945 ------- ------- ------- ------- ------- Income from operations 2,223 568 132 -- 2,923 Equity in net income (loss) of subsidiaries 492 (188) -- (304) -- Other income (expense), net 268 135 (306) -- 97 ------- ------- ------- ------- ------- Income (loss) before income taxes 2,983 515 (174) (304) 3,020 Income tax expense 556 37 -- -- 593 ------- ------- ------- ------- ------- Net income (loss) $ 2,427 $ 478 $ (174) $ (304) $ 2,427 ======= ======= ======= ======= =======
-10- 11 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2000 UNAUDITED (IN THOUSANDS)
NON- GUARANTOR GUARANTOR STERICYCLE, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ---------------- ------------ ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided by operating activities $ 2,976 $ 899 $ 537 $ - $ 4,412 ------- ------- ------- ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (660) (287) (211) - (1,158) Payments for acquisitions and international investments, net of cash acquired (298) (357) - - (655) Proceeds from maturity of short-term investments 7 - - - 7 --------- -------- -------- ------- --------- Net cash used in investing activities (951) (644) (211) - (1,806) -------- ------- ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on capital lease obligations (40) (279) (160) - (479) Repayment of long term debt (844) - - - (844) Proceeds from issuance of common stock 143 - - - 143 -------- -------- -------- ------- -------- Net cash (used in) provided by financing activities (741) (279) (160) - (1,180) -------- ------- -------- ------- -------- Net increase (decrease) in cash and cash equivalents $ 1,284 $ (24) $ 166 $ - 1,426 ======= ======= ====== ======= Cash and cash equivalents at beginning of year 19,344 -------- Cash and cash equivalents at end of year $ 20,770 ========
-11- 12 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1999 UNAUDITED (IN THOUSANDS)
NON- GUARANTOR GUARANTOR STERICYCLE, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ---------------- ------------ ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net cash (used in) provided by operating activities $ (2,061) $ 140 $ 1,602 $ - $ (319) -------- ----- ------- -------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (794) (5) (184) - (983) Payments for acquisitions and international investments, net of cash acquired (5,399) - - - (5,399) -------- ------- --------- -------- ---------- Net cash used in investing (6,193) (5) (184) - (6,382) actvities -------- ------- -------- -------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net payment on bank lines of credit (16,359) - - - (16,359) Repayment of long term debt (2,902) - - - (2,902) Principal payments on capital lease obligations (44) (6) - - (50) Net payments on subordinated debt (2,750) - - - (2,750) Payment of deferred financing costs (35) - - - (35) Net proceeds from secondary public offering of common stock 47,176 - - - 47,176 Proceeds from other issuances of common stock 143 - - - 143 -------- ------- --------- -------- --------- Net cash provided by (used in) financing activities 25,229 (6) - - 25,223 -------- ------- --------- -------- --------- Net increase in cash and cash equivalents $16,975 $ 129 $ 1,418 $ - 18,522 ======== ===== ======= ======== Cash and cash equivalents at beginning of year 1,283 --------- Cash and cash equivalents at end of year $ 19,805 =========
-12- 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We were incorporated in March 1989. We provide regulated medical waste collection, transportation and treatment services to our customers and related training and education programs and consulting services. We also sell ancillary supplies and transport pharmaceuticals, photographic chemicals, lead foil and amalgam for recycling in selected geographic service areas. We are also expanding into international markets through joint ventures or by licensing our proprietary technology and selling associated equipment. The following summarizes (in thousands) our operations:
Three Months Ended March 31, ---------------------------------------------- 2000 1999 ---------------------- ---------------------- Revenues........................................... $ 77,668 100.0% $ 23,868 100.0% Cost of revenues.................................. 47,357 61.0% 15,861 66.5% ----------- ----------- Gross profit....................................... 30,311 39.0% 8,007 33.5% Selling, general and administrative expenses......................................... 14,484 18.6% 5,084 21.3% Income from operations............................. 15,287 20.4% 2,923 12.2% Net income......................................... 3,773 4.9% 2,427 10.2% Depreciation and amortization...................... 5,783 7.4% 1,716 7.2% EBITDA............................................. $ 21,722 28.0% $ 5,022 21.0%
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999 Revenues. Revenues increased $53,800,000, or 225.4%, to $77,668,000 during the three months ended March 31, 2000 from $23,868,000 during the comparable period in 1999 as a result of the acquisition of the medical waste business of Browning-Ferris Industries, Inc. (the "BFI acquisition"), which we completed in November, 1999 and as we continued to implement our strategy of focusing on sales to higher-margin small account customers while simultaneously paring certain lower-margin accounts with large account customers. Sales of equipment internationally during the three months ended March 31, 2000 decreased $1,458,000 to $402,000 from $1,860,000 during the comparable period in 1999. During the three months ended March 31, 2000, acquisitions contributed $53,136,000 to the increase in revenues as compared to the prior year. For the quarter, our base internal revenue growth for small account customers increased more than 16% while revenues from large account customers also increased by more than 5.0%. Cost of revenues. Cost of revenues increased $31,496,000 or 198.6%, to $47,357,000 during the three months ended March 31, 2000 from $15,861,000 during the comparable period in 1999. The increase was primarily due to the substantial increase in revenues during the three months ended March 31, 2000 compared to the comparable period in 1999. The gross margin percentage increased to 39.0% during the three months ended March 31, 2000 from 33.5% during the comparable period in 1999 as a result of the inclusion of a full quarter of the BFI acquisition and synergy savings. -13- 14 Selling, general and administrative expenses. Selling, general and administrative expenses increased to $14,484,000 for the three months ended March 31, 2000 compared to $5,084,000 for the comparable period in 1999. The increase was largely the result of increases in selling and marketing expenses as a result of the BFI acquisition, higher amortization of goodwill, expansion of our sales network, and increased administrative costs related to the higher volume. Selling, general and administrative expenses as a percentage of revenues decreased to 18.6% during the three months ended March 31, 2000 from 21.3% during the comparable period in 1999. Excluding amortization, selling, general and administrative expenses as a percent of revenue decreased to 14.3% during the three months ended March 31, 2000 from 18.9% during the comparable period in 1999. EBITDA. Earnings before interest, income taxes, depreciation and amortization ("EBITDA") increased by 332.5% to $21,722,000 for the three months ended March 31, 2000 compared to $5,022,000 for the comparable period in 1999. Interest income and interest expense. Interest income increased to $196,000 during the three months ended March 31, 2000 from $77,000 during the comparable period in 1999 primarily due to higher cash balances. Interest expense increased to $9,855,000 during the three months ended March 31, 2000 versus the prior year period primarily due to increased interest expense related to borrowings associated with the BFI acquisition. Other income and expense. Other income of $112,000 during the three months ended March 31, 2000 primarily related to the recognition of income from our minority interest in our Mexican joint venture, Medam S.A. de C.V. During the three months ended March 31, 1999 a one-time gain of $656,000 on the sale of routes by our majority owned subsidiary, 3CI Complete Compliance Corporation ("3CI"), was partially offset by a one-time non-cash expense of $192,000 for warrants issued in connection with bridge loan borrowings in December 1998 and January 1999. Income tax expense. The effective tax rate of approximately 40% for the three months ended March 31, 2000 reflects federal and state income taxes. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2000 our working capital was $31,893,000 compared to working capital of $26,858,000 at December 31, 1999. The increase in working capital is primarily due to higher accounts receivable balances due to the BFI acquisition. We have available a $50,000,000 revolving line of credit secured by our accounts receivable and all of our other assets. At March 31, 2000 we did not have any borrowings under this line. Net cash provided by/used in operating activities was positively impacted by the improvement in net income plus depreciation and amortization of $5,783,000 for the three months ended March 31, 2000 compared to the same period in 1999. Net cash provided by operating activities was $4,412,000 during the three months ended March 31, 2000 compared to net cash used in operating activities of $319,000 for the comparable period in 1999. -14- 15 Net cash used in investing activities for the period ended March 31, 2000 amounted to $1,806,000 compared to $6,382,000 for the same period in 1999. The decrease was primarily due to a reduction in acquisitions completed in 2000. Capital expenditures were $1,158,000 for the three months ended March 31, 2000 compared to $983,000 for the same period in 1999. Net cash used in financing activities was $1,180,000 during the three months ended March 31, 2000 compared to net cash provided by financing activities of $25,223,000 for the same quarter in 1999. The difference results primarily from completion of our second public offering of common stock in February 1999, which raised $47,176,000 net of offering costs, partially offset by the repayment of $24,761,000 in debt in the first quarter of 1999. FROM TIME TO TIME WE ISSUE FORWARD-LOOKING STATEMENTS RELATING TO SUCH THINGS AS ANTICIPATED FINANCIAL PERFORMANCE, BUSINESS PROSPECTS, ACQUISITION ACTIVITIES AND SIMILAR MATTERS. A VARIETY OF FACTORS COULD CAUSE OUR ACTUAL RESULTS AND EXPERIENCE TO DIFFER MATERIALLY FROM THE ANTICIPATED RESULTS OR OTHER EXPECTATIONS EXPRESSED IN OUR FORWARD-LOOKING STATEMENTS. THE RISKS AND UNCERTAINTIES THAT MAY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATION INCLUDE DIFFICULTIES AND DELAYS IN COMPLETING AND INTEGRATING BUSINESS ACQUISITIONS; DELAYS AND DIVERSION OF ATTENTION RELATING TO PERMITTING AND OTHER REGULATORY COMPLIANCE; DIFFICULTIES AND DELAYS RELATING TO MARKETING AND SALES ACTIVITIES; AND GENERAL UNCERTAINTIES ACCOMPANYING THE EXPANSION INTO NEW GEOGRAPHIC SERVICE AREAS. -15- 16 PART II--OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 11: Statement Re: Computation of Per Share Earnings Exhibit 27: Financial Data Schedule (b) We did not file any reports on Form 8-K during the quarter ending March 31, 2000. -16- 17 SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STERICYCLE, INC. By: /s/ Frank J.M. ten Brink ---------------------------------------- Frank J.M. ten Brink Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Date: May 10, 2000 -17- 18 Exhibit Index Exhibit 11: Statement Re: Computation of Per Share Earnings Exhibit 27: Financial Data Schedule EX-11 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 STERICYCLE, INC. AND SUBSIDIARIES STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (Unaudited) The following table sets forth the computation of basic and diluted net income per share:
FOR THE THREE MONTHS ENDED -------------------------------- MARCH 31, -------------------------------- 2000 1999 ------------- -------------- Numerator: Net income $ 3,773 $ 2,427 Preferred stock dividends (660) -- ------------- ------------- Numerator for basic earnings per share-- income available to common stockholders $ 3,113 $ 2,427 Effect of dilutive securities: Preferred stock dividends 660 -- ------------- ------------- Numerator for diluted earnings per share-- income available to common stockholders after assumed conversions $ 3,773 $ 2,427 ============= ============= Denominator: Denominator for basic earnings per share-- weighted average shares 14,746,603 13,068,931 Effect of dilutive securities: Employee stock options 414,040 376,857 Warrants 105,006 88,743 Convertible preferred stock 4,323,441 -- ------------- ------------- Dilutive potential common shares 4,842,487 465,599 Denominator for diluted earnings per share-- adjusted weighted average shares and assumed conversions 19,589,090 13,534,530 ============= ============= Basic net income per share $ 0.21 $ 0.19 Diluted net income per share $ 0.19 $ 0.18
-18- EX-27 3 FINANCIAL DATA SCHEDULE
5 1000 3-MOS DEC-31-2000 JAN-31-2000 MAR-31-2000 20,770 278 54,571 1,153 2,702 84,509 93,403 19,204 599,173 52,616 353,130 0 69,855 147 121,264 599,173 0 77,668 0 61,841 0 0 9,855 6,280 2,507 3,773 0 0 0 3,773 0.21 0.19
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