-----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, Q1LuAv1+jAfLDBBaZaUKmOBZvqdgehtDP0ENsoqPiD9w+utUhtX+SHiduBitEOqM 1Azd2y4835vKX5nOZhHGIQ== /in/edgar/work/0000950137-00-004759/0000950137-00-004759.txt : 20001114 0000950137-00-004759.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950137-00-004759 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERICYCLE INC CENTRAL INDEX KEY: 0000861878 STANDARD INDUSTRIAL CLASSIFICATION: [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: 759651 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 c58425e10-q.txt QUARTERLY REPORT 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 SEPTEMBER 30, 2000 [ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 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 (I.R.S. Employer of incorporation or organization) Identification Number) 28161 NORTH KEITH DRIVE, LAKE FOREST, ILLINOIS 60045 (Address of principal executive offices) (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 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ x ] Yes [ ] No As of November 9, 2000, there were 14,970,174 shares of the Registrant's Common Stock outstanding. 2 STERICYCLE, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements of Stericycle, Inc. and Subsidiaries Condensed Consolidated Balance Sheets at September 30, 2000 (unaudited) and December 31, 1999 1 Condensed Consolidated Statements of Income for the three months ended September 30, 2000 and 1999 (unaudited) and nine months ended September 30, 2000 and 1999 (unaudited) 2 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 (unaudited) 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 17
3 STERICYCLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
SEPTEMBER 30 DECEMBER 31 2000 1999 --------- -------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 2,218 $ 19,344 Short-term investments 546 285 Accounts receivable, less allowance for doubtful accounts of $2,954 in 2000 and $980 in 1999 61,218 48,284 Parts and supplies 3,398 2,035 Prepaid expenses 1,775 863 Other 11,170 6,729 --------- --------- Total current assets 80,325 77,540 --------- --------- Property, plant and equipment: Land 7,486 7,308 Buildings and improvements 26,157 29,123 Machinery and equipment 52,866 50,011 Office equipment and furniture 5,069 5,182 Construction in progress 4,434 386 --------- --------- 96,012 92,010 Less accumulated depreciation (22,289) (16,898) --------- --------- Property, plant and equipment, net 73,723 75,112 --------- --------- Other assets: Goodwill, less accumulated amortization of $18,725 in 2000 and $7,974 in 1999 420,009 421,001 Other 18,951 22,133 --------- --------- Total other assets 438,960 443,134 --------- --------- Total assets $ 593,008 $ 595,786 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long term debt $ 2,932 $ 5,741 Accounts payable 10,631 14,347 Accrued compensation 4,019 7,569 Accrued acquisition related expenses 1,430 7,101 Accrued liabilities 21,946 15,782 Deferred revenue 335 142 --------- --------- Total current liabilities 41,293 50,682 --------- --------- Long-term debt, net of current portion 348,504 355,444 Other liabilities 2,994 2,351 Redeemable preferred stock: Series A convertible preferred stock (par value $.01 share, 75,000 shares authorized and outstanding in 2000 and 1999, liquidation preference of $108,171 in 2000 and $80,625 in 1999) 71,120 69,195 Common shareholders' equity: Common stock (par value $.01 per share, 30,000,000 shares authorized, 14,958,610 issued and outstanding in 2000, 14,665,106 issued and outstanding in 1999) 149 147 Additional paid-in capital 139,244 136,691 Accumulated deficit (10,296) (18,724) --------- --------- Total shareholders' equity 129,097 118,114 --------- --------- Total liabilities and shareholders' equity $ 593,008 $ 595,786 ========= =========
1 4 The accompanying notes are an integral part of these financial statements. 2 5 STERICYCLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED)
FOR THE THREE FOR THE NINE MONTHS ENDED MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------------- --------------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ Revenues $ 81,066 $ 25,398 $ 238,291 $ 74,285 Costs and expenses: Cost of revenues 49,151 16,658 144,769 48,998 Selling, general and administrative expenses 14,765 5,271 43,975 15,541 Acquisition related costs 1,483 -- 2,890 -- ------------ ------------ ------------ ------------ Total costs and expenses 65,399 21,929 191,634 64,539 ------------ ------------ ------------ ------------ Income from operations 15,667 3,469 46,657 9,746 Other income (expense): Interest income 177 304 485 576 Interest expense (9,861) (154) (29,671) (689) Other income (144) 15 (172) 404 ------------ ------------ ------------ ------------ Total other income (expense) (9,828) 165 (29,358) 291 ------------ ------------ ------------ ------------ Income before income taxes $ 5,839 $ 3,634 $ 17,299 $ 10,037 Income tax expense $ 2,406 752 7,007 2,168 ------------ ------------ ------------ ------------ Net income $ 3,433 $ 2,882 $ 10,292 $ 7,869 ============ ============ ============ ============ Earnings per share - Basic $ 0.19 $ 0.20 $ 0.56 $ 0.56 ============ ============ ============ ============ Earnings per share - Diluted $ 0.17 $ 0.19 $ 0.52 $ 0.54 ============ ============ ============ ============ Weighted average number of common shares outstanding-- Basic 14,872,322 14,605,219 14,809,100 14,073,309 Weighted average number of common shares outstanding--Diluted 20,096,123 15,003,105 19,877,865 14,471,191
The accompanying notes are an integral part of these financial statements. 3 6 STERICYCLE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, -------------------------- 2000 1999 -------- -------- OPERATING ACTIVITIES: Net income $ 10,292 $ 7,869 Adjustments to reconcile net income to net cash provided by operating activities: Stock compensation expense 120 -- Depreciation and amortization 17,415 5,316 Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable (11,972) (1,864) Parts and supplies (1,063) 438 Prepaid expenses (1,002) 475 Other assets (1,423) (2,393) Accounts payable (3,747) (1,755) Accrued liabilities (3,374) (252) Deferred revenue 193 (2,000) -------- -------- Net cash provided by operating activities 5,439 5,834 -------- -------- INVESTING ACTIVITIES: Payments for acquisitions and international investments, net of cash acquired (4,203) (11,667) Proceeds from maturity of short-term investments 237 460 Purchases of short-term investments -- (1,500) Capital expenditures (7,933) (2,367) -------- -------- Net cash used in investing activities (11,899) (15,074) -------- -------- FINANCING ACTIVITIES: Net proceeds and (repayments) on line of credit 5,000 (16,359) Repayment of long term debt (15,129) (4,022) Repayment of subordinated debt -- (2,750) Payments of deferred financing costs (522) (40) Principal payments on capital lease obligations (1,280) (154) Net proceeds from secondary public offering -- 47,158 Proceeds from other issuance of common stock 1,265 141 -------- -------- Net cash provided by (used in) financing activities (10,666) 23,974 -------- -------- Net increase (decrease) in cash and cash equivalents (17,126) 14,734 Cash and cash equivalents at beginning of period 19,344 1,283 -------- -------- Cash and cash equivalents at end of period $ 2,218 $ 16,017 ======== ======== Non-cash activities: Net issuance of common stock and warrants for certain acquisitions $ 1,260 $ 2,993 Net issuance of notes payable for certain acquisitions $ 263 $ 103
The accompanying notes are an integral part of these financial statements. 4 7 STERICYCLE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 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 the Company believes 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 year ended December 31, 1999, as filed with our 1999 Annual Report on Form 10-K. The results of operations for the nine-month period ended September 30, 2000 are not necessarily indicative of the results that may be achieved for the entire year ending December 31, 2000. NOTE 2 --ACQUISITIONS During the quarter we acquired the customers lists and other assets of Stick Proof Company in North Carolina, and Environmental Solutions, LLC and JS Holdings, Inc. d/b/a Sharps Away, both in Minnesota. In addition we acquired the customer lists from Waste Management of New York LLC in Rochester N.Y. The purchase price was paid in cash for two of the acquisitions, in a combination of cash and stock for one of the acquisitions and in a combination of cash, stock and a note for one of the acquisitions. The total purchase price for all four acquisitions was $2.6 million. In addition, on July 1, 2000 we increased our ownership in our Mexico joint venture, Medam S.A. de C.V. ("Medam"), to 64% from 49% by purchasing an additional 15% interest from our co-venturer. We paid the purchase price of $1.6 million by a combination of cash installment payments and warrants to purchase common stock. The increase in ownership changes our accounting method for the joint venture from the equity to the consolidation method. NOTE 3--STOCK OPTIONS During the quarter ended September 30, 2000, options to purchase 15,000 shares of common stock were granted to employees under our 2000 Stock Option Plan. These options vest ratably over a five year period and have an average exercise price of approximately $23.66 per share. Our 2000 Stock Option Plan, which authorizes the grant of options for a total of 500,000 shares of common stock, was approved by our Board of Directors in February 2000. We also issued warrants to purchase 44,374 shares of common stock in connection with our acquisition of an additional 15% interest in Medam. Of these warrants, warrants for 31,128 shares are exercisable immediately, while the remaining 13,246 shares become exercisable contingently over five years. The exercise price of the warrants is $17.50 per share. NOTE 4--STOCK ISSUANCES 5 8 During the quarter ending September 30, 2000, options to purchase 69,000 shares of common stock were exercised at prices ranging from $.53-$16.625 per share. In addition, warrants to purchase 63,290 shares of common stock were exercised at the price of $15.77 per share. We also issued 20,410 shares of common stock in connection with certain acquisitions made in the quarter. NOTE 5--INCOME TAXES At September 30, 2000, we had net operating loss carry forwards for federal income tax purposes of approximately $17.7 million (excluding loss carryforwards from 3CI Complete Compliance Corporation and Med Tech Environmental, Inc) 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", to an amount that we believe is more likely than not of being recovered. 6 9 NOTE 6 -- CONDENSED CONSOLIDATING FINANCIAL INFORMATION Payments under our senior subordinated notes (the Notes) are 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 in October 1998, Med-Tech Environmental, Inc., acquired in December 1998, BFI Medical Waste, Inc. and Browning-Ferris Industries of Connecticut, Inc., both acquired in November 1999, and certain other subsidiaries which have insignificant assets and operations (collectively,"the Guarantors"). Financial information concerning the Guarantors as of September 30, 2000 and December 31, 1999 and for the three and nine-month periods ended September 30, 2000 and 1999 is presented below for purposes of complying with the reporting requirements of the Guarantors. 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. Because of commingled operations, however, we are required to allocate particular items between Stericycle, Inc. and the Guarantors in the process of preparing the following condensed consolidating financial statements. These allocations have no effect on the combined results for Stericycle, Inc. and the Guarantors. Financial statements for the individual Guarantors have not been presented because we do not believe that such financial statements are material to investors. 7 10 CONDENSED CONSOLIDATING BALANCE SHEET SEPTEMBER 30, 2000 UNAUDITED
COMBINED STERICYCLE NON- GUARANTOR AND GUARANTOR STERICYCLE, SUBSIDIARIES GUARANTOR SUBSIDIARIES ELIMINATIONS CONSOLIDATED INC. SUBSIDIARIES ----------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 1,083 $ 164 $ 1,247 $ 971 $ -- $ 2,218 Other current assets 67,217 11,503 78,720 6,965 (7,578) 78,107 ------------------------------------------------------------------------------- Total current assets 68,300 11,667 79,967 7,936 (7,578) 80,325 Property, plant and equipment, net 33,967 26,099 60,066 13,657 -- 73,723 Goodwill, net 223,796 183,843 407,639 12,370 -- 420,009 Investment in subsidiaries 242,445 2,897 245,342 -- (245,342) -- Other assets 21,319 9,451 30,770 133 (11,952) 18,951 ------------------------------------------------------------------------------- Total assets $589,827 $233,957 $823,784 $34,096 $(264,872) $593,008 =============================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of $ 922 $ 468 $ 1,390 $ 1,542 $ -- $ 2,932 long-term debt Other current liabilities 41,844 1,312 43,156 4,172 (8,967) 38,361 ------------------------------------------------------------------------------- Total current liabilities 42,766 1,780 44,546 5,714 (8,967) 41,293 Long-term debt, net of current portion 345,140 1,957 347,097 11,930 (10,523) 348,504 Other liabilities 1,704 -- 1,704 1,290 -- 2,994 Convertible preferred stock 71,120 -- 71,120 -- -- 71,120 Common shareholders' equity 129,097 230,220 359,317 15,162 (245,382) 129,097 ------------------------------------------------------------------------------- Total liabilities and shareholders' equity $589,827 $233,957 $823,784 $34,096 $(264,872) $593,008 ===============================================================================
8 11 CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 1999 AUDITED
COMBINED STERICYCLE AND NON- GUARANTOR GUARANTOR GUARANTOR STERICYCLE, SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED INC. ---------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 18,808 $ 246 $ 19,054 $ 290 $ -- $ 19,344 Other current assets 52,928 8,840 61,768 4,648 (8,220) 58,196 ---------------------------------------------------------------------------------------- Total current assets 71,736 9,086 80,822 4,938 (8,220) 77,540 Property, plant and equipment, net 15,029 49,932 64,961 10,151 -- 75,112 Goodwill, net 40,920 369,914 410,834 10,167 -- 421,001 Investment in subsidiaries 441,423 3,627 445,050 -- (445,050) -- Other assets 17,817 13,617 31,434 3,675 (12,976) 22,133 ---------------------------------------------------------------------------------------- Total assets $586,925 $446,176 $1,033,101 $28,931 $(466,246) $595,786 ======================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 3,954 $ 892 $ 4,846 $ 895 $ -- $ 5,741 Other current liabilities 43,517 5,084 48,601 4,677 (8,337) 44,941 ---------------------------------------------------------------------------------------- Total current liabilities 47,471 5,976 53,447 5,572 (8,337) 50,682 Long-term debt, net of current portion 349,794 4,539 354,333 13,970 (12,859) 355,444 Other liabilities 2,351 -- 2,351 -- -- 2,351 Convertible preferred stock 69,195 -- 69,195 -- -- 69,195 Common shareholders' equity 118,114 435,661 553,775 9,389 (445,050) 118,114 ---------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $586,925 $446,176 $1,033,101 $28,931 $(466,246) $595,786 ========================================================================================
9 12 CONDENSED CONSOLIDATING STATEMENT OF INCOME THREE MONTHS ENDED SEPTEMBER 30, 2000 UNAUDITED
COMBINED STERICYCLE AND NON- GUARANTOR GUARANTOR GUARANTOR STERICYCLE, SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED INC. ---------------------------------------------------------------------------------------- Revenues $ 35,488 $ 37,996 $ 73,484 $ 7,913 $ (331) $81,066 Cost of revenues 19,921 24,015 43,936 5,546 (331) 49,151 Selling, general, and administrative expense 8,809 4,429 13,238 1,527 -- 14,765 Acquisition related expenses 1,483 -- 1,483 -- -- 1,483 --------------------------------------------------------------------------------------- Total costs and expenses 30,213 28,444 58,657 7,073 (331) 65,399 --------------------------------------------------------------------------------------- Income from operations 5,275 9,552 14,827 840 -- 15,667 Equity in net income (loss) of subsidiaries 6,491 (274) 6,217 -- (6,217) -- Other (expense) income, net (9,359) 126 (9,233) (595) (9,828) --------------------------------------------------------------------------------------- Income before income taxes 2,407 9,404 11,811 245 (6,217) 5,839 Income tax expense (benefit) (1,026) 3,370 2,344 62 -- 2,406 --------------------------------------------------------------------------------------- Net income $ 3,433 $ 6,034 $ 9,467 $ 183 $(6,217) $ 3,433 =======================================================================================
10 13 CONDENSED CONSOLIDATING STATEMENT OF INCOME THREE MONTHS ENDED SEPTEMBER 30, 1999 UNAUDITED
COMBINED STERICYCLE AND NON- GUARANTOR GUARANTOR GUARANTOR STERICYCLE, SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED INC. --------------------------------------------------------------------------------------- Revenues $ 16,996 $2,702 $ 19,698 $5,983 $ (283) $25,398 Cost of revenues 10,544 1,830 12,374 4,567 (283) 16,658 Selling, general, and administrative expense 4,114 442 4,556 715 -- 5,271 --------------------------------------------------------------------------------------- Total costs and expenses 14,658 2,272 16,930 5,282 (283) 21,929 --------------------------------------------------------------------------------------- Income from operations 2,338 430 2,768 701 -- 3,469 Equity in net income of subsidiaries 1,741 1,066 2,807 -- (2,807) -- Other income (expense), net (478) 151 (327) 492 -- 165 --------------------------------------------------------------------------------------- Income before income taxes 3,601 1,647 5,248 1,193 (2,807) 3,634 Income tax expense 719 33 752 -- -- 752 --------------------------------------------------------------------------------------- Net income $ 2,882 $1,614 $ 4,496 $1,193 $(2,807) $ 2,882 =======================================================================================
11 14 CONDENSED CONSOLIDATING STATEMENT OF INCOME NINE MONTHS ENDED SEPTEMBER 30, 2000 UNAUDITED
COMBINED STERICYCLE AND NON- GUARANTOR GUARANTOR GUARANTOR STERICYCLE, SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED INC. --------------------------------------------------------------------------------------------- Revenues $ 66,036 $ 151,446 $ 217,482 $ 21,258 $ (449) $238,291 Cost of revenues 37,344 92,436 129,780 15,438 (449) 144,769 Selling, general, and administrative expense 21,225 18,889 40,114 3,861 -- 43,975 Acquisition related expenses 2,890 -- 2,890 -- -- 2,890 -------------------------------------------------------------------------------------------- Total costs and expenses 61,459 111,325 172,784 19,299 (449) 191,634 -------------------------------------------------------------------------------------------- Income from operations 4,577 40,121 44,698 1,959 -- 46,657 Equity in net income (loss) of subsidiaries 26,053 (525) 25,528 -- (25,528) -- Other (expense) income, net (28,234) 301 (27,933) (1,425) -- (29,358) -------------------------------------------------------------------------------------------- Income before income taxes 2,396 39,897 42,293 534 (25,528) 17,299 Income tax expense (benefit) (7,896) 14,841 6,945 62 -- 7,007 -------------------------------------------------------------------------------------------- Net income $ 10,292 $ 25,056 $ 35,348 $ 472 $(25,528) $ 10,292 ============================================================================================
12 15 CONDENSED CONSOLIDATING STATEMENT OF INCOME NINE MONTHS ENDED SEPTEMBER 30, 1999 UNAUDITED
COMBINED STERICYCLE AND NON- GUARANTOR GUARANTOR GUARANTOR STERICYCLE, SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED INC. --------------------------------------------------------------------------------------------- Revenues $47,945 $9,135 $57,080 $ 17,569 $ (364) $74,285 Cost of revenues 29,904 5,820 35,724 13,638 (364) 48,998 Selling, general, and administrative expense 10,772 1,758 12,530 3,011 -- 15,541 ------------------------------------------------------------------------------------------ Total costs and expenses 40,676 7,578 48,254 16,649 (364) 64,539 ------------------------------------------------------------------------------------------ Income from operations 7,269 1,557 8,826 920 -- 9,746 Equity in net income of subsidiaries 2,608 732 3,340 -- (3,340) -- Other income (expense), net 53 431 484 (193) -- 291 ------------------------------------------------------------------------------------------ Income before income taxes 9,930 2,720 12,650 727 (3,340) 10,037 Income tax expense 2,061 107 2,168 -- -- 2,168 ------------------------------------------------------------------------------------------ Net income $ 7,869 $2,613 $10,482 $ 727 $(3,340) $ 7,869 ==========================================================================================
13 16 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2000 UNAUDITED
COMBINED STERICYCLE AND NON- GUARANTOR GUARANTOR GUARANTOR STERICYCLE, SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED INC. ------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided by operating activities $ 34 $ 3,848 $ 3,882 $ 1,557 $ -- $ 5,439 ----------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (5,508) (2,077) (7,585) (348) -- (7,933) Payments for acquisitions and international investments, net of cash acquired (3,215) (972) (4,187) (16) -- (4,203) Proceeds from maturity of short-term investments 237 -- 237 -- -- 237 ----------------------------------------------------------------------------------------- Net cash used in investing activities (8,486) (3,049) (11,535) (364) -- (11,899) ----------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from bank line of credit 5,000 -- 5,000 -- -- 5,000 Principal payments on capital lease obligations (118) (881) (999) (281) -- (1,280) Repayment of long term debt (14,898) -- (14,898) (231) -- (15,129) Payments of deferred financing costs (522) -- (522) -- -- (522) Proceeds from issuance of common stock 1,265 -- 1,265 -- -- 1,265 ----------------------------------------------------------------------------------------- Net cash used in financing activities (9,273) (881) (10,154) (512) -- (10,666) ----------------------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents $(17,725) $ (82) $(17,807) $ 681 $ -- (17,126) ========================================================================================= Cash and cash equivalents at beginning of period 19,344 -------- Cash and cash equivalents at end of period $ 2,218
14 17 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1999 UNAUDITED
COMBINED STERICYCLE AND NON- GUARANTOR GUARANTOR GUARANTOR STERICYCLE, SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED INC. ------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided by (used in) operating activities $ (895) $ 238 $ (657) $ 6,409 $ 82 $ 5,834 ------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (2,254) -- (2,254) (129) 16 (2,367) Payments for acquisitions and international investments, net of cash (11,667) -- (11,667) -- -- (11,667) acquired Proceeds from maturity of short-term investments 460 -- 460 -- -- 460 Purchases of short-term -- -- -- (1,500) -- (1,500) investments ------------------------------------------------------------------------------------------- Net cash used in investing (13,461) -- (13,461) (1,629) 16 (15,074) activities ------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net payment on bank lines (16,359) -- (16,359) -- -- (16,359) of credit Repayment of long term debt (262) -- (262) (3,760) -- (4,022) Principal payments on capital lease obligations (36) (18) (54) (100) -- (154) Net payments on (2,750) -- (2,750) -- -- (2,750) subordinated debt Payment of deferred (40) -- (40) -- -- (40) financing costs Net proceeds from secondary public offering of common 47,158 -- 47,158 -- -- 47,158 stock Proceeds from other issuances of common stock 141 -- 141 (5) 5 141 ------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 27,852 (18) 27,834 (3,865) 5 23,974 ------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents $ 13,496 $ 220 $ 13,716 $ 915 $103 14,734 =========================================================================================== Cash and cash equivalents at beginning of period 1,283 -------- Cash and cash equivalents at end of period $ 16,017 ========
16 18 PART I -- FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 The following summarizes (in thousands) the Company's operations:
Three Months Ended September 30, 2000 1999 ----- ---- $ % $ % Revenues $81,066 100.0 $25,398 100.0 Cost of revenues 49,151 60.6 16,658 65.6 -------------------------------------------- Gross profit 31,915 39.4 8,740 34.4 Selling, general and administrative expenses 14,765 18.2 5,271 20.8 -------------------------------------------- Income from operations before acquisition related costs 17,150 21.2 3,469 13.7 Acquisition related costs 1,483 1.8 -- --------------------------------------------
17 19 Income from operations 15,667 19.3 3,469 13.7 Net income 3,433 4.2 2,882 11.3 Depreciation and amortization 5,803 7.2 1,771 7.0 EBITDA before acquisition related costs* 22,809 28.1 5,255 20.7 Earnings per share-Diluted .17 .19 Earnings per share-Diluted (before tax adjusted acquisition related costs) .22 .19 Earnings per share-Diluted (fully taxed at 40% before acquisition related costs) .22 .15
*EBITDA before acquisition related costs is calculated as the sum of net income, plus net interest expense, income tax expense, depreciation expense, amortization expense, and acquisition related costs, to the extent deducted in calculating net income. Revenues. Revenues increased $55.7 million or 219.2%, to $81.1 million during the three months ended September 30, 2000 from $25.4 million 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. International equipment revenues and revenues from Medam during the three months ended September 30, 2000 were $2.7 million. During the three months ended September 30, 2000, acquisitions contributed approximately $53.1 million to the increase in revenues as compared to the prior year. For the quarter, our base internal revenue growth for small account customers increased over 16% while revenues from large account customers increased by more than 5%. Cost of Revenues. Cost of revenues increased $32.5 million to $49.2 million during the three months ended September 30, 2000 from $16.7 million during the comparable period in 1999. The increase was primarily due to the substantial increase in revenues during the three months ended September 30, 2000 compared to the same period in 1999. The gross margin percentage increased to 39.4% during the three months ended September 30, 2000 from 34.4% during the same period in 1999 as a result of the further integration of the BFI acquisition and an increase in international equipment revenue. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $14.8 million for the three months ended September 30, 2000 from $5.3 million 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 percent of revenues decreased to 18.2% during the three months ended September 30, 2000 from 20.8% during the comparable period in 1999. Excluding amortization, selling, general and administrative expenses as a percent of revenue decreased to 14.0% during the three months ended September 30, 2000 from 18.5% during the comparable period in 1999. Acquisition related costs. During the three months ended September 30, 2000, we incurred acquisition related costs of $1.5 million related to the integration of the BFI acquisition. EBITDA. Earnings before interest, income taxes, depreciation and amortization ('EBITDA') before the acquisition related costs increased by 334.0% to $22.8 million or 28.1% of revenue for the three months ended September 30, 2000 as compared to $5.3 million or 20.7% of revenue for the comparable period in 1999. The increase in EBITDA is primarily due to the factors described above. 18 20 Interest Expense and Interest Income. Interest expense increased to $9.9 million during the three months ended September 30, 2000 from $.2 million during the comparable period in 1999 primarily due to increased interest expense related to borrowings associated with the BFI acquisition. Interest income decreased to $.2 million during the three months ended September 30, 2000 from $.3 million during the comparable period in 1999 primarily due to lower cash balances. Income Tax Expense. Income taxes for the three months ended September 30, 2000 reflects an effective tax rate of approximately 41.2% for federal and state income taxes. 19 21 NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999 The following summarizes (in thousands) the Company's operations:
Nine Months Ended September 30, 2000 1999 ----- ---- $ % $ % Revenues $238,291 100.0 $74,285 100.0 Cost of revenues 144,769 60.8 48,998 66.0 --------------------------------------------- Gross profit 93,522 39.2 25,287 34.0 Selling, general and administrative expenses 43,975 18.5 15,541 20.9 --------------------------------------------- Income from operations before acquisition related costs 49,547 20.8 9,746 13.1 Acquisition related costs 2,890 1.2 -- -- --------------------------------------------- Income from operations 46,657 19.6 9,746 13.1 Net income 10,292 4.3 7,869 10.6 Depreciation and amortization 17,415 7.3 5,316 7.2 EBITDA before acquisition related costs* 66,790 28.0 15,466 20.8 Earnings per share-Diluted .52 .54 Earnings per share-Diluted (before acquisition related costs) .61 .54 Earnings per share-Diluted (fully taxed at 40% before acquisition related costs) .61 .42
*EBITDA before acquisition related costs is calculated as the sum of net income, plus net interest expense, income tax expense, depreciation expense, amortization expense, and acquisition related costs, to the extent deducted in calculating net income. Revenues. Revenues increased $164 million or 220.8%, to $238.3 million during the nine months ended September 30, 2000 from $74.3 million during the comparable period in 1999 as a result of the BFI acquisition and as we continued to implement our strategy of focusing on sales to higher-margin small account customers. During the nine months ended September 30, 2000, acquisitions made during the last 12 months contributed approximately $159 million to the increase in revenues as compared to the prior year. International equipment revenues and revenues from Medam were $3.7 million during the nine months ended September 30, 2000. Cost of Revenues. Cost of revenues increased $95.8 million or 195.5%, to $144.8 million during the nine months ended September 30, 2000 from $49 million during the comparable period in 1999. This increase was primarily due to the substantial increase in revenues during 2000 compared to the same period in 1999. The gross margin percentage increased to 39.2% during the nine months ended September 30, 2000 from 34.0% during the comparable period in 1999 as a result of the further integration of the BFI acquisition. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $44 million for the nine months ended September 30, 2000 from $15.5 million for the comparable period in 1999. The increase was largely the result of increases in selling and marketing expenses as a result of the 20 22 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 18.5% during the nine months ended September 30, 2000 from 20.9% during the comparable period in 1999. Excluding amortization, selling, general and administrative expenses as a percent of revenue decreased to 14.2% during the nine months ended September 30, 2000 from 18.5% during the comparable period in 1999. Acquisition related costs. During the nine months ended September 30, 2000, we incurred acquisition related costs of $2.9 million related to the integration of the BFI acquisition. EBITDA. Earnings before interest, income taxes, depreciation and amortization ('EBITDA') before acquisition related costs increased by 331.9% to $66.8 million or 28.0% of revenues for the nine months ended September 30, 2000 as compared to $15.5 million or 20.8% of revenues for the comparable period in 1999. The increase in EBITDA is primarily due to the factors described above. Interest Expense and Interest Income. Interest expense increased to $29.7 million during the nine months ended September 30, 2000, from $.7 million during the comparable period in 1999, primarily due to increased interest expense related to borrowings associated with the BFI acquisition. Interest income decreased to $.5 million during the nine months ended September 30, 2000, from $.6 million during the comparable period in 1999 due to lower cash balances throughout the nine months versus the prior year. Income Tax Expense. Income taxes for the nine months ended September 30, 2000 reflects an effective tax rate of approximately 40.5% for federal and state income taxes. LIQUIDITY AND CAPITAL RESOURCES At September 30, 2000, our working capital was $39 million compared to working capital of $26.9 million 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 million revolving line of credit secured by our accounts receivable and all of our other assets. At September 30, 2000 we had $5 million in borrowings under this line. Net cash provided by operating activities was $5.4 million during the nine months ended September 30, 2000 compared to net cash provided by operating activities of $5.8 million for the comparable period in 1999. This decrease primarily reflects higher accounts receivable and lower accounts payable and accrued liabilities partially offset by higher net income, depreciation and amortization expense . Net cash used in investing activities for the nine months ended September 30, 2000 was $11.9 million compared to $15.1 million for the comparable period in 1999. The change is primarily attributable to the decrease in acquisitions completed in 2000 partially offset by an increase in capital expenditures in 2000. Capital expenditures were $7.9 million for the nine months ended September 30, 2000 compared to $2.4 million for the same period in 1999. Net cash used in financing activities was $10.7 million during the nine months ended September 30, 2000 compared to net cash provided by financing activities of $24 million for the comparable period in 1999. The difference between the two periods results primarily from the completion of our second public offering of common stock, which raised $47.2 million net of offering costs, partially offset by the repayment of $23.3 million in debt in the nine months ended September 30, 1999. 21 23 During the first nine months of 2000 we made repayments of $16.4 million in debt which consisted of approximately $3.5 million in scheduled repayments and $12.9 million in prepayments. 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 THE OUR FORWARD-LOOKING STATEMENTS. THE RISKS AND UNCERTAINTIES THAT MAY AFFECT THE 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. 22 24 PART II -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following exhibits are filed with this Report: 11 Statement Re: Computation of Per Share Earnings 27.1 Financial Data Schedule (b) Reports on Form 8-K We did not file any Current Reports on Form 8-K during the quarter ended September 30, 2000. 23 25 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. Date: November 10, 2000. STERICYCLE, INC. By /s/ FRANK J.M. TEN BRINK Frank J.M. ten Brink Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) 24 EX-11 2 c58425ex11.txt COMPUTATION OD 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)
FOR THE THREE FOR THE NINE MONTHS ENDED MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------------- -------------------------------- 2000 1999 2000 1999 ------------ ----------- ------------ ----------- Numerator: Net Income $ 3,433 $ 2,882 $ 10,292 $ 7,869 Preferred stock dividends (633) -- (1,926) -- ------------ ----------- ------------ ----------- Numerator for basic earnings per share $ 2,800 $ 2,882 $ 8,366 $ 7,869 Effective of dilutive securities: Preferred stock dividends 633 -- 1,926 -- ------------ ----------- ------------ ----------- Numerator for diluted earnings per share income available to common shareholders after assumed conversions $ 3,433 $ 2,882 $ 10,292 $ 7,869 ------------ ----------- ------------ ----------- Denominator: Denominator for basic earnings per share Weighted average shares 14,872,322 14,605,219 14,809,100 14,073,309 Effective of dilutive securities: Employee stock options 660,822 314,636 581,939 317,014 Warrants 167,246 83,250 146,870 80,868 Convertible preferred stock 4,395,733 -- 4,339,956 -- ------------ ----------- ------------ ----------- Dilutive potential shares 5,223,801 397,886 5,068,765 397,882 Denominator for diluted earnings per share adjusted weighted average shares and assumed conversions 20,096,123 15,003,105 19,877,865 14,471,191 ============ =========== ============ =========== Earnings per share - Basic $ 0.19 $ 0.20 $ 0.56 $ 0.56 ============ =========== ============ =========== Earnings per share - Diluted $ 0.17 $ 0.19 $ 0.52 $ 0.54 ============ =========== ============ ===========
EX-27.1 3 c58425ex27-1.txt FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-2000 JUL-01-2000 SEP-30-2000 2218 546 61218 2954 3398 80325 96012 22289 593008 41293 348504 0 71120 149 128948 593008 0 81066 0 65399 144 0 9861 5839 2406 3433 0 0 0 3433 0.19 0.17
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