NOTE 3 – RESTRUCTURING, DIVESTITURES, AND ASSETS HELD FOR SALE

Restructuring - Business Transformation

Stericycle is focused on driving long-term growth, profitability and delivering enhanced shareholder value. As part of our business strategy, in the third quarter of 2017, we initiated a comprehensive multiyear Business Transformation with the objective to improve long-term operational and financial performance. The Business Transformation is based on a strategic vision to build a best-in-class enterprise performance management (“EPM”) operating model to enable the Company to operate more efficiently, provide an enhanced experience to customers, better capitalize on future growth opportunities and establish greater controls and oversight to drive more consistent results. Additionally, a key component to the Business Transformation is the implementation of an enterprise resource planning (“ERP”) system which will leverage standard processes throughout the organization to accelerate decision making, expedite acquisition integration, remediate compliance and control issues, and enable real-time analytics.

Key initiatives of the Business Transformation include:

•

Portfolio Rationalization: Executing on a comprehensive review of the Company’s global service lines to identify and pursue the divestiture of non-strategic assets.

•

Operational Optimization: Standardizing route planning logistics, modernizing field operations, and driving network efficiency across facilities.

•

Organizational Excellence and Efficiency: Redesigning the Company’s organizational structure to optimize resources and align around a global shared business services model.

•

Commercial Excellence: Aligning our sales and service organizations around the customer, standardizing our customer relationship management process, and expanding customer self-service options.

•

Strategic Sourcing: Reducing spend through global procure-to-pay processes and leveraging organizational scale.

For the year ended December 31, 2017, we incurred restructuring charges of $13.9 million related to employee termination benefits of $11.5 million and non-cash long-lived assets impairment charges of $2.4 million. These costs were incurred across all our segments.

As of December 31, 2017, the remaining liability for unpaid employee termination costs was $2.2 million related to Business Transformation which is expected to be paid within the current year. All other employee termination payments were complete by December 31, 2017. While the Company believes the recorded restructuring liability is adequate, revisions to current estimates may be recorded in future periods based on new information as it becomes available. There could be additional initiatives in the future to further streamline our operations. As such, the Company expects further expenses related to workforce reductions and other facility rationalization costs when those restructuring plans are finalized and related expenses are estimable.

Divestitures

In the fourth quarter of 2017, we sold certain assets and liabilities in South Africa for $7.3 million, resulting in a non-taxable gain of $3.0 million, which is included in SG&A on the Consolidated Statements of Income.

In the second quarter of 2017, we sold certain assets in the U.K. for $1.2 million, resulting in a pretax loss of $5.7 million ($4.6 million, net of tax), which is included in SG&A on the Consolidated Statements of Income.

In the fourth quarter of 2016, we sold certain assets in the U.K. for $0.8 million, resulting in a pretax loss of $1.6 million ($1.3 million, net of tax), which is included in SG&A on the Consolidated Statements of Income.

There were no divestitures in 2015.

All divestiture activity in 2017 and 2016 was recorded within the International RCS segment.

Assets and Liabilities Held for Sale

As of December 31, 2017, certain of our international operations met the criteria to be classified as held for sale. We recorded a $6.8 million non-cash impairment charge in SG&A on the Consolidated Statements of Income related to changes in the fair value of assets held for sale in the U.K. The assets and liabilities of the disposal groups are presented in assets held for sale and liabilities held for sale on the Consolidated Balance Sheet.

As of December 31, 2016, certain of our international operations met the criteria to be classified as held for sale. We recorded a $25.5 million impairment charge in SG&A on the Consolidated Statements of Income to adjust the carrying value of the asset group to their fair value less estimated costs to sell.

The following table presents information related to the major classes of assets and liabilities that were classified as held for sale on the Consolidated Balance Sheet at December 31:

In millions
	2017		2016
Total current assets	$	7.7	$	3.1
Fixed assets		8.5		4.9
Goodwill		1.6		0.1
Intangibles		2.6		0.7
Other assets		0.4		0.3
Assets held for sale	$	20.8	$	9.1

Total current liabilities	$	4.7	$	2.6
Deferred income taxes		0.4		0.3
Liabilities held for sale	$	5.1	$	2.9

We determined that the operations included in the table above did not meet the criteria to be classified as discontinued operations under the applicable guidance.