RESTRUCTURING, DIVESTITURES AND IMPAIRMENTS

9 Months Ended

Sep. 30, 2020

Restructuring and Related Activities [Abstract]

RESTRUCTURING, DIVESTITURES, AND IMPAIRMENTS

NOTE 3 – RESTRUCTURING, DIVESTITURES, AND IMPAIRMENTS

Restructuring - Business Transformation

Stericycle is focused on driving long-term growth, profitability and delivering enhanced shareholder value.

During the nine months ended September 30, 2019, the Company recognized $5.3 million in charges related to executive and employee termination costs, primarily within Other as part of SG&A in the Condensed Consolidated

Statements of Loss. As of September 30, 2020, approximately $1.2 million in future payments remained accrued as part of Accrued Liabilities on the Condensed Consolidated Balance Sheets.

Divestitures

On August 3, 2020, Stericycle entered into an agreement and completed the sale of its operations in Argentina for proceeds of approximately $3.9 million. Revenue of Argentina operations were approximately 1% of our consolidated annual revenues for 2019. The transaction resulted in a third quarter divestiture pre-tax loss of $112.4 million, of which $87.2 million related to the balance of cumulative currency translation adjustment.

On April 6, 2020, the Company completed the sale of all of the outstanding equity interests of its Domestic Environmental Solutions business (the “Transaction”) to Buyer for approximately $462.5 million (subject to customary adjustments for working capital and other adjustments), pursuant to the Purchase Agreement, dated February 6, 2020. As previously announced, the Purchase Agreement provided for the divestiture of the Company’s Domestic Environmental Solutions business, reported in the North America segment, exclusive of the Company’s healthcare hazardous waste services and unused consumer pharmaceutical take-back services, to Buyer. In connection with the Purchase Agreement, the Company entered into an HSA and TSA with the Buyer for a period of 7 years and 6 months, respectively. The Company allocated and deferred a portion of the Transaction proceeds, $17.7 million related to the HSA and $1.5 million related to the TSA, which will be recognized over the applicable duration of the HSA and TSA periods, subject to specific agreement provisions, thereby offsetting the expenses incurred to deliver the respective services. The allocated proceeds are reflected as an operating cash flow on the Condensed Consolidated Statement of Cash Flows, as they are advances received for services to be provided prospectively.

In the first quarter of 2020, the Company recognized an impairment charge of $58.3 million, inclusive of $10.8 million of related deal costs for the Transaction. In the second and third quarters of 2020, the Company recognized an incremental pre-tax loss (gain) of $3.8 million and $(8.3) million, respectively, primarily driven by working capital adjustments based upon the terms of the Purchase Agreement that have now concluded with an associated payment of $9.7 million to the Buyer in September 2020. These charges, net are reported as Divestiture losses (gains), net in the Company’s Condensed Consolidated Statements of Loss. Further, the Company released a $1.7 million benefit associated with contingent consideration related to a prior acquisition agreement connected with the divested business (Fair value - Level 3) that is reported in SG&A in the Company’s Condensed Consolidated Statements of Loss.

During the nine months ended September 30, 2019, the Company completed the sale of the its U.K. based texting business, a component of the International segment for proceeds of $14.9 million, including a $1.3 million note receivable that was due in six months from the closing of the transaction, resulting in a pre-tax gain of approximately $5.1 million, which is recognized in Divestiture losses (gains), net in the Condensed Consolidated Statements of Loss.

During September 2019, the Company approved plans to sell its TAS business in North America and its retail pharmaceutical returns business in the U.S. and Puerto Rico. Accordingly, the assets and liabilities for these businesses were classified as held for sale resulting in a $42.3 million impairment charge in the three and nine months ended September 30, 2019. These businesses are part of CRS, which is presented in the North America reportable segment. In October 2019, the Company entered into definitive agreements and completed the sales of these businesses for cash consideration of $36.4 million.

During September 2019, the Company also approved a plan to sell substantially all of its operations in Mexico. Accordingly, the assets and liabilities for these operations were classified as held for sale resulting in a $40.2 million impairment charge in the three and nine months ended September 30, 2019. In October 2019, the Company entered into a definitive agreement and completed the sale of the Mexico operations for nominal consideration. These operations are presented in the International RWCS reportable segment. The cumulative currency translation adjustment of $18.0 million was included as part of the carrying value of the disposal group when measuring the impairment charge.

Impairments:

In millions
	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Impairments
Operational Optimization - COR	$	—	$	0.9	$	—	$	5.7
Operational Optimization - SG&A	2.8		0.9		2.8		.4
Asset Impairment - COR	—		—		6.8		1.6
Asset Impairment - SG&A	0.6		—		6.1		2.1
Total Impairments	$	3.4	$	1.8	$	15.7	$	9.8
North America
Operational Optimization - COR	$	—	$	—	$	—	$	2.0
Operational Optimization - SG&A	—		—		—		—
Asset Impairment - COR	—		—		6.1		1.3
Asset Impairment - SG&A	—		—		4.0		0.4
Total North America Segment	$	—	$	—	$	10.1	$	3.7
International
Operational Optimization - COR	$	—	$	0.9	$	—	$	3.7
Operational Optimization - SG&A	2.8		0.9		2.8		.4
Asset Impairment - COR	—		—		0.7		0.3
Asset Impairment - SG&A	0.6		—		2.1		1.7
Total International Segment	$	3.4	$	1.8	$	5.6	$	6.1

Operational optimization impairments are associated with our actions to reduce operating costs and optimize operations. In the three and nine months ended September 30, 2020 our International reportable segment includes charges primarily related to the discontinuation of a service line in the U.K. In the three and nine months ended September 30, 2019 our International reportable segment includes charges related to impairments of permits and other long-lived assets in Europe and Latin America and our North America reportable segment for charges associated with a site movement.

Asset impairments in the three and nine months ended September 30, 2020 our North America reportable segment includes charges associated with rationalization of software application assets and intangible assets as a result of a discontinuation of a certain service line, and our International reportable segment includes charges associated with certain property, plant and equipment assets and permits primarily in the U.K.