<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT (AMENDED)
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): December 20, 1996
STERICYCLE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-21229 36-3640402
(State or other juris- (Commission file (IRS employer
diction of incorporation) number) identification number)
1419 Lake Cook Road, Suite 410
Deerfield, Illinois 60015
(Address of principal executive offices)
Registrant's telephone number, including area code: (847) 945-6550
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ITEM 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
In accordance with Rule 3-05 of Regulation S-X (17 C.F.R. 210.3-05(b)),
audited financial statements for the acquired business (the major portion of
the regulated medical waste business of Waste Management, Inc.) are filed
with this Report. With the concurrence of the Securities and Exchange
Commission, pursuant to Rule 3-13 of Regulation S-X, as expressed in a letter
dated February 10, 1997 from Douglas Tanner, Associate Chief Accountant, to
James F. Polark, the Company's Vice President, Finance and Chief Financial
Officer, the audited financial statements of the acquired business consist of
an audited statement of the assets to be acquired as of December 31, 1996,
audited statements of revenues and direct operating expenses for each of the
two years in the period ended December 31, 1996, and accompanying notes.
(b) Pro Forma Financial Information
In accordance with Article 11 of Regulation S-X, pro forma financial
information is filed with this Report. With the concurrence of the Securities
and Exchange Commission, pursuant to Rule 3-13 of Regulation S-X, as
expressed in a letter dated February 10, 1997 from Douglas Tanner, Associate
Chief Accountant, to James F. Polark, the Company's Vice President, Finance
and Chief Financial Officer, the pro forma financial information consists of
an unaudited pro forma condensed consolidated balance sheet as of September
30, 1996, an unaudited pro forma condensed consolidated statement of
operations for the nine months ended September 30, 1996, an unaudited
condensed consolidated statement of operations for the year ended December
31, 1995, and accompanying explanation and notes.
(c) Exhibits
Audited financial statements for the acquired business are filed as Exhibit
99.1 to this Report.
Pro forma financial information is filed as Exhibit 99.2 to this Report.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 4, 1997.
STERICYCLE, INC.
By /s/ James F. Polark
----------------------------------------
James F. Polark
Vice President, Finance
and Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT DESCRIPTION NUMBERED PAGE
23.1 Consent of Arthur Andersen LLP 5
99.1 Waste Management, Inc. Regulated Medical Waste 6
Business Financial Statements as of December 31, 1996
and for the Years Ended December 31, 1996 and 1995
99.2 Stericycle, Inc. Pro Forma Condensed Consolidated 12
Financial Statements
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation in
this Form 8-K/A of our report dated March 3, 1997.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 3, 1997
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EXHIBIT 99.1
WASTE MANAGEMENT, INC.
REGULATED MEDICAL WASTE BUSINESS
Financial Statements
as of December 31, 1996 and for the
years ended December 31, 1996 and 1995
Together With Auditors' Report
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management of Stericycle, Inc.:
We have audited the accompanying statement of assets to be acquired of the
REGULATED MEDICAL WASTE BUSINESS OF WASTE MANAGEMENT, INC. (the "Business") as
of December 31, 1996, and the related statements of revenue and direct operating
expenses for each of the two years in the period ended December 31, 1996. These
financial statements are the responsibility of the Business's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As described in Note 1, the accompanying financial statements were prepared for
the purpose of complying with Rule 3-05 of Regulation S-X of the Securities and
Exchange Commission, and are not intended to be a complete presentation of
assets and liabilities and results of operations on a stand-alone basis of the
Regulated Medical Waste Business of Waste Management, Inc.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets to be acquired of the Regulated Medical Waste
Business of Waste Management, Inc. at December 31, 1996, and the revenue and
direct operating expenses for each of the two years in the period ended December
31, 1996, as described in Note 1, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 3, 1997
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WASTE MANAGEMENT, INC.
REGULATED MEDICAL WASTE BUSINESS
STATEMENT OF ASSETS TO BE ACQUIRED
AS OF DECEMBER 31, 1996
CUSTOMER ACCOUNTS AND CUSTOMER ACCOUNT
CONTRACT COMMITMENTS $ --
PROPERTY AND EQUIPMENT, at cost:
Vehicles and equipment 5,952,000
Containers 190,000
6,142,000
Less - Accumulated depreciation (4,332,000)
Net property and equipment 1,810,000
Total assets to be acquired $ 1,810,000
The accompanying notes are an integral part of this statement.
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WASTE MANAGEMENT, INC.
REGULATED MEDICAL WASTE BUSINESS
STATEMENTS OF REVENUE AND DIRECT OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
---- ----
REVENUE $ 15,779,000 $ 15,500,000
DIRECT OPERATING EXPENSES 13,143,000 13,081,000
Direct operating profit $ 2,636,000 $ 2,419,000
The accompanying notes are an integral part of these statements.
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WASTE MANAGEMENT, INC.
REGULATED MEDICAL WASTE BUSINESS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
On December 20, 1996, Stericycle, Inc. ("Stericycle") and Waste Management, Inc.
("WMI") entered into an Asset Purchase Agreement (the "Agreement") whereby
Stericycle agreed to purchase from WMI certain assets and assume certain
contractual obligations of WMI's Regulated Medical Waste Business (the
"Business").
The accompanying statement of assets to be acquired presents, as of December 31,
1996, the assets of the Business acquired by Stericycle pursuant to the
Agreement. The acquired assets consist primarily of vehicles and medical waste
containers. The Business's customer accounts and customer account contracts were
also acquired by Stericycle. However, accounts receivable from the customer
accounts and any assets or liabilities related to the customer account contracts
as of December 20, 1996, were retained by WMI. In addition, cash, prepaid
assets, certain property and equipment, income tax benefits and liabilities,
accrued expenses and certain other assets and liabilities related to the
Business were retained by WMI and are not included herein. Pursuant to the
Agreement, Stericycle assumed certain contractual obligations that are not
required by generally accepted accounting principles to be recorded in these
financial statements. The statements of revenue and direct operating expenses
represent those revenues and expenses that are specifically identifiable to the
Business and do not include certain expenses as described in Note 3.
As a result, the accompanying financial statements are not intended to be a
complete presentation of the Business's assets and liabilities and results of
operations had it been operated as a stand-alone entity (see Note 3). Rather,
these financial statements were prepared for the purpose of complying with Rule
3-05 of Regulation S-X of the Securities and Exchange Commission.
REVENUE RECOGNITION
Revenues are recognized when services are performed.
PROPERTY AND EQUIPMENT
Property and equipment (including major repairs and improvements) are
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capitalized and stated at cost. Items of an ordinary maintenance or repair
nature are charged directly to operations.
The cost, less estimated salvage value, of property and equipment is depreciated
over the estimated useful lives on the straight-line method as follows:
vehicles and equipment - 3 to 10 years; containers - 2 to 3 years. Depreciation
expense of $825,000 and $856,000 is included in direct operating expenses in the
accompanying statements of revenues and direct operating expenses for the years
ended December 31, 1996 and 1995, respectively.
The property and equipment included in the accompanying statement of assets to
be acquired includes the majority of vehicles and containers used by WMI to
operate the Business. Certain of this property and equipment may not ultimately
be acquired by Stericycle as the final list of assets acquired, and resulting
purchase price, is still being negotiated.
RENT EXPENSE
WMI leased certain office and other facility space and certain equipment in
several cities to operate the Business. Rent expense under these leases was
$265,000 and $355,000 in 1996 and 1995, respectively.
As specified in the Agreement, Stericycle may lease or sublease certain facility
space and other equipment from WMI in the future. No lease or sublease contracts
have yet been signed.
DIRECT OPERATING EXPENSES
The direct operating expenses of the Business include costs associated with
direct customer support to produce revenues. Such expenses (including certain
allocations) include costs of vehicle drivers, vehicle operating expenses,
disposal costs, depreciation, containers, supplies and certain occupancy costs.
Selling, general and administrative expenses, certain employee benefit costs,
interest expense, goodwill amortization and provision for income taxes incurred
by WMI on behalf of and to support the Business have not been included in these
financial statements since these costs have historically been included in WMI's
consolidated statement of operations and have not been allocated to the various
WMI businesses. Accordingly, as also indicated in Note 1, the accompanying
financial statements are not intended to be a complete presentation of the
Business's assets and liabilities and results of operations had it been operated
as a stand-alone entity.
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<PAGE>
EXHIBIT 99.2
STERICYCLE, INC.
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The following unaudited pro forma condensed consolidated financial statements
give effect to the acquisition by Stericycle, Inc. ("Stericycle") of certain
assets of the regulated medical waste business (the "Business") of Waste
Management, Inc. using the purchase method of accounting, and are based on
estimates and assumptions set forth below and in the notes to such statements.
The Business represented an insignificant component of Waste Management Inc.
("WMI") consolidated revenues and was not a separate legal entity for which full
audited financial statements were prepared. These pro forma condensed
consolidated financial statements are based upon the historical financial
statements of Stericycle adjusted to give effect to the acquisition on December
20, 1996.
The financial information of Stericycle is based upon its audited
consolidated financial statements for the year ended December 31, 1995 and
its unaudited consolidated financial statements as of and for the nine-month
period ended September 30, 1996. An audited statement of assets to be
acquired as of December 31, 1996 and audited statements of revenues and
direct operating expenses for the years ended December 31, 1996 and 1995 of
the Business are included herein (as Exhibit F-1). The financial information
of the Business is based upon the audited statement of revenues and direct
operating expenses for the year ended December 31, 1995, described above, the
unaudited financial statements of the Business for the nine month period
ended September 30, 1996, and its audited statement of assets to be acquired
as of December 31, 1996.
The unaudited pro forma condensed consolidated statements of operations for the
year ended December 31, 1995 and the nine month period ended September 30, 1996
have been prepared on the assumption that the transaction had occurred on
January 1, 1995. The unaudited pro forma condensed consolidated balance sheet
has been prepared on the assumption that the transaction had occurred as of
Stericycle's latest interim balance sheet, September 30, 1996.
The pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deemed appropriate. Final
purchase accounting adjustments will be made on the basis of appraisals and
evaluations, and therefore may differ from the pro forma adjustments
presented herein. The unaudited pro forma final information does not profess
to represent Stericycle's results of operations or financial position had the
above transaction, in fact, occurred on these dates, or project the combined
Company's financial position or results of operations for any future date or
period. The pro forma condensed consolidated financial statements should be
read in conjunction with Stericycle's consolidated historical financial
statements and notes thereto, contained in Stericycle's Registration
Statement on Form S-1 (Registration No. 333-05665) and Stericycle's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996. The Company's
future historical financial statements will reflect the acquisition of the
Business as of December 20, 1996.
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<PAGE>
Stericycle, Inc.
Pro Forma Condensed Consolidated Balance Sheet
September 30, 1996
(In 000's)
(Unaudited)
<TABLE>
<CAPTION>
WMI PRO FORMA PRO FORMA
STERICYCLE, BUSINESS ADJUSTMENTS CONSOLIDATED
INC. ACQUIRED
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $24,265 ($5,450) (1) $18,815
Accounts receivable, net 4,634 4,634
Parts, supplies, prepaid expenses 1,182 1,182
and other
-------------------------------------------------------------------------------
Total current assets 30,081 (5,450) 24,631
Property, plant and equipment 15,044 1,810 16,854
Less accumulated depreciation and
amortization
(4,765) (4,765)
10,279 1,810 12,089
Goodwill and other assets 9,455 10,024 (2) 19,479
-------------------------------------------------------------------------------
Total assets $49,815 $1,810 $4,574 $56,199
------- ------ ------ -------
------- ------ ------ -------
Liabilities and shareholders' equity
Current portion of long term debt and
capital lease obligations $1,815 $2,605 (1) $4,420
Accounts payable, accrued liabilities
and deferred revenue
4,361 391 (2) 4,752
-------------------------------------------------------------------------------
Total current liabilities 6,176 2,996 9,172
Note payable 2,605 (1) 2,605
Industrial development revenue bonds 2,137 2,137
and other
Other liabilities 543 783 (2) 1,326
-------------------------------------------------------------------------------
Total long-term liabilities 2,680 3,388 6,068
Shareholders' equity 40,959 40,959
-------------------------------------------------------------------------------
Total liabilities and shareholders' $49,815 $6,384 $56,199
equity ------- ------ -------
------- ------ -------
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
Stericycle, Inc.
Pro Forma Condensed Consolidated Statement Of Operations
Nine Months Ended September 30, 1996
(In 000's, Except Share And Per Share Information)
(Unaudited)
<TABLE>
<CAPTION>
WMI
STERICYCLE, INC. BUSINESS PRO FORMA PRO FORMA
ACQUIRED ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C>
Revenues $17,930 $12,304 $30,234
Costs and expenses:
Cost of revenues 14,200 10,125 24,325
Selling, general and administrative
expenses 5,118 1,335 (3) 6,453
---------------------------------------------------------------------
Total costs and expenses 19,318 10,125 1,335 30,778
---------------------------------------------------------------------
(Loss) income from operations (1,388) 2,179 (1,335) (544)
Other income (expense):
Interest expense (308) (137) (4) (445)
Interest income 116 116
---------------------------------------------------------------------
Total other expense (192) (137) (329)
---------------------------------------------------------------------
Net loss ($1,580) ($1,472) ($873)
------- ------- -----
------- ------- -----
Net loss per common share ($0.21) ($0.12)
------ ------
------ ------
Weighted average number of
common shares outstanding
7,401,916 7,401,916
--------- ---------
--------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
Stericycle, Inc.
Pro Forma Condensed Consolidated Statement Of Operations
Year Ended December 31, 1995
(In 000's, Except Share And Per Share Information)
(Unaudited)
<TABLE>
<CAPTION>
WMI
STERICYCLE, INC. BUSINESS PRO FORMA PRO FORMA
ACQUIRED ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C>
Revenues $21,339 $15,500 $36,839
Costs and expenses:
Cost of revenues 17,478 13,081 30,559
Selling, general and administrative
expenses 8,137 1,780 (3) 9,917
---------------------------------------------------------------------
Total costs and expenses 25,615 13,081 1,780 40,476
---------------------------------------------------------------------
(Loss) income from operations (4,276) 2,419 (1,780) (3,637)
Other income (expense):
Interest expense (277) (365) (4) (642)
Interest income 9 9
---------------------------------------------------------------------
Total other expense (268) (365) (633)
---------------------------------------------------------------------
Net loss ($4,544) ($2,145) ($4,270)
------- ------- -------
------- ------- -------
Net loss per common share ($0.65) ($0.61)
------ ------
------ ------
Weighted average number of
common shares outstanding 6,974,820 6,974,820
--------- ---------
--------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
Stericycle, Inc.
Notes To Pro Forma Condensed Consolidated Financial Statements
(In 000's)
(Unaudited)
A. Unaudited Pro Forma Condensed Consolidated Balance Sheet Adjustments
1. This adjustment reflects the consideration paid for the regulated
medical waste business of WMI, including $5,450 in cash and a $5,210
note payable at 7% interest. Not reflected is the effect, if any,
resulting from adjustments to the purchase price to be determined if
actual revenues achieved by Stericycle are less than or exceed a
stated threshold for a specified period of time following closing. In
the event that the actual revenues differ from the stated threshold,
the purchase price will be increased or decreased. Any adjustment will
be made to the goodwill and the note payable.
2. This adjustment to record goodwill of $10,024 represents the purchase
price of $10,660, less the estimated value of the vehicles and
containers acquired of $1,810 plus an accrual of $1,174 relating to an
unfavorable lease agreement entered into between Stericycle and WMI.
The vehicles will be adjusted based on a physical inventory and the
appraised value of the vehicles and any reduction in purchase price
will reduce the notes payable to WMI. In the event that the parties
cannot agree on the values for the vehicles, WMI would have the right
to retain any vehicles upon which a price could not be agreed.
B. Unaudited Pro Forma Condensed Consolidated Statement of Operations
Adjustments
3. This adjustment records the incremental recurring costs associated
with the consolidation of these operations, such as manager and sales
representative salaries and benefits, as well as expenses estimated to
be incurred in relation to billing, customer support and information
systems support. The adjustment also includes goodwill amortization.
The historical statements of revenue and direct expenses for the
Business of WMI do not reflect these costs.
4. This adjustment reflects the incremental interest expense of the
$5,210 note payable to WMI at 7% interest. The note is payable in
installments of $2,605 and $2,605, respectively, on the first and
second anniversaries of the acquisition.
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