<PAGE> 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, 1999
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 10, 1999, there were 14,722,693 shares of the
Registrant's Common Stock outstanding.
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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, 1999 (unaudited) and December 31, 1998 1
Condensed Consolidated Statements of Income for the three
months ended September 30, 1999 and 1998 (unaudited)
and nine months ended September 30, 1999 and 1998 (unaudited) 2
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 1999 and 1998 (unaudited) 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
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STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,017 $ 1,283
Short-term investments 1,583 536
Accounts receivable, less allowance for doubtful
accounts of $743 in 1999 and $901 in 1998 18,553 16,582
Other receivable 1,679 -
Parts and supplies 1,003 1,291
Prepaid expenses 808 1,283
Other 1,587 835
--------- ---------
Total current assets 41,230 21,810
--------- ---------
Property, plant and equipment:
Land 725 680
Buildings and improvements 11,066 10,514
Machinery and equipment 20,964 18,924
Office equipment and furniture 1,644 1,425
Construction in progress 901 1,007
--------- ---------
35,300 32,550
Less accumulated depreciation (12,865) (9,450)
--------- ---------
Property, plant and equipment, net 22,435 23,100
--------- ---------
Other assets:
Goodwill, less accumulated amortization of $5,461
in 1999 and $3,551 in 1998 59,524 49,112
Other 5,539 3,733
--------- ---------
Total other assets 65,063 52,845
--------- ---------
Total assets $ 128,728 $ 97,755
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 1,900 $ 5,499
Accounts payable 4,747 6,502
Accrued liabilities 6,213 6,465
Deferred revenue 178 2,178
--------- ---------
Total current liabilities 13,038 20,644
--------- ---------
Long-term debt, net of current portion 3,878 23,460
Shareholders' equity:
Common stock (par value $.01 per share, 30,000,000 shares
authorized, 14,713,398 issued and outstanding in 1999,
10,865,862 issued and outstanding in 1998) 147 109
Additional paid-in capital 136,148 85,894
Accumulated deficit (24,483) (32,352)
--------- --------
Total shareholders' equity 111,812 53,651
--------- ---------
Total liabilities and shareholders' equity $ 128,728 $ 97,755
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
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STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 25,398 $ 16,741 $ 74,285 $ 44,759
Costs and expenses:
Cost of revenues 16,658 10,863 48,998 30,492
Selling, general and
administrative expenses 5,271 3,793 15,541 10,151
---------- ------------ ----------- ----------
Total costs and expenses 21,929 14,656 64,539 40,643
---------- ------------ ----------- ----------
Income from operations 3,469 2,085 9,746 4,116
Other income (expense):
Interest income 304 69 576 308
Interest expense (154) (118) (689) (242)
Other income 15 20 404 20
---------- ------------ ----------- ----------
Total other income (expense) 165 (29) 291 86
---------- ------------ ----------- ----------
Income before income taxes $ 3,634 $ 2,056 $ 10,037 $ 4,202
Income tax expense $ 752 503 2,168 781
---------- ------------ ----------- ----------
Net income $ 2,882 $ 1,553 $ 7,869 $ 3,421
========== ========== =========== ==========
Earnings per share - Basic $ 0.20 $ 0.15 $ 0.56 $ 0.32
========== ========== =========== ==========
Earnings per share - Diluted $ 0.19 $ 0.14 $ 0.54 $ 0.30
========== ========== =========== ==========
Weighted average number of
common shares outstanding--
Basic 14,605,219 10,694,683 14,073,309 10,579,886
Weighted average number of common
shares outstanding--Diluted 15,003,105 11,364,524 14,471,191 11,233,812
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
------------
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 7,869 $ 3,421
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,316 2,694
Changes in operating assets and liabilities, net of
effect of acquisitions:
Accounts receivable (1,864) (541)
Parts and supplies 438 (365)
Prepaid expenses 475 (88)
Other assets (2,393) (1,632)
Accounts payable (1,755) 59
Accrued liabilities (252) (2,179)
Deferred revenue (2,000) (23)
------- ---------
Net cash provided by operating activities 5,834 1,346
------- ---------
INVESTING ACTIVITIES:
Payments for acquisitions and international investments,
net of cash acquired (11,667) (7,130)
Proceeds from maturity of short-term investments 460 --
Purchases of short-term investments (1,500) --
Capital expenditures (2,367) (1,825)
------- ---------
Net cash used in investing activities (15,074) (8,955)
------- ---------
FINANCING ACTIVITIES:
Net (payments) proceeds on line of credit (16,359) 4,075
Proceeds from subordinated debt 2,750 --
Repayment of subordinated debt (5,500) --
Repayment of long term debt (4,022) (1,244)
Payments of deferred financing costs (40) --
Principal payments on capital lease obligations (154) (116)
Net proceeds from secondary public offering 47,158 --
Proceeds from issuance of common stock 141 295
------- ---------
Net cash provided by financing activities 23,974 3,010
------- ---------
Net increase (decrease) in cash and cash equivalents 14,734 (4,599)
Cash and cash equivalents at beginning of period 1,283 5,374
------- ---------
Cash and cash equivalents at end of period $16,017 $ 775
======= =========
Non-cash activities:
Net issuances of common stock for certain acquisitions
and international investments $ 2,993 $ 1,807
Net issuances of notes payable for certain acquisitions $ 103 $ 195
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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STERICYCLE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
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 the opinion of management, 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 three years ended
December 31, 1998, as filed with the Company's Annual Report on Form 10-K for
1998. The results of operations for the nine-month period ended September 30,
1999 are not necessarily indicative of the results that may be achieved for the
entire year ending December 31, 1999.
NOTE 2 --ACQUISITIONS
In July 1999, the Company acquired the customer lists and selected
other assets of Envirotech Services, Inc. in Arizona and Allmed-Safewaste, Inc.
in Massachusetts. Also in July 1999, the Company acquired all of the outstanding
stock of Ionization Research Company, Inc. which operated under the name of
EcoSolutions, Inc. in California. The aggregate purchase price of these
acquisitions was immaterial and was paid in a combination of cash, notes payable
and common stock.
On September 30, 1999, the Company purchased an additional 18.45%
ownership in its Mexican joint venture from Pennoni, Inc., increasing its
ownership percentage to 49%. The purchase price was immaterial and was paid by
the issuance of common stock.
NOTE 3--STOCK OPTIONS
During the quarter ended September 30, 1999, options to purchase
common stock totalling 432,650 shares were granted. These options will vest
ratably over a five year period from a pre-determined start date and have an
average exercise price of approximately $12.563 to 12.750 per share. The grant
of options was made under the Company's 1997 Stock Option Plan, which authorized
the grant of options for a total of 1,500,000 shares of the Company's common
stock. The 1997 Stock Option Plan was approved by the Company's stockholders in
April 1997.
NOTE 4--STOCK ISSUANCES
During the quarter ending September 30, 1999, options to purchase
49,980 shares of common stock were exercised at prices ranging from $0.53-13.625
per share. The Company also issued 104,001 shares of common stock in connection
with certain acquisitions and international investments made in the quarter.
NOTE 5--INCOME TAXES
Prior to 1997, the Company had generated net operating losses for
income tax purposes. Any benefit resulting from these net operating losses has
been offset by a valuation allowance. Annual utilization of the Company's net
operating loss carryforward is limited by Internal Revenue Code Section 382. The
Company's income tax expense reflects federal taxable income expected in excess
of the Section 382 limitation and income taxes in states where the Company has
no offsetting net operating losses.
4
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NOTE 6 ---SUBSEQUENT EVENTS
On November 12, 1999, the Company completed its pending acquisition
from Allied Waste Industries, Inc. ("Allied") of the medical waste business of
Browning-Ferris Industries, Inc. ("BFI") in the United States, Canada and Puerto
Rico. Allied had acquired BFI in a merger completed in July 1999.
The purchase price for the Company's acquisition of BFI's medical waste
business was $410.5 million in cash. The Company paid the purchase price from
the following sources, in addition to cash on hand: (i) $225.0 million in
borrowings under the term loan facilities of a new senior credit facility that
the Company established with DLJ Capital Funding, Inc., Bank of America, N.A.
and Bankers Trust Company; (ii) $125.0 million in proceeds from the sale of
12-3/8% senior subordinated notes due 2009; and (iii) $75.0 in proceeds from the
issuance of new convertible preferred stock to investment funds affiliated with
Bain Capital, Inc. and Madison Dearborn Partners, Inc. These transactions were
completed concurrently with completion of the Company's acquisition.
PART I -- FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company provides regulated medical waste collection,
transportation, treatment, disposal, reduction, reuse and recycling services to
its customers, together with related training and education programs and
consulting services. The Company also sells ancillary supplies and in selected
geographic service areas transports pharmaceuticals, photographic chemicals,
lead foil and amalgam for recycling. Internationally, the Company licenses its
patented machinery technology and occasionally sells equipment.
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998
The following summarizes (in thousands) the Company's operations:
Three Months Ended
September 30,
1999 1998
----- ----
$ % $ %
Revenues $25,398 100.0 $16,741 100.0
Cost of revenues 16,658 65.6 10,863 64.9
------- -------
Gross profit 8,740 34.4 5,878 35.1
Selling, general and administrative
expenses 5,271 20.8 3,793 22.7
------- -------
Income from operations 3,469 13.7 2,085 12.5
Net income 2,882 11.3 1,553 9.3
Depreciation and amortization 1,771 7.0 961 5.7
EBITDA* 5,255 20.7 3,066 18.3
* EBITDA is calculated as the sum of net income, plus net interest expense,
income tax expense, depreciation expense, and amortization expense, to the
extent deducted in calculating net income.
Revenues. Revenues increased $8,657,000, or 51.7%, to $25,398,000
during the three months ended September 30, 1999 from $16,741,000 during the
comparable period in 1998 as the Company continued to implement its strategy of
focusing on sales to higher-margin alternate care generators. During the three
months ended September 30, 1999, acquisitions made during the last 12 months
contributed $7,900,000 to the increase in revenues as compared to the prior
year. Revenues generated from the sale of machinery internationally was
$2,177,000 during the three months ended September
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30, 1999 as compared to $2,600,000 for the same period in 1998. For the quarter,
internal growth for alternate care generators increased approximately 16.2%
while revenues from large quantity generators increased by approximately .4%.
Cost of Revenues. Cost of revenues increased $5,795,000 to $16,658,000
during the three months ended September 30, 1999 from $10,863,000 during the
comparable period in 1998. The increase was due to the substantial increase in
revenues during the three months September 30, 1999 compared to the same period
in 1998. The gross margin percentage decreased to 34.4% during the three months
ended September 30, 1999 from 35.1% during the same period in 1998 principally
as a result of lower international revenues which have a higher gross margin.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $5,271,000 for the three months ended
September 30, 1999 from $3,793,000 for the comparable period in 1998. The
increase was largely the result of increases in selling and marketing expenses
and goodwill amortization as a result of our acquisitions, as well as, expansion
of the sales network, and increased administrative expenses related to the
higher volume. Selling, general and administrative expenses as a percent of
revenues decreased to 20.8% during the three months ended September 30, 1999
from 22.7% during the comparable period in 1998. Excluding amortization,
selling, general and administrative expenses as a percent of revenue decreased
to 18.5% during the three months ended September 30, 1999 from 20.5% during the
comparable period in 1998.
EBITDA. Earnings before interest, income taxes, depreciation and
amortization (`EBITDA') increased by 71.4% to $5,255,000 or 20.7% of revenue for
the three months ended September 30, 1999 as compared to $3,066,000 or 18.3% of
revenue for the comparable period in 1998. The increase in EBITDA is primarily
due to the factors described above.
Interest Expense and Interest Income. Interest expense increased to
$154,000 during the three months ended September 30, 1999 from $118,000 during
the comparable period in 1998 primarily due to the interest on the debt of the
Company's wholly owned subsidiary, Waste Systems Inc. acquired in October 1998.
Interest income increased to $304,000 during the three months ended September
30, 1999 from $69,000 during the comparable period in 1998 primarily due to the
investment of proceeds from the Company's public offering of common stock
completed in February 1999.
Income Tax Expense. The effective tax rate of 20.7% for the three
months ended September 30, 1999 reflects federal taxable income expected in
excess of Internal Revenue Code Section 382 limitations on the annual
utilization of the Company's net operating loss carryforward and state income
taxes in states where the Company has no offsetting net operating losses.
6
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NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998
The following summarizes (in thousands) the Company's operations:
Nine Months Ended
September 30,
1999 1998
----- ----
$ % $ %
Revenues $74,285 100.0 $44,759 100.0
Cost of revenues 48,998 66.0 30,492 68.1
------- -------
Gross profit 25,287 34.0 14,267 31.9
Selling, general and administrative
expenses 15,541 20.9 10,151 22.7
------- -------
Income from operations 9,746 13.1 4,116 9.2
Net income 7,869 10.6 3,421 7.6
Depreciation and amortization 5,316 7.2 2,694 6.0
EBITDA* 15,466 20.8 6,830 15.3
* EBITDA is calculated as the sum of the net income, plus net interest expense,
income tax expense, depreciation expense, and amortization expense, to the
extent deducted in calculating net income.
Revenues. Revenues increased $29,526,000, or 66.0%, to $74,285,000
during the nine months ended September 30, 1999 from $44,759,000 during the
comparable period in 1998 as the Company continued to implement its strategy of
acquiring selected businesses and focusing on sales to higher-margin alternate
care generators while simultaneously paring certain higher-revenue but
lower-margin accounts with large quantity generators. Revenues generated from
the sale of machinery internationally was $5,161,000 during the nine month
period ended September 30, 1999 as compared to $3,802,000 during the same
period in 1998. During the nine months ended September 30, 1999, acquisitions
made during the last 12 months contributed approximately $24,846,000 to the
increase in revenues as compared to the prior year.
Cost of Revenues. Cost of revenues increased $18,506,000, or 60.7%, to
$48,998,000 during the nine months ended September 30, 1999 from $30,492,000
during the comparable period in 1998. This increase was primarily due to the
substantial increase in revenues during 1999 compared to the same period in 1998
and an increase in the cost of equipment sold internationally. The gross margin
percentage increased to 34.0% during the nine months ended September 30, 1999
from 31.9% during the comparable period in 1998 due to further integration of
new acquisitions into the existing infrastructure, lower relative costs relating
to the changing mix of alternate care versus large quantity customers, increased
utilization of treatment capacity and an increase in sales of equipment
internationally.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $15,541,000 for the nine months ended
September 30, 1999 from $10,151,000 for the comparable period in 1998. The
increase was largely the result of increases in selling and marketing expenses
and goodwill amortization as a result of the Company's acquisitions, expansion
of the sales network, and increased administrative expenses related to the
higher volume. Selling, general and administrative expenses as a percentage of
revenues decreased to 20.9% during the nine months ended September 30, 1999 from
22.7% during the comparable period in 1998. Excluding amortization, selling,
general and administrative expenses as a percent of revenue decreased to 18.5%
during the nine months ended September 30, 1999 from 20.4% during the comparable
period in 1998.
EBITDA. Earnings before interest, income taxes, depreciation and
amortization (`EBITDA') increased by 126% to $15,466,000 or 20.8% of revenues
for the nine months ended September 30, 1999 as compared to $6,830,000 or 15.3%
of revenues for the
7
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comparable period in 1998. The increase in EBITDA is primarily due to the
factors described above.
Interest Expense and Interest Income. Interest expense increased to
$689,000 during the nine months ended September 30, 1999, from $242,000 during
the comparable period in 1998, primarily due to increased interest expense
related to borrowings associated with acquisitions completed prior to the
completion of the issuance of common stock in a public offering in February
1999. Interest income also increased to $576,000 during the nine months ended
September 30, 1999, from $308,000 during the comparable period in 1998,
primarily due to the investment of proceeds from the public offering offset by
lower cash balances prior to the stock issuance.
Other Income and Expense. A one-time gain of $656,000 on the sale of
routes by 3CI Complete Compliance Corporation of which Waste Systems Inc. (a
wholly owned subsidiary of Stericycle) is majority shareholder, was partially
offset by a one-time non-cash expense of $192,000 for warrants issued with
bridge loan borrowings in December 1998 and January 1999.
Income Tax Expense. The estimated effective tax rate of approximately
21.6% for the nine months ended September 30, 1999 reflects federal taxable
income expected in excess of Internal Revenue Code Section 382 limitations on
the annual utilization of the Company's net operating loss carryforward and
state income taxes in states where the Company has no offsetting net operating
losses.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company's working capital was $28,192,000
compared to working capital of $1,166,000 at December 31, 1998. The increase in
working capital is primarily due to higher cash balances and lower current
liabilities as a result of the public offering completed in February 1999. The
Company has available a $25,000,000 revolving line of credit secured by the
Company's accounts receivable and all of its other assets. At September 30, 1999
the Company did not have any borrowings under this line. In February 1999, the
Company successfully completed a second public offering of common stock and
raised $47,158,000 net of offering costs.
Net cash provided by operating activities was $5,834,000 during the
nine months ended September 30, 1999 compared to $1,346,000 for the comparable
period in 1998. This increase primarily reflects higher net income, depreciation
and amortization expense offset by changes in working capital.
Net cash used in investing activities for the nine months ended
September 30, 1999 was $15,074,000 compared to $8,955,000 for the comparable
period in 1998. The change is primarily attributable to the increase in cash
used for funding acquisitions and international investments completed in 1999
and an increase in capital expenditures. Capital expenditures were $2,367,000
for the nine months ended September 30, 1999 compared to $1,825,000 for the same
period in 1998. The increase in capital spending is a result of improvements
made to existing treatment facilities, the movement of the corporate office to a
new facility and facility improvements made by the Company's subsidiaries, 3CI
and Med Tech Environmental Limited. Payments for acquisitions and international
investments amounted to $11,667,000 during 1999.
Net cash provided by financing activities was $23,974,000 during the
nine months ended September 30, 1999 compared to $3,010,000 for the comparable
period in 1998. The difference between the two periods results primarily from
the completion of the Company's second public offering of common stock, which
raised $47,158,000 net of offering costs, partially offset by the repayment of
$25,881,000 in debt in the first half of 1999.
YEAR 2000 ISSUES
8
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The Company has developed a plan to modify its information systems in
anticipation of the year 2000. The Company currently has substantially
implemented this plan at a cost of less than $200,000. In light of the Company's
progress to date and the fact that the Company's business is not significantly
affected by the software employed by its vendors and customers, the Company does
not anticipate that the year 2000 will present any material problems in respect
of the Company's key products and services. The Company is continuously making
acquisitions and in the course of an acquisition may acquire software or
hardware that is not year 2000 compliant. In the event that this situation
arises, the Company will take the necessary steps to correct the compliance
issues in a timely manner.
The Company's plan for the year 2000 comprises both remediating the
Company's existing hardware and software and upgrading the Company's business
information systems generally. The Company initiated the upgrading process in
1998, for reasons unrelated to year 2000 issues, in order to respond to the
growth in size of the Company's business and the inefficiencies caused by
disparate hardware and software systems. The Company's upgrading of its business
information systems has the benefit of enabling the Company to become year 2000
compliant in the course of the upgrade.
The Company has conducted an extensive review of potential year 2000
issues. The Company's assessment of its treatment facilities and equipment
concluded that there was no risk that the Company would be unable to treat
regulated medical waste as a result of year 2000 issues. The new software that
the Company adopted in 1998 for accounting and related purposes is already year
2000 compliant. The Company's other software and computer hardware have been
tested, and upgrades or appropriate adjustments have been or will be made in
accordance with the Company's upgrade plans or as required. The Company is also
in the process of reviewing the year 2000 compliance status of its significant
vendors.
The Company believes that it has an effective plan in place to resolve
year 2000 issues in a timely manner. As of November 1999, and in the event that
the Company were unable to complete the remaining phases of its year 2000 plan,
the Company believes that, as a result of year 2000 issues solely affecting the
Company, the principal effect on the Company would be an inability to invoice a
small portion of its customers for the Company's services.
The Company is also developing contingency plans to take into account
any inability of the Company itself and others to become fully year 2000
compliant in time. These plans involve, among other actions, implementing manual
systems, increasing inventories of parts and supplies and adjusting staffing
strategies.
FROM TIME TO TIME THE COMPANY ISSUES FORWARD-LOOKING STATEMENTS
RELATING TO SUCH THINGS AS ANTICIPATED FINANCIAL PERFORMANCE, BUSINESS
PROSPECTS, ACQUISITION ACTIVITIES AND SIMILAR MATTERS.
A VARIETY OF FACTORS COULD CAUSE THE COMPANY'S ACTUAL RESULTS AND
EXPERIENCE TO DIFFER MATERIALLY FROM THE ANTICIPATED RESULTS OR OTHER
EXPECTATIONS EXPRESSED IN THE COMPANY'S FORWARD-LOOKING STATEMENTS. THE RISKS
AND UNCERTAINTIES THAT MAY AFFECT THE COMPANY'S 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.
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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
On August 20, 1999, the Company filed a current report on Form 8-K to
report that the Company had reached an agreement with certain investment funds
managed by Bain Capital, Inc. (the "Bain Investors") to sell 75,000 shares of
convertible preferred stock in the Company for $75,000,000, contingent upon
approval by the Company's shareholders and completion of the Company's
previously announced acquisition of the medical waste business of
Browning-Ferris Industries, Inc. from Allied Waste Industries, Inc. ("Allied").
On October 15, 1999, the Company filed a current report on Form 8-K to
report the results of its annual shareholder meeting held on October 15, 1999.
The shareholders accepted all items submitted for their approval, including the
amendment to the Company's certificate of incorporation to authorize 1,000,000
shares of a new class of convertible preferred stock and sale of 75,000 such
shares. The Company also reported that the Company and Bain Investors had
amended their agreement in order to allow certain investment funds managed by
Madison Dearborn Partners, Inc. to participate in the purchase of the 75,000
shares of convertible preferred stock to be issued by the Company.
On October 25, 1999, the Company filed a current report on Form 8-K to
report that the Company and Allied had agreed to an amendment to their stock
purchase and asset purchase agreements originally dated April 14, 1999 reducing
the purchase price from $440 million to $410.5 million and eliminating
provisions addressing adjustments to the purchase price.
10
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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 15, 1999.
STERICYCLE, INC.
By /s/ FRANK J.M. TEN BRINK
Frank J.M. ten Brink
Vice President, Chief Financial
Officer (Principal Financial
and Accounting Officer)
11
<PAGE> 1
EXHIBIT 11
STERICYCLE, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
Weighted average common shares
outstanding--basic earnings
per share 14,605,219 10,694,683 14,073,309 10,579,886
Common stock issuable upon
assumed conversion of stock
options and warrants 397,886 669,841 397,882 653,926
----------- ----------- ----------- -----------
Adjusted weighted average
common shares outstanding--
diluted earnings per share 15,003,105 11,364,524 14,471,191 11,233,812
=========== =========== =========== ===========
Net income (in thousands) $ 2,882 $ 1,553 $ 7,869 $ 3,421
=========== =========== =========== ===========
Net income per share--basic $ 0.20 $ 0.15 $ 0.56 $ 0.32
=========== =========== =========== ===========
Net income per share--diluted $ 0.19 $ 0.14 $ 0.54 $ 0.30
=========== =========== =========== ===========
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 16,017
<SECURITIES> 1,583
<RECEIVABLES> 19,296
<ALLOWANCES> 743
<INVENTORY> 1,003
<CURRENT-ASSETS> 41,230
<PP&E> 35,300
<DEPRECIATION> 12,865
<TOTAL-ASSETS> 128,728
<CURRENT-LIABILITIES> 13,038
<BONDS> 3,878
0
0
<COMMON> 147
<OTHER-SE> 111,665
<TOTAL-LIABILITY-AND-EQUITY> 128,728
<SALES> 0
<TOTAL-REVENUES> 25,398
<CGS> 0
<TOTAL-COSTS> 21,929
<OTHER-EXPENSES> 15
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 154
<INCOME-PRETAX> 3,634
<INCOME-TAX> 752
<INCOME-CONTINUING> 2,882
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,882
<EPS-BASIC> 0.20
<EPS-DILUTED> 0.19
</TABLE>
