<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 JUNE 30, 1999
[ ] 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 August 12, 1999, there were 14,634,566 shares of the Registrant's
Common Stock outstanding.
<PAGE> 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 June 30, 1999 (unaudited) and December 31, 1998 1
Condensed Consolidated Statements of Income for the three
months ended June 30, 1999 and 1998 (unaudited)
and six months ended June 30, 1999 and 1998 (unaudited) 2
Condensed Consolidated Statements of Cash Flows for the
six months ended June 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
<PAGE> 3
STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1999 1998
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,562 $ 1,283
Short-term investments 76 536
Accounts receivable, less allowance for doubtful
accounts of $672 in 1999 and $901 in 1998 17,205 16,582
Parts and supplies 886 1,291
Prepaid expenses 1,239 1,283
Other 1,289 835
--------- ---------
Total current assets 40,257 21,810
--------- ---------
Property, plant and equipment:
Land 731 680
Buildings and improvements 10,923 10,514
Machinery and equipment 20,118 18,924
Office equipment and furniture 1,592 1,425
Construction in progress 1,062 1,007
--------- ---------
34,426 32,550
Less accumulated depreciation (11,311) (9,450)
--------- ---------
Property, plant and equipment, net 23,115 23,100
--------- ---------
Other assets:
Goodwill, less accumulated amortization of $4,958
in 1999 and $3,551 in 1998 55,438 49,112
Other 3,987 3,733
--------- ---------
Total other assets 59,425 52,845
--------- ---------
Total assets $ 122,797 $ 97,755
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 1,549 $ 5,499
Accounts payable 3,257 6,502
Accrued liabilities 5,859 6,465
Deferred revenue 226 2,178
--------- ---------
Total current liabilities 10,891 20,644
--------- ---------
Long-term debt, net of current portion 4,383 23,460
Shareholders' equity:
Common stock (par value $.01 per share, 30,000,000 shares
authorized, 14,559,417 issued and outstanding in 1999,
10,865,862 issued and outstanding in 1998) 145 109
Additional paid-in capital 134,743 85,894
Accumulated deficit (27,365) (32,352)
--------- ---------
Total shareholders' equity 107,523 53,651
--------- ---------
Total liabilities and shareholders' equity $ 122,797 $ 97,755
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
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 SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 25,019 $ 14,763 $ 48,887 $ 28,018
Costs and expenses:
Cost of revenues 16,479 10,331 32,340 19,629
Selling, general and
administrative expenses 5,186 3,268 10,270 6,358
---------- ---------- ----------- ----------
Total costs and expenses 21,665 13,599 42,610 25,987
---------- ---------- ---------- ----------
Income from operations 3,354 1,164 6,277 2,031
Other income (expense):
Interest income 195 181 272 239
Interest expense (172) (62) (535) (124)
Other income 6 - 389 -
---------- ---------- ----------- ----------
Total other income (expense) 29 119 126 115
---------- ---------- ----------- ----------
Income before income taxes $ 3,383 $ 1,283 $ 6,403 $ 2,146
Income tax expense $ 823 195 1,416 278
---------- ---------- ----------- ----------
Net income $ 2,560 $ 1,088 $ 4,987 $ 1,868
========== ========== ========== =========
Earnings per share - Basic $ 0.18 $ 0.10 $ 0.36 $ 0.18
========== ========== ========== =========
Earnings per share - Diluted $ 0.17 $ 0.10 $ 0.35 $ 0.17
========== ========== ========== =========
Weighted average number of
common shares outstanding--
Basic 14,546,201 10,539,806 13,811,646 10,511,297
Weighted average number of common
shares outstanding--Diluted 14,878,684 11,176,777 14,209,693 11,167,492
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30,
--------
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,987 $ 1,868
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,545 1,733
Changes in operating assets and liabilities, net of
effect of acquisitions:
Accounts receivable (516) (1,152)
Parts and supplies 555 (135)
Prepaid expenses 44 (45)
Other assets (16) (115)
Accounts payable (3,245) 198
Accrued liabilities (606) (1,429)
Deferred revenue (1,952) (30)
------- -------
Net cash provided by operating activities 2,796 893
------- -------
INVESTING ACTIVITIES:
Payments for acquisitions and international investments,
net of cash acquired (7,287) (1,163)
Proceeds from maturity of short-term investments 460 --
Capital expenditures (1,879) (984)
------- -------
Net cash used in investing activities (8,706) (2,147)
------- -------
FINANCING ACTIVITIES:
Net payments on line of credit (16,359) --
Proceeds from subordinated debt 2,750 --
Repayment of subordinated debt (5,500) --
Repayment of long term debt (3,912) (788)
Payments of deferred financing costs (40) --
Principal payments on capital lease obligations (80) (57)
Net proceeds from secondary public offering 47,158 --
Proceeds from issuance of common stock 172 83
------- -------
Net cash provided by (used in) financing activities 24,189 (762)
------- -------
Net increase (decrease) in cash and cash equivalents 18,279 (2,016)
Cash and cash equivalents at beginning of period 1,283 5,374
------- -------
Cash and cash equivalents at end of period $19,562 $ 3,358
======= =======
Non-cash activities:
Net issuances of common stock for certain acquisitions $ 1,452 $ 697
Net issuances of notes payable for certain acquisitions $ 73 $ 195
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
STERICYCLE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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 six-month period ended June 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 June 1999, the Company acquired the customer lists and selected
other assets of Environmental Guardian Inc. in Wisconsin and Foster
Environmental Service Corporation in New York. The aggregate purchase price of
these acquisitions was immaterial and was paid in a combination of cash and
notes payable.
NOTE 3--STOCK OPTIONS
During the quarter ended June 30, 1999, options to purchase common stock
totalling 20,085 shares were granted to key employees. These options will vest
ratably over a five year period and have an average exercise price of
approximately $12.69 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 June 30, 1999, options to purchase 16,037
shares of common stock were exercised at prices ranging from $.53-$13.625 per
share. The Company also issued 43,276 shares of common stock in connection with
certain acquisitions made in prior quarters.
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
<PAGE> 7
NOTE 6 ---PENDING BROWNING FERRIS ACQUISITION
On April 14, 1999, the Company entered into agreements with Allied
Waste Industries, Inc. (`Allied') to acquire, upon completion of Allied's
acquisition of Browning-Ferris Industries, Inc. (`BFI'), all of BFI's medical
waste management operations in the United States, Canada and Puerto Rico, and,
in addition, all of Allied's own medical waste management operations, for $440
million in cash. Allied acquired BFI pursuant to a merger agreement on August 2,
1999.
The Company's acquisition of BFI's and Allied's medical waste
management operations is expected to close late in the third quarter or in the
fourth quarter of 1999. The Company's acquisition is subject to a number of
conditions, including, among others, regulatory clearance and receipt of the
financing necessary to complete the acquisition.
NOTE 7 ---SUBSEQUENT EVENT
On August 31, 1999, the Company entered into an agreement with certain
investment funds managed by Bain Capital, Inc., under which the Bain Funds will
purchase 75,000 unregistered shares of a new class of stock from the Company
for $75 million. The transaction is intended to provide the Company with a
portion of the financing necessary to complete its pending acquisition of the
BFI and Allied medical waste management operations. See Note 6.
The new class of stock will be convertible preferred stock. It will
accrue dividends at the rate of 3.375% per annum, payable in additional shares
of convertible preferred stock, and will be convertible into common stock at a
conversion price of $17.50 per share. It will also have voting rights on an
as-if-converted basis, with special class voting rights on certain matters, and
will possess certain demand and piggyback registration rights. The convertible
preferred stock will have a liquidation preference over the Company's common
stock in an amount equal to the purchase price of the convertible preferred
stock plus accumulated and accrued dividends. Under the agreement, the Company
will increase the size of its board of directors from seven to nine members,
and the Bain funds will be entitled to designate two individuals to serve as
directors of the Company.
Closing of the Company's issuance and sale of the convertible
preferred stock to the Bain funds is subject to a number of conditions. These
conditions include the Company's obtaining the necessary approval of its
stockholders to authorize the creation of the new class of stock and the
Company's closing of its pending acquisition of the BFI and Allied medical
waste management operations.
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 JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
The following summarizes (in thousands) the Company's operations:
Three Months Ended
June 30,
1999 1998
---- ----
$ % $ %
Revenues $25,019 100.0 $14,763 100.0
Cost of revenues 16,479 65.9 10,331 70.0
Gross profit 8,540 34.1 4,432 30.0
Selling, general and administrative
expenses 5,186 20.7 3,268 22.1
Income from operations 3,354 13.4 1,164 7.9
Net income 2,560 10.2 1,088 7.4
Depreciation and amortization 1,829 7.3 870 5.9
EBITDA 5,189 20.7 2,034 13.8
Revenues. Revenues increased $10,256,000, or 69.5%, to $25,019,000
during the three months ended June 30, 1999 from $14,763,000 during the
comparable period in 1998 as the Company continued to implement its strategy of
focusing on sales to higher-margin alternate care generators while
simultaneously paring certain lower-margin accounts with large quantity
generators. During the three months ended June 30, 1999, acquisitions made
during the last 12 months contributed $8,792,000 to the increase in revenues as
compared to the prior year. Revenues generated from the sale of machinery
internationally was $1,089,000 during the three months ended June 30, 1999 as
compared to $1,202,000 for the same period in 1998. For the quarter,
5
<PAGE> 8
internal growth for alternate care generators increased approximately 17% while
revenues from large quantity generators decreased by approximately 2%.
Cost of Revenues. Cost of revenues increased $6,148,000 to $16,479,000
during the three months ended June 30, 1999 from $10,331,000 during the
comparable period in 1998. The increase was due to the substantial increase in
revenues during the three months June 30, 1999 compared to the same period in
1998. The gross margin percentage increased to 34.1% during the three months
ended June 30, 1999 from 30.0% during the same period in 1998 as a result of the
further integration of new acquisitions into the Company's existing
infrastructure, lower relative costs relating to the changing mix of alternate
care and large quantity generators, increased utilization of existing treatment
capacity and sale of equipment internationally.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $5,186,000 for the three months ended June
30, 1999 from $3,268,000 for the comparable period in 1998. The increase was
largely the result of the Company's acquisitions, higher amortization of
goodwill, 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 20.7% during the three months ended June 30,
1999 from 22.1% during the comparable period in 1998. Excluding amortization,
selling, general and administrative expenses as a percent of revenue decreased
to 18.3% during the three months ended June 30, 1999 from 19.8% during the
comparable period in 1998.
EBITDA. Earnings before interest, income taxes, depreciation and
amortization (`EBITDA') increased by 155.1% to $5,189,000 or 20.7% of revenue
for the three months ended June 30, 1999 as compared to $2,034,000 or 13.8% of
revenue for the comparable period in 1998. The increase in EBITDA is primarily
due to the factors described above and an increase in depreciation and
amortization expense as a result of acquisitions completed since June 30, 1998.
Interest Expense and Interest Income. Interest expense increased to
$172,000 during the three months ended June 30, 1999 from $62,000 during the
comparable period in 1998 primarily due to the interest paid on the debt held by
the Company's wholly owned subsidiary, Waste Systems Inc. acquired in October
1998. Interest income increased to $195,000 during the three months ended June
30, 1999 from $181,000 during the comparable period in 1998 primarily due to the
interest earned on the investment of proceeds from the issuance of common stock
in connection with the Company's public offering which was completed in February
1999
Income Tax Expense. The effective tax rate of 24.3% for the three
months ended June 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
<PAGE> 9
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
The following summarizes (in thousands) the Company's operations:
Six Months Ended
June 30,
1999 1998
---- ----
$ % $ %
Revenues $48,887 100.0 $28,018 100.0
Cost of revenues 32,340 66.2 19,629 70.1
Gross profit 16,547 33.8 8,389 29.9
Selling, general and administrative
expenses 10,270 21.0 6,358 22.7
Income from operations 6,277 12.8 2,031 7.2
Net income 4,987 10.2 1,868 6.7
Depreciation and amortization 3,545 7.3 1,733 6.2
EBITDA 10,211 20.9 3,764 13.4
Revenues. Revenues increased $20,869,000, or 74.5%, to $48,887,000
during the six months ended June 30, 1999 from $28,018,000 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. The increase in revenues also reflects
$2,949,000 from the sale of machinery internationally. During the six months
ended June 30, 1999, acquisitions made during the last 12 months contributed
approximately $17,138,000 to the increase in revenues as compared to the prior
year.
Cost of Revenues. Cost of revenues increased $12,711,000, or 64.8%, to
$32,340,000 during the six months ended June 30, 1999 from $19,629,000 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 the cost of equipment sold internationally. The gross margin percentage
increased to 33.8% during the six months ended June 30, 1999 from 29.9% 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 sales of equipment internationally.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $10,270,000 for the six months ended June
30, 1999 from $6,358,000 for the comparable period in 1998. The increase was
largely the result of increases in selling and marketing expenses as a result of
the Company's acquisitions, higher amortization of goodwill, 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 21.0% during the six months ended June 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 18.6% during the
six months ended June 30, 1999 from 20.4% during the comparable period in 1998.
EBITDA. Earnings before interest, income taxes, depreciation and
amortization (`EBITDA') increased by 171% to $10,211,000 or 20.9% of revenues
for the six months ended June 30, 1999 as compared to $3,764,000 or 13.4% of
revenues for the
7
<PAGE> 10
comparable period in 1998. The increase in EBITDA is primarily due to the
factors described above and an increase in depreciation and amortization expense
as a result of acquisitions completed since June 30, 1998.
Interest Expense and Interest Income. Interest expense increased to
$535,000 during the six months ended June 30, 1999, from $124,000 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 $272,000 during the six months ended June 30, 1999,
from $239,000 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
22.1% for the six months ended June 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 June 30, 1999, the Company's working capital was $29,366,000 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, beginning in October 1998, a $25,000,000 revolving line of credit
secured by the Company's accounts receivable and all of its other assets. At
June 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 $2,796,000 during the six
months ended June 30, 1999 compared to $893,000 for the comparable period in
1998. This increase primarily reflects higher net income, depreciation and
amortization expense offset by a reduction of accounts payable, deferred revenue
and accrued liabilities.
Net cash used in investing activities for the six months ended June 30,
1999 was $8,706,000 compared to $2,147,000 for the comparable period in 1998.
The change is primarily attributable to the increase in cash used for funding
acquisitions completed in 1999 and an increase in capital expenditures. Capital
expenditures were $1,879,000 for the six months ended June 30, 1999 compared to
$984,000 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 $7,287,000 during 1999.
Net cash provided by financing activities was $24,189,000 during the
six months ended June 30, 1999 compared to net cash used in financing activities
of $762,000 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 $25,851,000 in debt in the first half of
1999.
8
<PAGE> 11
YEAR 2000 ISSUES
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 August 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.
9
<PAGE> 12
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 April 23, 1999, the Company filed a current report on Form 8-K to
report that on April 14, 1999, the Company entered into an agreement with Allied
Waste Industries, Inc. (`Allied') to acquire from Allied all of the regulated
medical waste management operations of Browning-Ferris Industries, Inc. (`BFI')
in the United States, Canada and Puerto Rico, that Allied acquired from BFI and
all of Allied's own medical waste management operations, for $440 million in
cash.
10
<PAGE> 13
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: August 16, 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)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding--basic earnings
per share 14,546,201 10,539,806 13,811,646 10,511,297
Common stock issuable upon
assumed conversion of stock
options and warrants 332,483 636,971 398,047 656,195
----------- ----------- ----------- -----------
Adjusted weighted average
common shares outstanding--
diluted earnings per share 14,878,684 11,176,777 14,209,693 11,167,492
=========== =========== =========== ===========
Net income (in thousands) $ 2,560 $ 1,088 $ 4,987 $ 1,868
=========== =========== =========== ===========
Net income per share--basic $ 0.18 $ 0.10 $ 0.36 $ 0.18
=========== =========== =========== ===========
Net income per share--diluted $ 0.17 $ 0.10 $ 0.35 $ 0.17
=========== =========== =========== ===========
</TABLE>
12
<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> JUN-30-1999
<CASH> 19,562
<SECURITIES> 76
<RECEIVABLES> 17,877
<ALLOWANCES> 672
<INVENTORY> 886
<CURRENT-ASSETS> 40,257
<PP&E> 34,426
<DEPRECIATION> 11,311
<TOTAL-ASSETS> 122,797
<CURRENT-LIABILITIES> 10,891
<BONDS> 4,383
0
0
<COMMON> 145
<OTHER-SE> 107,378
<TOTAL-LIABILITY-AND-EQUITY> 122,797
<SALES> 0
<TOTAL-REVENUES> 25,019
<CGS> 0
<TOTAL-COSTS> 21,665
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 172
<INCOME-PRETAX> 3,383
<INCOME-TAX> 823
<INCOME-CONTINUING> 2,560
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,560
<EPS-BASIC> 0.18
<EPS-DILUTED> 0.17
</TABLE>
