<PAGE> 1
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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 March 31, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
28161 NORTH KEITH DRIVE
LAKE FOREST, ILLINOIS 60045
(Address of principal executive offices) (Zip Code)
(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 of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
As of May 9, 2000 there were 14,809,108 shares of the Registrant's
Common Stock outstanding.
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<PAGE> 2
STERICYCLE, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION
Page
----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Financial Statements of Stericycle, Inc.
and Subsidiaries
Condensed Consolidated Balance Sheets
March 31, 2000 (unaudited) and December 31, 1999....................................... 3
Condensed Consolidated Statements of Operations
Three months ended March 31, 2000 and 1999 (unaudited)................................. 4
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 2000 and 1999 (unaudited)................................. 5
Notes to Condensed Consolidated Financial Statements................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................................... 13
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................................................... 16
</TABLE>
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<PAGE> 3
STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
------------ -----------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................................ $ 20,770 $ 19,344
Short-term investments ........................................................... 278 285
Accounts receivable, less allowance for doubtful
accounts of $1,153 in 2000 and $980 in 1999 .................................... 53,418 48,284
Parts and supplies ............................................................... 2,702 2,035
Prepaid expenses ................................................................. 1,205 863
Other ............................................................................ 6,136 6,729
--------- ---------
Total current assets ........................................................... 84,509 77,540
--------- ---------
Property, plant and equipment:
Land ............................................................................. 7,308 7,308
Buildings and improvements ....................................................... 29,287 29,123
Machinery and equipment .......................................................... 51,185 50,011
Office equipment and furniture ................................................... 4,991 5,182
Construction in progress ......................................................... 632 386
--------- ---------
93,403 92,010
Less accumulated depreciation .................................................... (19,204) (16,898)
--------- ---------
Property, plant and equipment, net ............................................. 74,199 75,112
Other assets:
Goodwill, less accumulated amortization of $11,521
in 2000 and $7,974 in 1999 ..................................................... 418,190 421,001
Other ............................................................................ 22,275 22,133
--------- ---------
Total other assets ............................................................. 440,465 443,134
--------- ---------
Total assets ................................................................. $ 599,173 $ 595,786
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt ................................................ $ 7,080 $ 5,741
Accounts payable ................................................................. 11,308 14,347
Accrued compensation ............................................................. 7,499 7,569
Accrued transition expenses ...................................................... 5,866 7,101
Accrued liabilities .............................................................. 20,156 15,782
Deferred revenue ................................................................. 707 142
--------- ---------
Total current liabilities ...................................................... 52,616 50,682
--------- ---------
Long-term debt, net of current portion .............................................. 363,130 355,444
Long-term liabilities ............................................................... 2,161 2,351
Redeemable convertible preferred stock
Series A convertible preferred stock (par value $.01 per share, 75,000 shares
authorized and outstanding in 2000 and 1999, liquidation preference
of $107,125 in 2000 and $80,625 in 1999 ........................................ 69,855 69,195
Common shareholders' equity
Common stock (par value $.01 per share, 30,000,000 shares authorized,
14,758,604 issued and outstanding
in 2000, 14,734,237 issued and outstanding in 1999) ............................ 147 147
Additional paid-in capital-common stock .......................................... 136,875 136,691
Accumulated deficit .............................................................. (15,611) (18,724)
--------- ---------
Total shareholders' equity ..................................................... 121,411 118,114
--------- ---------
Total liabilities and shareholders' equity .......................................... $ 599,173 $ 595,786
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 4
STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
----------------------------
MARCH 31,
---------
2000 1999
------------- -------------
<S> <C> <C>
Revenues .................................... $ 77,668 $ 23,868
Costs and expenses:
Cost of revenues ......................... 47,357 15,861
Selling, general and administrative ...... 14,484 5,084
----------- ------------
Total costs and expenses ............... 61,841 20,945
----------- ------------
Income from operations ...................... 15,827 2,923
Other income (expense):
Interest income .......................... 196 77
Interest expense ......................... (9,855) (363)
Other income, net ........................ 112 383
----------- ------------
Total other income (expense) ........... (9,547) 97
----------- ------------
Income before income taxes .................. 6,280 3,020
Income tax expense .......................... 2,507 593
----------- ------------
Net income .................................. $ 3,773 $ 2,427
=========== ============
Earnings per share--Basic .................. $ 0.21 $ 0.19
=========== ============
Earnings per share--Diluted ................ $ 0.19 $ 0.18
=========== ============
Weighted average number of common
shares outstanding--Basic ............... 14,746,603 13,068,931
=========== ============
Weighted average number of common
shares outstanding--Diluted ............. 19,589,090 13,534,530
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 5
STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------
MARCH 31,
---------
2000 1999
--------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ............................................................................. $ 3,773 $ 2,427
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Stock compensation expense ........................................................ 40 --
Depreciation and amortization ..................................................... 5,783 1,716
Change in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable ............................................................... (5,133) 478
Parts and supplies ................................................................ (667) 292
Prepaid expenses .................................................................. (342) (176)
Other assets ...................................................................... 553 (637)
Accounts payable .................................................................. (3,039) (3,574)
Accrued liabilities ............................................................... 2,879 (30)
Deferred revenue .................................................................. 565 (815)
-------- --------
Net cash provided by (used in) operating activities .................................... 4,412 (319)
-------- --------
INVESTING ACTIVITIES:
Payments for acquisitions and international
investments, net of cash acquired ............................................... (655) (5,399)
Proceeds from maturity of short-term investments .................................. 7 --
Capital expenditures .............................................................. (1,158) (983)
-------- --------
Net cash used in investing activities .................................................. (1,806) (6,382)
-------- --------
FINANCING ACTIVITIES:
Net proceeds and repayment from bank lines of credit .............................. -- (16,359)
Net proceeds ad repayment from subordinated debt .................................. -- (2,750)
Repayment of long term debt ....................................................... (844) (2,902)
Payments of deferred financing costs .............................................. -- (35)
Principal payments on capital lease obligations ................................... (479) (50)
Net proceeds from secondary public offering
of common stock ................................................................. -- 47,176
Proceeds from other issuances of common stock ..................................... 143 143
-------- --------
Net cash provided by (used in) financing activities .................................... (1,180) 25,223
-------- --------
Net increase in cash and cash equivalents .............................................. 1,426 18,522
Cash and cash equivalents at beginning of period ....................................... 19,344 1,283
-------- --------
Cash and cash equivalents at end of period ............................................. $ 20,770 $ 19,805
======== ========
Non-cash activities:
Net issuances of common stock for certain
acquisitions .................................................................... $ -- $ 982
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unless the context requires otherwise, "we", "us" or "our" refers to
Stericycle, Inc. and its subsidiaries on a consolidated basis.
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 we believe the disclosures in the accompanying
condensed consolidated financial statements are adequate to make the information
presented not misleading. In our opinion, 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 two years ended December 31, 1999, as filed with our 1999 Annual Report
on Form 10-K. The results of operations for the three-month period ended March
31, 2000 are not necessarily indicative of the results that may be achieved for
the entire year ending December 31, 2000.
NOTE 2--ACQUISITIONS
There were no material acquisitions during the quarter ended March 31,
2000.
NOTE 3--STOCK OPTIONS
During the quarter ended March 31, 2000, options to purchase common stock
totaling 8,100 shares were granted to employees. These options vest ratably over
a five year period and have an average exercise price of approximately $15.94
per share. The grant of options was made under our 2000 Stock Option Plan, which
authorizes the grant of options for a total of 500,000 shares of our common
stock. The 2000 Stock Option Plan was approved by our Board of Directors in
February 2000. In addition, 32,256 options to purchase common stock were granted
to outside directors under our 1996 Directors Stock Option Plan and 15,000
options to purchase common stock were granted under our 1997 Stock Option Plan.
These options have an average exercise price of $15.94 per share.
NOTE 4--STOCK ISSUANCES
During the quarter ended March 31 2000, options to purchase 30,354 shares
of common stock were exercised at prices ranging from $0.53 - $18.125 per share.
In addition, warrants with rights to purchase 5,651 shares of common stock were
exercised at a price of $1.59 per share.
-6-
<PAGE> 7
NOTE 5--INCOME TAXES
At March 31, 2000, we had net operating loss carryforwards for federal
income tax purposes of approximately $18,500,000, which expire beginning in
2006. During the fourth quarter of 1999, we reevaluated the estimated amount of
the valuation allowance required. As a result, we reduced the valuation
allowance on deferred tax assets in accordance with SFAS No. 109, "Accounting
for Income Taxes" (SFAS No. 109), to an amount that we believe is more likely
than not of being recovered.
NOTE 6--CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Payments under our senior subordinated notes (the "notes") is
unconditionally guaranteed, jointly and severally, by all of our wholly-owned
domestic subsidiaries, which include Environmental Control Company, Inc.,
acquired in May 1997, Waste Systems, Inc., acquired October 1, 1998, Med-Tech
Environmental, Inc., acquired December 31, 1998, BFI Medical Waste, Inc. and
Browning-Ferris Industries of Connecticut, Inc., both acquired on November 12,
1999, and certain other subsidiaries which have insignificant assets and
operations (collectively, the "guarantors"). Financial information concerning
the guarantors as of March 31, 2000 and December 31, 1999 and for the three
months ended March 31, 2000 and 1999 is presented below for purposes of
complying with the reporting requirements of the guarantor subsidiaries. The
financial information concerning the guarantors is being presented through
condensed consolidating financial statements since we have more than minimal
independent operations and the guarantees are full and unconditional and are
joint and several. Guarantor financial statements have not been presented
because management does not believe that such financial statements are material
to investors.
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<PAGE> 8
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2000
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
STERICYCLE, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 20,092 $ 222 $ 456 $ -- $ 20,770
Other current assets 56,536 9,643 5,613 (8,053) 63,739
--------- --------- --------- --------- ---------
Total current assets 76,628 9,865 6,069 (8,053) 84,509
Property, plant and equipment, net 15,109 49,140 9,950 -- 74,199
Goodwill, net 38,673 367,276 12,241 -- 418,190
Investment in subsidiaries 440,905 3,754 -- (444,659) --
Other assets 18,694 13,200 121 (9,740) 22,275
--------- --------- --------- --------- ---------
Total assets $ 590,009 $ 443,235 $ 28,381 $(462,452) $ 599,173
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term debt $ 4,801 $ 998 $ 1,281 $ -- $ 7,080
Other current liabilities 44,054 5,133 4,044 (7,695) 45,536
--------- --------- --------- --------- ---------
Total current liabilities 48,855 6,131 5,325 (7,695) 52,616
Long-term debt, net of current
portion 347,727 4,502 10,959 (10,058) 353,130
Other liabilities 2,161 -- -- -- 2,161
Redeemable convertible preferred stock 69,855 -- -- -- 69,855
Common shareholders' equity 121,411 432,602 12,097 (444,699) 121,411
--------- --------- --------- --------- ---------
Total liabilities and shareholders'
equity $ 590,009 $ 443,235 $ 28,381 $(462,452) $ 599,173
========= ========= ========= ========= =========
</TABLE>
-8-
<PAGE> 9
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
AUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
STERICYCLE, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,808 $ 246 $ 290 $ -- $ 19,344
Other current assets 52,928 8,840 4,648 (8,220) 58,196
--------- --------- --------- --------- ---------
Total current assets 71,736 9,086 4,938 (8,220) 77,540
Property, plant and equipment, net 15,029 49,932 10,151 -- 75,112
Goodwill, net 40,290 369,914 10,167 -- 421,001
Investment in subsidiaries 441,423 3,627 -- (445,050) --
Other assets 17,817 13,617 3,675 (12,976) 22,133
--------- --------- --------- --------- ---------
Total assets $ 586,925 $ 446,176 $ 28,931 $(466,246) $ 595,786
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term debt $ 3,954 $ 892 $ 895 $ -- $ 5,741
Other current liabilities 43,517 5,084 4,677 (8,337) 44,941
--------- --------- --------- --------- ---------
Total current liabilities 47,471 5,976 5,572 (8,337) 50,682
Long-term debt, net of current
portion 349,794 4,539 13,970 (12,859) 355,444
Other liabilities 2,351 -- -- -- 2,351
Redeemable convertible preferred stock 69,195 -- -- -- 69,195
Common shareholders' equity 118,114 435,661 9,389 (445,050) 118,114
--------- --------- --------- --------- ---------
Total liabilities and shareholders'
equity $ 586,925 $ 446,176 $ 28,931 $(466,246) $ 595,786
========= ========= ========= ========= =========
</TABLE>
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<PAGE> 10
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 2000
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
STERICYCLE, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $32,863 $38,104 $6,727 $ (26) $77,668
Cost of revenues 18,900 23,503 4,980 (26) 47,357
Selling, general, and
administrative expense 8,870 4,408 1,206 - 14,484
-------- -------- ------ --------- -------
Total costs and expenses 27,770 27,911 6,186 (26) 61,841
------- ------- ------ -------- -------
Income from operations 5,093 10,193 541 - 15,827
Equity in net income of subsidiaries 6,738 5 - (6,743) -
Other income (expense), net (9,342) 138 (343) - (9,547)
------- --------- ------- --------- --------
Income before income taxes 2,489 10,336 198 (6,743) 6,280
Income tax (benefit) expense (1,284) 3,791 - - 2,507
-------- -------- --------- --------- --------
Net income (loss) $ 3,773 $ 6,545 $ 198 $(6,743) $ 3,773
======= ======= ======= ======= =======
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1999
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
STERICYCLE, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $14,965 $ 3,198 $ 5,739 $ (34) $23,868
Cost of revenues 9,488 1,978 4,429 (34) 15,861
Selling, general, and
administrative expense 3,254 652 1,178 -- 5,084
------- ------- ------- ------- -------
Total costs and expenses 12,742 2,630 5,607 (34) 20,945
------- ------- ------- ------- -------
Income from operations 2,223 568 132 -- 2,923
Equity in net income (loss) of
subsidiaries 492 (188) -- (304) --
Other income (expense), net 268 135 (306) -- 97
------- ------- ------- ------- -------
Income (loss) before income taxes 2,983 515 (174) (304) 3,020
Income tax expense 556 37 -- -- 593
------- ------- ------- ------- -------
Net income (loss) $ 2,427 $ 478 $ (174) $ (304) $ 2,427
======= ======= ======= ======= =======
</TABLE>
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<PAGE> 11
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
STERICYCLE, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------------- ------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net cash provided by operating
activities $ 2,976 $ 899 $ 537 $ - $ 4,412
------- ------- ------- ------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures (660) (287) (211) - (1,158)
Payments for acquisitions and
international investments, net
of cash acquired (298) (357) - - (655)
Proceeds from maturity of
short-term investments 7 - - - 7
--------- -------- -------- ------- ---------
Net cash used in investing
activities (951) (644) (211) - (1,806)
-------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Principal payments on capital
lease obligations (40) (279) (160) - (479)
Repayment of long term debt (844) - - - (844)
Proceeds from issuance of common
stock 143 - - - 143
-------- -------- -------- ------- --------
Net cash (used in) provided by
financing activities (741) (279) (160) - (1,180)
-------- ------- -------- ------- --------
Net increase (decrease) in cash and
cash equivalents $ 1,284 $ (24) $ 166 $ - 1,426
======= ======= ====== =======
Cash and cash equivalents at
beginning of year 19,344
--------
Cash and cash equivalents at end of
year $ 20,770
========
</TABLE>
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<PAGE> 12
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
STERICYCLE, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------------- ------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net cash (used in) provided by
operating activities $ (2,061) $ 140 $ 1,602 $ - $ (319)
-------- ----- ------- -------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures (794) (5) (184) - (983)
Payments for acquisitions and
international investments, net
of cash acquired (5,399) - - - (5,399)
-------- ------- --------- -------- ----------
Net cash used in investing (6,193) (5) (184) - (6,382)
actvities -------- ------- -------- -------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net payment on bank lines of
credit (16,359) - - - (16,359)
Repayment of long term debt (2,902) - - - (2,902)
Principal payments on capital
lease obligations (44) (6) - - (50)
Net payments on subordinated debt
(2,750) - - - (2,750)
Payment of deferred financing
costs (35) - - - (35)
Net proceeds from secondary
public offering of common stock
47,176 - - - 47,176
Proceeds from other issuances of
common stock 143 - - - 143
-------- ------- --------- -------- ---------
Net cash provided by (used in)
financing activities 25,229 (6) - - 25,223
-------- ------- --------- -------- ---------
Net increase in cash and cash
equivalents $16,975 $ 129 $ 1,418 $ - 18,522
======== ===== ======= ========
Cash and cash equivalents at
beginning of year 1,283
---------
Cash and cash equivalents at end of
year $ 19,805
=========
</TABLE>
-12-
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
We were incorporated in March 1989. We provide regulated medical waste
collection, transportation and treatment services to our customers and related
training and education programs and consulting services. We also sell ancillary
supplies and transport pharmaceuticals, photographic chemicals, lead foil and
amalgam for recycling in selected geographic service areas. We are also
expanding into international markets through joint ventures or by licensing our
proprietary technology and selling associated equipment.
The following summarizes (in thousands) our operations:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------------
2000 1999
---------------------- ----------------------
<S> <C> <C> <C> <C>
Revenues........................................... $ 77,668 100.0% $ 23,868 100.0%
Cost of revenues.................................. 47,357 61.0% 15,861 66.5%
----------- -----------
Gross profit....................................... 30,311 39.0% 8,007 33.5%
Selling, general and administrative
expenses......................................... 14,484 18.6% 5,084 21.3%
Income from operations............................. 15,287 20.4% 2,923 12.2%
Net income......................................... 3,773 4.9% 2,427 10.2%
Depreciation and amortization...................... 5,783 7.4% 1,716 7.2%
EBITDA............................................. $ 21,722 28.0% $ 5,022 21.0%
</TABLE>
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Revenues. Revenues increased $53,800,000, or 225.4%, to $77,668,000
during the three months ended March 31, 2000 from $23,868,000 during the
comparable period in 1999 as a result of the acquisition of the medical waste
business of Browning-Ferris Industries, Inc. (the "BFI acquisition"), which we
completed in November, 1999 and as we continued to implement our strategy of
focusing on sales to higher-margin small account customers while simultaneously
paring certain lower-margin accounts with large account customers. Sales of
equipment internationally during the three months ended March 31, 2000 decreased
$1,458,000 to $402,000 from $1,860,000 during the comparable period in 1999.
During the three months ended March 31, 2000, acquisitions contributed
$53,136,000 to the increase in revenues as compared to the prior year. For the
quarter, our base internal revenue growth for small account customers increased
more than 16% while revenues from large account customers also increased by more
than 5.0%.
Cost of revenues. Cost of revenues increased $31,496,000 or 198.6%, to
$47,357,000 during the three months ended March 31, 2000 from $15,861,000 during
the comparable period in 1999. The increase was primarily due to the substantial
increase in revenues during the three months ended March 31, 2000 compared to
the comparable period in 1999. The gross margin percentage increased to 39.0%
during the three months ended March 31, 2000 from 33.5% during the comparable
period in 1999 as a result of the inclusion of a full quarter of the BFI
acquisition and synergy savings.
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<PAGE> 14
Selling, general and administrative expenses. Selling, general and
administrative expenses increased to $14,484,000 for the three months ended
March 31, 2000 compared to $5,084,000 for the comparable period in 1999. The
increase was largely the result of increases in selling and marketing expenses
as a result of the BFI acquisition, higher amortization of goodwill, expansion
of our sales network, and increased administrative costs related to the higher
volume. Selling, general and administrative expenses as a percentage of revenues
decreased to 18.6% during the three months ended March 31, 2000 from 21.3%
during the comparable period in 1999. Excluding amortization, selling, general
and administrative expenses as a percent of revenue decreased to 14.3% during
the three months ended March 31, 2000 from 18.9% during the comparable period in
1999.
EBITDA. Earnings before interest, income taxes, depreciation and
amortization ("EBITDA") increased by 332.5% to $21,722,000 for the three months
ended March 31, 2000 compared to $5,022,000 for the comparable period in 1999.
Interest income and interest expense. Interest income increased to
$196,000 during the three months ended March 31, 2000 from $77,000 during the
comparable period in 1999 primarily due to higher cash balances. Interest
expense increased to $9,855,000 during the three months ended March 31, 2000
versus the prior year period primarily due to increased interest expense related
to borrowings associated with the BFI acquisition.
Other income and expense. Other income of $112,000 during the three
months ended March 31, 2000 primarily related to the recognition of income from
our minority interest in our Mexican joint venture, Medam S.A. de C.V. During
the three months ended March 31, 1999 a one-time gain of $656,000 on the sale of
routes by our majority owned subsidiary, 3CI Complete Compliance Corporation
("3CI"), was partially offset by a one-time non-cash expense of $192,000 for
warrants issued in connection with bridge loan borrowings in December 1998 and
January 1999.
Income tax expense. The effective tax rate of approximately 40% for the
three months ended March 31, 2000 reflects federal and state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000 our working capital was $31,893,000 compared to working
capital of $26,858,000 at December 31, 1999. The increase in working capital is
primarily due to higher accounts receivable balances due to the BFI acquisition.
We have available a $50,000,000 revolving line of credit secured by our accounts
receivable and all of our other assets. At March 31, 2000 we did not have any
borrowings under this line.
Net cash provided by/used in operating activities was positively impacted
by the improvement in net income plus depreciation and amortization of
$5,783,000 for the three months ended March 31, 2000 compared to the same period
in 1999. Net cash provided by operating activities was $4,412,000 during the
three months ended March 31, 2000 compared to net cash used in operating
activities of $319,000 for the comparable period in 1999.
-14-
<PAGE> 15
Net cash used in investing activities for the period ended March 31, 2000
amounted to $1,806,000 compared to $6,382,000 for the same period in 1999. The
decrease was primarily due to a reduction in acquisitions completed in 2000.
Capital expenditures were $1,158,000 for the three months ended March 31, 2000
compared to $983,000 for the same period in 1999.
Net cash used in financing activities was $1,180,000 during the three
months ended March 31, 2000 compared to net cash provided by financing
activities of $25,223,000 for the same quarter in 1999. The difference results
primarily from completion of our second public offering of common stock in
February 1999, which raised $47,176,000 net of offering costs, partially offset
by the repayment of $24,761,000 in debt in the first quarter of 1999.
FROM TIME TO TIME WE ISSUE FORWARD-LOOKING STATEMENTS RELATING TO SUCH
THINGS AS ANTICIPATED FINANCIAL PERFORMANCE, BUSINESS PROSPECTS, ACQUISITION
ACTIVITIES AND SIMILAR MATTERS.
A VARIETY OF FACTORS COULD CAUSE OUR ACTUAL RESULTS AND EXPERIENCE TO
DIFFER MATERIALLY FROM THE ANTICIPATED RESULTS OR OTHER EXPECTATIONS EXPRESSED
IN OUR FORWARD-LOOKING STATEMENTS. THE RISKS AND UNCERTAINTIES THAT MAY AFFECT
OUR 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.
-15-
<PAGE> 16
PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11: Statement Re: Computation of Per Share Earnings
Exhibit 27: Financial Data Schedule
(b) We did not file any reports on Form 8-K during the quarter ending
March 31, 2000.
-16-
<PAGE> 17
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.
STERICYCLE, INC.
By: /s/ Frank J.M. ten Brink
----------------------------------------
Frank J.M. ten Brink
Executive Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
Date: May 10, 2000
-17-
<PAGE> 18
Exhibit Index
Exhibit 11: Statement Re: Computation of Per Share Earnings
Exhibit 27: Financial Data Schedule
<PAGE> 1
EXHIBIT 11
STERICYCLE, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(Unaudited)
The following table sets forth the computation of basic and diluted net
income per share:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------------
MARCH 31,
--------------------------------
2000 1999
------------- --------------
Numerator:
<S> <C> <C>
Net income $ 3,773 $ 2,427
Preferred stock dividends (660) --
------------- -------------
Numerator for basic earnings per share--
income available to common stockholders $ 3,113 $ 2,427
Effect of dilutive securities:
Preferred stock dividends 660 --
------------- -------------
Numerator for diluted earnings per share--
income available to common stockholders
after assumed conversions $ 3,773 $ 2,427
============= =============
Denominator:
Denominator for basic earnings per share--
weighted average shares 14,746,603 13,068,931
Effect of dilutive securities:
Employee stock options 414,040 376,857
Warrants 105,006 88,743
Convertible preferred stock 4,323,441 --
------------- -------------
Dilutive potential common shares 4,842,487 465,599
Denominator for diluted earnings per share--
adjusted weighted average shares and
assumed conversions 19,589,090 13,534,530
============= =============
Basic net income per share $ 0.21 $ 0.19
Diluted net income per share $ 0.19 $ 0.18
</TABLE>
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 20,770
<SECURITIES> 278
<RECEIVABLES> 54,571
<ALLOWANCES> 1,153
<INVENTORY> 2,702
<CURRENT-ASSETS> 84,509
<PP&E> 93,403
<DEPRECIATION> 19,204
<TOTAL-ASSETS> 599,173
<CURRENT-LIABILITIES> 52,616
<BONDS> 353,130
0
69,855
<COMMON> 147
<OTHER-SE> 121,264
<TOTAL-LIABILITY-AND-EQUITY> 599,173
<SALES> 0
<TOTAL-REVENUES> 77,668
<CGS> 0
<TOTAL-COSTS> 61,841
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,855
<INCOME-PRETAX> 6,280
<INCOME-TAX> 2,507
<INCOME-CONTINUING> 3,773
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,773
<EPS-BASIC> 0.21
<EPS-DILUTED> 0.19
</TABLE>
