UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002 or
[ ] TRANSITION 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.
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28161 North Keith Drive
Lake Forest, Illinois 60045
(847) 367-5910
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 period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ],
As of August 5, 2002 there were 37,675,327 shares of the Registrant's Common Stock outstanding.
Stericycle, Inc.
Table of Contents
| PART I. Financial Information | Page No. |
| Item 1. Financial Statements |
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Condensed Consolidated Balance Sheets as of June 30, 2002 (Unaudited) and December 31, 2001 |
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Condensed Consolidated Statements of Income for the three and six months ended June 30, 2002 and 2001 (Unaudited) |
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001 (Unaudited) |
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| Notes to Condensed Consolidated Financial Statements (Unaudited) |
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| Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| PART II. Other Information |
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| Item 6. Exhibits and Reports on Form 8-K |
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| Signatures |
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
June 30, December 31
2002 2001
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 8,910 12,737
Short-term investments................................. 638 280
Accounts receivable, less allowance for doubtful
accounts of $3,242 in 2002 and $3,106 in 2001........ 61,270 65,300
Parts and supplies..................................... 4,610 6,044
Prepaid expenses....................................... 2,314 2,457
Deferred tax asset..................................... 7,630 --
Other.................................................. 9,483 11,175
----------- -----------
Total current assets.......................... 94,855 97,993
----------- -----------
Property, plant and equipment:
Land................................................... 7,600 7,596
Buildings and improvements............................. 28,291 28,075
Machinery and equipment................................ 73,183 65,409
Office equipment and furniture......................... 10,806 10,458
Construction in progress............................... 4,810 5,193
----------- -----------
124,690 116,731
Less accumulated depreciation.......................... (40,097) (33,995)
----------- -----------
Property, plant and equipment, net................... 84,593 82,736
----------- -----------
Other assets:
Goodwill, less accumulated amortization of $32,374
in 2002 and 2001..................................... 421,837 411,877
Intangible assets, less accumulated amortization of -- --
$5,526 in 2002 and $4,510 in 2001.................... 10,561 10,775
Other.................................................. 11,070 11,149
----------- -----------
Total other assets................................... 443,468 433,801
----------- -----------
Total assets.................................. $ 622,916 $ 614,530
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt...................... $ 5,109 $ 12,633
Accounts payable....................................... 11,930 13,317
Accrued income tax..................................... 10,095 3
Accrued liabilities.................................... 29,873 32,506
Deferred revenue....................................... 3,115 4,920
----------- -----------
Total current liabilities..................... 60,122 63,379
----------- -----------
Long-term debt, net of current portion................. 235,740 267,365
Deferred income taxes.................................. 14,796 3,194
Other liabilities...................................... 4,270 3,210
Redeemable preferred stock
Series A convertible preferred stock (par value
$.01 share, 75,000 shares authorized, 45,405
outstanding in 2002 and 2001, liquidation
preference of $49,419 in 2002 and $48,735 in 2001). 45,549 44,872
Common shareholders' equity
Common stock (par value $.01 per share, 80,000,000
shares authorized, 37,636,385 issued and outstanding
in 2002, 37,079,900 issued and outstanding in 2001).. 376 370
Additional paid-in capital............................. 237,673 230,724
Accumulated other comprehensive loss................... (2,498) (3,996)
Retained earnings...................................... 26,888 5,412
----------- -----------
Total shareholders' equity............................. 262,439 232,510
----------- -----------
Total liabilities and shareholders' equity........... $ 622,916 $ 614,530
=========== ===========
The accompanying notes are an integral part of these financial statements
STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2002 2001 2002 2001
----------- ------------ ----------- ------------
Revenues........................... $ 99,269 $ 88,549 $ 196,333 $ 174,384
Costs and expenses:
Cost of revenues................. 59,042 53,348 117,217 105,119
Selling, general and
administrative expenses........ 14,868 16,250 29,563 32,078
Acquisition related costs........ 22 89 175 327
----------- ----------- ----------- -----------
Total costs and expenses...... 73,932 69,687 146,955 137,524
----------- ----------- ----------- -----------
Income from operations............. 25,337 18,862 49,378 36,860
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Other income (expense):
Interest income.................. 98 139 261 180
Interest expense................. (5,991) (9,016) (11,800) (18,456)
Other expense.................... (350) (554) (1,021) (726)
----------- ----------- ----------- -----------
Total other income (expense).. (6,243) (9,431) (12,560) (19,002)
----------- ----------- ----------- -----------
Income before income taxes......... 19,094 9,431 36,818 17,858
Income tax expense................. 7,571 3,837 14,664 7,247
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Net income......................... $ 11,523 $ 5,594 $ 22,154 $ 10,611
=========== =========== =========== ===========
Earnings per share - Basic......... $ 0.30 $ 0.16 $ 0.57 $ 0.30
=========== =========== =========== ===========
Earnings per share - Diluted....... $ 0.26 $ 0.13 $ 0.49 $ 0.26
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Weighted average number of
common shares outstanding--Basic. 37,523,591 30,811,364 37,371,309 30,646,594
=========== =========== =========== ===========
Weighted average number of common
shares outstanding--Diluted...... 45,146,640 41,704,248 44,959,087 41,459,408
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Proforma Results Excluding Goodwill Amortization:
Net Income $ 7,351 $ 14,107
Earnings per share - Basic $ 0.22 $ 0.39
Earnings per share - Diluted $ 0.18 $ 0.34
The accompanying notes are an integral part of these financial statements
STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
For the Six
Months Ended June 30,
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2002 2001
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OPERATING ACTIVITIES:
Net income............................................. $ 22,154 $ 10,611
Adjustments to reconcile net income to net cash
provided by operating activities:
Ineffective portion of cash flow hedges (381) 13
Stock compensation expense......................... -- 82
Tax benefit of disqualifying dispositions of stock. 1,168 --
Loss on sale of fixed assets....................... 201 --
Depreciation....................................... 6,194 5,424
Amortization....................................... 1,016 6,899
Changes in operating assets and liabilities, net of
effect of acquisitions:
Accounts receivable................................ 5,381 3,152
Parts and supplies................................. 1,453 (783)
Prepaid expenses and other assets.................. 2,032 (1,870)
Accounts payable................................... (1,931) (4,392)
Accrued liabilities................................ 13,956 3,877
Deferred revenue................................... (1,805) 292
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Net cash provided by operating activities.............. 49,438 23,305
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INVESTING ACTIVITIES:
Payments for acquisitions and international
investments, net of cash acquired.................. (10,070) (3,957)
Short-term investments............................... (358) (38)
Proceeds from sale of equipment...................... 55 --
Capital expenditures................................. (7,413) (6,619)
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Net cash used in investing activities.................. (17,786) (10,614)
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FINANCING ACTIVITIES:
Proceeds from issuance of notes payable.............. 1,181 --
Repurchase of senior subordinated debt............... (1,626) --
Repayment of long term debt.......................... (23,581) (8,901)
Net proceeds and repayments on line of credit........ (15,000) (5,000)
Principal payments on capital lease obligations...... (376) (796)
Proceeds from issuance of common stock............... 3,817 2,504
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Net cash used in financing activities.................. (35,585) (12,193)
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Effect of exchange rate changes on cash................ 106 --
Net increase (decrease) in cash and cash equivalents... (3,827) 498
Cash and cash equivalents at beginning of period....... 12,737 2,666
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Cash and cash equivalents at end of period............. $ 8,910 $ 3,164
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Non-cash activities:
Net issuances of common stock for certain acquisitions. $ 2,298 $ --
The accompanying notes are an integral part of these financial statements
STERICYCLE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
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 the Company believes 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 year ended December 31, 2001, as filed with our 2001 Annual Report on Form 10-K. The results of operations for the three and six month periods ended June 30, 2002 are not necessarily indicative of the results that may be achieved for the entire year ending December 31, 2002.
NOTE 2-ACQUISITIONS
During the quarter ended June 30, 2002, we completed the acquisition of one domestic medical waste management business with the purchase of the customer contracts and selected other assets of Bio-Waste Industries of Central Florida, Inc., which operated in Florida. And our Mexican subsidiary, Medam, S.A. de C.V., completed one acquisition with the purchase of a majority of the stock of Ecotermica de Oriente, S.A.de C.V. In addition we acquired certain profit sharing rights, put rights and other rights of three stockholders of 3CI Complete Compliance Corporation, under a settlement agreement that they entered into with 3CI in January 1996. Incidental to this acquisition, we purchased their shares of stock in 3CI, increasing our stock ownership to 6,037,218 shares or 65.6% of its common stock outstanding. The aggregate purchase price for these acquisitions was $5.4 million.
NOTE 3--STOCK OPTIONS
During the quarter ended June 30, 2002, options to purchase 59,552 shares of common stock were granted to outside directors. These options vest ratably over a one-year period and have an exercise price of $36.48 per share. In addition, options to purchase 5,050 shares of common stock were granted to employees during the quarter. These options vest ratably over a five-year period and have an exercise price of $27.37 per share.
NOTE 4-COMMON STOCK
At the close of business on May 31, 2002 we recorded a 2-for-1 stock split. The stock split was in the form of a stock dividend of one share payable on May 31, 2002 on each share of common stock outstanding on May 16, 2002. All share and earnings per share information in this 10Q is reported on a post-split basis.
During the quarter ended June 30, 2002, options to purchase 198,971 shares of common stock were exercised at prices ranging from $0.27-$27.37 per share. We also issued 2,028 shares of common stock in connection with certain acquisitions made in the quarter.
NOTE 5--INCOME TAXES
At June 30, 2002, we had net operating loss carry forwards for federal income tax purposes of approximately $11.3 million (excluding 3CI and Med-Tech) which expire beginning in 2006.
NOTE 6--DERIVATIVE INSTRUMENTS
We have entered into interest rate swap agreements that effectively convert a portion of our floating-rate debt to a fixed-rate basis for the next year, thus reducing the impact of interest rate changes on future interest expense. We have an interest rate swap agreement covering $100.0 million in principal at a 5.23% fixed interest rate expiring in January 2003 and an interest rate swap agreement covering $25 million in principal at a 5.19% fixed interest rate expiring in February 2003. Approximately 82% ($125 million) of our outstanding floating-rate debt was designated as the hedged items to interest rate swap agreements at June 30, 2002. The differential to be paid or received is accrued monthly as an adjustment to interest expense.
We adopted SFAS 133 on January 1, 2001, which requires us to adjust instruments that are designated and qualify as a cash flow hedge. The effective portion of the gain or loss on the derivative instrument is recognized as a component of other comprehensive income (loss) and is reclassified into earnings in the same period during which the hedged transaction affects earnings. The remaining gain or loss in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in current earnings during the period of change. During the three months ended June 30, 2002, we did not have any ineffective portions to record related to our hedging instruments.
Activity related to the accumulated loss on derivative instruments is as follows:
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Balance at December 31, 2001 |
$(3,986) |
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Change associated with current period hedge transactions |
1,842 |
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Amount reclassified into interest expense |
(381) |
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Balance at June 30, 2002 |
$(2,525) |
NOTE 7-NET INCOME PER COMMON SHARE
The following table sets forth the computation of basic and diluted net income per share:
STERICYCLE, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
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2002 2001 2002 2001
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Numerator:
Net Income................................ $ 11,523 $ 5,594 $ 22,154 $ 10,611
Preferred stock dividends................. (274) (649) (678) (1,294)
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Numerator for basic earnings
per share.............................. $ 11,249 $ 4,945 $ 21,476 $ 9,317
Effective of dilutive securities:
Preferred stock dividends............... 274 649 678 1,294
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Numerator for diluted earnings
per share income available to
common shareholders after
assumed conversions...................... $ 11,523 $ 5,594 $ 22,154 $ 10,611
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Denominator:
Denominator for basic earnings per share
Weighted average shares.................. 37,523,591 30,811,364 37,371,309 30,646,594
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Effective of dilutive securities:
Employee stock options................... 1,866,479 1,775,380 1,850,349 1,694,582
Warrants................................. 119,214 150,770 121,848 187,742
Convertible preferred stock.............. 5,637,356 8,966,734 5,615,581 8,930,490
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Dilutive potential shares.................. 7,623,049 10,892,884 7,587,778 10,812,814
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Denominator for diluted earnings
per share adjusted weighted
average shares and assumed
conversions................................ 45,146,640 41,704,248 44,959,087 41,459,408
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Earnings per share - Basic................... $ 0.30 $ 0.16 $ 0.57 $ 0.30
=========== =========== =========== ===========
Earnings per share - Diluted................. $ 0.26 $ 0.13 $ 0.49 $ 0.26
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NOTE 8--COMPREHENSIVE INCOME
During the three months ended June 30, 2002, total comprehensive income amounted to $11.6 million as compared to $5.3 million during the comparable period in 2001. For the six months ended June 20, 2002, the comprehensive income amounted to $23.7 million as compared to $8.6 million during the six months ended June 30, 2001. The components of comprehensive income are net income, change in cumulative currency translation adjustments and the change in cumulative unrealized losses on derivative instruments recorded in accordance with FAS 133.
NOTE 9 --ADOPTION OF NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill will no longer be amortized but will be subject to annual impairment tests, or more frequently if circumstances indicate that it may be impaired. During the quarter ended June 30, 2002 we performed our first annual goodwill impairment evaluation and determined that none of the recorded goodwill was impaired. At the quarter ended June 30, 2002, we had $5.4 million in the goodwill balance related to two acquisitions recently completed in which the assignment of intangibles and goodwill has not yet been determined.
We have two reporting segments, United States and Foreign Countries, both of which have goodwill. The changes in the carrying amount of goodwill for the six months ended June 30, 2002, was as follows (in thousands):
United Foreign
States Countries Total
--------- --------- ----------
Balance as of January 1, 2002 $ 405,926 $ 5,951 $ 411,877
Goodwill acquired during year 9,614 346 9,960
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Balance as of June 30, 2002 $ 415,540 $ 6,297 $ 421,837
The proforma impact of eliminating goodwill amortization on the Condensed Consolidating Statements of Income is as follows:
Proforma results excluding goodwill amortization
(in thousands except earnings-per-share amounts)
Three months Six months
ended June 30, 2001 ended June 30, 2001
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Reported net income $ 5,594 $ 10,611
Add back: Goodwill amortization 2,951 5,883
Subtract: Tax effect of goodwill amortization (1,194) (2,387)
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Adjusted net income $ 7,351 $ 14,107
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Basic earnings-per-share
Reported net income $ 0.16 $ 0.28
Add back: Goodwill amortization 0.10 0.19
Subtract: Tax effect of goodwill amortization (0.04) (0.08)
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Adjusted net income $ 0.22 $ 0.39
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Diluted earnings-per-share
Reported net income $ 0.13 $ 0.26
Add back: Goodwill amortization 0.08 0.14
Subtract: Tax effect of goodwill amortization (0.03) (0.06)
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Adjusted net income $ 0.18 $ 0.34
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According to FAS 142, other intangible assets will continue to be amortized over their useful lives. During the quarter ended June 30, 2002 we assigned values to the intangibles acquired from our acquisitions of Bio Environmental Services, Inc., Pyroval Inc. and A-Medco, Inc. We assigned $0.8 million to the customer relationships with an amortization period of 45 years.
As of June 30, 2002 the value of the amortizing intangible assets were as follows (in thousands):
Gross
Carrying Accumulated
Amount Amortization
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Amortized intangible assets:
Non-compete $ 5,300 $ 2,827
Workforce 2,870 2,551
Customer relationships 3,594 75
Other 223 73
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Total $ 11,987 $ 5,526
========= =========
At June 30, 2002 we have indefinite lived intangible assets of $4.1 million that are environmental permits.
During the six months ended June 30, 2002 the aggregate amortization expense was $1.0 million. The estimated amortization expense, in thousands, for each of the next five years is as follows:
12 months ended June 30, 2003 $ 1,469 12 months ended June 30, 2004 1,154 12 months ended June 30 2005 448 12 months ended June 30, 2006 94 12 months ended June 30, 2007 94
NOTE 10-DEBT AND PREFERRED STOCK
On June 28, 2002 we entered into an amendment of our senior secured credit facility increasing our revolving credit facility from $80.0 million to $105.0 million and modifying the loan covenants restricting our ability to make payments to purchase or redeem shares of our common stock or to redeem our 12- 3/8% senior subordinated notes.
On July 26, 2002 we entered into an amendment and waiver agreement with the holders of our Series A convertible preferred stock pursuant to which the parties agreed that the 3.375% payment in kind dividends payable on the shares of preferred stock ceased to accrue after May 31, 2002.
NOTE 11-LEGAL PROCEEDINGS
We operate in a highly regulated industry and from time to time receive regulatory inquires or become subject to governmental proceedings to enforce regulations relating to the handling and treatment of medical waste. We have had to pay fines and penalties and to undertake remedial work at our facilities, and we may be subject to similar proceedings in the future. We are also a party to various legal proceedings arising in the ordinary course of business. We believe that the resolution of these proceedings will be settled or resolved on terms acceptable to us, without having a material adverse affect on our operations or financial condition.
NOTE 12--CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Payments under the Company's senior subordinated notes (the Notes) are unconditionally guaranteed, jointly and severally, by all of the Company's wholly-owned domestic subsidiaries, which include Environmental Control Company, Inc., Waste Systems, Inc., and certain other subsidiaries which have insignificant assets and operations (collectively, "the guarantors"). Financial information concerning the guarantors as of June 30, 2002 and December 31, 2001 and for the three and six month periods ended June 30, 2002 and 2001 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. Financial statements for the guarantors have not been presented because management does not believe that such financial statements are material to investors.
CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 2002
UNAUDITED
COMBINED
STERICYCLE NON-
STERICYCLE, GUARANTOR AND GUARANTOR GUARANTOR
INC. SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ----------- ------------ ----------- ----------- ------------
ASSETS
Current assets:
Cash and cash equivalents............ $ 6,749 $ 260 $ 7,009 $ 1,901 $ -- $ 8,910
Other current assets................. 74,537 24,912 99,449 9,982 (23,486) 85,945
---------- ----------- ------------ ----------- ----------- ------------
Total current assets.................... 81,286 25,172 106,458 11,883 (23,486) 94,855
Property, plant and equipment,
net.................................. 73,922 309 74,231 10,362 -- 84,593
Goodwill, net........................... 399,438 10,237 409,675 12,162 -- 421,837
Investment in subsidiaries.............. 53,208 547 53,755 -- (53,755) --
Other assets............................ 27,710 4,896 32,606 52 (11,027) 21,631
---------- ----------- ------------ ----------- ----------- ------------
Total assets............................ $ 635,564 $ 41,161 $ 676,725 $ 34,459 $ (88,268) $ 622,916
========== =========== ============ =========== =========== ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Current portion of
long-term debt..................... $ 4,923 $ -- $ 4,923 $ 186 $ $ 5,109
Other current liabilities............ 73,158 411 73,569 4,930 (23,486) 55,013
---------- ----------- ------------ ----------- ----------- ------------
Total current liabilities............... 78,081 411 78,492 5,116 (23,486) 60,122
Long-term debt, net of current
portion.............................. 232,309 -- 232,309 14,458 (11,027) 235,740
Other liabilities....................... 17,186 -- 17,186 1,880 -- 19,066
Convertible preferred stock............. 45,549 -- 45,549 -- -- 45,549
Common shareholders' equity............. 262,439 40,750 303,189 13,005 (53,755) 262,439
---------- ----------- ------------ ----------- ----------- ------------
Total liabilities and
shareholders' equity................. $ 635,564 $ 41,161 $ 676,725 $ 34,459 $ (88,268) $ 622,916
========== =========== ============ =========== =========== ============
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2001
AUDITED
COMBINED
STERICYCLE NON-
STERICYCLE, GUARANTOR AND GUARANTOR GUARANTOR
INC. SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ----------- ------------ ----------- ----------- ------------
ASSETS
Current assets:
Cash and cash equivalents............ $ 8,919 $ 833 $ 9,752 $ 2,985 $ -- $ 12,737
Other current assets................. 73,742 19,585 93,327 8,304 (16,375) 85,256
---------- ----------- ------------ ----------- ----------- ------------
Total current assets.................... 82,661 20,418 103,079 11,289 (16,375) 97,993
Property, plant and equipment,
net.................................. 70,208 1,764 71,972 10,764 -- 82,736
Goodwill, net........................... 380,526 19,252 399,778 12,099 -- 411,877
Investment in subsidiaries.............. 60,004 1,437 61,441 -- (61,441) --
Other assets............................ 27,334 5,589 32,923 118 (11,117) 21,924
---------- ----------- ------------ ----------- ----------- ------------
Total assets............................ $ 620,733 $ 48,460 $ 669,193 $ 34,270 $ (88,933) $ 614,530
========== =========== ============ =========== =========== ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Current portion of
long-term debt..................... $ 12,143 $ -- $ 12,143 $ 490 $ -- $ 12,633
Other current liabilities............ 60,972 817 61,789 5,332 (16,375) 50,746
---------- ----------- ------------ ----------- ----------- ------------
Total current liabilities............... 73,115 817 73,932 5,822 (16,375) 63,379
Long-term debt, net of current
portion.............................. 265,185 118 265,303 13,179 (11,117) 267,365
Other liabilities....................... 5,051 -- 5,051 1,353 -- 6,404
Convertible preferred stock............. 44,872 -- 44,872 -- -- 44,872
Common shareholders' equity............. 232,510 47,525 280,035 13,916 (61,441) 232,510
---------- ----------- ------------ ----------- ----------- ------------
Total liabilities and
shareholders' equity................. $ 620,733 $ 48,460 $ 669,193 $ 34,270 $ (88,933) $ 614,530
========== =========== ============ =========== =========== ============
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED JUNE 30, 2002
UNAUDITED
COMBINED
STERICYCLE NON-
STERICYCLE, GUARANTOR AND GUARANTOR GUARANTOR
INC. SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ----------- ------------ ----------- ----------- ------------
Revenues................................ $ 87,049 $ 4,584 $ 91,633 $ 8,546 $ (910) $ 99,269
Cost of revenues........................ 51,298 2,726 54,024 5,928 (910) 59,042
Selling, general, and
administrative expense............... 13,224 156 13,380 1,488 -- 14,868
Acquisition related expenses............ 22 -- 22 -- -- 22
---------- ----------- ------------ ----------- ----------- ------------
Total costs and expenses................ 64,544 2,882 67,426 7,416 (910) 73,932
---------- ----------- ------------ ----------- ----------- ------------
Income from operations.................. 22,505 1,702 24,207 1,130 -- 25,337
Equity in net income (loss) of
subsidiaries......................... 1,921 224 2,145 -- (2,145) --
Other (expense) income, net............. (6,006) 190 (5,816) (427) -- (6,243)
---------- ----------- ------------ ----------- ----------- ------------
Income before income taxes.............. 18,420 2,116 20,536 703 (2,145) 19,094
Income tax expense...................... 6,897 675 7,572 (1) -- 7,571
---------- ----------- ------------ ----------- ----------- ------------
Net income.............................. $ 11,523 $ 1,441 $ 12,964 $ 704 $ (2,145) $ 11,523
========== =========== ============ =========== =========== ============
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED JUNE 30, 2001
UNAUDITED
COMBINED
STERICYCLE NON-
STERICYCLE, GUARANTOR AND GUARANTOR GUARANTOR
INC. SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ----------- ------------ ----------- ----------- ------------
Revenues................................ $ 75,874 $ 4,369 $ 80,243 $ 8,642 $ (336) $ 88,549
Cost of revenues........................ 44,677 2,685 47,362 6,322 (336) 53,348
Selling, general, and
administrative expense............... 14,254 363 14,617 1,633 -- 16,250
Acquisition related expenses............ 89 -- 89 -- -- 89
---------- ----------- ------------ ----------- ----------- ------------
Total costs and expenses................ 59,020 3,048 62,068 7,955 (336) 69,687
---------- ----------- ------------ ----------- ----------- ------------
Income from operations.................. 16,854 1,321 18,175 687 -- 18,862
Equity in net income (loss) of
subsidiaries......................... 1,054 244 1,298 -- (1,298) --
Other (expense) income, net............. (8,701) 140 (8,561) (870) -- (9,431)
---------- ----------- ------------ ----------- ----------- ------------
Income before income taxes.............. 9,207 1,705 10,912 (183) (1,298) 9,431
Income tax expense (benefit)............ 3,613 110 3,723 114 -- 3,837
---------- ----------- ------------ ----------- ----------- ------------
Net income.............................. $ 5,594 $ 1,595 $ 7,189 $ (297) $ (1,298) $ 5,594
========== =========== ============ =========== =========== ============
CONDENSED CONSOLIDATING STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2002
UNAUDITED
COMBINED
STERICYCLE NON-
STERICYCLE, GUARANTOR AND GUARANTOR GUARANTOR
INC. SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ----------- ------------ ----------- ----------- ------------
Revenues................................ $ 170,657 $ 9,448 $ 180,105 $ 18,030 $ (1,802) $ 196,333
Cost of revenues........................ 100,809 5,797 106,606 12,436 (1,825) 117,217
Selling, general, and
administrative expense............... 26,155 380 26,535 3,061 (33) 29,563
Acquisition related expenses............ 175 -- 175 -- -- 175
---------- ----------- ------------ ----------- ----------- ------------
Total costs and expenses................ 127,139 6,177 133,316 15,497 (1,858) 146,955
---------- ----------- ------------ ----------- ----------- ------------
Income from operations.................. 43,518 3,271 46,789 2,533 56 49,378
Equity in net income (loss) of
subsidiaries......................... 4,097 583 4,680 -- (4,680) --
Other (expense) income, net............. (12,132) 262 (11,870) (690) -- (12,560)
---------- ----------- ------------ ----------- ----------- ------------
Income before income taxes.............. 35,483 4,116 39,599 1,843 (4,624) 36,818
Income tax expense...................... 13,386 1,300 14,686 (22) -- 14,664
---------- ----------- ------------ ----------- ----------- ------------
Net income.............................. $ 22,097 $ 2,816 $ 24,913 $ 1,865 $ (4,624) $ 22,154
========== =========== ============ =========== =========== ============
CONDENSED CONSOLIDATING STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2001
UNAUDITED
COMBINED
STERICYCLE NON-
STERICYCLE, GUARANTOR AND GUARANTOR GUARANTOR
INC. SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ----------- ------------ ----------- ----------- ------------
Revenues................................ $ 148,660 $ 8,690 $ 157,350 $ 17,699 $ (665) $ 174,384
Cost of revenues........................ 88,068 5,366 93,434 12,350 (665) 105,119
Selling, general, and
administrative expense............... 28,360 653 29,013 3,065 -- 32,078
Acquisition related expenses............ 327 -- 327 -- -- 327
---------- ----------- ------------ ----------- ----------- ------------
Total costs and expenses................ 116,755 6,019 122,774 15,415 (665) 137,524
---------- ----------- ------------ ----------- ----------- ------------
Income from operations.................. 31,905 2,671 34,576 2,284 -- 36,860
Equity in net income (loss) of
subsidiaries......................... 3,689 1,073 4,762 -- (4,762) --
Other (expense) income, net............. (18,145) 314 (17,831) (1,171) -- (19,002)
---------- ----------- ------------ ----------- ----------- ------------
Income before income taxes.............. 17,449 4,058 21,507 1,113 (4,762) 17,858
Income tax expense (benefit)............ 6,838 220 7,058 189 -- 7,247
---------- ----------- ------------ ----------- ----------- ------------
Net income.............................. $ 10,611 $ 3,838 $ 14,449 $ 924 $ (4,762) $ 10,611
========== =========== ============ =========== =========== ============
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2002
UNAUDITED
COMBINED
STERICYCLE NON-
STERICYCLE, GUARANTOR AND GUARANTOR GUARANTOR
INC. SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ----------- ------------ ----------- ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by
operating activities............... $ 46,349 $ 3,867 $ 50,216 $ (778) $ -- $ 49,438
---------- ----------- ------------ ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................. (6,977) (78) (7,055) (358) -- (7,413)
Retirement of property and equipment. 54 -- 54 1 55
Payments for acquisitions and
international investments, net of
cash acquired...................... (5,077) (4,184) (9,261) (809) -- (10,070)
Short-term investments............... (358) -- (358) -- -- (358)
---------- ----------- ------------ ----------- ----------- ------------
Net cash used in investing activities (12,358) (4,262) (16,620) (1,166) -- (17,786)
---------- ----------- ------------ ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of bank line of credit (15,000) -- (15,000) -- -- (15,000)
Principal payments on capital lease
obligations........................ (180) (178) (358) (18) -- (376)
Repayment of long term debt.......... (23,172) -- (23,172) (409) -- (23,581)
Repayment of subordinated notes...... (1,626) -- (1,626) -- -- (1,626)
Proceeds from issuance of notes payab -- -- -- 1,181 -- 1,181
Proceeds from issuance of common
stock.............................. 3,817 -- 3,817 -- -- 3,817
---------- ----------- ------------ ----------- ----------- ------------
Net cash used in financing activities... (36,161) (178) (36,339) 754 -- (35,585)
---------- ----------- ------------ ----------- ----------- ------------
Effect of exchange rate changes on cash. -- -- 106 106
---------- ----------- ------------ ----------- ----------- ------------
Net decrease in cash and
cash equivalents..................... $ (2,170) $ (573) $ (2,743) $ (1,084) $ -- (3,827)
========== =========== ============ =========== ===========
Cash and cash equivalents at beginning
of period............................ 12,737
------------
Cash and cash equivalents at end of
period............................... $ 8,910
============
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2001
UNAUDITED
COMBINED
STERICYCLE NON-
STERICYCLE, GUARANTOR AND GUARANTOR GUARANTOR
INC. SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ----------- ------------ ----------- ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by
operating activities............... $ 21,525 $ (120) $ 21,405 $ 1,900 $ -- $ 23,305
---------- ----------- ------------ ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................. (5,864) (153) (6,017) (602) -- (6,619)
Payments for acquisitions and
international investments, net of
cash acquired...................... (3,957) -- (3,957) -- -- (3,957)
Short-term investments............... (38) -- (38) -- -- (38)
---------- ----------- ------------ ----------- ----------- ------------
Net cash used in investing activities (9,859) (153) (10,012) (602) -- (10,614)
---------- ----------- ------------ ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease
obligations........................ (796) -- (796) -- -- (796)
Net repayments of bank line of credit (5,000) -- (5,000) -- -- (5,000)
Repayment of long term debt.......... (8,267) -- (8,267) (634) -- (8,901)
Proceeds from issuance of common
stock.............................. 2,504 -- 2,504 -- -- 2,504
---------- ----------- ------------ ----------- ----------- ------------
Net cash used in financing activities... (11,559) -- (11,559) (634) -- (12,193)
---------- ----------- ------------ ----------- ----------- ------------
Net (decrease) increase in cash and
cash equivalents..................... $ 107 $ (273) $ (166) $ 664 $ -- 498
========== =========== ============ =========== ===========
Cash and cash equivalents at beginning
of period............................ 2,666
------------
Cash and cash equivalents at end of
period............................... $ 3,164
============
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 and/or by licensing our proprietary technology and selling associated equipment.
THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001
The following summarizes (in thousands) the Company's operations:
Three Months Ended June 30,
-------------------------------------
2002 2001
------------------ -----------------
$ % $ %
-------- -------- -------- -------
Revenues............................ $ 99,269 100.0 $ 88,549 100.0
Cost of revenues.................... 59,042 59.5 53,348 60.2
-------- -------- -------- -------
Gross profit........................ 40,227 40.5 35,201 39.8
Selling, general and
administrative expenses........... 14,868 15.0 16,250 18.4
-------- -------- -------- -------
Income from operations before
acquisition related costs......... 25,359 25.5 18,951 21.4
Acquisition related costs........... 22 0.0 89 0.1
-------- -------- -------- -------
Income from operations.............. 25,337 25.5 18,862 21.3
Net income.......................... 11,523 11.6 5,594 6.3
Depreciation and amortization....... 3,648 3.7 6,201 7.0
EBITDA*............................. 28,635 28.8 24,871 28.1
Earnings per share-diluted.......... $ 0.26 $ 0.13
Proforma results excluding goodwill amortization 2001
(in thousands except earnings-per-share amounts) ------
Reported net income $ 5,594 6.3%
Add back: Goodwill amortization 2,951 3.3%
Subtract: Tax effect of goodwill amortization (1,194) (1.3)%
------- -----
Adjusted net income $ 7,351 8.3%
======= =====
Basic earnings-per-share
Reported net income $ 0.16
Add back: Goodwill amortization 0.10
Subtract: Tax effect of goodwill amortization (0.04)
-------
Adjusted net income $ 0.22
=======
Diluted earnings-per-share
Reported net income $ 0.13
Add back: Goodwill amortization 0.08
Subtract: Tax effect of goodwill amortization (0.03)
-------
Adjusted net income $ 0.18
=======
(1) Calculated for a period 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 $10.7 million, or 12.1%, to $99.3 million during the three months ended June 30, 2002 from $88.5 million during the comparable period in 2001 as a result of our continued strategy of focusing on sales to higher-margin small account customers, and revenues from acquisitions completed in the previous quarter. International equipment revenues during the three months ended June 30, 2002 increased $0.1 million to $1.1 million from $1.0 million during the comparable period in 2001. During the three months ended June 30, 2002, acquisitions less than one year old contributed approximately $5.0 million to the increase in revenues as compared to the prior year. For the quarter, our base internal revenue growth for small account customers increased over 9% while revenues from large account customers increased by over 5%.
Cost of Revenues. Cost of revenues increased $5.7 million to $59.0 million during the three months ended June 30, 2002 from $53.3 million during the comparable period in 2001. The increase was primarily due to increased volume growth, acquisitions, higher insurance and employee benefit costs. The gross margin percentage increased to 40.5% during the three months ended June 30, 2002 from 39.8% during the same period in 2001 as benefits from productivity improvements and leveraging our infrastructure exceeded higher operating expenses.
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased to $14.9 million for the three months ended June 30, 2002 from $16.3 million for the comparable period in 2001. The decrease was largely the result of discontinued amortization of Goodwill after our adoption of FAS 142 on January 1, 2002, partially offset by higher spending on the Steri-SafeSM OSHA compliance program and other strategic marketing investments. Selling, general and administrative expenses as a percent of revenues decreased to 15.0% during the three months ended June 30, 2002 from 18.4% during the comparable period in 2001. Excluding amortization, selling, general and administrative expenses as a percent of revenue increased to 14.5% during the three months ended June 30, 2002 from 14.4% during the comparable period in 2001.
Acquisition related costs. During the three months ended June 30, 2002, we incurred acquisition-related costs of $22,000 related to the integration of acquisitions as compared to $89,000 during the same period in 2001.
Income from Operations. Income from operations increased to $25.3 million for the three months ended June 30, 2002 from $18.9 million for the comparable period in 2001. The increase was due to higher gross profit and margins and lower goodwill amortization expenses, as a result of the adoption of FAS 142, partially offset by higher costs of revenues and selling, general and administrative expenses during the three months. Income from operations as a percentage of revenue increased to 25.5% during the three months ended June 30, 2002 from 21.3% during the same period in 2001 as a result of productivity improvements and lower goodwill amortization expense.
EBITDA. EBITDA increased by 15.1% to $28.6 million or 28.8% of revenue for the three months ended June 30, 2002, as compared to $24.9 million or 28.1% of revenue for the comparable period in 2001. The increase in EBITDA is primarily due to the factors described above.
Net Interest Expense. Net interest expense decreased to $5.9 million during the three months ended June 30, 2002 from $8.9 million during the comparable period in 2001 primarily due to decreased interest rates and debt prepayments. During the quarter, we incurred a one-time $0.3 million interest expense related to the repurchase of $1.6 million of our 12 3/8% bonds and an additional $0.2 million one-time interest expense related to increasing the available balance on our revolver from $80.0 million to $105.0 million and amending the credit agreement.
Other Expense. Other expense decreased to $0.4 million during the three months ended June 30, 2002 from $0.6 million during the comparable period in 2001 primarily due to a one-time state and local tax accrual in 2001 of $0.4 million partially offset by higher minority interest expense during the comparable period in 2002.
Net Income. Net Income increased to $11.5 million for the three months ended June 30, 2002 from $5.6 million for the comparable period in 2001. The increase was due to higher income from operations and lower interest expense partially offset by higher income tax expense.
SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001
The following summarizes (in thousands) the Company's operations:
Six Months Ended June 30,
-------------------------------------
2002 2001
------------------ -----------------
$ % $ %
-------- -------- -------- -------
Revenues............................ $196,333 100.0 $174,384 100.0
Cost of revenues.................... 117,217 59.7 105,119 60.3
-------- -------- -------- -------
Gross profit........................ 79,116 40.3 69,265 39.7
Selling, general and
administrative expenses........... 29,563 15.1 32,078 18.4
-------- -------- -------- -------
Income from operations before
acquisition related costs......... 49,553 25.2 37,187 21.3
Acquisition related costs........... 175 0.1 327 0.2
-------- -------- -------- -------
Income from operations.............. 49,378 25.2 36,860 21.1
Net income.......................... 22,154 11.3 10,611 6.1
Depreciation and amortization....... 7,210 3.7 12,323 7.1
EBITDA*............................. 55,567 28.3 48,819 28.0
Earnings per share-Diluted.......... 0.49 0.26
Proforma results excluding goodwill amortization 2001
(in thousands except earnings-per-share amounts) ------
Reported net income $ 10,611 6.1%
Add back: Goodwill amortization 5,883 3.4%
Subtract: Tax effect of goodwill amortization (2,387) (1.4)%
-------- -----
Adjusted net income $ 14,107 8.1%
======== =====
Basic earnings-per-share
Reported net income $ 0.28
Add back: Goodwill amortization 0.19
Subtract: Tax effect of goodwill amortization (0.08)
-------
Adjusted net income $ 0.39
=======
Diluted earnings-per-share
Reported net income $ 0.26
Add back: Goodwill amortization 0.14
Subtract: Tax effect of goodwill amortization (0.06)
-------
Adjusted net income $ 0.34
=======
(1) Calculated for a period 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 $21.9 million, or 12.6%, to $196.3 million during the six months ended June 30, 2002 from $174.4 million during the comparable period in 2001 as a result of our continued strategy of focusing on sales to higher-margin small account customers, slightly higher revenues from international equipment sales, and revenues from acquisitions completed during the six months. International equipment revenues during the six months ended June 30, 2002 increased $0.7 million to $3.8 million from $3.1 million during the comparable period in 2001. During the six months ended June 30, 2002, acquisitions less than one year old contributed approximately $10 million to the increase in revenues as compared to the prior year. For the six months, our base internal revenue growth for small account customers increased over 9% while revenues from large account customers increased by over 5%.
Cost of Revenues. Cost of revenues increased $12.1 million to $117.2 million during the six months ended June 30, 2002 from $105.1 million during the comparable period in 2001. The increase was primarily due to increased volume growth, acquisitions, higher insurance and employee benefit costs. The gross margin percentage increased to 40.3% during the six months ended June 30, 2002 from 39.7% during the same period in 2001 as a benefits from productivity improvements and leveraging our infrastructure, exceeded higher operating expenses.
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased to $29.6 million for the six months ended June 30, 2002 from $32.1 million for the comparable period in 2001. The decrease was largely the result of discontinued amortization of Goodwill after our adoption of FAS 142 on January 1, 2002, partially offset by higher spending on the Steri-SafeSM OSHA compliance program and other strategic investments. Selling, general and administrative expenses as a percent of revenues decreased to 15.1% during the six months ended June 30, 2002 from 18.4% during the comparable period in 2001. Excluding amortization, selling, general and administrative expenses as a percent of revenue increased to 14.5% during the six months ended June 30, 2002 from 14.4% during the comparable period in 2001.
Acquisition related costs. During the six months ended June 30, 2002, we incurred acquisition-related costs of $0.2 million related to the integration of acquisitions as compared to $0.3 million during the same period in 2001.
Income from Operations. Income from operations increased to $49.4 million for the six months ended June 30, 2002 from $36.9 million for the comparable period in 2001. The increase was due to higher revenues and lower goodwill amortization expenses, as a result of the adoption of FAS 142, offset by higher costs of revenues and selling, general and administrative expenses during the six months. Income from operations as a percentage of revenue increased to 25.2% during the six months ended June 30, 2002 from 21.1% during the same period in 2001 as a result of productivity improvements and lower goodwill amortization expense.
EBITDA. EBITDA increased by 13.8% to $55.6 million or 28.3% of revenue for the six months ended June 30, 2002, as compared to $48.8 million or 28.0% of revenue for the comparable period in 2001. The increase in EBITDA is primarily due to the factors described above.
Net Interest Expense. Net interest expense decreased to $11.5 million during the six months ended June 30, 2002 from $18.3 million during the comparable period in 2001 primarily due to decreased interest rates and debt repayments.. During the six months, we incurred a one-time $0.3 million interest expense related to the repurchase of $1.6 million of our 12 3/8% bonds, and an additional $0.2 million one-time interest expense related to increasing the available balance on our revolver from $80.0 million to $105.0 million. During the six months, per FAS 133, we recognized a net gain of $0.4 million related to the ineffective portion of our hedging instruments.
Other Expense. Other expense increased to $1.0 million during the six months ended June 30, 2002 from $0.7 million during the comparable period in 2001 primarily due to increased minority interest expense related to our foreign subsidiaries.
Net Income. Net Income increased to $22.2 million for the six months ended June 30, 2002 from $10.6 million for the comparable period in 2001. The increase was due to higher income from operations and lower interest expense partially offset by higher income tax expense.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2002, our working capital was $34.7 million compared to working capital of $34.6 million at December 31, 2001. The increase in working capital is primarily due to lower current liabilities balances and lower accounts receivable and prepaid asset balances partially offset by higher other asset balances. On June 30, 2002 we had available a $105.0 million revolving line of credit under our senior secured credit facility which was secured by our accounts receivable and all of our other assets. On June 28, 2002 we completed an amendment to our senior loan agreement that increased the amount available on the revolving line of credit from $80.0 million to $105.0 million. The amendment also gave us more flexibility relative to repaying higher cost term loans, and to purchasing or redeeming our stock and senior subordinated notes. At June 30, 2002 we had no borrowings under this line.
Net cash provided by operating activities was $49.4 million during the six months ended June 30, 2002 compared to $23.3 million for the comparable period in 2001. This increase primarily reflects higher net income and accrued liability balances, lower accounts receivable, prepaid expenses, other assets, and parts and supply balances in 2002 versus 2001, offset by lower accounts payable and deferred revenue balances.
Net cash used in investing activities for the six months ended June 30, 2002 was $17.8 million compared to $10.6 million for the comparable period in 2001. This increase is primarily attributable to the increase in investments in acquisitions. Capital expenditures were $7.4 million for the six months ended June 30, 2002 or 3.8% of revenues, compared to $6.6 million for the same period in 2001. This rate of capital spending is less than the 4-5% of revenues that we anticipated spending during 2002. After the upgrades in 2002 are completed we plan to have less than 15% of our treatment capacity in incineration and more than 85% in non-incineration technologies such as autoclave and ETD. Cash investments in acquisitions and international joint ventures for the six months ended June 30, 2002 were $10.0 million versus $4.0 million in the comparable period in 2001.
Net cash used in financing activities was $35.6 million during the six months ended June 30, 2002 compared to $12.2 million for the comparable period in 2001. During the first six months of 2002 we made repayments of $40.6 million in debt and capital leases which consisted of approximately $6.5 million in scheduled repayments and $34.1 million in prepayments.
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 THE 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.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Certification of Mark C. Miller, President and Chief Executive Officer
99.2 Certification of Frank J.M. ten Brink, Executive Vice President and Chief Financial Officer
(b) Reports on Form 8-K
We filed a form 8-K on August 5, 2002 relating to an amendment of our senior secured credit agreement and to the termination of dividend accruals on our preferred stock.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 7, 2002
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STERICYCLE, INC. |
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(Registrant) |
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By: |
/s/ FRANK J.M. TEN BRINK |
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Frank J.M. ten Brink |
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Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) |
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