scl-20230630

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________________

FORM 10-Q

________________________________________________________

[Mark One]

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ 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 1-37556

________________________________________________________

________________________________________________________


Delaware			36-3640402
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification Number)

2355 Waukegan Road

Bannockburn, Illinois 60015

(Address of principal executive offices, including zip code)

(847) 367-5910

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	SRCL	Nasdaq Global Select Market

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 such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Smaller reporting company ☐

Accelerated filer ☐

Emerging growth company ☐

Non-accelerated filer ☐

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

On July 24, 2023, there were 92,521,649 shares of the Registrant’s Common Stock outstanding.

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		Page No.
PART I. FINANCIAL INFORMATION

	Item 1. Financial Statements (Unaudited)	5

	Condensed Consolidated Statements of (Loss) Income	5

	Condensed Consolidated Statements of Comprehensive Income (Loss)	6

	Condensed Consolidated Balance Sheets	7

	Condensed Consolidated Statements of Cash Flows	8

	Condensed Consolidated Statements of Changes in Equity	9

	Notes to Condensed Consolidated Financial Statements	11

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

	Item 3. Quantitative and Qualitative Disclosure s About Market Risk	29

	Item 4. Controls and Procedures	29

PART II. OTHER INFORMATION

	Item 1. Legal Proceedings	30

	Item 1A. Risk Factors	30

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	30

	Item 5 . Other Information	30

	Item 6. Exhibits	31

	SIGNATURES	32


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Glossary of Defined Terms

Unless the context requires otherwise, the “Company”, “Stericycle”, “we”, “us”, or “our” refers to Stericycle, Inc. on a consolidated basis. The Company also uses several other terms in this Quarterly Report on Form 10-Q, most of which are explained or defined below:


Abbreviation			Description
2022 Form 10-K			Annual report on Form 10-K for the year ended December 31, 2022
Adjusted Income from Operations			Income from Operations adjusted for certain items discussed in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
AICPA			American Institute of Certified Public Accountants






COVID-19			The global novel coronavirus disease 2019 outbreak, which the World Health Organization declared to be a pandemic
Credit Agreement			Credit Agreement dated September 30, 2021, First Amendment dated April 26, 2022, and Second Amendment dated June 15, 2023, among the Company and certain subsidiaries as borrowers. Bank of America, N.A., as administrative agent, swing line lender, a lender and a letter of credit issuer and the other lenders party thereto, as amended
Credit Agreement Defined Debt Leverage Ratio			As of any date of determination, the ratio of (a) (i) Consolidated Funded Indebtedness as of such date minus (ii) Unrestricted Cash as of such date to (b) Consolidated EBITDA (as defined in the Credit agreement) for the period of four fiscal quarters most recently ended on or prior to such date
Credit Facility			The Company's $1.2 billion credit facility due in September of 2026 granted under the terms of the Credit Agreement
CRS			Communication and Related Services (Divested December 2022)
DEA			U.S. Drug Enforcement Administration. The DEA is a division of the U.S. Department of Justice. It is the federal agency which regulates the manufacture, dispensing, storage, and shipment of controlled substances including medications with human abuse potential
DOJ			U.S. Department of Justice
Domestic Environmental Solutions			Hazardous Waste Solutions and Manufacturing and Industrial Services (Divested April 2020)

DSO			Days Sales Outstanding, defined as the average number of days that it takes a company to collect payment after revenue has been recorded, computed as the trailing twelve months of Revenues for the period ended DSO, divided by the Accounts Receivable balance at the end of the period
DTSC			U.S. Department of Toxic Substances Control
EBITDA			Earnings Before Interest, Taxes, Depreciation & Amortization. Another common financial term utilized by Stericycle to analyze the core profitability of the business before interest, tax, depreciation and amortization

Enviri			Enviri Corporation, a Delaware Corporation, formerly known as Harsco Corporation
ERP			Enterprise Resource Planning
Exchange Act			U.S. Securities Exchange Act of 1934
FASB			Financial Accounting Standards Board
FCPA			U.S. Foreign Corrupt Practices Act
FCPA Settlement			FCPA Settlement with the Securities and Exchange Commission, the Department of Justice and Brazil authorities of approximately $90 million and engagement of an independent compliance monitor for 2 years and self-reporting for additional year
International			Operating segment including Europe, Middle East, Asia Pacific (Divested our Korea operations in June 2023, which was our last remaining Asia Pacific business) and Latin America (Divested our Brazil operations in April 2023, which was our last remaining Latin America business) Business operations outside of North America
IRS			U.S. Internal Revenue Service
LIBOR			London Interbank Offered Rate - benchmark interest rate that was replaced by SOFR
North America			Operating segment in North America, including U.S., Canada and Puerto Rico
NOV			Notice of Violation

Other Costs			Represents corporate enabling and shared services costs, annual incentive and stock-based compensation
Purchase Agreement			Stock Purchase Agreement, dated as of February 6, 2020, by and between Stericycle, Inc., and the Harsco Corporation (now known as Enviri Corporation) and CEI Holding LLC, a Delaware limited liability company and subsidiary of Harsco Corporation (now known as Enviri Corporation)
PSU			Performance-based Restricted Stock Unit
RSU			Restricted Stock Unit
RWCS			Regulated Waste and Compliance Services, a business unit that provides regulated medical waste services
SEC			U.S. Securities and Exchanges Commission
Senior Notes			5.375% ($600.0 million) Senior Notes due July 2024 and 3.875% ($500.0 million) Senior Notes due January 2029
SG&A			Selling, general and administrative expenses
SID			Secure Information Destruction Services, a business unit that provides confidential customer material shredding services and recycling of shredded paper
SOFR			Secured Overnight Financing Rate - benchmark interest rate that replaced LIBOR
SOP			Sorted Office Paper
SQ Settlement			Small quantity medical waste customers class action settlement of $295.0 million
Term Facility			Aggregate amount of commitments made by any lender under the terms of the Credit Agreement
Term Loans			Advances made by any lender under the Term Facility
TSA			Transition Services Agreement
UAE			United Arab Emirates
U.S.			United States of America
U.S. GAAP			U.S. Generally Accepted Accounting Principles


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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

STERICYCLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(Unaudited)


In millions, except per share data
	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues	$	669.5	$	679.8	$	1,353.8	$	1,344.0
Cost of revenues	418.4		419.3		841.7		839.0
Gross profit	251.1		260.5		512.1		505.0
Selling, general and administrative expenses	220.9		222.4		436.9		461.0
Divestiture losses, net	54.2		—		59.2		—

(Loss) income from operations	(24.0)		38.1		16.0		44.0
Interest expense, net	(19.1)		(18.5)		(39.5)		(34.8)

Other expense, net	(0.6)		(0.7)		(0.4)		(1.5)
(Loss) income before income taxes	(43.7)		18.9		(23.9)		7.7
Income tax expense	(5.8)		(8.4)		(14.3)		(11.3)
Net (loss) income	(49.5)		10.5		(38.2)		(3.6)
Net (loss) income attributable to noncontrolling interests	—		—		(0.1)		(0.2)
Net (loss) income attributable to Stericycle, Inc. common shareholders	$	(49.5)	$	10.5	$	(38.3)	$	(3.8)

(Loss) income per common share attributable to Stericycle, Inc. common shareholders:
Basic	$	(0.54)	$	0.11	$	(0.41)	$	(0.04)
Diluted	$	(0.54)	$	0.11	$	(0.41)	$	(0.04)
Weighted average number of common shares outstanding:
Basic	92.5		92.1		92.3		92.0
Diluted	92.5		92.2		92.3		92.0

See accompanying Notes to Condensed Consolidated Financial Statements.


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STERICYCLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


In millions
	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net (loss) income	$	(49.5)	$	10.5	$	(38.2)	$	(3.6)

Other comprehensive income (loss):
Currency translation adjustments	6.1		(46.0)		14.0		(54.9)
Cumulative currency translation gain realized through disposition of Republic of Korea operations	(2.7)		—		(2.7)		—
Cumulative currency translation loss realized through disposition of Australia and Singapore operations	2.2		—		2.2		—
Cumulative currency translation loss realized through disposition of Brazil operations	70.1		—		70.1		—
Total other comprehensive income (loss)	75.7		(46.0)		83.6		(54.9)

Comprehensive income (loss)	26.2		(35.5)		45.4		(58.5)
Less: comprehensive (loss) attributable to noncontrolling interests	—		(0.1)		(2.2)		(0.3)
Comprehensive income (loss) attributable to Stericycle, Inc. common shareholders	$	26.2	$	(35.4)	$	47.6	$	(58.2)

See accompanying Notes to Condensed Consolidated Financial Statements.


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STERICYCLE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


In millions, except per share data
	June 30, 2023		December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	30.7	$	56.0
Accounts receivable, less allowance for doubtful accounts of $44.1 in 2023 and $53.3 in 2022	410.3		414.5
Prepaid expenses	33.5		33.2
Other current assets	52.7		55.0
Total Current Assets	527.2		558.7
Property, plant and equipment, less accumulated depreciation of $662.0 in 2023 and $657.7 in 2022	692.5		715.7
Operating lease right-of-use assets	431.1		398.9
Goodwill	2,751.9		2,784.9
Intangible assets, less accumulated amortization of $873.2 in 2023 and $823.3 in 2022	743.8		811.1
Other assets	66.6		64.8
Total Assets	$	5,213.1	$	5,334.1
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt	$	15.6	$	22.3
Bank overdrafts	—		2.9
Accounts payable	207.0		213.5
Accrued liabilities	243.2		244.1
Operating lease liabilities	99.6		91.2
Other current liabilities	53.7		47.9
Total Current Liabilities	619.1		621.9
Long-term debt, net	1,293.7		1,484.0
Long-term operating lease liabilities	352.4		329.0
Deferred income taxes	429.0		427.0
Long-term income taxes payable	9.3		11.8
Other liabilities	26.8		35.9
Total Liabilities	2,730.3		2,909.6

Commitments and contingencies

EQUITY
Common stock (par value $0.01 per share, 120.0 shares authorized, 92.5 and 92.2 issued and outstanding in 2023 and 2022, respectively)	0.9		0.9
Additional paid-in capital	1,299.8		1,285.4
Retained earnings	1,372.5		1,410.8
Accumulated other comprehensive loss	(191.0)		(276.9)
Total Stericycle, Inc.’s Equity	2,482.2

SEC Form 10-Q filed by Stericycle Inc.