scl-20210331

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 March 31, 2021

☐ 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

________________________________________________________

Stericycle, Inc.

(Exact name of registrant as specified in its charter)

________________________________________________________


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 ☐

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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 April 26, 2021, there were 91,760,677 shares of the Registrant’s Common Stock outstanding.

Table of Contents


		Page No.
PART I. FINANCIAL INFORMATION

	Item 1. Financial Statements (Unaudited)

	Condensed Consolidated Statements of Income (Loss)	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	18

	Item 3. Quantitative and Qualitative Disclosure about Market Risk	28

	Item 4. Controls and Procedures	28

PART II. OTHER INFORMATION

	Item 1. Legal Proceedings	29

	Item 1A. Risk Factors	29

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	29

	Item 6. Exhibits	30

	SIGNATURES	31


2021 Q1 10-Q Report			Stericycle, Inc. ●			2

Table of Contents

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


2021 Q1 10-Q Report			Stericycle, Inc. ●			3

Table of Contents

which are explained or defined below:


Abbreviation			Description
2020 Form 10-K			Annual report on Form 10-K for the year ended December 31, 2020
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
ARP Act			American Rescue Plan Act of 2021
ASC 740			Accounting Standards Codification Topic 740 "Income Taxes"
ASEA			Agencia de Seguridad, Energia y Ambiente
ASU			Accounting Standards Update
CAA 2021			Consolidated Appropriations Act, 2021
CARES Act			U.S. Coronavirus Aid, Relief, and Economic Security Act enacted into law on March 27, 2020
Clean Air Act			The Clean Air Act of 1970
Credit Agreement Debt Leverage Ratio			Credit Agreement Debt Leverage Ratio means, 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 for the period of four fiscal quarters most recently ended on or prior to such date, as defined in the Fifth Amendment.
COR			Cost of revenues
COSO Framework			Internal Control Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
COVID-19			The global novel coronavirus disease 2019 outbreak, which the World Health Organization declared as to be a pandemic
Credit Agreement			Credit Agreement dated November 17, 2017 by and among the Company and certain of its subsidiaries named therein, Bank of America, N.A., as administrative agent, and the other financial institutions party thereto as amended
CRS			Communication and Related Services
DAQ			Division of Air Quality
DEA			Drug Enforcement Administration. The Drug Enforcement Administration (DEA) is a division of the US 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
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 quarter and period ended DSO, respectively, divided by the Accounts Receivable balance at the end of the period.
DTSC			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.
EPA			U.S. Environmental Protection Agency
ERP			Enterprise Resource Planning
Exchange Act			U.S. Securities Exchange Act of 1934
Expert Solutions			Recall and Return Services
FASB			Financial Accounting Standards Board
FCPA			U.S. Foreign Corrupt Practices Act
Fourth Amendment			Fourth Amendment to the Credit Agreement, dated as of June 14, 2019
Fifth Amendment			Fifth Amendment to the Credit Agreement, dated as of February 25, 2020
HSA			Healthcare Service Agreement with Buyer
International			Operating segment including Europe, Middle East, Asia Pacific and Latin America Business operations outside of North America
IRS			U.S. Internal Revenue Service
North America			Operating segment in North America, including Puerto Rico
NOV			Notice of Violation
Other Costs			Represents corporate enabling and shared services functions costs, annual incentive and stock-based compensation
PFA			Pre-filing agreement with the U.S. Internal Revenue Service
Purchase Agreement			Stock Purchase Agreement, dated as of February 6, 2020, by and between Stericycle, Inc., and the Buyer
PSU			Performance-based restricted stock unit
ROU			Right-of-use
RSU			Restricted stock unit
RWCS			Regulated Waste and Compliance Services. Stericycle business unit that provides regulated medical waste services.
SEC			U.S. Securities and Exchanges Commission
Senior Credit Facility			The Company's $1.2 billion senior credit facility due in November of 2022 granted under the terms of the Credit Agreement
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.Business unit that provides regulated confidential customer material shredding services.
SOP			Sorted office paper
SQ Settlement			Small quantity medical waste customers class action settlement of $295.0 million
Term Loans			Advances made by any lender under the Term Facility
TSA			Transition Services Agreement
U.K.			United Kingdom
U.S.			United States of America
U.S. GAAP			U.S. Generally Accepted Accounting Principles


2021 Q1 10-Q Report			Stericycle, Inc. ●			4

Table of Contents

PART I – FINANCIAL INFORMATION


Item 1. Financial Statements (Unaudited)

STERICYCLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)


In millions, except per share data
	Three Months Ended March 31,
	2021		2020
Revenues	$	668.0	$	785.0
Cost of revenues	406.6		498.4
Gross profit	261.4		286.6
Selling, general and administrative expenses	202.3		258.7
Divestiture losses (gains), net	—		58.3

Income (loss) from operations	59.1		(30.4)
Interest expense, net	(18.4)		(25.0)

Other expense, net	(0.7)		(2.9)
Income (loss) before income taxes	40.0		(58.3)
Income tax (expense) benefit	(13.8)		38.4
Net income (loss)	26.2		(19.9)
Net income attributable to noncontrolling interests	(0.1)		(0.2)
Net income (loss) attributable to Stericycle, Inc. common shareholders	$	26.1	$	(20.1)
Earnings (loss) per common share attributable to Stericycle, Inc. common shareholders:
Basic	$	0.29	$	(0.22)
Diluted	$	0.28	$	(0.22)
Weighted average number of common shares outstanding:
Basic	91.6		91.3
Diluted	92.0		91.3

See accompanying Notes to Condensed Consolidated Financial Statements.


2021 Q1 10-Q Report			Stericycle, Inc. ●			5

Table of Contents

STERICYCLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


In millions
	Three Months Ended March 31,
	2021		2020
Net income (loss)	$	26.2	$	(19.9)

Other comprehensive income (loss):
Currency translation adjustments	(13.1)		(39.1)




Total other comprehensive income (loss)	(13.1)		(39.1)

Comprehensive income (loss)	13.1		(59.0)
Less: comprehensive (loss) income attributable to noncontrolling interests	(0.1)		0.2
Comprehensive income (loss) attributable to Stericycle, Inc. common shareholders	$	13.2	$	(59.2)

See accompanying Notes to Condensed Consolidated Financial Statements.


2021 Q1 10-Q Report			Stericycle, Inc. ●			6

Table of Contents

STERICYCLE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


In millions, except per share data
	March 31, 2021		December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	50.0	$	53.3
Accounts receivable, less allowance for doubtful accounts of $50.5 in 2021 and $56.2 in 2020	388.3		380.7
Prepaid expenses	48.3		63.0
Other current assets	50.6		55.5
Total Current Assets	537.2		552.5
Property, plant and equipment, less accumulated depreciation of $642.0 in 2021 and $629.7 in 2020	702.4		701.3
Operating lease right-of-use assets	373.5		365.0
Goodwill	2,811.3		2,819.3
Intangible assets, less accumulated amortization of $669.3 in 2021 and $641.6 in 2020	1,054.0		1,087.4
Other assets	53.0		56.4
Total Assets	$	5,531.4	$	5,581.9
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt	$	88.6	$	91.0
Bank overdrafts	4.3		—
Accounts payable	195.1		181.2
Accrued liabilities	245.2		289.4
Operating lease liabilities	87.4		86.2
Other current liabilities	53.4		49.3
Total Current Liabilities	674.0		697.1
Long-term debt, net	1,651.0		1,689.1
Long-term operating lease liabilities	305.3		299.0
Deferred income taxes	375.9		380.4
Long-term taxes payable	18.1		22.7
Other liabilities	58.3		59.2
Total Liabilities	3,082.6		3,147.5

Commitments and Contingencies	—		—

EQUITY
Common stock (par value $0.01 per share, 120.0 shares authorized, 91.8 and 91.6 issued and outstanding in 2021 and 2020, respectively)	0.9		0.9
Additional paid-in capital	1,235.9		1,234.0
Retained earnings	1,408.7		1,382.6
Accumulated other comprehensive loss	(200.3)		(187.4)
Total Stericycle, Inc.’s Equity	2,445.2		2,430.1
Noncontrolling interests	3.6		4.3
Total Equity	2,448.8		2,434.4
Total Liabilities and Equity	$	5,531.4	$	5,581.9

See accompanying Notes to Condensed Consolidated Financial Statements.


2021 Q1 10-Q Report			Stericycle, Inc. ●			7

Table of Contents

STERICYCLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


In millions
	Three Months Ended March 31,
	2021		2020
OPERATING ACTIVITIES:
Net income (loss)	$	26.2	$	(19.9)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation	25.5		28.0
Intangible amortization	29.8		31.9

Stock-based compensation expense	5.1		5.1
Deferred income taxes	(2.1)		(0.4)

Divestiture losses (gains), net	—		58.3
Asset impairments, loss on disposal of property plant and equipment and other charges	—		3.9
Other, net	1.9		0.1
Changes in operating assets and liabilities, net of the effects of divestitures:
Accounts receivable	(10.4)		(1.2)
Prepaid expenses	14.4		(32.7)
Accounts payable	11.2		9.3
Accrued liabilities	(34.2)		(7.7)
Other assets and liabilities	(4.8)		7.4
Net cash from operating activities	62.6		82.1
INVESTING ACTIVITIES:
Capital expenditures	(24.7)		(39.6)


Other, net	0.2		(0.5)
Net cash from investing activities	(24.5)		(40.1)
FINANCING ACTIVITIES:
Repayments of long-term debt and other obligations	(6.3)		(6.7)

Repayments of foreign bank debt	(0.1)		(2.6)

Repayment of term loan	(11.9)		(43.8)


Proceeds from senior credit facility	269.3		343.6
Repayment of senior credit facility	(288.8)		(327.4)
Proceeds from bank overdrafts, net	4.3		1.2
Payments of capital lease obligations	(0.9)		(1.3)
Payments of debt issuance costs	—		(1.4)
Proceeds from issuance of common stock, net of (payments of) taxes from withheld shares	(5.1)		(1.2)

Payments to noncontrolling interest	(0.6)		—
Net cash from financing activities	(40.1)		(39.6)
Effect of exchange rate changes on cash and cash equivalents	(1.3)		(1.1)
Net change in cash and cash equivalents	(3.3)		1.3
Cash and cash equivalents at beginning of period	53.3		34.7
Cash and cash equivalents at end of period	$	50.0	$	36.0

SUPPLEMENTAL CASH FLOW INFORMATION:

Interest paid during the period, net of capitalized interest	$	20.0	$	35.6
Income taxes paid (refunded), net during the period	$	1.9	$	0.4
Capital expenditures in Accounts payable	$	15.5	$	33.1

See accompanying Notes to Condensed Consolidated Financial Statements.


2021 Q1 10-Q Report			Stericycle, Inc. ●			8

Table of Contents

STERICYCLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


In millions
	Stericycle, Inc. Equity
	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity
	Shares	Amount
Balance as of December 31, 2020	91.6	$	0.9	$	1,234.0	$	1,382.6	$	(187.4)	$	4.3	$	2,434.4
Net income	—	—				26.1		—		0.1		26.2
Currency translation adjustment	—	—		—		—		(12.9)		(0.2)		(13.1)

Issuance of common stock for incentive stock programs, net of (payments of) taxes from withheld shares	0.2	—		(3.2)		—		—		—		(3.2)
Stock-based compensation expense	—	—		5.1		—		—		—		5.1
Changes to noncontrolling interest	—	—		—		—		—		(0.6)		(0.6)
Balance as of March 31, 2021	91.8	$	0.9	$	1,235.9	$	1,408.7	$	(200.3)	$	3.6	$	2,448.8

In millions
	Stericycle, Inc. Equity
	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity
	Shares	Amount
Balance as of December 31, 2019	91.2	$	0.9	$	1,205.7	$	1,442.4	$	(318.1)	$	3.8	$	2,334.7
Net loss	—	—		—		(20.1)

SEC Form 10-Q filed by Stericycle, Inc.