UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
or
o 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)
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Delaware |
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36-3640402 |
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(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification Number) |
28161 North Keith Drive
Lake Forest, Illinois 60045
(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:
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Common stock, par value $.01 per share |
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NASDAQ Global Select Market |
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Depositary Shares, each representing a 1/10th ownership interest in a share of 5.25% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share |
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NASDAQ Global Select Market |
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(Title of each class) |
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(Name of each exchange on which registered) |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES x NO o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act of 1934. YES o NO x
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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of "accelerated filer", "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one)
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Large accelerated filer x |
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Accelerated filer o |
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Non-accelerated filer o |
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act). YES o NO x
State the aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at which common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2015): $11,358,678,595.
On February 19, 2016, there were 84,647,029 shares of the Registrant’s Common Stock outstanding.
Stericycle, Inc. (the “Company,” “we” or “our”) is filing this amended Annual Report on Form 10-K/A because the Audit Committee of our Board of Directors determined that the consolidated financial statements for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015, originally included in the Company’s Quarterly Reports on Form 10-Q for each of the respective quarterly periods, should no longer be relied upon due to errors in the timing of recognition of certain loss reserves. This Form 10-K/A is being filed to present amended and restated quarterly financial information in Note 20, Selected Quarterly Financial Data (Unaudited) for 2015, originally included in the Company’s Annual Report on Form 10-K filed on March 15, 2016 (the “Original Form 10-K”), and to disclose additional information regarding the Company’s internal control over financial reporting and disclosure controls and procedures related to these errors.
The errors in timing of recognition of certain loss reserves relate to the Company’s settlement of two previously disclosed litigation matters: first, a class action complaint filed in the Circuit Court of Cook County, Illinois captioned Sawyer v. Stericycle, Inc., et al., Case No. 2015 CH 07190 (the “TCPA Action”), alleging that from 2010 to 2014, the Company violated the Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005; and second, a qui tam action filed in the U.S. District Court for the Northern District of Illinois captioned United States of America ex rel. Jennifer D. Perez v. Stericycle, Inc., Case No. 1:08-cv-2390 (the “Qui Tam Action”), alleging that from January 1, 2003 to June 30, 2014, the Company improperly increased its service price to certain government customers without their consent or contractual authorization, in violation of the False Claims Act and similar state statutes.
The identified accounting errors related to the timing of recognition of loss reserves between quarterly periods and had no effect on the Company’s audited annual results for the fiscal year ended December 31, 2015.
We originally recorded $45.0 million in accrued liabilities related to the TCPA Action in the second quarter of 2015; we are now of the view that this amount should have been recorded in the first quarter of 2015. In addition, we originally recorded $28.5 million in accrued liabilities related to the Qui Tam Action in the third quarter of 2015; we are now of the view that this amount also should have been recorded in the first quarter of 2015.
The impact of the restatement is as follows:
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· |
the estimated loss contingency for the first quarter of fiscal 2015 was understated by $73.5 million, resulting in an overstatement of net income of $46.5 million for the three month period ended March 31, 2015; |
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· |
the estimated loss contingency for the second quarter of fiscal 2015 was overstated by $45.0 million, resulting in an understatement of net income of $27.4 million for the three month period ended June 30, 2015. For the six month period ended June 30, 2015, the estimated loss contingency was understated by $28.5 million, resulting in an overstatement of net income of $19.1 million for the six month period ended June 30, 2015; and |
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· |
the estimated loss contingency for the third quarter of fiscal 2015 was overstated by $28.5 million, resulting in an understatement of net income of $17.2 million for the three month period ended September 30, 2015. |
Accordingly, we are filing this Form 10-K/A to correct the errors presented in Note 20 - Selected Quarterly Financial Data (Unaudited) of the Original Form 10-K.
The Company’s controls related to the accounting for loss contingencies were inadequate to ensure that loss reserves were recorded timely in the appropriate period. We are also filing this Form 10-K/A to revise the COSO Component – Risk Assessment material weakness described in Management’s Report on Internal Control Over Financial Reporting as described in our Original Form 10-K to encompass the accounting for loss contingencies. Our Independent Registered Public Accounting Firm has also revised its opinion report with respect to the effectiveness of internal control over financial reporting.
The following sections of the Original Form 10-K have been amended and restated and are included in this Form 10-K/A:
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1) |
Item 8 of Part II, Financial Statements and Supplementary Data; |
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2) |
Item 15 of Part IV, Exhibits and Financial Statement Schedules. |
Specifically, the following sections within Item 8 of Part II have been amended or restated:
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1) |
Management’s Report on Internal Control Over Financial Reporting; |
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2) |
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting; |
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3) |
Note 19 – Legal Proceedings; and |
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4) |
Note 20 – Selected Quarterly Financial Data. |
The Company has also included the signature page, the certifications of our Chief Executive Officer and Chief Financial Officer in Exhibits 31.3, 31.4, and 32.1, the consent of the independent registered public accounting firm in Exhibit 23.1, and financial statements formatted in Extensible Business Reporting Language (XBRL) in Exhibits 101.
Except as described above, no other amendments have been made to the Original Form 10-K. The Company has not updated the disclosures contained herein to reflect events that have occurred since the date of the Original Form 10-K. Accordingly, this amended annual report on Form 10-K/A should be read in conjunction with the Company’s other filings made with the SEC subsequent to the filing of the Original Form 10-K, including any amendments to those filings.
Stericycle, Inc.
Table of Contents
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Page No. |
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1 |
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41 |
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48 |
Item 8. Financial Statements and Supplementary Data
Management’s Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:
• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company acquired Shred-it International ULC (“Shred-it”) on October 1, 2015. Due to the timing of the acquisition, the Company has excluded the acquired operations of Shred-it from its assessment of the effectiveness of the Company’s internal control over financial reporting. Shred-it represented 32% of the Company’s assets as of December 31, 2015 and 6% of the Company’s revenues for the year ended December 31, 2015.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) in Internal Control-Integrated Framework (the “COSO Framework”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that there were material weaknesses in internal controls over financial reporting described below.
COSO Component - Risk Assessment
The Company’s risk assessment process did not operate effectively, resulting in a material weakness pertaining to this component of the COSO Framework. Specifically, the Company did not sufficiently identify risks associated with certain routine processes and related information systems, including revenue, and certain non-routine transactions, including the accounting for loss contingencies. In addition, the Company did not properly design and implement appropriate process-level internal controls at the Environmental Solutions component of the Domestic Regulated and Compliance Services segment. The Environmental Solutions component primarily consists of the PSC Environmental Services, LLC component acquired on April 22, 2014, which was excluded from management assessment of internal controls over financial reporting as of December 31, 2014. The material weakness relating to the risk assessment component of the internal control framework contributed to the other material weaknesses described below.
1
COSO Component - Control Activities
Revenue - The design and operating effectiveness of revenue control activities are inadequate to ensure that revenue transactions are properly measured and recorded in the appropriate period.
Environmental Solutions - The design and operating effectiveness of control activities at the Environmental Solutions component of the Domestic Regulated and Compliance Services segment of the business were inadequate to ensure the component’s financial statements were appropriately stated.
Conclusion
Management concluded that there is a reasonable possibility that a material misstatement could occur in the consolidated financial statements if the control deficiencies were not remediated. Accordingly, management concluded that the matters described above are material weaknesses in the Company’s internal control over financial reporting and that the Company did not maintain effective internal control over financial reporting as of December 31, 2015.
The Company’s independent registered public accounting firm has issued an opinion on the Company’s internal control over financial reporting. That report appears on page 3.
Stericycle, Inc.
Lake Forest, IL
August 9, 2016
2
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
The Board of Directors and Shareholders of Stericycle, Inc. and Subsidiaries
We have audited Stericycle, Inc. and Subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Shred-it International ULC (“Shred-it”) which is included in the 2015 consolidated financial statements of the Company and constituted 32% of the Company’s assets as of December 31, 2015 and 6% of the Company’s revenues for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Shred-it.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment. Management has identified material weaknesses in controls related to the Company’s revenue process, the Environmental Solutions component of the Domestic Regulated and Compliance Services component of the Domestic Regulated and Compliance Services segment, and in its risk assessment process pertaining to this component of the COSO Framework. Specifically, the Company did not sufficiently identify risks associated with certain routine processes and related information systems, including revenue, and certain non-routine transactions, including accounting for loss contingencies. We also have audited, in accordance with the standards of the
3
Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Stericycle, Inc. and Subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2015, and our report dated March 15, 2016 expressed an unqualified opinion thereon. The material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the 2015 consolidated financial statements, and this report does not affect our report dated March 15, 2016, which expressed an unqualified opinion on those financial statements.
In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, Stericycle, Inc. and Subsidiaries has not maintained effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.
/s/ Ernst & Young LLP
Chicago, Illinois
March 15, 2016, except for the revision to the risk assessment material weakness, to include the accounting for loss contingencies, described in the sixth paragraph above, as to which the date is August 9, 2016
4
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Stericycle, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Stericycle, Inc. and Subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Stericycle, Inc. and Subsidiaries at December 31, 2015 and 2014, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Stericycle Inc. and Subsidiaries' internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 15, 2016, except for the revision to the risk assessment material weakness, to include the accounting for loss contingencies, described in the sixth paragraph of that report, as to which the date is August 9, 2016, expressed an adverse opinion thereon.
/s/ Ernst & Young LLP
Chicago, Illinois
March 15, 2016
5
STERICYCLE, INC. AND SUBSIDIARIES
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In thousands, except share and per share data |
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December 31, |
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2015 |
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2014 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
55,634 |
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$ |
22,236 |
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Short-term investments |
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69 |
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380 |
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Accounts receivable, less allowance for doubtful accounts of $22,329 in 2015 and $19,083 in 2014 |
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614,494 |
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465,473 |
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Prepaid expenses |
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46,740 |
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30,632 |
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Other current assets |
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44,891 |
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33,173 |
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Total Current Assets |
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761,828 |
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551,894 |
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Property, Plant and Equipment, less accumulated depreciation of $426,019 in 2015 and $364,124 in 2014 |
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665,602 |
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460,408 |
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Goodwill |
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3,758,177 |
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2,418,832 |
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Intangible assets, less accumulated amortization of $151,025 in 2015 and $114,922 in 2014 |
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1,842,561 |
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909,645 |
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Other assets |
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49,282 |
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32,523 |
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Total Assets |
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$ |
7,077,450 |
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$ |
4,373,302 |
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LIABILITIES AND EQUITY |
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Current Liabilities: |
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Current portion of long-term debt |
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$ |
161,409 |
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$ |
131,969 |
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Accounts payable |
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149,202 |
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114,596 |
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Accrued liabilities |
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197,329 |
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131,743 |
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Deferred revenues |
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16,989 |
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21,624 |
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Other current liabilities |
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62,420 |
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60,975 |
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Total Current Liabilities |
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587,349 |
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460,907 |
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Long-term debt, net of current portion |
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3,052,639 |
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1,527,246 |
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Deferred income taxes |
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608,272 |
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403,847 |
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Other liabilities |
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81,352 |
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64,117 |
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Equity: |
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Preferred stock (par value $0.01 per share, 1,000,000 shares authorized), Mandatory Convertible Preferred Stock, Series A, 770,000 issued and outstanding in 2015 |
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8 |
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— |
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Common stock (par value $0.01 per share, 120,000,000 shares authorized, 84,852,584 issued and outstanding in 2015 and 84,883,517 issued and outstanding in 2014) |
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849 |
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849 |
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Additional paid-in capital |
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1,143,020 |
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289,211 |
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Accumulated other comprehensive loss |
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(282,631 |
) |
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(138,419 |
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Retained earnings |
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1,868,645 |
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1,743,371 |
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Total Stericycle, Inc.’s Equity |
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2,729,891 |
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1,895,012 |
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Noncontrolling interest |
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17,947 |
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22,173 |
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Total Equity |
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2,747,838 |
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1,917,185 |
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Total Liabilities and Equity |
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$ |
7,077,450 |
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$ |
4,373,302 |
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The accompanying notes are an integral part of these consolidated financial statements.
6
STERICYCLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
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In thousands, except share and per share data |
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Years Ended December 31, |
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2015 |
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2014 |
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2013 |
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Revenues |
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$ |
2,985,908 |
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$ |
2,555,601 |
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$ |
2,142,807 |
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Costs and Expenses: |
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Cost of revenues (exclusive of depreciation shown below) |
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1,658,081 |
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1,404,712 |
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1,128,170 |
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Depreciation - cost of revenues |
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61,642 |
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56,478 |
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50,003 |
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Selling, general and administrative expenses (exclusive of depreciation and amortization shown below) |
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712,803 |
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489,937 |
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390,610 |
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Depreciation – SG&A |
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20,272 |
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15,446 |
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11,338 |
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Amortization |
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45,498 |
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32,692 |
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27,067 |
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Total Costs and Expenses |
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2,498,296 |
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1,999,265 |
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|
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1,607,188 |
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Income from Operations |
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487,612 |
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556,336 |
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535,619 |
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Other Income (Expense): |
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Interest income |
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|
224 |
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|
120 |
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|
294 |
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Interest expense |
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(77,498 |
) |
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(66,142 |
) |
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(55,243 |
) |
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Other income/ (expense), net |
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569 |
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(2,746 |
) |
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(2,924 |
) |
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Total Other Expense |
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(76,705 |
) |
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(68,768 |
) |
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(57,873 |
) |
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Income Before Income Taxes |
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410,907 |
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487,568 |
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477,746 |
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Income tax expense |
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142,894 |
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159,422 |
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|
164,662 |
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Net Income |
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268,013 |
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|
328,146 |
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|
|
313,084 |
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Less: net income attributable to noncontrolling interests |
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|
967 |
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|
1,690 |
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|
|
1,712 |
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Net Income Attributable to Stericycle, Inc. |
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|
267,046 |
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|
326,456 |
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|
|
311,372 |
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Less: mandatory convertible preferred stock dividend |
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10,106 |
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— |
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— |
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Net Income Attributable to Stericycle, Inc. Common Shareholders |
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$ |
256,940 |
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$ |
326,456 |
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$ |
311,372 |
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Earnings Per Common Share Attributable to Stericycle, Inc. Common Shareholders: |
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Basic |
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$ |
3.02 |
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$ |
3.84 |
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$ |
3.62 |
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Diluted |
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$ |
2.98 |
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$ |
3.79 |
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$ |
3.56 |
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Weighted Average Number of Common Shares Outstanding: |
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Basic |
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84,944,841 |
|
|
|
84,932,792 |
|
|
|
85,902,550 |
|
|
Diluted |
|
|
86,162,609 |
|
|
|
86,233,612 |
|
|
|
87,391,988 |
|
The accompanying notes are an integral part of these consolidated financial statements.
7
STERICYCLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
In thousands |
|
|||||||||||
|
|
|
Years Ended December 31, |
|
|||||||||
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|||
|
Net Income |
|
$ |
268,013 |
|
|
$ |
328,146 |
|
|
$ |
313,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income/ (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
(140,648 |
) |
|
|
(82,871 |
) |
|
|
(19,160 |
) |
|
Amortization of cash flow hedge into income, net of tax ($452, $209 and $200) for the years ended December 31, 2015, 2014 and 2013, respectively) |
|
|
716 |
|
|
|
339 |
|
|
|
314 |
|
|
Change in fair value of cash flow hedge, net of tax ($2,623, $813 and $0 for the years ended December 31, 2015, 2014 and 2013, respectively) |
|
|
(4,119 |
) |
|
|
(2,069 |
) |
|
|
— |
|
|
Total Other Comprehensive Loss |
|
|
(144,051 |
) |
|
|
(84,601 |
) |
|
|
(18,846 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
|
123,962 |
|
|
|
243,545 |
|
|
|
294,238 |
|
|
Less: comprehensive loss/ (income) attributable to noncontrolling interests |
|
|
1,128 |
|
|
|
(960 |
) |
|
|
270 |
|
|
Comprehensive Income Attributable to Stericycle, Inc. Common Shareholders |
|
$ |
122,834 |
|
|
$ |
244,505 |
|
|
$ |
293,968 |
|
The accompanying notes are an integral part of these consolidated financial statements.
8
STERICYCLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
In thousands |
|
|||||||||||
|
|
|
Years Ended December 31, |
|
|||||||||
|
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|||
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
268,013 |
|
|
$ |
328,146 |
|
|
$ |
313,084 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense |
|
|
21,750 |
|
|
|
17,773 |
|
|
|
17,457 |
|
|
Excess tax benefit of stock options exercised |
|
|
(16,897 |
) |
|
|
(17,906 |
) |
|
|
(17,153 |
) |
|
Depreciation |
|
|
81,914 |
|
|
|
71,924 |
|
|
|
61,341 |
|
|
Amortization |
|
|
45,498 |
|
|
|
32,692 |
|
|
|
27,067 |
|
|
Deferred income taxes |
|
|
(10,294 |
) |
|
|
16,550 |
|
|
|
30,930 |
|
|
Other, net |
|
|
7,467 |
|
|
|
8,932 |
|
|
|
1,103 |
|
|
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(55,890 |
) |
|
|
(34,116 |
) |
|
|
(54,767 |
) |
|
Accounts payable |
|
|
26,366 |
|
|
|
(5,712 |
) |
|
|
7 |
|
|
Accrued liabilities |
|
|
26,060 |
|
|
|
21,279 |
|
|
|
4,547 |
|
|
Deferred revenues |
|
|
(4,615 |
) |
|
|
1,017 |
|
|
|
(1,319 |
) |
|
Other assets and liabilities |
|
|
956 |
|
|
|
7,921 |
|
|
|
23,010 |
|
|
Net cash provided by operating activities |
|
|
390,328 |
|
|
|
448,500 |
|
|
|
405,307 |
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for acquisitions, net of cash acquired |
|
|
(2,419,437 |
) |
|
|
(374,321 |
) |
|
|
(161,936 |
) |
|
Proceeds from/ (purchases of) investments |
|
|
294 |
|
|
|
(1,957 |
) |
|
|
73 |
|
|
Capital expenditures |
|
|
(114,761 |
) |
|
|
(86,496 |
) |
|
|
(73,109 |
) |
|
Net cash used in investing activities |
|
|
(2,533,904 |
) |
|
|
(462,774 |
) |
|
|
(234,972 |
) |
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt and other obligations |
|
|
(93,172 |
) |
|
|
(101,231 |
) |
|
|
(88,507 |
) |
|
Proceeds from foreign bank debt |
|
|
53,747 |
|
|
|
205,086 |
|
|
|
218,968 |
|
|
Repayments of foreign bank debt |
|
|
(87,308 |
) |
|
|
(193,284 |
) |
|
|
(201,967 |
) |
|
Proceeds from term loan |
|
|
1,550,000 |
|
|
|
— |
|
|
|
— |
|
|
Repayment of term loan |
|
|
(300,000 |
) |
|
|
— |
|
|
|
— |
|
|
Proceeds from private placement of long-term note |
|
|
600,000 |
|
|
|
— |
|
|
|
— |
|
|
Repayments of private placement of long-term note |
|
|
(100,000 |
) |
|
|
— |
|
|
|
— |
|
|
Proceeds from senior credit facility |
|
|
1,907,402 |
|
|
|
1,413,026 |
|
|
|
1,029,718 |
|
|
Repayments of senior credit facility |
|
|
(2,004,385 |
) |
|
|
(1,216,031 |
) |
|
|
(984,979 |
) |
|
Payments of capital lease obligations |
|
|
(3,865 |
) |
|
|
(5,826 |
) |
|
|
(4,024 |
) |
|
Payments of deferred financing costs |
|
|
(9,903 |
) |
|
|
(2,280 |
) |
|
|
— |
|
|
Payment of cash flow hedge |
|
|
(8,833 |
) |
|
|
— |
|
|
|
— |
|
|
Purchases and cancellations of treasury stock |
|
|
(130,576 |
) |
|
|
(194,066 |
) |
|
|
(163,700 |
) |
|
Proceeds from issuance of mandatory convertible preferred stock |
|
|
746,900 |
|
|
|
— |
|
|
|
— |
|
|
Dividends paid on mandatory convertible preferred stock |
|
|
(10,106 |
) |
|
|
— |
|
|
|
— |
|
|
Proceeds from issuance of common stock |
|
|
60,124 |
|
|
|
51,852 |
|
|
|
42,345 |
|
|
Excess tax benefit of stock options exercised |
|
|
16,897 |
|
|
|
17,906 |
|
|
|
17,153 |
|
|
Payments to noncontrolling interests |
|
|
(5,714 |
) |
|
|
(5,201 |
) |
|
|
(1,026 |
) |
|
Net cash provided by/ (used in) financing activities |
|
|
2,181,208 |
|
|
|
(30,049 |
) |
|
|
(136,019 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(4,234 |
) |
|
|
(608 |
) |
|
|
(1,809 |
) |
|
Net increase/ (decrease) in cash and cash equivalents |
|
|
33,398 |
|
|
|
(44,931 |
) |
|
|
32,507 |
|
|
Cash and cash equivalents at beginning of period |
|
|
22,236 |
|
|
|
67,167 |
|
|
|
34,660 |
|
|
Cash and cash equivalents at end of period |
|
$ |
55,634 |
|
|
$ |
22,236 |
|
|
$ |
67,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances of obligations for acquisitions |
|
$ |
80,189 |
|
|
$ |
145,938 |
|
|
$ |
100,101 |
|
|
Issuances of obligations for noncontrolling interest |
|
|
— |
|
|
|
— |
|
|
|
6,119 |
|
The accompanying notes are an integral part of these consolidated financial statements.
9
STERICYCLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years Ended December 31, 2015, 2014 and 2013
|
In thousands |
|
|||||||||||||||||||||||||||||||||||
|
|
|
Stericycle, Inc. Equity |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
|
|
Preferred Stock |
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Additional Paid-In Capital |
|
|
Retained Earnings |
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|
Noncontrolling Interest |
|
|
Total Equity |
|
|||||||||
|
Balance at January 1, 2013 |
|
|
— |
|
|
$ |
— |
|
|
|
85,988 |
|
|
$ |
860 |
|
|
$ |
116,720 |
|
|
$ |
1,463,277 |
|
|
$ |
(39,064 |
) |
|
$ |
15,530 |
|
|
$ |
1,557,323 |
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
311,372 |
|
|
|
|
|
|
|
1,712 |
|
|
|
313,084 |
|
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,718 |
) |
|
|
(1,442 |
) |
|
|
(19,160 |
) |
|
Change in qualifying cash flow hedge, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
314 |
|
|
|
|
|
|
|
314 |
|
|
Issuance of common stock for exercise of options and employee stock purchases |
|
|
|
|
|
|
|
|
|
|
973 |
|
|
|
10 |
|
|
|
47,991 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,001 |
|
|
Purchase and cancellation of treasury stock |
|
|
|
|
|
|
|
|
|
|
(1,461 |
) |
|
|
(15 |
) |
|
|
|
|
|
|
(163,685 |
) |
|
|
|
|
|
|
|
|
|
|
(163,700 |
) |
|
Stock compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,457 |
|
|
Excess tax benefit of stock options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,153 |
|
|
Noncontrolling interests attributable to acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,211 |
|
|
|
4,211 |
|
|
Reduction to noncontrolling interests due to additional ownership |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,211 |
) |
|
|
|
|
|
|
|
|
|
|
(2,934 |
) |
|
|
(7,145 |
) |
|
Balance at December 31, 2013 |
|
|
— |
|
|
|
— |
|
|
|
85,500 |
|
|
|
855 |
|
|
|
195,110 |
|
|
|
1,610,964 |
|
|
|
(56,468 |
) |
|
|
17,077 |
|
|
|
1,767,538 |
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
326,456 |
|
|
|
|
|
|
|
1,690 |
|
|
|
328,146 |
|
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(80,221 |
) |
|
|
(2,650 |
) |
|
|
(82,871 |
) |
|
Change in qualifying cash flow hedge, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,730 |
) |
|
|
|
|
|
|
(1,730 |
) |
|
Issuance of common stock for exercise of options, restricted stock units and employee stock purchases |
|
|
|
|
|
|
|
|
|
|
1,061 |
|
|
|
11 |
|
|
|
58,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,562 |
|
|
Purchase and cancellation of treasury stock |
|
|
|
|
|
|
|
|
|
|
(1,677 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
(194,049 |
) |
|
|
|
|
|
|
|
|
|
|
(194,066 |
) |
|
Stock compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,773 |
|
|
Excess tax benefit of stock options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,906 |
|
|
Noncontrolling interests attributable to acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,781 |
|
|
|
6,781 |
|
|
Reduction to noncontrolling interests due to additional ownership |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(129 |
) |
|
|
|
|
|
|
|
|
|
|
(725 |
) |
|
|
(854 |
) |
|
Balance at December 31, 2014 |
|
|
— |
|
|
|
— |
|
|
|
84,884 |
|
|
|
849 |
|
|
|
289,211 |
|
|
|
1,743,371 |
|
|
|
(138,419 |
) |
|
|
22,173 |
|
|
|
1,917,185 |
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
267,046 |
|
|
|
|
|
|
|
967 |
|
|
|
268,013 |
|
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(140,809 |
) |
|
|
161 |
|
|
|
(140,648 |
) |
|
Change in qualifying cash flow hedge, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,403 |
) |
|
|
|
|
|
|
(3,403 |
) |
|
Issuance of common stock for exercise of options, restricted stock units and employee stock purchases |
|
|
|
|
|
|
|
|
|
|
973 |
|
|
|
10 |
|
|
|
68,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,640 |
|
|
Issuance of mandatory convertible preferred stock |
|
|
770 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||