Stericycle, Inc. Reports Results for the Third Quarter of 2012

LAKE FOREST, Ill.--(BUSINESS WIRE)--Stericycle, Inc. (NASDAQ:SRCL), today reported financial results for the third quarter of 2012.

Revenues for the quarter ended September 30, 2012 were $480.5 million, up 14.2% from $420.9 million from the third quarter last year. Acquisitions less than 12 months old contributed approximately $31.5 million to the current period’s growth in revenues. Revenues increased 16.0% compared with the prior period when adjusted for an unfavorable foreign exchange impact of $8.0 million. Gross profit was $215.6 million, up 13.4% from $190.1 million in the third quarter last year. Gross profit as a percent of revenue was 44.9% compared with 45.2% in the third quarter of 2011.

Net income attributable to Stericycle for the third quarter of 2012 was $65.5 million or $0.75 per diluted share compared with $59.2 million or $0.68 per diluted share for the third quarter of 2011. Net income attributable to Stericycle for the third quarter of 2012 and third quarter of 2011 includes acquisition expenses, restructuring costs, loss on sale of business, and other items. Excluding the effect of these items, non-GAAP earnings per diluted share were $0.84 for the current quarter (see table below). Non-GAAP earnings per diluted share increased 15.3% from non-GAAP earnings per diluted share of $0.72 in the third quarter of 2011.

FIRST NINE MONTHS’ RESULTS

Revenues for the nine months ending September 30, 2012 were $1.41 billion, up 14.6% from $1.23 billion in the same period last year. Revenues increased 16.2% compared with the prior period when adjusted for an unfavorable foreign exchange impact of $19.5 million. Gross profit was $630.3 million, up 12.7% from $559.2 million in the same period last year. Gross profit as a percent of revenue was 44.7% compared with 45.5% in 2011. Non-GAAP earnings per diluted share, when adjusted for various items, increased 15.5% to $2.42 in 2012 from $2.10 in 2011 (see table below).

Table to reconcile non-GAAP EPS to GAAP EPS:
	Three months ended September 30,								Nine months ended September 30,
					Change								Change
	2012		2011		$		%		2012		2011		$		%
GAAP EPS	$	0.75	$	0.68	$	0.07	10.6	%	$	2.28	$	1.95	$	0.33	17.1	%
Acquisition expenses/
Adjustment to Fair Value		0.03		0.04						0.08		0.13
Restructuring/ Plant Closure		0.02		0.00						0.02		0.01
Loss on Sale of Business		0.04		0.00						0.04		0.00
Other		0.00		0.00						0.00		0.01
Non-GAAP EPS (adjusted)	$	0.84	$	0.72	$	0.11	15.3	%	$	2.42	$	2.10	$	0.32	15.5	%

* In accordance with U.S. generally accepted accounting principles (GAAP), reported earnings per share include the after-tax impact of the items identified in this table. For internal purposes, including the determination of management compensation, the Company excludes these items from results when evaluating operating performance. This table and the Company’s internal use of non-GAAP earnings per share are not intended to imply, and should not be interpreted as implying, that non-GAAP earnings per share is a better measure of performance than GAAP earnings per share.

Cash flow from operations was $277.1 million and $215.2 million for the nine months ended September 30, 2012 and 2011, respectively.

For more information about Stericycle, please visit our website at www.stericycle.com.

Safe Harbor Statement: Statements in this press release may contain forward-looking statements that involve risks and uncertainties, some of which are beyond our control (for example, general economic conditions). Our actual results could differ significantly from the results described in the forward-looking statements. Factors that could cause such differences include changes in governmental regulation of medical waste collection and treatment and increases in transportation and other operating costs, as well as the other factors described in our filings with the U.S. Securities and Exchange Commission. As a result, past financial performance should not be considered a reliable indicator of future performance, and investors should not use historical trends to anticipate future results or trends. We make no commitment to disclose any subsequent revisions to forward-looking statements.

Conference call to be held October 24, 2012 4:00 p.m. Central time – Dial 866-516-6872 at least 5 minutes before start time. If you are unable to participate on the call, a replay will be available through November 24th, 2012 by dialing 855-859-2056, access code 94523356. To hear a live simulcast of the call over the internet on www.earnings.com, or to access an audio archive of the call, go to the Investors page on Stericycle’s website at www.stericycle.com.

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE DATA)
		Three Months Ended										Nine Months Ended
		September 30,										September 30,
		2012					2011					2012					2011
		(unaudited)										(unaudited)
		$		% of Rev			$		% of Rev			$		% of Rev			$		% of Rev
Revenues	$	480,484		100.0	%	$	420,924		100.0	%	$	1,409,511		100.0	%	$	1,229,491		100.0	%
Cost of revenues		253,526		52.8	%		220,419		52.4	%		746,540		53.0	%		639,773		52.0	%
Depreciation - cost of revenues		11,404		2.4	%		10,450		2.5	%		32,622		2.3	%		30,438		2.5	%
Restructuring costs		-		0.0	%		-		0.0	%		-		0.0	%		54		0.0	%
Gross profit		215,554		44.9	%		190,055		45.2	%		630,349		44.7	%		559,226		45.5	%
Selling, general and administrative expenses		82,176		17.1	%		72,582		17.2	%		240,635		17.1	%		214,815		17.5	%
Depreciation - SG&A		2,480		0.5	%		2,274		0.5	%		6,892		0.5	%		6,447		0.5	%
Amortization		5,561		1.2	%		4,209		1.0	%		15,675		1.1	%		11,102		0.9	%
Total SG&A expense and amortization		90,217		18.8	%		79,065		18.8	%		263,202		18.7	%		232,364		18.9	%
Income from operations before
acquisition, integration, and other expenses		125,337		26.1	%		110,990		26.4	%		367,147		26.0	%		326,862		26.6	%
Acquisition expenses		2,467		0.5	%		3,195		0.8	%		6,213		0.4	%		14,394		1.2	%
Restructuring costs and plant closure expense		2,250		0.5	%		633		0.2	%		3,400		0.2	%		1,032		0.1	%
Litigation settlement		-		0.0	%		460		0.1	%		-		0.0	%		460		0.0	%
Loss on sale of business		4,867		1.0	%		323		0.1	%		4,867		0.3	%		323		0.0	%
Change in fair value of contingent consideration		(11	)	0.0	%		-		0.0	%		591		0.0	%		(2,140	)	-0.2	%
Integration expenses		1,217		0.3	%		1,813		0.4	%		3,540		0.3	%		3,866		0.3	%
Income from operations		114,547		23.8	%		104,566		24.8	%		348,536		24.7	%		308,927		25.1	%
Other income (expense):
Interest income		117		0.0	%		237		0.1	%		333		0.0	%		484		0.0	%
Interest expense		(13,048	)	-2.7	%		(12,034	)	-2.9	%		(38,597	)	-2.7	%		(36,413	)	-3.0	%
Other expense, net		(488	)	-0.1	%		(577	)	-0.1	%		(556	)	0.0	%		(1,659	)	-0.1	%
Total other income (expense)		(13,419	)	-2.8	%		(12,374	)	-2.9	%		(38,820	)	-2.8	%		(37,588	)	-3.1	%
Income before income taxes		101,128		21.0	%		92,192		21.9	%		309,716		22.0	%		271,339		22.1	%
Income tax expense		35,382		7.4	%		32,448		7.7	%		110,283		7.8	%		99,119		8.1	%
Net income		65,746		13.7	%		59,744		14.2	%		199,433		14.1	%		172,220		14.0	%
Net income attributable to
noncontrolling interests		269		0.1	%		497		0.1	%		1,506		0.1	%		1,757		0.1	%
Net income attributable to Stericycle, Inc.	$	65,477		13.6	%	$	59,247		14.1	%	$	197,927		14.0	%	$	170,463		13.9	%
Earnings per share - diluted	$	0.75				$	0.68				$	2.28				$	1.95
Weighted average number of
common shares outstanding - diluted		87,305,779					87,385,121					86,911,229					87,620,867

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE DATA)
		September 30,			December 31,
		2012			2011
		(unaudited)			(audited)
ASSETS
Current Assets:
Cash and cash equivalents	$	16,205		$	22,511
Short-term investments		466			416
Accounts receivable, less allowance for doubtful
accounts of $18,711 in 2012 and $18,905 in 2011		314,577			290,854
Deferred income taxes		19,712			19,314
Prepaid expenses		26,092			22,466
Other current assets		40,333			35,035
Total Current Assets		417,385			390,596
Property, plant and equipment, net		328,222			293,912
Goodwill		2,005,698			1,913,703
Intangible assets, less accumulated amortization of
$57,855 in 2012 and $42,050 in 2011		623,418			546,618
Other assets		36,873			32,261
Total Assets	$	3,411,596		$	3,177,090
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt	$	286,636		$	100,526
Accounts payable		80,213			66,635
Accrued liabilities		122,010			140,521
Deferred revenues		15,248			12,855
Other current liabilities		17,216			6,377
Total Current Liabilities		521,323			326,914
Long-term debt, net of current portion		1,010,514			1,284,113
Deferred income taxes		356,196			313,733
Other liabilities		30,705			25,079
Equity:
Common stock (par value $0.01 per share, 120,000,000 shares
authorized, 85,924,721 issued and outstanding in 2012,
and 84,696,227 issued and outstanding in 2011)		859			847
Additional paid-in capital		84,046			-
Accumulated other comprehensive loss		(41,602	)		(45,984	)
Retained earnings		1,434,373			1,243,303
Total Stericycle, Inc.'s Equity		1,477,676			1,198,166
Noncontrolling interest		15,182			29,085
Total Equity		1,492,858			1,227,251
Total Liabilities and Equity	$	3,411,596		$	3,177,090

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
		Nine Months Ended
		September 30,
		2012			2011
		(unaudited)			(unaudited)
Operating Activities:
Net income	$	199,433		$	172,220
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on sale of business		4,867			323
Change in fair value of contingent consideration		591			(2,140	)
Accelerated amortization of term loan financing fees		-			1,241
Stock compensation expense		12,346			11,563
Excess tax benefit of stock options exercised		(20,994	)		(16,614	)
Depreciation		39,514			36,885
Amortization		15,675			11,102
Deferred income taxes		25,462			27,685
Changes in operating assets and liabilities, net of
effect of acquisitions and divestitures:
Accounts receivable		(4,657	)		(20,288	)
Accounts payable		7,246			(11,239	)
Accrued liabilities		(972	)		16,694
Deferred revenues		615			(1,241	)
Other assets and liabilities		(1,979	)		(11,015	)
Net cash provided by operating activities		277,147			215,176
Investing Activities:
Payments for acquisitions, net of cash acquired		(153,390	)		(467,430	)
(Purchases of)/ proceeds from short-term investments		(49	)		15,941
Proceeds from sale of business and other assets		764			2,371
Capital expenditures		(51,658	)		(36,981	)
Net cash used in investing activities		(204,333	)		(486,099	)
Financing Activities:
Net repayment of long-term debt		(43,916	)		(17,294	)
Net (repayments)/ borrowings on senior credit facility		(96,601	)		269,792
Payments of deferred financing costs		(148	)		(3,740	)
Payments on capital lease obligations		(2,559	)		(2,703	)
Purchase and cancellation of treasury stock		(2,945	)		(81,201	)
Proceeds from other issuances of common stock		44,879			30,487
Excess tax benefit of stock options exercised		20,994			16,614
Payments to noncontrolling interests		(398	)		-
Net cash (used in)/ provided by financing activities		(80,694	)		211,955
Effect of exchange rate changes on cash		1,574			3,087
Net decrease in cash and cash equivalents		(6,306	)		(55,881	)
Cash and cash equivalents at beginning of period		22,511			79,276
Cash and cash equivalents at end of period	$	16,205		$	23,395
Non-cash activities:
Net issuances of obligations for acquisitions	$	62,262		$	41,847