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Press release from Business Wire

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

Wednesday, October 24, 2012

Stericycle, Inc. Reports Results for the Third Quarter of 201216:02 EDT Wednesday, October 24, 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 SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE DATA)     Three Months Ended     Nine Months EndedSeptember 30,September 30,2012   20112012   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 SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE DATA)       September 30,     December 31,20122011 (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 SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(IN THOUSANDS)       Nine Months EndedSeptember 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   Stericycle, Inc.Frank ten Brink, 847-607-2012