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Stericycle Q2 Earnings Beat Expectations, Again

Date: July 25, 2012

Source: Stericycle, Inc.

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

Stericycle, Inc. (NASDAQ:SRCL), today reported financial results for the second quarter of 2012.

Revenues for the quarter ended June 30, 2012 were $468.9 million, up 14.3% from $410.4 million from the second quarter last year. Acquisitions contributed approximately $36.6 million to the current period growth in revenues compared with the same period last year. Revenues increased 16.2% compared with the prior period when adjusted for unfavorable foreign exchange impacts of $8.1 million. Gross profit was $209.5 million, up 12.2% from $186.7 million in the second quarter last year. Gross profit as a percent of revenue was 44.7% compared with 45.5% in the second quarter of 2011.

Net income attributable to Stericycle for the second quarter of 2012 was $67.6 million or $0.78 per diluted share compared with $55.5 million or $0.63 per diluted share for the second quarter of 2011. Net income attributable to Stericycle for the second quarter of 2012 and second quarter of 2011 includes acquisition expenses, adjustments of contingent consideration to fair value, restructuring, plant closure, and other items. Excluding the effect of these items, non-GAAP earnings per diluted share were $0.81 for the current quarter (see table below). Non-GAAP earnings per diluted share increased 17.0% from non-GAAP earnings per diluted share of $0.69 in the second quarter of 2011.

FIRST SIX MONTHS’ RESULTS

Revenues for the six months ending June 30, 2012 were $929.0 million, up 14.9% from $808.6 million in the same period last year. Revenues increased 16.3% compared with the prior period when adjusted for an unfavorable foreign exchange impact of $11.4 million. Gross profit was $414.8 million, up 12.4% from $369.2 million in the same period last year. Gross profit as a percent of revenue was 44.6% compared with 45.7% in 2011. Non-GAAP earnings per diluted share, when adjusted for various non-operational items, increased 15.5% to $1.58 from $1.37(see table below).

               
Table to reconcile non-GAAP EPS to GAAP EPS:
 

 

Three months ended June 30,

Six months ended June 30,

 

 

2012

 

2011

 

Change
$

 

Change
%

 

2012

 

2011

 

Change
$

 

Change
%

GAAP EPS

$

0.78

$

0.63

$

0.15

23.2

%

$

1.53

$

1.27

$

0.26

20.5

%

 

Acquisition expenses

0.02

0.05

0.04

0.09

 

Restructuring/Plant Closure

0.01

0.01

 
Acceleration of

0.01

0.01

Term Loan Fees
 
Non-GAAP EPS (adjusted)

$

0.81

$

0.69

$

0.12

17.0

%

$

1.58

$

1.37

$

0.21

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 $188.8 million and $119.7 million for the six months ended June 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 July 25, 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 August 25th, 2012 by dialing 855-859-2056, access code 94518179. 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 Six Months Ended
June 30, June 30,
2012 2011 2012 2011
(unaudited) (unaudited)
$     % of Rev $   % of Rev $   % of Rev $   % of Rev
 
Revenues $ 468,950 100.0 % $ 410,441 100.0 % $ 929,027 100.0 % $ 808,567 100.0 %
 
Cost of revenues 248,832 53.1 % 213,538 52.0 % 493,014 53.1 % 419,354 51.9 %
Depreciation - cost of revenues 10,630 2.3 % 10,170 2.5 % 21,218 2.3 % 19,988 2.5 %
Restructuring Costs

0

    0.0 % (8 )   0.0 % -     0.0 % 54     0.0 %
 
Gross profit 209,488 44.7 % 186,741 45.5 % 414,795 44.6 % 369,171 45.7 %
 
Selling, general and administrative expenses 80,652 17.2 % 72,261 17.6 % 158,459 17.1 % 142,233 17.6 %
Depreciation - SG&A 2,261 0.5 % 2,235 0.5 % 4,412 0.5 % 4,173 0.5 %
Amortization 5,135     1.1 % 3,546     0.9 % 10,114     1.1 % 6,893     0.9 %
 
Total SG&A expense and amortization 88,048     18.8 % 78,042     19.0 % 172,985     18.6 % 153,299     19.0 %
 
Income from operations before
acquisition, integration, and other expenses 121,440 25.9 % 108,699 26.5 % 241,810 26.0 % 215,872 26.7 %
 
Acquisition expenses 2,207 0.5 % 5,261 1.3 % 3,746 0.4 % 11,199 1.4 %
Restructuring costs and plant closure expense 1,064 0.2 % 203 0.0 % 1,150 0.1 % 399 0.0 %
Change in fair value of contingent consideration (602 ) -0.1 % - 0.0 % 602 0.1 % (2,140 ) -0.3 %
Integration expenses 1,044     0.2 % 1,287     0.3 % 2,323     0.3 % 2,053     0.3 %
 
Income from operations 117,727 25.1 % 101,948 24.8 % 233,989 25.2 % 204,361 25.3 %
 
Other income (expense):
Interest income 124 0.0 % 63 0.0 % 216 0.0 % 247 0.0 %
Interest expense (12,783 ) -2.7 % (13,007 ) -3.2 % (25,549 ) -2.8 % (24,379 ) -3.0 %
Other expense, net 490     0.1 % (819 )   -0.2 % (68 )   0.0 % (1,082 )   -0.1 %
 
Total other income (expense) (12,169 )   -2.6 % (13,763 )   -3.4 % (25,401 )   -2.7 % (25,214 )   -3.1 %
 
Income before income taxes 105,558 22.5 % 88,185 21.5 % 208,588 22.5 % 179,147 22.2 %
 
Income tax expense 37,186     7.9 % 32,295     7.9 % 74,901     8.1 % 66,671     8.2 %
 
Net income 68,372     14.6 % 55,890     13.6 % 133,687     14.4 % 112,476     13.9 %
 
Net income attributable to
noncontrolling interests 779 0.2 % 348 0.1 % 1,237 0.1 % 1,260 0.2 %
 
Net income attributable to Stericycle, Inc. $ 67,593     14.4 % $ 55,542     13.5 % $ 132,450     14.3 % $ 111,216     13.8 %
 
Earnings per share-diluted $ 0.78   $ 0.63   $ 1.53   $ 1.27  
 
Weighted average number of
common shares outstanding-diluted 86,835,615   87,935,310   86,714,407   87,738,638  

 

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE DATA)
   
 
June 30, December 31,
2012 2011
(unaudited) (audited)
ASSETS
Current Assets:
Cash and cash equivalents $ 54,213 $ 22,511
Short-term investments 418 416
Accounts receivable, less allowance for doubtful
accounts of $18,612 in 2012 and $18,905 in 2011 294,890 290,854
Deferred income taxes 23,005 19,314
Prepaid expenses 23,347 22,466
Other current assets 40,255   35,035  
Total Current Assets 436,128 390,596
Property, plant and equipment, net 309,443 293,912
Goodwill 1,962,849 1,913,703
Intangible assets, less accumulated amortization of
$51,816 in 2012 and $42,050 in 2011 596,128 546,618
Other 37,106   32,261  
Total Assets $ 3,341,654   $ 3,177,090  
 
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt $ 82,074 $ 100,526
Accounts payable 77,240 66,635
Accrued liabilities 117,845 140,521
Deferred revenues 16,030 12,855
Other current liabilities 8,793   6,377  
Total Current Liabilities 301,982 326,914
Long-term debt, net of current portion 1,282,462 1,284,113
Deferred income taxes 341,511 313,733
Other liabilities - long term 26,523 25,079
Equity:
Common stock (par value $0.01 per share, 120,000,000 shares
authorized, 85,478,988 issued and outstanding in 2012,
and 84,696,227 issued and outstanding in 2011) 855 847
Additional paid-in capital 51,787 -
Accumulated other comprehensive loss (57,736 ) (45,984 )
Retained earnings 1,372,808   1,243,303  
Total Stericycle, Inc. Equity 1,367,714 1,198,166
Noncontrolling interest 21,462   29,085  
Total Equity 1,389,176   1,227,251  
Total Liabilities and Equity $ 3,341,654   $ 3,177,090  
 
 
 

 

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
 
Six Months Ended
June 30,
2012 2011
(unaudited) (unaudited)
Operating Activities:
Net income $ 133,687 $ 112,476
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in fair value of contingent consideration 602 (2,140 )
Accelerated amortization of term loan financing fees - 1,241
Stock compensation expense 8,217 7,718
Excess tax benefit of stock options exercised (11,523 ) (14,549 )
Depreciation 25,630 24,161
Amortization 10,114 6,893
Deferred income taxes 14,546 18,734
Changes in operating assets and liabilities, net of
effect of acquisitions and divestitures:
Accounts receivable 5,368 (22,584 )
Accounts payable 7,252 (5,531 )
Accrued liabilities (6,409 ) (4,987 )
Deferred revenue 2,111 (566 )
Other assets and liabilities (797 ) (1,172 )
 
Net cash provided by operating activities 188,798   119,694  
 
Investing Activities:
Payments for acquisitions, net of cash acquired (111,716 ) (280,823 )
Purchases of short-term investments (2 ) (403 )
Proceeds from sale of businesses and other assets - 389
Capital expenditures (33,819 ) (23,652 )
 
Net cash used in investing activities (145,537 ) (304,489 )
 
Financing Activities:
Net repayment of long-term debt (38,323 ) (18,094 )
Net (repayments)/ borrowings on senior credit facility (10,074 ) 126,600
Payments of deferred financing costs (148 ) -
Payments on capital lease obligations (1,278 ) (1,456 )
Purchase and cancellation of treasury stock (2,945 ) (4,302 )
Payments to noncontrolling interests (10 ) -
Proceeds from other issuances of common stock 28,450 27,069
Excess tax benefit of stock options exercised 11,523   14,549  
 
Net cash (used in)/ provided by financing activities (12,805 ) 144,366
Effect of exchange rate changes on cash 1,246   1,575  
Net increase/ (decrease) in cash and cash equivalents 31,702 (38,854 )
Cash and cash equivalents at beginning of period 22,511   77,053  
 
Cash and cash equivalents at end of period $ 54,213   $ 38,199  
 
Non-cash activities:
Net issuances of obligations for acquisitions $ 34,328 $ 10,036

For more information, contact:
Stericycle, Inc.
Frank ten Brink, 847-607-2012

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