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Stericycle, Inc. Reports Results for the Third Quarter and Year to Date 2014

LAKE FOREST, Ill., Oct. 23, 2014 (GLOBE NEWSWIRE) -- Stericycle, Inc. (Nasdaq:SRCL), today reported financial results for the third quarter of 2014.

THIRD QUARTER RESULTS

Revenues for the quarter ended September 30, 2014 were $667.9 million, up $133.3 million or 24.9% from $534.6 million in the third quarter last year. Acquisitions contributed approximately $93.8 million to the current period's growth in revenues. Revenues increased 25.7% compared to the prior period when adjusted for unfavorable foreign exchange impact of $4.1 million. Gross profit, reported in accordance with U.S. generally accepted accounting principles ("GAAP"), was $278.7 million, up 15.4% from $241.4 million in the third quarter last year. Gross profit as a percent of revenues was 41.7% compared with 45.2% in the third quarter of 2013. Non-GAAP gross profit was $279.5 million, up 15.6% from $241.8 million in the third quarter last year. Non-GAAP gross profit as a percent of revenues was 41.9% compared with 45.2% in the third quarter of 2013. GAAP earnings per diluted share increased 4.4% to $0.96 from $0.92 in the third quarter last year. Non-GAAP earnings per diluted share, when adjusted for various items identified in the second of the following tables, increased 12.4% to $1.08 from $0.96. See tables below.

FIRST NINE MONTHS' RESULTS

Revenues for the nine months ending September 30, 2014 were $1,878.7 million, up $303.7 million or 19.3% from $1,574.9 million in the same period last year. Acquisitions contributed approximately $208.5 million to the current year's growth in revenues. Revenues increased 20.3% compared with the prior period when adjusted for unfavorable foreign exchange impact of $16.5 million. GAAP gross profit was $809.4 million, up 13.8% from $711.3 million in the same period last year. Gross profit as a percent of revenues was 43.1% compared with 45.2% in 2013. Non-GAAP gross profit was $812.0 million, up 14.1% from $711.8 million in the same period last year. Non-GAAP gross profit as a percent of revenues was 43.2% compared with 45.2% in the 2013. GAAP earnings per diluted share increased 6.1% to $2.83 from $2.67 in the same period last year. Non-GAAP earnings per diluted share, when adjusted for various items identified in the second of the following tables, increased 14.0% to $3.15 from $2.77. See tables below.

The following table shows our calculations of organic revenue growth (in millions)(1):

Three Months Ended September 30, Nine Months Ended September 30,
Change Change
2014 2013 $ % 2014 2013 $ %
Total As Reported Revenues (GAAP) $667.9 $534.6 $133.3 24.9% $1,878.7 $1,574.9 $303.7 19.3%
Adjustment for Foreign Exchange 4.1 4.1 16.5 16.5
Subtotal (non-GAAP): 672.0 534.6 137.4 25.7% 1,895.2 1,574.9 320.3 20.3%
Adjustment for Acquisitions (98.2) (4.4) (93.8) (217.7) (9.3) (208.5)
Adjustment for Regulated Returns and Recall Management Services (16.6) (25.1) 8.5 (64.4) (71.3) 6.9
Subtotal (non-GAAP): $557.2 $505.1 $52.1 10.3% $1,613.1 $1,494.3 $118.7 7.9%
Domestic/ International Breakdown:
Domestic Revenues $470.7 $378.1 $92.5 24.5% $1,317.1 $1,112.0 $205.1 18.4%
International Revenues 197.2 156.5 40.8 26.1% 561.6 462.9 98.6 21.3%
Total As Reported Revenues (GAAP) $667.9 $534.6 $133.3 24.9% $1,878.7 $1,574.9 $303.7 19.3%

(1) For internal purposes, we exclude the impact of foreign exchange and revenues attributed to acquisitions closed within the preceding 12 months and from our regulated returns and recall management services when we evaluate organic revenue growth. This table and the Company's internal use of non-GAAP adjusted revenues are not intended to imply, and should not be interpreted as implying, that non-GAAP adjusted revenues are a better measure of internal growth or the Company's performance, as compared to GAAP revenues.

Table to reconcile GAAP EPS to Non-GAAP EPS(2):

Three Months Ended September 30, Nine Months Ended September 30,
Change Change
2014 2013 $ % 2014 2013 $ %
GAAP EPS $0.96 $0.92 $0.04 4.4% $2.83 $2.67 $0.16 6.1%
Acquisition Expenses 0.03 0.02 0.12 0.07
Integration Expenses 0.05 0.01 0.11 0.03
Plant Conversion and Restructuring 0.02 0.00 0.03 0.00
Change in Fair Value -- -- 0.05 --
Litigation Expenses 0.01 0.00 0.02 0.00
Non-GAAP EPS (Adjusted) $1.08 $0.96 $0.12 12.4% $3.15 $2.77 $0.39 14.0%

(2) In accordance with GAAP, reported earnings per share (EPS) 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 $345.0 million and $336.1 million for the nine months ended September 30, 2014 and 2013, 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.

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
September 30, December 31,
2014 2013
ASSETS
Current Assets:
Cash and cash equivalents $ 41,985 $ 67,167
Short-term investments 479 413
Accounts receivable, net 456,461 388,996
Deferred income taxes 18,185 18,031
Prepaid expenses 37,929 28,379
Other current assets 37,638 37,279
Total Current Assets 592,677 540,265
Property, plant and equipment, net 498,577 358,967
Goodwill 2,415,210 2,231,582
Intangible assets, net 910,928 720,035
Other assets 28,242 37,124
Total Assets $ 4,445,634 $ 3,887,973
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt $ 165,074 $ 150,380
Accounts payable 131,617 89,146
Accrued liabilities 139,025 107,445
Deferred revenues 22,406 18,826
Other current liabilities 57,183 50,387
Total Current Liabilities 515,305 416,184
Long-term debt, net of current portion 1,512,333 1,280,663
Deferred income taxes 470,383 396,119
Other liabilities 67,426 27,469
Equity:
Common stock 848 855
Additional paid-in capital 253,286 195,110
Accumulated other comprehensive loss (95,350) (56,468)
Retained earnings 1,697,903 1,610,964
Total Stericycle, Inc. Equity 1,856,687 1,750,461
Noncontrolling interests 23,500 17,077
Total Equity 1,880,187 1,767,538
Total Liabilities and Equity $ 4,445,634 $ 3,887,973
STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
$ % of Rev $ % of Rev $ % of Rev $ % of Rev
Revenues $ 667,877 100.0% $ 534,579 100.0% $1,878,654 100.0% $1,574,908 100.0%
Cost of revenues ("COR") - exclusive of depreciation, and adjusting items shown below 373,128 55.9% 280,222 52.4% 1,023,615 54.5% 826,280 52.5%
Depreciation 15,235 2.3% 12,531 2.3% 43,063 2.3% 36,856 2.3%
Total cost of revenues 388,363 58.1% 292,753 54.8% 1,066,678 56.8% 863,136 54.8%
Gross profit (non-GAAP) 279,514 41.9% 241,826 45.2% 811,976 43.2% 711,772 45.2%
Selling, general and administrative expenses ("SG&A") - exclusive of depreciation, amortization, and adjusting
items shown below
111,793 16.7% 92,964 17.4% 321,302 17.1% 272,363 17.3%
Depreciation 5,033 0.8% 2,610 0.5% 12,325 0.7% 8,373 0.5%
Amortization 8,497 1.3% 6,709 1.3% 24,214 1.3% 19,884 1.3%
Total SG&A expense 125,323 18.8% 102,283 19.1% 357,841 19.0% 300,620 19.1%
Income from operations (non-GAAP) - exclusive of adjusting items shown below 154,191 23.1% 139,543 26.1% 454,135 24.2% 411,152 26.1%
Adjusting items:
Plant conversion expenses (COR) 845 0.1% 423 0.1% 2,534 0.1% 423 0.0%
Acquisition expenses (SG&A) 3,472 0.5% 2,111 0.4% 10,672 0.6% 6,238 0.4%
Integration expenses (SG&A) 7,461 1.1% 1,423 0.3% 14,625 0.8% 3,702 0.2%
Change in fair value of contingent consideration (SG&A) -- 0.0% (185) 0.0% 3,953 0.2% (307) 0.0%
Litigation expenses (SG&A) 1,342 0.2% 12 0.0% 3,243 0.2% 116 0.0%
Plant conversion and restructuring expenses (SG&A) 1,535 0.2% 364 0.1% 1,535 0.1% 468 0.0%
Income from operations (GAAP) 139,536 20.9% 135,395 25.3% 417,573 22.2% 400,512 25.4%
Other income (expense):
Interest expense, net (16,617) -2.5% (13,316) -2.5% (47,883) -2.5% (39,608) -2.5%
Other expense, net (477) -0.1% (1,341) -0.3% (1,569) -0.1% (2,899) -0.2%
Total other expense (17,094) -2.6% (14,657) -2.7% (49,452) -2.6% (42,507) -2.7%
Income before income taxes 122,442 18.3% 120,738 22.6% 368,121 19.6% 358,005 22.7%
Income tax expense 39,401 5.9% 39,906 7.5% 122,633 6.5% 123,508 7.8%
Net income 83,041 12.4% 80,832 15.1% 245,488 13.1% 234,497 14.9%
Less: net income attributable to noncontrolling interests 196 0.0% 285 0.1% 1,558 0.1% 1,289 0.1%
Net income attributable to Stericycle, Inc. $ 82,845 12.4% $ 80,547 15.1% $ 243,930 13.0% $ 233,208 14.8%
Earnings per share - diluted $ 0.96 $ 0.92 $ 2.83 $ 2.67
Weighted average number of common shares outstanding - diluted 86,116,455 87,401,565 86,237,202 87,497,276
STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Nine Months Ended
September 30,
2014 2013
Operating Activities:
Net income $ 245,488 $ 234,497
Adjustments to reconcile net income to net cash provided by operating activities:
Stock compensation expense 13,365 12,088
Excess tax benefit of stock options exercised (10,747) (12,354)
Depreciation 55,388 45,229
Amortization 24,214 19,884
Deferred income taxes 8,833 15,623
Change in fair value of contingent consideration 3,953 (307)
Plant conversion expenses 1,379 --
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable (25,420) (43,816)
Accounts payable 13,383 3,258
Accrued liabilities 17,640 21,420
Deferred revenue 2,326 (614)
Other assets and liabilities (4,830) 41,181
Net cash provided by operating activities 344,972 336,089
Investing Activities:
Payments for acquisitions, net of cash acquired (333,541) (131,902)
(Purchases of)/ proceeds from investments (2,051) 45
Capital expenditures (66,262) (54,329)
Net cash used in investing activities (401,854) (186,186)
Financing Activities:
Repayments of long-term debt and other obligations (45,031) (48,858)
Borrowings on foreign bank debt 151,605 164,669
Repayments on foreign bank debt (131,295) (163,941)
Borrowings on senior credit facility 1,154,100 731,015
Repayments on senior credit facility (979,059) (725,940)
Payments on capital lease obligations (4,014) (2,623)
Payments of deferred financing costs (2,280) --
Purchases and cancellations of treasury stock (157,004) (114,531)
Proceeds from issuances of common stock 33,904 33,827
Excess tax benefit of stock options exercised 10,747 12,354
Payments to noncontrolling interests (732) (1,018)
Net cash provided by/ (used) in financing activities 30,941 (115,046)
Effect of exchange rate changes on cash 759 (1,795)
Net (decrease)/ increase in cash and cash equivalents (25,182) 33,062
Cash and cash equivalents at beginning of period 67,167 34,659
Cash and cash equivalents at end of period $ 41,985 $ 67,721
Non-cash activities:
Issuances of obligations for acquisitions $ 100,944 $ 88,530
Issuance of obligations for noncontrolling interests -- 2,113

CONTACT: FOR FURTHER INFORMATION CONTACT: Dan Ginnetti 847-607-2069

Source:Stericycle, Inc.