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Stericycle, Inc. Reports Results for the Fourth Quarter and Full Year Ended 2015

LAKE FOREST, Ill., Feb. 04, 2016 (GLOBE NEWSWIRE) -- Stericycle, Inc. (NASDAQ:SRCL) today reported financial results for the fourth quarter and the full year of 2015.

FOURTH QUARTER RESULTS
Revenues for the quarter ended December 31, 2015 were $888.3 million, up $211.4 million or 31.2%, from $676.9 million in the fourth quarter last year. Acquisitions contributed approximately $200.0 million in revenues to the current period’s growth. Revenues increased 35.2% compared to the prior period when adjusted for unfavorable foreign exchange impact of $26.9 million.

Gross profit, reported in accordance with U.S. generally accepted accounting principles (“GAAP”), was $380.4 million, up 33.5% from $285.0 million in the fourth quarter last year. GAAP gross profit as a percent of revenues was 42.8% compared to 42.1% in the fourth quarter last year. Non-GAAP gross profit, when adjusted for various items identified in the second of the following tables, was $380.9 million, up 33.5% from $285.4 million in the fourth quarter last year. Non-GAAP gross profit as a percent of revenues was 42.9% compared to 42.2% in the fourth quarter last year.

GAAP earnings per diluted share decreased 16.4% to $0.80 from $0.96 in the fourth quarter last year. Non-GAAP earnings per diluted share, when adjusted for various items identified in the third of the following tables, decreased 0.9% to $1.11 from $1.12 in the fourth quarter last year. See tables below.

FULL-YEAR RESULTS
Revenues for the full year 2015 were $2.99 billion, up $430.3 million or 16.8%, from $2.56 billion in the same period last year. Acquisitions contributed approximately $378.5 million in revenues to the current year’s growth. Revenues increased 21.2% compared with the prior period when adjusted for unfavorable foreign exchange impact of $110.2 million.

GAAP gross profit was $1.27 billion, up 15.7% from $1.09 billion in the same period last year. GAAP gross profit as a percent of revenues was 42.4% compared to 42.8% in the same period last year. Non-GAAP gross profit, when adjusted for various items identified in the second of the following tables, was $1.27 billion, up 15.5% from $1.10 billion in the same period as last year. Non-GAAP gross profit as a percent of revenues was 42.5% compared to 42.9% in the same period last year.

GAAP earnings per diluted share decreased 21.7% to $2.96 from $3.79 in 2014. Non-GAAP earnings per diluted share, when adjusted for various items identified in the third of the following tables, increased 3.0% to $4.40 from $4.27. See tables below.

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

Three Months Ended December 31, Years Ended December 31,
Change Change
2015 2014 $% 2015 2014 $%
Total As Reported Revenues (GAAP)$ 888.3 $ 676.9 $ 211.4 31.2% $ 2,985.9 $ 2,555.6 $ 430.3 16.8%
Adjustment for Foreign Exchange 26.9 26.9 110.2 110.2
Subtotal (non-GAAP): 915.2 676.9 238.2 35.2% 3,096.1 2,555.6 540.5 21.2%
Adjustment for Acquisitions (206.6) (6.7) (200.0) (439.1) (60.6) (378.5)
Adjustment for Regulated Returns and
Recall Management Services
(20.4) (16.1) (4.4) (87.4) (80.5) (7.0)
Total revenues, as adjusted (non-GAAP):$ 688.1 $ 654.2 $ 33.9 5.2% $ 2,569.6 $ 2,414.5 $ 155.1 6.4%
Domestic/ International Breakdown:
Domestic Revenues$651.1 $477.6 $173.5 36.3% $2,165.0 $1,788.4 $376.6 21.1%
International Revenues 237.2 199.3 37.9 19.0% 820.9 767.2 53.7 7.0%
Total As Reported Revenues (GAAP)$ 888.3 $ 676.9 $ 211.4 31.2% $ 2,985.9 $ 2,555.6 $ 430.3 16.8%

(1) For internal purposes, we exclude the impact of foreign exchange, revenues attributed to acquisitions closed within the preceding 12 months, and revenue 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 Gross Profit to Non-GAAP Gross Profit (in millions)(2)

Three Months Ended December 31, Years Ended December 31,
2015 2014 2015 2014
$% of Rev $% of Rev $% of Rev $% of Rev
GAAP Gross Profit$380.4 42.8% $285.0 42.1% $1,266.2 42.4% $1,094.4 42.8%
Plant Conversion Expenses 0.5 0.1% 0.4 0.1% 1.5 0.1% 2.9 0.1%
Non-GAAP Gross Profit$380.9 42.9% $285.4 42.2% $1,267.7 42.5% $1,097.3 42.9%

(2) In accordance with GAAP, reported Gross Profit includes the 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 Gross Profit are not intended to imply, and should not be interpreted as implying, that non-GAAP Gross Profit is a better measure of performance than GAAP Gross Profit.

Table to reconcile GAAP EPS to Non-GAAP EPS(3)

Three Months Ended December 31, Years Ended December 31,
Change Change
2015 2014 $% 2015 2014 $%
GAAP EPS$ 0.80 $ 0.96 $ (0.16) (16.4)% $ 2.96 $ 3.79 $ (0.82) (21.7)%
Acquisition Expenses a 0.00 0.03 0.34 0.14
Integration Expenses a 0.15 0.08 0.39 0.19
Litigation Expenses a 0.05 0.02 0.46 0.05
Changes in Fair Value of Contingent
Consideration a
-- (0.06) (0.01) (0.02)
Impairment of intangible assets a 0.02 -- 0.02 --
Plant Conversion and Restructuring
Expenses a
0.04 0.09 0.18 0.12
Add Back Convertible Preferred
Stock Dividend b
0.12 -- 0.14 --
Reallocation of EPS Related to
Convertible Preferred Stock If-
Converted Method b
(0.07)-- (0.08)--
Non-GAAP EPS (Adjusted)$ 1.11 $ 1.12 $ (0.01) (0.9)% $ 4.40 $ 4.27 $ 0.13 3.0%
Diluted Weighted Average Number
of Common Shares Outstanding
Under If-Converted Method
91,430,668 86,194,513 87,810,927 86,233,612

(3a) In accordance with GAAP, reported earnings per diluted share (EPS) include the after-tax impact of the items identified. For internal purposes, including the determination of management compensation, the Company excludes these items from results when evaluating operating performance.

(3b) For purposes of determining non-GAAP EPS, the Company (1) adds back the mandatory convertible preferred stock dividend; and (2) deducts the EPS impact of the items identified above and the mandatory convertible preferred stock dividend using the “if-converted” method. Under the “if-converted” method used in determining our non-GAAP EPS, the items identified above and the preferred dividend applicable to the convertible preferred stock is added back to net income attributable to Stericycle, the numerator. The Mandatory Convertible Preferred shares are assumed to be converted to common shares at the beginning of the period or, if later, at the time of issuance, and the resulting common shares are included in the denominator.

This table and the Company’s internal use of non-GAAP earnings per diluted share are not intended to imply, and should not be interpreted as implying, that non-GAAP earnings per diluted share is a better measure of performance than GAAP earnings per diluted share.

Cash flow from operations was $390.3 million and $448.5 million for the full years of 2015 and 2014, respectively.

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

Safe Harbor Statement: This press release may contain forward-looking statements that involve risks and uncertainties, some of which are beyond our control (for example, general economic and market 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 the collection, transportation, treatment and disposal of regulated waste or the proper handling and protection of personal and confidential information, increases in transportation and other operating costs, the level of governmental enforcement of regulations governing regulated waste collection and treatment or the proper handling and protection of personal and confidential information, our obligations to service our substantial indebtedness and to comply with the covenants and restrictions contained in our private placement notes, term loan credit facility and revolving credit facility, our ability to execute our acquisition strategy and to integrate acquired businesses, competition and demand for services in the regulated waste and secure information destruction industries, political, economic and currency risks related to our foreign operations, impairments of goodwill or other indefinite-lived intangibles, variability in the demand for services we provide on a project or non-recurring basis, exposure to environmental liabilities, fluctuations in the price we receive for the sale of paper, disruptions in or attacks on our information technology systems, compliance with existing and future legal and regulatory requirements, as well as other factors described in our filings with the U.S. Securities and Exchange Commission, including our most recently filed Annual Report on Form 10-K. 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.

FOR FURTHER INFORMATION CONTACT:

Investor Relations 847-607-2012

Conference call to be held February 4, 2016 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 March 4th by dialing 855-859-2056, access code 21498985. To hear a live simulcast of the call or access the audio archive, visit the investor relations page on www.stericycle.com.

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
December 31,
2015 2014
ASSETS
Current Assets:
Cash and cash equivalents$ 55,634 $ 22,236
Short-term investments 69 380
Accounts receivable, net 614,494 465,473
Prepaid expenses 46,740 30,632
Other current assets 44,891 33,173
Total Current Assets 761,828 551,894
Property, plant and equipment, net 665,602 460,408
Goodwill 3,676,326 2,418,832
Intangible assets, net 1,833,561 909,645
Other assets 43,553 32,523
Total Assets$ 6,980,870 $ 4,373,302
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt$ 161,409 $ 131,969
Accounts payable 149,202 114,596
Accrued liabilities 196,087 131,743
Deferred revenues 16,989 21,624
Other current liabilities 64,105 60,975
Total Current Liabilities 587,792 460,907
Long-term debt, net of current portion 3,052,639 1,527,246
Deferred income taxes 517,587 403,847
Other liabilities 76,667 64,117
Equity:
Mandatory convertible preferred stock 8 -
Common stock 849 849
Additional paid-in capital 1,141,999 289,211
Accumulated other comprehensive loss (282,632) (138,419)
Retained earnings 1,868,014 1,743,371
Total Stericycle, Inc. Equity 2,728,238 1,895,012
Noncontrolling interests 17,947 22,173
Total Equity 2,746,185 1,917,185
Total Liabilities and Equity$ 6,980,870 $ 4,373,302

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
Three Months Ended Years Ended
December 31, December 31,
2015 2014 2015 2014
$% of Rev $% of Rev $% of Rev $% of Rev
Revenues$ 888,304 100.0% $ 676,947 100.0% $ 2,985,908 100.0% $ 2,555,601 100.0%
Cost of revenues ("COR") exclusive of depreciation
and adjusting items shown below 488,523 55.0% 378,182 55.9% 1,656,573 55.5% 1,401,797 54.9%
Depreciation 18,919 2.1% 13,415 2.0% 61,642 2.1% 56,478 2.2%
Total cost of revenues 507,442 57.1% 391,597 57.8% 1,718,215 57.5% 1,458,275 57.1%
Gross profit (non-GAAP) 380,862 42.9% 285,350 42.2% 1,267,693 42.5% 1,097,326 42.9%
Selling, general and administrative expenses ("SG&A")
exclusive of depreciation, amortization and adjusting
items shown below 177,556 20.0% 112,563 16.6% 539,944 18.1% 433,865 17.0%
Depreciation 7,519 0.8% 3,121 0.5% 20,272 0.7% 15,446 0.6%
Amortization 18,541 2.1% 8,478 1.3% 45,498 1.5% 32,692 1.3%
Total SG&A expense 203,616 22.9% 124,162 18.3% 605,714 20.3% 482,003 18.9%
Income from operations (non-GAAP) exclusive of
adjusting items shown below 177,246 20.0% 161,188 23.8% 661,979 22.2% 615,323 24.1%
Adjusting items:
Plant conversion expenses (COR) 507 0.1% 381 0.1% 1,508 0.1% 2,915 0.1%
Acquisition expenses (SG&A) (818) -0.1% 2,661 0.4% 39,138 1.3% 13,333 0.5%
Integration expenses (SG&A) 20,432 2.3% 11,343 1.7% 51,689 1.7% 25,968 1.0%
Change in fair value of contingent consideration (SG&A) - 0.0% (5,405) -0.8% (640) 0.0% (1,452) -0.1%
Impairment of intangible assets (SG&A) 1,781 0.2% - 0.0% 1,781 0.1% - 0.0%
Restructuring and plant conversion expenses (SG&A) 4,160 0.5% 10,114 1.5% 21,240 0.7% 11,649 0.5%
Litigation expenses (SG&A) 645 0.1% 3,331 0.5% 59,651 2.0% 6,574 0.3%
Income from operations (GAAP) 150,539 16.9% 138,763 20.5% 487,612 16.3% 556,336 21.8%
Other income (expense):
Interest expense, net (24,908) -2.8% (18,139) -2.7% (77,274) -2.6% (66,022) -2.6%
Other income/ (expense), net 4,525 0.5% (1,177) -0.2% 569 0.0% (2,746) -0.1%
Total other expense (20,383) -2.3% (19,316) -2.9% (76,705) -2.6% (68,768) -2.7%
Income before income taxes 130,156 14.7% 119,447 17.6% 410,907 13.8% 487,568 19.1%
Income tax expense 51,537 5.8% 36,789 5.4% 142,862 4.8% 159,422 6.2%
Net income 78,619 8.9% 82,658 12.2% 268,045 9.0% 328,146 12.8%
Less: net (loss)/ income attributable to noncontrolling interests (289) 0.0% 132 0.0% 967 0.0% 1,690 0.1%
Net income attributable to Stericycle, Inc. 78,908 8.9% 82,526 12.2% 267,078 8.9% 326,456 12.8%
Less: mandatory convertible preferred stock dividend 10,107 1.1% - 0.0% 11,791 0.4% - 0.0%
Net income attributable to Stericycle, Inc.
Common Shareholders$ 68,801 7.7% $ 82,526 12.2% $ 255,287 8.5% $ 326,456 12.8%
Earnings per share - diluted$ 0.80 $ 0.96 $ 2.96 $ 3.79
Weighted average number of
common shares outstanding - diluted 85,949,461 86,194,513 86,162,609 86,233,612

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
December 31,
2015 2014
Operating Activities:
Net income$ 268,045 $ 328,146
Adjustments to reconcile net income to net cash
provided by operating activities:
Stock compensation expense 21,750 17,773
Excess tax benefit of stock options exercised (16,897) (17,906)
Depreciation 81,914 71,924
Amortization 45,498 32,692
Deferred income taxes (6,715) 16,550
Other, net 7,467 8,932
Changes in operating assets and liabilities, net of
effect of acquisitions:
Accounts receivable (55,890) (34,116)
Accounts payable 26,366 (5,712)
Accrued liabilities 23,133 21,279
Deferred revenue (4,615) 1,017
Other assets and liabilities 294 7,921
Net cash provided by operating activities 390,350 448,500
Investing Activities:
Payments for acquisitions, net of cash acquired (2,419,437) (374,321)
Proceeds from/ (purchases of) investments 294 (1,957)
Capital expenditures (114,761) (86,496)
Net cash used in investing activities (2,533,904) (462,774)
Financing Activities:
Repayments of long-term debt and other obligations (93,172) (101,231)
Proceeds from foreign bank debt 53,747 205,086
Repayments of foreign bank debt (87,308) (193,284)
Proceeds from term loan 1,550,000 -
Repayments 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
Repayments of senior credit facility (2,004,385) (1,216,031)
Repayments of capital lease obligations (3,865) (5,826)
Payments of deferred financing costs (9,903) (2,280)
Payment for hedge (8,833) -
Purchases and cancellations of treasury stock (130,576) (194,066)
Proceeds from issuance of mandatory convertible preferred stock 746,900 -
Dividends paid on mandatory convertible preferred stock (10,106) -
Proceeds from issuances of common stock 60,124 51,852
Excess tax benefit of stock options exercised 16,897 17,906
Payments to noncontrolling interests (5,714) (5,201)
Net cash provided by/ (used in) financing activities 2,181,208 (30,049)
Effect of exchange rate changes on cash (4,256) (608)
Net increase/ (decrease) in cash and cash equivalents 33,398 (44,931)
Cash and cash equivalents at beginning of period 22,236 67,167
Cash and cash equivalents at end of period$ 55,634 $ 22,236
Non-cash activities:
Net issuance of obligations for acquisitions$ 80,189 $ 145,938


Source:Stericycle, Inc.