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Stericycle, Inc. Reports Results for the First Quarter of 2016

Conference call to be held April 28, 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 May 28th by dialing 855-859-2056, access code 21514993. To hear a live simulcast of the call or access the audio archive, visit the investor relations page on www.stericycle.com.

LAKE FOREST, Ill., April 28, 2016 (GLOBE NEWSWIRE) -- Stericycle, Inc. (NASDAQ:SRCL), today reported financial results for the first quarter of 2016.

Revenues for the quarter ended March 31, 2016 were $874.2 million, up 31.8% from $663.3 million in the first quarter of last year. Acquisitions contributed approximately $194.5 million to the current period’s growth in revenues. Revenues increased 35.4% compared to the prior period when adjusted for unfavorable foreign exchange impacts of $23.8 million.

Gross profit, reported in accordance with U.S. generally accepted accounting principles (“GAAP”), was $369.2 million, up 31.2% from $281.3 million in the first quarter of last year. GAAP gross profit as a percent of revenue was 42.2% compared to 42.4% in the first quarter of 2015. Non-GAAP gross profit, when adjusted as identified in the second of the following tables, was $369.4 million, an increase of 31.3% from $281.3 million in the first quarter of last year. Non-GAAP gross profit as a percent of revenues was 42.3% compared to 42.4% in the first quarter of 2015.

GAAP earnings per diluted share decreased 11.1% to $0.78 from $0.87 in the first quarter of 2015. Non-GAAP earnings per diluted share, when adjusted for various items identified in the third of the following tables, decreased 3.4% to $1.11 from $1.15. See tables below.

Cash flow from operations was $156.9 million and $132.6 million for the three months ended March 31, 2016 and 2015, respectively.

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

Three Months Ended March 31,
Change
2016 2015 $ %
Total as Reported Revenues (GAAP) $874.2 $663.3 $210.9 31.8%
Adjustment for Foreign Exchange 23.8 23.8
Subtotal (non-GAAP) 898.0 663.3 234.7 35.4%
Adjustment for Acquisitions (201.5) (7.0) (194.5)
Adjustment for Regulated Recall and Returns Management Services (24.8) (20.0) (4.8)
Total Revenues, as Adjusted (non-GAAP) $671.8 $636.3 $35.4 5.6%
Domestic/ International Breakdown:
Domestic Revenues $649.7 $472.2 $177.5 37.6%
International Revenues 224.5 191.1 33.4 17.5%
Total as Reported Revenues (GAAP) $874.2 $663.3 $210.9 31.8%

(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 March 31,
2016 2015
$ % of Rev $ % of Rev
GAAP Gross Profit $369.2 42.2% $281.3 42.4%
Plant Conversion Expenses 0.2 0.0% - 0.0%
Non-GAAP Gross Profit $369.4 42.3% $281.3 42.4%

(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 March 31,
Change
2016 2015 $ %
GAAP EPS $0.78 $0.87 $(0.10) -11.1%
Acquisition Expenses a 0.02 0.04
Integration Expenses a 0.14 0.07
Litigation Expenses a 0.01 0.01
Changes in Fair Value of Contingent Consideration a (0.03) (0.01)
Plant Conversion and Restructuring Expenses a 0.00 0.10
Amortization Expense a, c 0.14 0.07
Add Back Convertible Preferred Stock Dividend b 0.12 0.00
Reallocation of EPS Related to Convertible Preferred Stock If-Converted Method b (0.07) 0.00
Non-GAAP EPS (Adjusted) $1.11 $1.15 $(0.04) -3.4%
Diluted Weighted Average Number of Common Shares Outstanding Under If-Converted Method 91,496,877 86,357,006

(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.

(3c) Beginning the quarter ended March 31, 2016, the Company has started to exclude amortization expense from non-GAAP EPS. For comparable reporting, the Company’s previously reported 2015 results are adjusted to reflect the change.

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 operating performance than GAAP earnings per diluted share.

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.

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
March 31, December 31,
2016 2015
ASSETS
Current Assets:
Cash and cash equivalents$ 45,655 $ 55,634
Short-term investments 64 69
Accounts receivable, net 622,709 614,494
Prepaid expenses 46,198 46,740
Other current assets 42,732 44,891
Total Current Assets 757,358 761,828
Property, plant and equipment, net 677,525 665,602
Goodwill 3,790,016 3,758,177
Intangible assets, net 1,840,844 1,842,561
Other assets 46,801 49,282
Total Assets$ 7,112,544 $ 7,077,450
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt$ 114,066 $ 161,409
Accounts payable 133,779 149,202
Accrued liabilities 218,933 197,329
Deferred revenues 17,543 16,989
Other current liabilities 68,192 62,420
Total Current Liabilities 552,513 587,349
Long-term debt, net of current portion 3,038,083 3,052,639
Deferred income taxes 617,011 608,272
Other liabilities 86,448 81,352
Equity:
Mandatory convertible preferred stock 8 8
Common stock 848 849
Additional paid-in capital 1,172,962 1,143,020
Accumulated other comprehensive loss (265,018) (282,631)
Retained earnings 1,897,636 1,868,645
Total Stericycle, Inc. Equity 2,806,436 2,729,891
Noncontrolling interests 12,053 17,947
Total Equity 2,818,489 2,747,838
Total Liabilities and Equity$ 7,112,544 $ 7,077,450


STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
Three Months Ended
March 31,
2016 2015
$% of Rev $% of Rev
Revenues$ 874,181 100.0% $ 663,319 100.0%
Cost of revenues ("COR") exclusive of depreciation and adjusting items shown below 482,120 55.2% 367,340 55.4%
Depreciation 22,641 2.6% 14,648 2.2%
Total cost of revenues 504,761 57.7% 381,988 57.6%
Gross profit (non-GAAP) 369,420 42.3% 281,331 42.4%
Selling, general and administrative expenses ("SG&A") exclusive of depreciation and adjusting items shown below 181,569 20.8% 115,431 17.4%
Depreciation 7,499 0.9% 4,118 0.6%
Total SG&A expense 189,068 21.6% 119,549 18.0%
Income from operations (non-GAAP) exclusive of adjusting items shown below 180,352 20.6% 161,782 24.4%
Adjusting items:
Plant conversion expenses (COR) 236 0.0% - 0.0%
Amortization (SG&A) 18,274 2.1% 8,797 1.3%
Acquisition expenses (SG&A) 2,990 0.3% 3,296 0.5%
Integration expenses (SG&A) 19,268 2.2% 8,886 1.3%
Change in fair value of contingent consideration (SG&A) (2,644) -0.3% (675) -0.1%
Restructuring and plant conversion expenses (SG&A) 5 0.0% 12,302 1.9%
Litigation expenses (SG&A) 1,300 0.1% 2,123 0.3%
Income from operations (GAAP) 140,923 16.1% 127,053 19.2%
Other income (expense):
Interest expense, net (24,041) -2.8% (18,598) -2.8%
Other income/ (expense), net (1,251) -0.1% (598) -0.1%
Total other expense (25,292) -2.9% (19,196) -2.9%
Income before income taxes 115,631 13.2% 107,857 16.3%
Income tax expense 38,036 4.4% 32,047 4.8%
Net income 77,595 8.9% 75,810 11.4%
Less: net income attributable to noncontrolling interests 809 0.1% 352 0.1%
Net income attributable to Stericycle, Inc. 76,786 8.8% 75,458 11.4%
Less: mandatory convertible preferred stock dividend 10,106 1.2% - 0.0%
Net income attributable to Stericycle, Inc. common shareholders$ 66,680 7.6% $ 75,458 11.4%
Earnings per share - diluted$ 0.78 $ 0.87
Weighted average number of common shares outstanding - diluted 85,845,501 86,357,006


STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended
March 31,
2016 2015
Operating Activities:
Net income$ 77,595 $ 75,810
Adjustments to reconcile net income to net cash
provided by operating activities:
Stock compensation expense 6,105 5,487
Excess tax benefit of stock options exercised - (8,222)
Depreciation 30,140 18,766
Amortization 18,274 8,797
Deferred income taxes 6,932 (2,957)
Other, net (2,644) 5,313
Changes in operating assets and liabilities, net of
effect of acquisitions and divestitures:
Accounts receivable (3,918) (14,491)
Accounts payable (15,203) 5,443
Accrued liabilities 21,151 35,924
Deferred revenue 487 (628)
Other assets and liabilities 18,030 3,312
Net cash provided by operating activities 156,949 132,554
Investing Activities:
Payments for acquisitions, net of cash acquired (24,884) (34,210)
Proceeds from investments 7 257
Proceeds from sale of property and equipment 766 -
Capital expenditures (34,185) (21,356)
Net cash used in investing activities (58,296) (55,309)
Financing Activities:
Repayments of long-term debt and other obligations (6,879) (9,780)
Proceeds from foreign bank debt 15,607 4,851
Repayments of foreign bank debt (18,721) (38,252)
Proceeds from term loan - 250,000
Repayments of term loan (171,000) -
Proceeds from senior credit facility 457,959 394,097
Repayments of senior credit facility (353,520) (670,254)
Repayments of capital lease obligations (1,381) (988)
Payment for hedge - (8,833)
Purchases and cancellations of treasury stock (37,693) (11,516)
Dividends paid on mandatory convertible preferred stock (10,106) -
Proceeds from issuances of common stock 22,310 27,452
Excess tax benefit of stock options exercised - 8,222
Payments to noncontrolling interests (4,997) (2,603)
Net cash used in financing activities (108,421) (57,604)
Effect of exchange rate changes on cash and cash equivalents (211) (3,594)
Net (decrease)/ increase in cash and cash equivalents (9,979) 16,047
Cash and cash equivalents at beginning of period 55,634 22,236
Cash and cash equivalents at end of period$ 45,655 $ 38,283
Non-cash activities:
Net issuances of obligations for acquisitions$ 13,013 $ 21,543

FOR FURTHER INFORMATION CONTACT: Investor Relations 847-607-2012

Source:Stericycle, Inc.