Stericycle, Inc. Reports Results for the Third Quarter and Year to Date 2015

Conference call to be held October 22, 2015 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 22nd by dialing 855-859-2056, access code 39410916. 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., Oct. 22, 2015 (GLOBE NEWSWIRE) — Stericycle, Inc. (NASDAQ:SRCL), today reported financial results for the third quarter and year to date 2015.

THIRD QUARTER RESULTS

Revenues for the quarter ended September 30, 2015 were $718.6 million, up $50.7 million or 7.6%, from $667.9 million in the third quarter last year. Acquisitions contributed approximately $33.3 million in revenues to the current period’s growth. Revenues increased 12.5% compared to the prior period when adjusted for unfavorable foreign exchange impact of $33.0 million.

Gross profit, reported in accordance with U.S. generally accepted accounting principles (“GAAP”), was $299.7 million, up 7.5% from $278.7 million in the third quarter last year. GAAP gross profit as a percent of revenues was 41.7% for both the third quarters of 2015 and 2014. Non-GAAP gross profit, when adjusted for various items identified in the second of the following tables, was $300.2 million, up 7.4% from $279.5 million in the third quarter last year. Non-GAAP gross profit as a percent of revenues was 41.8% compared to 41.9% in the third quarter of 2014.

GAAP earnings per diluted share decreased 51.6% to $0.47 from $0.96 in the third quarter last year. Non-GAAP earnings per diluted share, when adjusted for various items identified in the third of the following tables, remained at $1.08. See tables below.

FIRST NINE MONTHS RESULTS

Revenues for the nine months ended September 30, 2015 were $2.10 billion, up $219.0 million or 11.7%, from $1.88 billion in the same period last year. Acquisitions contributed approximately $178.5 million in revenues to the current year’s growth. Revenues increased 16.1% compared with the prior period when adjusted for unfavorable foreign exchange impact of $83.3 million.

GAAP gross profit was $885.8 million, up 9.4% from $809.4 million in the same period last year. GAAP gross profit as a percent of revenues was 42.2% compared to 43.1% in the same period last year. Non-GAAP gross profit, when adjusted for various items identified in the second of the following tables, was $886.8 million, up 9.2% from $812.0 million in the same period as last year. Non-GAAP gross profit as a percent of revenues was 42.3% compared to 43.2% in the same period as last year.

GAAP earnings per diluted share decreased 27.8% to $2.04 from $2.83 in 2014. Non-GAAP earnings per diluted share, when adjusted for various items identified in the third of the following tables, increased 4.5% to $3.30 from $3.15. 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
  2015 2014 $ % 2015 2014 $ %
Total As Reported Revenues (GAAP) $ 718.6 $ 667.9 $ 50.7 7.6% $ 2,097.6 $ 1,878.7 $ 219.0 11.7%
Adjustment for Foreign Exchange 33.0   33.0   83.3   83.3  
Subtotal (non-GAAP): 751.6 667.9 83.7 12.5% 2,181.0 1,878.7 302.3 16.1%
                 
Adjustment for Acquisitions (37.0) (3.7) (33.3)   (232.5) (54.0) (178.5)  
Adjustment for Regulated Returns and
Recall Management Services
(26.4) (16.6) (9.8)   (67.0) (64.4) (2.6)  
Total revenues, as adjusted (non-GAAP): $  688.2 $  647.6 $  40.6 6.3% $ 1,881.5 $ 1,760.3 $ 121.2 6.9%
                 
Domestic/ International Breakdown:                
Domestic Revenues $ 523.5 $ 468.7 $ 54.8 11.7% $  1,513.9 $ 1,310.8 $ 203.2 15.5%
International Revenues 195.1 199.2 (4.1)  (2.1)% 583.7 567.9 15.8 2.8%
Total As Reported Revenues (GAAP) $ 718.6 $ 667.9 $ 50.7 7.6% $ 2,097.6 $ 1,878.7 $ 219.0 11.7%
 
(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 thousands)(2)

  Three Months Ended September 30, Nine Months Ended September 30,
  2015 2014 2015 2014
  $ % of
Rev
$ % of
Rev
$ % of
Rev
$ % of
Rev
GAAP Gross Profit $299,675 41.7% $278,669 41.7% $885,830 42.2% $809,442 43.1%
Plant Conversion Expenses 487 0.1% 845 0.1% 1,001 0.0% 2,534 0.1%
Non-GAAP Gross Profit $300,162 41.8% $279,514 41.9% $886,831 42.3% $811,976 43.2%
 
(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 September 30, Nine Months Ended September 30,
      Change     Change
  2015 2014 $ % 2015 2014 $ %
GAAP EPS $ 0.47 $ 0.96 $ (0.50) (51.6)% $ 2.04  $ 2.83 $ (0.79) (27.8)%
Acquisition Expenses a 0.27 0.03     0.34 0.12    
Integration Expenses a 0.10 0.05     0.23 0.11    
Change in Fair Value of Contingent Consideration a     (0.01) 0.05    
Litigation Expenses a 0.21 0.01     0.54 0.02    
Plant Conversion and Restructuring Expenses a 0.02 0.02     0.15 0.03    
Add Back Convertible Preferred Stock Dividend Method b 0.02     0.02    
Reallocation of EPS Related to Convertible Preferred Stock If Converted Method b (0.01)     (0.01)    
Non-GAAP EPS (Adjusted) $ 1.08 $ 1.08 $  (0.00) (0.1)% $3.30   $ 3.15 $ 0.14 4.5%
 
(3a) In accordance with GAAP, reported earnings per 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) In accordance with GAAP, the issue of the Mandatory Convertible Preferred Stock requires that EPS for GAAP purposes be stated using the more dilutive of the dividend method or the if-converted method. Under the dividend method, the net income is reduced by the amount of the accrued dividend related to Mandatory Convertible Preferred Stock. Under the if-converted method, the dividend is ignored in favor of the diluted share count that would occur under the assumption that the Mandatory Convertible Preferred shares were converted to common shares at the closing share price of the last day in the quarter. In order to align the EPS calculation with the reporting method that will prevail when the preferred stock converts to common stock, the EPS related to the dividend is added back, then reduced by the amount that the if-converted method exceeds the dividend method.

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 $293.3 million and $345.0 million for the nine months ended September 30, 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, increases in transportation and other operating costs, the level of governmental enforcement of regulations governing regulated waste collection and treatment, our ability to execute our acquisition strategy and to integrate acquired businesses, competition and demand for services in the regulated waste industry, political, economic and currency risks related to our foreign operations, impairments of goodwill or other indefinite-lived intangibles, exposure to environmental liabilities, 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)
     
  September 30, December 31,
  2015 2014
ASSETS    
Current Assets:    
Cash and cash equivalents  $ 32,883  $ 22,236
Short-term investments  636,288  380
Accounts receivable, net  524,503  465,473
Deferred income taxes  51,094  28,322
Prepaid expenses  34,197  30,632
Other current assets  40,500  33,173
Total Current Assets  1,319,465  580,216
Property, plant and equipment, net  464,898  460,408
Goodwill  2,447,454  2,418,832
Intangible assets, net  909,503  909,645
Other assets  35,137  32,621
Total Assets  $ 5,176,457  $ 4,401,722
     
LIABILITIES AND EQUITY    
Current Liabilities:    
Current portion of long-term debt  $ 106,405  $ 131,969
Accounts payable  150,213  114,596
Accrued liabilities  203,000  131,743
Deferred revenues  18,223  21,624
Other current liabilities  64,903  61,599
Total Current Liabilities  542,744  461,531
Long-term debt, net of current portion  1,409,687  1,527,246
Deferred income taxes  430,203  431,643
Other liabilities  68,191  64,117
Equity:    
Mandatory convertible preferred stock  8  — 
Common stock  849  849
Additional paid-in capital  1,125,667  289,211
Accumulated other comprehensive loss  (237,246)  (138,419)
Retained earnings   1,818,025  1,743,371
Total Stericycle, Inc. Equity  2,707,303  1,895,012
Noncontrolling interests  18,329  22,173
Total Equity  2,725,632  1,917,185
Total Liabilities and Equity  $ 5,176,457  $ 4,401,722
 
 
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,
  2015 2014 2015 2014
  $ % of Rev $ % of Rev $ % of Rev $ % of Rev
                 
Revenues  $ 718,596 100.0%  $ 667,877 100.0%  $2,097,604 100.0%  $1,878,654 100.0%
Cost of revenues (“COR”) exclusive of depreciation and adjusting items shown below  404,431 56.3%  373,128 55.9%  1,168,050 55.7%  1,023,615 54.5%
Depreciation  14,003 1.9%  15,235 2.3%  42,723 2.0%  43,063 2.3%
Total cost of revenues  418,434 58.2%  388,363 58.1%  1,210,773 57.7%  1,066,678 56.8%
                 
Gross profit (non-GAAP)  300,162 41.8%  279,514 41.9%  886,831 42.3%  811,976 43.2%
                 
Selling, general and administrative expenses (“SG&A”) exclusive of depreciation, amortization and adjusting items shown below  124,521 17.3%  111,793 16.7%  362,388 17.3%  321,302 17.1%
Depreciation  4,248 0.6%  5,033 0.8%  12,753 0.6%  12,325 0.7%
Amortization  9,239 1.3%  8,497 1.3%  26,957 1.3%  24,214 1.3%
Total SG&A expense  138,008 19.2%  125,323 18.8%  402,098 19.2%  357,841 19.0%
                 
Income from operations (non-GAAP) exclusive of adjusting items shown below  162,154 22.6%  154,191 23.1%  484,733 23.1%  454,135 24.2%
                 
Adjusting items:                
Plant conversion expenses (COR)  487 0.1%  845 0.1%  1,001 0.0% 2,534 0.1%
Acquisition expenses (SG&A)  33,674 4.7%  3,472 0.5%  39,956 1.9%  10,672 0.6%
Integration expenses (SG&A)  13,447 1.9%  7,461 1.1%  31,257 1.5%  14,625 0.8%
Change in fair value of contingent consideration (SG&A)  —  0.0%  —  0.0%  (640) 0.0%  3,953 0.2%
Restructuring and plant conversion expenses (SG&A)  2,234 0.3%  1,535 0.2%  17,080 0.8%  1,535 0.1%
Litigation expenses (SG&A)  29,062 4.0%  1,342 0.2%  76,012 3.6%  3,243 0.2%
                 
Income from operations (GAAP)  83,250 11.6%  139,536 20.9%  320,067 15.3%  417,573 22.2%
                 
Other income (expense):                
Interest expense, net  (17,378) -2.4%  (16,617) -2.5%  (52,366) -2.5%  (47,883) -2.5%
Other expense, net  (1,754) -0.2%  (477) -0.1%  (3,956) -0.2%  (1,569) -0.1%
                 
Total other expense  (19,132) -2.7%  (17,094) -2.6%  (56,322) -2.7%  (49,452) -2.6%
                 
Income before income taxes  64,118 8.9%  122,442 18.3%  263,745 12.6%  368,121 19.6%
                 
Income tax expense  21,892 3.0%  39,401 5.9%  84,813 4.0%  122,633 6.5%
                 
Net income  42,226 5.9%  83,041 12.4%  178,932 8.5%  245,488 13.1%
                 
Less: net income attributable to noncontrolling interests  457 0.1%  196 0.0%  1,256 0.1%  1,558 0.1%
                 
Net income attributable to Stericycle, Inc.  $ 41,769 5.8%  $ 82,845 12.4%  $ 177,676 8.5%  $ 243,930 13.0%
                 
Earnings per share – diluted  $ 0.47    $ 0.96    $ 2.04    $ 2.83  
                 
Weighted average number of common shares outstanding – diluted  86,120,810    86,116,455    86,113,130    86,237,202  
 
 
STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
     
  Nine Months Ended
  September 30,
  2015 2014
Operating Activities:    
Net income  $ 178,932  $ 245,488
Adjustments to reconcile net income to net cash provided by operating activities:    
Stock compensation expense  16,158  13,365
Excess tax benefit of stock options exercised  (15,483)  (10,747)
Depreciation   55,476  55,388
Amortization  26,957  24,214
Deferred income taxes  (17,169)  8,833
Change in fair value of contingent consideration  (640)  3,953
Other, net  6,326  1,379
Changes in operating assets and liabilities, net of effect of acquisitions:    
Accounts receivable  (66,352)  (25,420)
Accounts payable  29,170  13,383
Accrued liabilities  88,314  17,640
Deferred revenue  (3,412)  2,326
Other assets and liabilities  (4,986)  (4,830)
     
Net cash provided by operating activities  293,291  344,972
     
Investing Activities:    
Payments for acquisitions, net of cash acquired  (97,098)  (328,811)
Purchases of investments  (635,919)  (2,051)
Capital expenditures  (72,566)  (66,262)
     
Net cash used in investing activities  (805,583)  (397,124)
     
Financing Activities:    
Repayments of long-term debt and other obligations  (61,805)  (45,031)
Proceeds from foreign bank debt  42,535  151,605
Repayments of foreign bank debt  (76,387)  (136,025)
Proceeds from term loan  250,000  — 
Repayments of term loan  (250,000)  — 
Proceeds from private placement of long-term note  300,000  — 
Repayments of private placement of long-term note  (100,000)  — 
Proceeds from senior credit facility  1,338,140  1,154,100
Repayments of senior credit facility  (1,614,968)  (979,059)
Repayments of capital lease obligations  (2,813)  (4,014)
Payments of deferred financing costs  —   (2,280)
Payment for hedge  (8,833)  — 
Purchases and cancellations of treasury stock  (103,029)  (157,004)
Proceeds from issuance of mandatory convertible preferred stock  746,900  — 
Proceeds from issuances of common stock  53,529  33,904
Excess tax benefit of stock options exercised  15,483  10,747
Payments to noncontrolling interests  (5,236)  (732)
     
Net cash provided by financing activities  523,516  26,211
Effect of exchange rate changes on cash  (577)  759
Net increase/ (decrease) in cash and cash equivalents  10,647  (25,182)
Cash and cash equivalents at beginning of period  22,236  67,167
     
Cash and cash equivalents at end of period  $ 32,883  $ 41,985
     
Non-cash activities:    
Net issuance of obligations for acquisitions  $ 71,905  $ 100,944
CONTACT: Investor Relations
         847-607-2012

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