Stericycle, Inc. Reports Results for Second Quarter 2009

Tuesday, July 28, 2009 4:21 PM

Stericycle, Inc. (NASDAQ:SRCL), today reported financial results for the second quarter of 2009.

Revenues for the quarter ending June 30, 2009 were $289.3 million, up 4.1% from $277.8 million in the same quarter last year. Acquisitions less than 12 months old contributed approximately $20.5 million to the growth in revenues for the quarter. Revenues increased 9.3% compared to the second quarter of 2008 when adjusted for an unfavorable foreign exchange impact of $14.3 million. Regulated returns management services revenues were $18.3 million versus $26.0 million in 2008. Gross profit was $136.5 million, up 10.9% from $123.2 million in the same quarter last year. Gross profit as a percent of revenue was 47.2% versus 44.3% in the second quarter of 2008.

Net income for the second quarter of 2009 was $43.9 million or $0.51 per diluted share compared with net income of $38.7 million or $0.44 per diluted share for the second quarter of 2008. Net income for the second quarter of 2008 included the effect of $0.1 million of charges related to an arbitration settlement, and net income for the second quarter of 2009 included the effect of $0.8 million of transactional expenses related to acquisitions. Adjusted for these charges, the earnings per diluted share increased from $0.44 in the second quarter of 2008 to $0.52 in the second quarter of 2009 or 17.5% (see table below).

For the six months ending June 30, 2009, revenues were $566 million, up 6.3% from $533 million in the same period last year. The unfavorable foreign exchange impact was $30.5 million and regulated returns management services revenues were $38.0 million versus $42.5 million in the same period last year. Gross profit was $264 million, up 11.7% from $237 million in the same period last year. Gross profit as a percent of revenues was 46.7% versus 44.5% in the same period in 2008. Earnings per diluted share increased 23.1% to $0.97 from $0.79 per diluted share in the same period last year. Net income for the six months ended 2008 included the effect of $3.4 million of charges related to an arbitration settlement, and net income for the six months of 2009 included the effect of $1.2 million of transactional expenses related to acquisitions. Adjusted for these charges, the earnings per diluted share increased from $0.83 to $0.99, or 19.1% (see table below):


Table to reconcile non-GAAP EPS to GAAP EPS
	Three month ended June 30,				Six months ended June 30,
	2009	2008	Change $	Change %	2009	2008	Change $	Change %
GAAP EPS	$0.51	$0.44	$0.07	15.6%	$0.97	$0.79	$0.18	23.1%

Transactional expenses related to acquisitions	0.01	-			0.02	-

Arbitration settlement	-	-			-	0.04

Non-GAAP EPS (adjusted)	$0.52	$0.44	$0.08	17.5%	$0.99	$0.83	$0.16	19.1%

Cash flow from operations was $126.2 million for the first six months of 2009. Cash flow and increased loan balances were used to strengthen our business by acquisitions, capital expenditures and funding share repurchases.

On June 24, 2009, we entered into a three-year term loan credit agreement. Our initial borrowing under this credit agreement was $50 million and on July 23, 2009, we borrowed an additional $145 million. We also have signed commitments for an additional borrowing of $20 million under the term credit agreement. The proceeds of these loans were used to reduce our borrowings under our revolving credit facility. The interest rate on our loans under the new credit agreement is fluctuating and based on LIBOR plus the applicable margin provided in the credit agreement. The applicable margin is based on our leverage ratio and ranges from 2.75% to 3.5%. We anticipate that our after-tax interest costs for the remainder of 2009 will increase by approximately $1.8 million as a result of our borrowings under the new credit agreement.

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

Conference call to be held July 28, 2009 at 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 28th by dialing 800-642-1687, access code 17891684. 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.

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
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE DATA)


		June 30,			December 31,
		2009			2008
		(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,682		$	9,095
Short-term investments		977			1,408
Accounts receivable, less allowance for doubtful
accounts of $7,357 in 2009 and $6,616 in 2008		163,263			168,598
Deferred income taxes		11,121			16,821
Other current assets		30,660			28,508
Total current assets		208,703			224,430
Property, plant and equipment, net		216,971			207,144
Other assets:
Goodwill		1,188,946			1,135,778
Intangible assets, less accumulated amortization of
$15,633 in 2009 and $14,116 in 2008		203,995			170,624
Other		23,067			21,322
Total other assets		1,416,008			1,327,724
Total assets	$	1,841,682		$	1,759,298

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	43,917		$	38,880
Accounts payable		29,821			33,612
Accrued liabilities		77,788			93,487
Deferred revenue		14,165			13,663
Total current liabilities		165,691			179,642
Long-term debt, net of current portion		741,641			753,846
Deferred income taxes		161,698			147,287
Other liabilities		6,033			8,043
Shareholders' equity:
Common stock (par value $0.01 per share, 120,000,000 shares
authorized, 85,033,935 issued and outstanding in 2009,
85,252,879 issued and outstanding in 2008)		850			852
Additional paid in capital		58,092			67,776
Accumulated other comprehensive loss		(10,807	)		(32,075	)
Retained earnings		718,484			633,927
Total shareholders' equity		766,619			670,480
Total liabilities and shareholders' equity	$	1,841,682		$	1,759,298


STERICYCLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE DATA)


	Three Months Ended										Six Months Ended
	June 30,										June 30,
	(unaudited)										(unaudited)
	2009					2008					2009						2008
	$			% of Rev		$			% of Rev		$			% of Rev			$		% of Rev

Revenues	$	289,268		100.0	%	$	277,786		100.0	%	$	566,358		100.0	%	$	532,570		100.0	%

Cost of revenues		152,734		52.8	%		154,632		55.7	%		302,021		53.3	%		295,826		55.5	%

Gross profit		136,534		47.2	%		123,154		44.3	%		264,337		46.7	%		236,744		44.5	%

Selling, general and
administrative expenses		54,215		18.7	%		50,973		18.3	%		106,087		18.7	%		97,958		18.4	%
Amortization		1,376		0.5	%		792		0.3	%		2,386		0.4	%		1,844		0.3	%

Total SG&A expense and amortization		55,591		19.2	%		51,765		18.6	%		108,473		19.2	%		99,802		18.7	%

Income from operations before
acquisition and other expenses		80,943		28.0	%		71,389		25.7	%		155,864		27.5	%		136,942		25.7	%

Transactional expenses related to acquisitions		1,330		0.5	%		-		0.0	%		1,940		0.3	%		-		0.0	%
Arbitration settlement and related costs		-		0.0	%		147		0.1	%		-		0.0	%		5,499		1.0	%
Acquisition integration expenses		73		0.0	%		316		0.1	%		184		0.0	%		1,029		0.2	%

Income from operations		79,540		27.5	%		70,926		25.5	%		153,740		27.1	%		130,414		24.5	%

Other income (expense):
Interest Income		49		0.0	%		157		0.1	%		223		0.0	%		559		0.1	%
Interest expense		(8,200	)	-2.8	%		(8,139	)	-2.9	%		(16,299	)	-2.9	%		(16,267	)	-3.1	%
Other expense, net		(920	)	-0.3	%		(518	)	-0.2	%		(1,729	)	-0.3	%		(961	)	-0.2	%

Total other income (expense)		(9,071	)	-3.1	%		(8,500	)	-3.1	%		(17,805	)	-3.1	%		(16,669	)	-3.1	%

Income before income taxes		70,469		24.4	%		62,426		22.5	%		135,935		24.0	%		113,745		21.4	%

Income tax expense		26,567		9.2	%		23,741		8.5	%		51,378		9.1	%		43,396		8.1	%

Net income	$	43,902		15.2	%	$	38,685		13.9	%	$	84,557		14.9	%	$	70,349		13.2	%

Earnings per share-diluted	$	0.51				$	0.44				$	0.97				$	0.79

Weighted average number of
common shares outstanding-diluted		86,843,260					88,484,943					86,843,043					88,944,593


STERICYCLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

		For the six months ended
		June 30,
		2009			2008
		(unaudited)			(unaudited)
Operating Activities:
Net income	$	84,557		$	70,349
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on sale of assets		62			-
Write-off of note receivable related to joint venture					798
Stock compensation expense		7,092			5,987
Excess tax benefit from exercise of stock options		(551	)		(4,523	)
Depreciation		16,118			14,793
Amortization		2,386			1,844
Deferred income taxes		11,976			11,222
Changes in operating assets and liabilities, net of
effect of acquisitions:
Accounts receivable		12,302			(9,304	)
Other assets		1,505			(686	)
Accounts payable		(7,806	)		(9,575	)
Accrued liabilities		(1,620	)		10,748
Deferred revenues		181			2,982

Net cash provided by operating activities		126,202			94,635

Investing Activities:
Payments for acquisitions and international
investments, net of cash acquired		(60,519	)		(33,399	)
Proceeds from maturity of short-term investments		513			129
Proceeds from sale of property and equipment		448			-
Capital expenditures		(17,904	)		(22,977	)

Net cash used in investing activities		(77,462	)		(56,247	)

Financing Activities:
Repayment of long-term debt		(11,383	)		(3,760	)
Net borrowings on senior credit facility		(71,762	)		(29,700	)
Proceeds from term loan		50,000			-
Proceeds from private placement of long-term note		-			100,000
Payments of deferred financing costs		(888	)		(236	)
Net payments on capital lease obligations		(122	)		(199	)
Excess tax benefit from exercise of stock options		551			4,523
Purchase/cancellation of treasury stock		(29,975	)		(121,195	)
Proceeds from other issuances of common stock		9,163			9,737

Net cash used in financing activities		(54,416	)		(40,830	)
Effect of exchange rate changes on cash		(737	)		(2,271	)
Net decrease in cash and cash equivalents		(6,413	)		(4,713	)
Cash and cash equivalents at beginning of period		9,095			17,108

Cash and cash equivalents at end of period	$	2,682		$	12,395
Non-cash activities:
Net issuances of notes payable for certain acquisitions	$	20,756		$	30,544

Stericycle, Inc.
Frank ten Brink 847-607-2012

(Source: Business Wire )

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