Stericycle, Inc. Reports Results for Third Quarter 2009

Tuesday, October 27, 2009 4:03 PM

Oct. 27, 2009 (Business Wire) -- Stericycle, Inc. (NASDAQ:SRCL), today reported financial results for the third quarter of 2009.

Revenues for the quarter ending September 30, 2009 were $297.8 million, up 7.5% from $277.1 million in the same quarter last year. Acquisitions less than 12 months old contributed approximately $19.3 million to the growth in revenues for the quarter. Revenues increased 11.1% compared to the third quarter of 2008 when adjusted for unfavorable foreign exchange impacts of $10.1 million. Regulated returns management services revenues for the quarter were $16.0 million compared with $16.1 million for the third quarter of 2008. Gross profit was $140.9 million, up 14.5% from $123.0 million in the same quarter last year. Gross profit as a percent of revenue was 47.3% compared with 44.4% in the third quarter of 2008.

Net income for the third quarter of 2009 was $46.5 million or $0.54 per diluted share compared with net income of $39.2 million or $0.45 per diluted share for the third quarter of 2008. Net income for the third quarter of 2008 included the effect of $0.1 million of charges related to an arbitration settlement, and net income for the third quarter of 2009 included the effect of $3.3 million of transactional expenses related to acquisitions offset by $1.8 million net release of prior years’ tax reserves. Adjusted for these charges, earnings per diluted share increased from $0.45 in the third quarter of 2008 to $0.55 in the third quarter of 2009 or up 23.6% (see table below).

For the nine months ending September 30, 2009, revenues were $864.2 million, up 6.7% from $809.7 million in the same period last year. Revenues increased 11.7% compared with the prior year-to-date when adjusted for unfavorable foreign exchange impacts of $40.6 million. Regulated returns management services revenues were $54.0 million compared with $58.6 million in the same period last year. Gross profit was $405.3 million, up 12.6% from $359.8 million in the same period last year. Gross profit as a percent of revenues was 46.9% versus 44.4% in the same period in 2008. Earnings per diluted share increased 22.0% to $1.51 from $1.24 per diluted share in the same period last year. Net income for the nine months of 2008 included the effect of $3.5 million of charges related to an arbitration settlement, and net income for the nine months of 2009 included the effect of $4.8 million of transactional expenses related to acquisitions offset by $1.8 million net release of prior years’ tax reserves. Adjusted for these charges, the earnings per diluted share increased from $1.28 to $1.54, or 21.0% (see table below):

Table to reconcile GAAP EPS to non-GAAP EPS

	Three month ended September 30,						Nine months ended September 30,
	2009		2008	Change $	Change %		2009		2008	Change $	Change %
GAAP EPS	$0.54		$0.45	$0.09	20.1	%	$1.51		$1.24	$0.27	22.0	%

Transactional expenses related to acquisitions	0.04		-				0.06		-

Arbitration settlement	-		-				-		0.04

Net release of prior years’ tax reserves	(0.02	)	-				(0.02	)	-

Non-GAAP EPS (adjusted)	$0.55		$0.45	$0.09	23.6	%	$1.54		$1.28	$0.27	21.0	%

Cash flow from operations was $213.9 million for the first nine months of 2009. Cash flow and increased loan balances were used to strengthen our business by acquisitions, to fund share repurchases and capital expenditures.

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

Conference call to be held October 27, 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 November 27th by dialing 800-642-1687, access code 30587273. 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE DATA)


		September 30,			December 31,
		2009			2008
		(unaudited)			(audited)
ASSETS
Current Assets:
Cash and cash equivalents	$	14,286		$	9,095
Short-term investments		1,519			1,408
Accounts receivable, less allowance for doubtful
accounts of $7,358 in 2009 and $6,616 in 2008		167,946			168,598
Deferred income taxes		10,482			16,821
Other current assets		29,101			28,508
Total Current Assets		223,334			224,430
Property, plant and equipment, net		227,327			207,144
Other assets:
Goodwill		1,222,025			1,135,778
Intangible assets, less accumulated amortization of
$16,923 in 2009 and $14,116 in 2008		227,718			170,624
Other		29,063			21,322
Total other assets		1,478,806			1,327,724
Total Assets	$	1,929,467		$	1,759,298

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt	$	58,001		$	38,880
Accounts payable		33,412			33,612
Accrued liabilities		99,464			93,487
Deferred revenues		14,202			13,663
Total Current Liabilities		205,079			179,642
Long-term debt, net of current portion		768,041			753,846
Deferred income taxes		165,373			147,287
Other liabilities		4,179			7,885
Shareholders' Equity:
Common stock (par value $0.01 per share, 120,000,000 shares
authorized, 84,297,521 issued and outstanding in 2009,
85,252,879 issued and outstanding in 2008)		843			852
Additional paid-in capital		23,011			67,776
Treasury stock		-			-
Accumulated other comprehensive income		(13,696	)		(32,075	)
Retained earnings		765,010			633,927
Total Stericycle, Inc. Shareholders' Equity		775,168			670,480
Noncontrolling Interest		11,627			158
Total Shareholders' Equity		786,795			670,638
Total Liabilities and Shareholders' Equity	$	1,929,467		$	1,759,298

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


	Three Months Ended										Nine Months Ended
	September 30,										September 30,
	(unaudited)										(unaudited)
		2009					2008					2009					2008
		$		% of Rev			$		% of Rev			$		% of Rev			$		% of Rev

Revenues	$	297,836		100.0	%	$	277,098		100.0	%	$	864,194		100.0	%	$	809,668		100.0	%

Cost of revenues		156,919		52.7	%		154,069		55.6	%		458,940		53.1	%		449,895		55.6	%

Gross profit		140,917		47.3	%		123,029		44.4	%		405,254		46.9	%		359,773		44.4	%

Selling, general and administrative expenses		56,190		18.9	%		50,115		18.1	%		162,277		18.8	%		148,073		18.3	%
Amortization		1,434		0.5	%		1,100		0.4	%		3,820		0.4	%		2,944		0.4	%

Total SG&A expense and amortization		57,624		19.3	%		51,215		18.5	%		166,097		19.2	%		151,017		18.7	%

Income from operations before acquisition integration and other expenses		83,293		28.0	%		71,814		25.9	%		239,157		27.7	%		208,756		25.8	%

Transactional expenses related to acquisitions		3,478		1.2	%		-		0.0	%		5,418		0.6	%		-		0.0	%
Arbitration settlement and related costs		-		0.0	%		96		0.0	%		-		0.0	%		5,595		0.7	%
Acquisition integration expenses		282		0.1	%		210		0.1	%		466		0.1	%		1,239		0.2	%

Income from operations		79,533		26.7	%		71,508		25.8	%		233,273		27.0	%		201,922		24.9	%

Other income (expense):
Interest income		48		0.0	%		185		0.1	%		271		0.0	%		744		0.1	%
Interest expense		(9,262	)	-3.1	%		(8,618	)	-3.1	%		(25,561	)	-3.0	%		(24,885	)	-3.1	%
Other expense, net		(683	)	-0.2	%		(611	)	-0.2	%		(2,412	)	-0.3	%		(1,572	)	-0.2	%

Total other income (expense)		(9,897	)	-3.3	%		(9,044	)	-3.3	%		(27,702	)	-3.2	%		(25,713	)	-3.2	%

Income before income taxes		69,636		23.4	%		62,464		22.5	%		205,571		23.8	%		176,209		21.8	%

Income tax expense		23,110		7.8	%		23,237		8.4	%		74,488		8.6	%		66,633		8.2	%

Net income	$	46,526		15.6	%	$	39,227		14.2	%	$	131,083		15.2	%	$	109,576		13.5	%

Earnings per share-diluted	$	0.54				$	0.45				$	1.51				$	1.24

Weighted average number of common shares outstanding-diluted		86,794,118					87,864,210					86,827,626					88,578,506

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

		For the nine months ended
		September 30,
		2009			2008
		(unaudited)			(unaudited)
Operating Activities:
Net income	$	131,083		$	109,576
Adjustments to reconcile net income to net cash
provided by operating activities:
Write-off of note receivable related to joint venture		-			798
Stock compensation expense		10,861			8,880
Excess tax benefit of stock options exercised		(357	)		(6,165	)
Depreciation		24,643			22,344
Amortization		3,820			2,944
Deferred income taxes		20,718			18,729
Changes in operating assets and liabilities, net of
effect of acquisitions and divestitures:
Accounts receivable		8,115			(13,976	)
Accounts payable		(4,502	)		(10,205	)
Accrued liabilities		20,452			24,451
Deferred revenues		252			2,299
Other assets		(1,158	)		(3,398	)

Net cash provided by operating activities		213,927			156,277

Investing Activities:
Payments for acquisitions and international
investments, net of cash acquired		(107,079	)		(46,564	)
(Purchases)/proceeds from maturity of short-term investments		(58	)		37
Proceeds from sale of property and equipment		640			-
Capital expenditures		(29,644	)		(35,729	)

Net cash used in investing activities		(136,141	)		(82,256	)

Financing Activities:
Repayment of long-term debt		(10,443	)		(7,868	)
Net repayments on senior credit facility		(213,027	)		(52,184	)
Proceeds from term loan		215,000			-
Proceeds from private placement of long-term notes		-			100,000
Payments of deferred financing costs		(3,620	)		(236	)
Principal payments on capital lease obligations		(255	)		(130	)
Purchase/cancellation of treasury stock		(69,986	)		(140,306	)
Proceeds from other issuances of common stock		11,726			14,688
Excess tax benefit of stock options exercised		357			6,165

Net cash used in financing activities		(70,248	)		(79,871	)
Effect of exchange rate changes on cash		(2,347	)		(4,215	)
Net increase/(decrease) in cash and cash equivalents		5,191			(10,065	)
Cash and cash equivalents at beginning of period		9,095			17,108

Cash and cash equivalents at end of period	$	14,286		$	7,043
Non-cash activities:
Net issuances of notes payable for certain acquisitions	$	32,116		$	58,977

(Source: iStockAnalyst )

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