LAKE FOREST, Ill., May 04, 2017 (GLOBE NEWSWIRE) -- Stericycle, Inc. (NASDAQ:SRCL) today reported financial results for the first quarter of 2017.

FIRST QUARTER HIGHLIGHTS COMPARED TO PRIOR YEAR:

  • Revenues of $892.4 million, an increase of 2.1%, including a 1.1% unfavorable impact from foreign exchange
  • Gross profit of $368.7 million, an increase of 0.6%
  • Earnings per diluted share (“EPS”) decreased 19.7% to $0.62 and Adjusted earnings per diluted share (“Adjusted EPS”) decreased 1.2% to $1.09.

FIRST QUARTER RESULTS

Revenues for the quarter ended March 31, 2017 were $892.4 million, an increase of 2.1% from $874.2 million in the first quarter of last year. Acquisitions contributed approximately $10.0 million to the current period’s increase in revenues. Divestitures reduced current period revenues by $0.7 million. Revenues increased 3.2% compared to the first quarter of last year when adjusted for unfavorable foreign exchange impacts of $9.7 million. Organic revenues grew 2.1%, or 3.6% when adjusted for Manufacturing and Industrial Services. See Tables 1-A and 1-B.

“We are off to a great start for 2017,” said Charlie Alutto, President and Chief Executive Officer.  “Our Secure Information Destruction business grew 8% organically from an increase in sales of ongoing and one-time services combined with higher revenues for recycled paper.  Additionally, the market-leading position and unique capabilities of our Communication and Related Services business enabled the team to deliver solid year-over-year organic growth of greater than 6%.”

Gross profit was $368.7 million, an increase of 0.6% from $366.6 million in the first quarter of last year. Gross profit as a percentage of revenues was 41.3% compared to 41.9% in the first quarter of last year. Adjusted gross profit was $368.7 million, an increase of 0.5% from $366.8 million in the first quarter of last year. Adjusted gross profit as a percentage of revenues was 41.3% compared to 42.0% in the first quarter of last year. See Table 2.

EPS decreased 19.7% to $0.62 from $0.78 in the first quarter of last year. Adjusted EPS decreased 1.2% to $1.09 from $1.11 in the first quarter of last year. See Tables 3 and 4.

Cash flow from operations for the three months ended March 31, 2017 was $175.3 million, an increase of 11.7% from $156.9 million in the same period last year.

CONFERENCE CALL INFORMATION

Conference call to be held May 4, 2017 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 for 30 days by dialing 855-859-2056 or 404-537-3406, access code 92841381. To hear a live simulcast of the call or access the audio archive, visit the investor relations page on www.stericycle.com.

PRESENTATION AND DISCUSSION OF NON-GAAP INFORMATION

The Company reports its financial results in compliance with U.S. Generally Accepted Accounting Principles (“GAAP”), but believes that also discussing non-GAAP financial measures allows for a better period over period comparison by removing the impact of items that, in management’s view, do not reflect the Company’s underlying operating performance. This press release includes certain non-GAAP financial measures, as defined in the SEC’s Regulation G. These non-GAAP measures are also used to evaluate senior management and are a factor in determining their performance-based compensation.

Adjusted EPS, Adjusted net income attributable to Stericycle common shareholders, Adjusted gross profit, and Adjusted revenues are described in the Reconciliation of Certain Non-GAAP Measures section of this document.

We present our change in revenues separately to show the impact of foreign currency, acquisitions, and divestitures because we believe that exclusion of these items better represents the Company’s underlying business trends, including organic revenue growth. We also present revenues excluding Manufacturing and Industrial Services (“M&I”) which allow for visibility to a revenue stream that has shown greater volatility than our other service lines.

For the purpose of evaluating operating performance, we present our financials to show the impact of certain acquisition-related items in our adjusted earnings. These adjustments include acquisition and integration expenses, intangible amortization expense, and the change in fair value of contingent consideration. This allows for comparison of period over period results without the impact of acquisition-related items. Further, we show the impact of certain other items in our adjusted earnings to allow for period over period comparison of results without the impact of items that may not occur each year and, if so, are due to different factors. For the periods presented, these adjustments include litigation and professional services and restructuring, contract exit and plant conversion related items.

For the purpose of calculating the ultimate impact of our mandatory convertible preferred stock, we show the impact by excluding the mandatory convertible preferred stock dividend and using the “if-converted” method of share dilution. This provides the reader insight to how our diluted share count will be affected after these preferred shares are converted to common shares.

These non-GAAP financial measures should not be considered in isolation or as a substitute for GAAP financial results, but should be read in conjunction with the unaudited condensed consolidated statement of income and other information presented herein. The non-GAAP financial measures in the press release may differ from similar measures used by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP measure is included in the accompanying tables.

RECONCILIATION OF CERTAIN NON-GAAP MEASURES

Table 1 – A: RECONCILIATION OF REVENUES TO ADJUSTED REVENUES

  Three Months Ended March 31, 
  In millions  Percentage Change (%) 
Global Revenues Details by Service 2017    2016  Change  Organic Acquisitions,
Net of
Divestiture		 Foreign
Exchange		 Total 
Regulated Waste and Compliance Services $511.2    $506.6  $4.6   1.5% 0.4% (1.0%) 0.9%
Secure Information Destruction Services  204.1     184.6   19.4   8.0% 3.8% (1.2%) 10.5%
Communication and Related Services  93.5     87.9   5.6   6.3% 1.0% (1.0%) 6.3%
Manufacturing and Industrial Services  83.6     95.0   (11.4)  (9.6%) (0.8%) (1.6%) (12.0%)
Total Revenues, as Reported  892.4     874.2   18.2   2.1% 1.1% (1.1%) 2.1%
Less: Manufacturing and Industrial Services  (83.6)    (95.0)                 
Total Revenues, as Adjusted $808.8    $779.2  $29.6   3.6% 1.3% (1.1%) 3.8%
                            
Domestic and Canada Revenues $710.8    $686.2  $24.6   2.2% 1.2% 0.2% 3.6%
International Revenues  181.6     188.0   (6.4)  1.8% 0.7% (5.9%) (3.4%)
Total Revenues, as Reported $892.4    $874.2  $18.2   2.1% 1.1% (1.1%) 2.1%
                            

Table 1 – B: DISAGGREGATED REVENUES CHANGE – 2017

In millions 
 Three Months Ended
March 31, 2017		 
Organic$18.7 
Acquisitions 10.0 
Divestiture (0.7)
Foreign Exchange (9.7)
Total Change$18.2 
    

Table 2: RECONCILIATION OF GROSS PROFIT TO ADJUSTED GROSS PROFIT

In millions             
 Three Months Ended
March 31,		 
 2017  2016 
 $ % of
Revenues		  $ % of
Revenues		 
Gross Profit, as Reported$368.7  41.3% $366.6  41.9%
Plant Conversion Expenses -  0.0%  0.2  0.0%
Gross Profit, as Adjusted$368.7  41.3% $366.8  42.0%
              

Table 3: RECONCILIATION OF NET INCOME ATTRIBUTABLE TO STERICYCLE COMMON SHAREHOLDERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO STERICYCLE COMMON SHAREHOLDERS

In millions, except share and per share data 
 Three Months Ended
March 31,		 
 2017  2016 
Net Income Attributable to Stericycle, Inc. Common Shareholders, as Reported$53.4  $66.7 
Adjustments:       
Intangible Amortization Expense 29.1   18.3 
Acquisition and Integration Expenses 19.8   22.3 
Litigation and Professional Service Expenses 3.6   1.3 
Restructuring, Contract Exit and Plant Conversion Expenses 2.9   0.2 
Changes in Fair Value of Contingent Consideration 0.4   (2.6)
Add Back Convertible Preferred Stock Dividend 9.4   10.1 
Total Adjustments 65.2   49.5 
Tax Effect of above adjustments (a) (19.2)  (14.9)
Net Income Attributable to Stericycle, Inc. Common Shareholders, as Adjusted$99.4  $101.3 
EPS, as Reported$0.62  $0.78 
EPS, as Adjusted$1.09  $1.11 
Weighted average number of common shares outstanding - diluted 85,572,409   85,845,501 
Additional Dilution Under If-Converted Method 5,264,188   5,651,376 
Diluted Weighted Average Number of Common Shares Outstanding       
Under If-Converted Method 90,836,597   91,496,877 

(a) The tax effect of the adjustments is calculated based on applying the tax rate for the jurisdictions in which the adjustment occurred for the respective periods.

Table 4: RECONCILIATION OF EPS TO ADJUSTED EPS

 Three Months Ended
March 31,		 
         Change 
 2017  2016  $ % 
EPS, as Reported$0.62  $0.78   (0.15) -19.7%
Intangible Amortization Expense 0.22   0.14        
Acquisition and Integration Expenses 0.15   0.16        
Litigation and Professional Service Expenses 0.03   0.01        
Restructuring, Contract Exit and Plant Conversion Expenses 0.03   0.00        
Changes in Fair Value of Contingent Consideration 0.00   (0.03)       
Add Back Convertible Preferred Stock Dividend 0.11   0.12        
Total Impact of All Adjustments Including Convertible Preferred Stock Dividend (0.07)  (0.07)       
EPS, as Adjusted$1.09  $1.11   (0.01) -1.2%
Diluted Weighted Average Number of Common Shares Outstanding Under If-Converted Method 90,836,597   91,496,877        

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, the outcome of pending or future litigation, 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 
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS 
        
In thousands 
 March 31, 2017  December 31, 2016 
ASSETS       
Current Assets:       
Cash and cash equivalents$47,023  $44,189 
Accounts receivable, net 615,348   634,902 
Prepaid expenses 51,926   46,214 
Assets held for sale 9,628   9,134 
Other current assets 35,999   39,179 
Total Current Assets 759,924   773,618 
Property, plant and equipment, net 725,420   723,894 
Goodwill 3,622,793   3,591,020 
Intangible assets, net 1,857,209   1,861,973 
Other assets 31,510   29,556 
Total Assets$6,996,856  $6,980,061 
        
LIABILITIES AND EQUITY       
Current Liabilities:       
Current portion of long-term debt$96,301  $72,822 
Accounts payable 133,119   152,881 
Accrued liabilities 243,871   228,526 
Deferred revenues 17,974   17,902 
Liabilities held for sale 3,172   2,858 
Other current liabilities 85,124   67,864 
Total Current Liabilities 579,561   542,853 
        
Long-term debt, net 2,767,035   2,877,315 
Deferred income taxes 657,865   645,371 
Other liabilities 99,914   98,136 
Equity:       
Preferred stock 7   7 
Common stock 853   852 
Additional paid-in capital 1,161,983   1,166,457 
Accumulated other comprehensive loss (341,119)  (367,643)
Retained earnings 2,059,452   2,006,064 
Total Stericycle, Inc.'s Equity 2,881,176   2,805,737 
Noncontrolling interests 11,305   10,649 
Total Equity 2,892,481   2,816,386 
Total Liabilities and Equity$6,996,856  $6,980,061 


STERICYCLE, INC. AND SUBSIDIARIES 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
              
In thousands, except share and per share data 
 Three Months Ended March 31, 
 2017  2016 
 $ % of
Revenues		  $ % of
Revenues		 
Revenues$892,399  100.0% $874,181  100.0%
Cost of revenues ("COR") exclusive of depreciation 500,830  56.1%  483,751  55.3%
Depreciation 22,907  2.6%  23,850  2.7%
Total cost of revenues 523,737  58.7%  507,601  58.1%
              
Gross profit, as reported 368,662  41.3%  366,580  41.9%
Gross profit, as adjusted 368,662  41.3%  366,816  42.0%
              
Selling, general and administrative expenses ("SG&A") exclusive of depreciation 247,930  27.8%  219,367  25.1%
Depreciation 6,183  0.7%  6,290  0.7%
Total SG&A expense, as reported 254,113  28.5%  225,657  25.8%
Total SG&A expense, as adjusted 198,292  22.2%  186,464  21.3%
              
Income from operations, as reported 114,549  12.8%  140,923  16.1%
Income from operations, as adjusted exclusive of adjusting items shown below 170,370  19.1%  180,352  20.6%
              
Adjusting items:             
Plant conversion expenses (COR) -  0.0%  236  0.0%
Intangible amortization expense (SG&A) 29,089  3.3%  18,274  2.1%
Acquisition and integration expenses (SG&A) 19,820  2.2%  22,258  2.5%
Litigation and professional services expenses (SG&A) 3,620  0.4%  1,300  0.1%
Change in fair value of contingent consideration (SG&A) 401  0.0%  (2,644) -0.3%
Restructuring, contract exit and plant conversion expenses (SG&A) 2,891  0.3%  5  0.0%
Total adjustments 55,821  6.3%  39,429  4.5%
              
Other income (expense):             
Interest expense, net (23,300) -2.6%  (24,041) -2.8%
Other expense, net (1,544) -0.2%  (1,251) -0.1%
Total other expense (24,844) -2.8%  (25,292) -2.9%
              
Income before income taxes 89,705  10.1%  115,631  13.2%
              
Income tax expense 31,148  3.5%  38,036  4.4%
              
Net income 58,557  6.6%  77,595  8.9%
              
Less: net income attributable to noncontrolling interests 368  0.0%  809  0.1%
              
Net income attributable to Stericycle, Inc.$58,189  6.5% $76,786  8.8%
              
Less: mandatory convertible preferred stock dividend 9,364  1.0%  10,106  1.2%
Less: gain on repurchase of preferred stock (4,563) -0.5%  -  0.0%
              
Net income attributable to Stericycle, Inc. common shareholders$53,388  6.0% $66,680  7.6%
              
Earnings per share - diluted$0.62     $0.78    
              
Weighted average number of common shares outstanding - diluted 85,572,409      85,845,501    


STERICYCLE, INC. AND SUBSIDIARIES 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
        
In thousands 
 Three Months Ended March 31, 
 2017  2016 
Operating Activities:       
Net income$58,557  $77,595 
Adjustments to reconcile net income to net cash provided by operating activities:       
Stock compensation expense 5,999   6,105 
Depreciation 29,090   30,140 
Intangible amortization 29,089   18,274 
Deferred income taxes 8,722   6,932 
Other, net 3,020   (2,644)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:       
Accounts receivable 25,546   (3,918)
Accounts payable (15,162)  (15,203)
Accrued liabilities 14,138   21,151 
Other assets and liabilities 16,321   18,517 
Net cash provided by operating activities 175,320   156,949 
        
Investing Activities:       
Payments for acquisitions, net of cash acquired (16,871)  (24,884)
Proceeds from investments -   7 
Proceeds from sale of property and equipment 250   766 
Capital expenditures (33,136)  (34,185)
Net cash used in investing activities (49,757)  (58,296)
        
Financing Activities:       
Repayments of long-term debt and other obligations (12,779)  (6,879)
Proceeds from foreign bank debt 301   15,607 
Repayments of foreign bank debt (2,936)  (18,721)
Repayments of term loan (30,000)  (171,000)
Proceeds from senior credit facility 383,929   457,959 
Repayments of senior credit facility (446,248)  (353,520)
Payments of capital lease obligations (940)  (1,381)
Payments for repurchase of common stock -   (37,693)
Payments for repurchase of mandatory convertible preferred stock (9,570)  - 
Proceeds from issuances of common stock 3,503   22,310 
Dividends paid on mandatory convertible preferred stock (9,364)  (10,106)
Payments to noncontrolling interests -   (4,997)
Net cash used in financing activities (124,104)  (108,421)
Effect of exchange rate changes on cash and cash equivalents 1,375   (211)
Net change in cash and cash equivalents 2,834   (9,979)
Cash and cash equivalents at beginning of period 44,189   55,634 
        
Cash and cash equivalents at end of period$47,023  $45,655 
        
Non-cash activities:       
Net issuances of obligations for acquisitions$13,945  $13,013 
        


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

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