Stericycle, Inc. Reports Results for the Second Quarter and Year to Date 2017

Lake Forest, Ill., Aug. 03, 2017 (GLOBE NEWSWIRE) -- Stericycle, Inc. (NASDAQ:SRCL) today reported financial results for the second quarter and year to date 2017.

SECOND QUARTER HIGHLIGHTS COMPARED TO PRIOR YEAR:

• Revenues of $917.7 million, an increase of 2.9%, including a 1.3% unfavorable impact from foreign exchange
• Gross profit of $381.8 million, an increase of 1.1%
• Reached proposed settlement of class action lawsuit of $295.0 million to reduce uncertainty and expense of continued litigation
• Loss per share of $1.74, due primarily to the impact of the proposed class action settlement, and Adjusted earnings per share (“Adjusted EPS”) of $1.15

SECOND QUARTER RESULTS

Revenues for the quarter ended June 30, 2017 were $917.7 million, an increase of 2.9% from $891.6 million in the second quarter of last year. Acquisitions contributed approximately $8.6 million to the increase in revenues. Divestitures reduced revenues by $0.8 million. On a constant currency basis, revenues increased 4.2% compared to the second quarter of last year after adjusting for unfavorable foreign exchange impacts of $12.1 million. Organic revenues increased 3.4%, or 4.1% when adjusted for Manufacturing and Industrial Services. See Tables 1-A, 1-B and 1-C.

Gross profit was $381.8 million, an increase of 1.1% from $377.6 million in the second quarter of last year. Gross profit as a percentage of revenues was 41.6% compared to 42.4% in the second quarter of last year. Adjusted gross profit was $381.8 million, an increase of 1.0% from $378.2 million in the second quarter of last year. Adjusted gross profit as a percentage of revenues was 41.6% compared to 42.4% in the second quarter of last year. See Table 2.

“This quarter we continued to see strong performance from our Secure Information Destruction Services and Communication and Related Services.  We also reached a preliminary settlement to the small quantity medical waste customer class action lawsuit,” said Charlie Alutto, President and Chief Executive Officer. “This preliminary settlement not only reduces the uncertainty and expense of continued litigation, it is an important step toward putting this matter behind us and allowing our team to focus on our customers and the growth of our business.”

Loss per share was $1.74, due primarily to the impact of the proposed class action settlement, compared to earnings per share of $0.43 in the second quarter of last year. Adjusted EPS was $1.15 compared to $1.18 in the second quarter of last year. See Tables 3 and 4.

As previously reported, the Company has reached a preliminary resolution with the plaintiffs in a proposed settlement of the class action litigation In re: Stericycle, Inc., Steri-Safe Contract Litigation, Case No. 1:13-cv-05795 (N.D. Ill.). Under the proposed settlement terms, the Company will establish a common fund of $295.0 million from which will be paid all compensation to members of the settlement class, attorneys’ fees to class counsel, incentive awards to the named class representatives and all costs of notice and administration. The Company’s existing contracts with its customers will remain in force, while the Company will also establish guidelines for future price increases as part of the settlement. The Company is admitting no fault or wrongdoing, and is entering into this settlement to avoid the cost and uncertainty of litigation. In connection with the proposed settlement, which remains subject to court approval of a final agreement, the Company recorded a charge of $295.0 million in the second quarter ended June 30, 2017.

FIRST SIX MONTHS HIGHLIGHTS COMPARED TO PRIOR YEAR:

• Revenues of $1.81 billion, an increase of 2.5%, including a 1.2% unfavorable impact from foreign exchange
• Gross profit of $750.4 million, an increase of 0.8%
• Loss per share of $1.12, due primarily to the impact of the proposed class action settlement of $295.0 million, and Adjusted EPS of $2.25

FIRST SIX MONTHS RESULTS

Revenues for the six months ended June 30, 2017 were $1.81 billion, an increase of 2.5% from $1.77 billion in the same period last year. Acquisitions contributed approximately $18.6 million to the increase in revenues. Divestitures reduced revenues by $1.5 million. On a constant currency basis, revenues increased 3.7% compared to the first six months of last year after adjusting for unfavorable foreign exchange impacts of $21.8 million. Organic revenues increased 2.8%, or 3.9% when adjusted for Manufacturing and Industrial Services. See Tables 1-A, 1-B and 1-C.

Gross profit was $750.4 million, an increase of 0.8% from $744.2 million in the same period last year. Gross profit as a percentage of revenues was 41.5% compared to 42.1% in the same period last year. Adjusted gross profit was $750.4 million, an increase of 0.7% from $745.0 million in the same period last year. Adjusted gross profit as a percentage of revenues was 41.5% compared to 42.2% in the same period last year. See Table 2.

Loss per share was $1.12, due primarily to the impact of the proposed class action settlement, compared to earnings per share of $1.21 in the same period last year. Adjusted EPS was $2.25 compared to $2.29 in the same period last year. See Tables 3 and 4.

Cash flow from operations for the six months ended June 30, 2017 was $237.1 million, a decrease of 3.4% from $245.4 million in the same period last year.

CONFERENCE CALL INFORMATION

We will hold a conference call on August 3, 2017 at 4:00 p.m. Central time – Dial 866-516-6872 at least 5 minutes before start time. A replay will be available for 30 days by dialing 855-859-2056 or 404-537-3406, access code 92841882. 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”), and supplementally provides certain non-GAAP financial measures to provide additional information based on measures that management uses to operate the Company’s business and to remove the impact of certain items that, in management’s view, do not reflect the Company’s underlying operating performance. 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 changes. 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 expenses, restructuring, plant conversion and other related expenses, and contract exit expenses, and asset impairment charges and loss on disposal of assets held for sale.

For the purpose of calculating the ultimate EPS 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 (loss) 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

Table 1 – B: RECONCILIATION OF REVENUES TO ADJUSTED REVENUES – SIX MONTHS ENDED

Table 1 – C: DISAGGREGATED REVENUES CHANGE

Table 2: RECONCILIATION OF GROSS PROFIT TO ADJUSTED GROSS PROFIT

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

Table 4: RECONCILIATION OF (LOSS) EARNINGS PER SHARE TO ADJUSTED EPS

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, completion and court approval of the proposed resolution of the class action litigation, 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, intangibles or other long-lived assets, 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 and subsequent Forms 10-Q. 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.

FOR FURTHER INFORMATION CONTACT:

Investor Relations 847-607-2012