Stericycle: Q4 and Full Year 2009 Results

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Stericycle, Inc. reported financial results for the fourth quarter and the full year 2009.

Revenues for the quarter ended December 31, 2009 were $313.5 million, up 14.4% from $274.0 million in the same quarter last year. Acquisitions less than 12 months old contributed approximately $25.9 million to the growth in revenues for the quarter. Revenues increased 13.5% compared to the fourth quarter of 2008 when adjusted for favorable foreign exchange impacts of $2.6 million. Gross profit was $147.1 million, up 17.5% from $125.3 million in the fourth quarter last year. Gross profit as a percent of revenue was 46.9% compared with 45.7% in the fourth quarter of 2008. Gross profit for the fourth quarter of 2009 was unfavorably impacted by $0.7 million of restructuring costs for our regulated returns management services business.

Net income attributable to Stericycle for the fourth quarter of 2009 was $44.6 million or $0.52 per diluted share compared with net income of $39.1 million or $0.45 per diluted share for the fourth quarter of 2008. Net income attributable to Stericycle for the fourth quarter of 2008 included the effect of $0.3 million of charges related to foreign investment write-down, and net income for the fourth quarter of 2009 included the effects of $1.8 million of after-tax transactional expenses related to acquisitions and $1.0 million of after-tax restructuring costs for our regulated returns management services business. Adjusted for these charges, non-GAAP earnings per diluted share increased from $0.45 in the fourth quarter of 2008 to $0.55 in the fourth quarter of 2009 or up 22.0% (see table below).

FULL YEAR RESULTS

For the full year ended December 31, 2009, revenues were $1.18 billion, up 8.7% from $1.08 billion in 2008. Revenues increased 12.2% compared with prior year when adjusted for unfavorable foreign exchange impacts of $38.1 million. Gross profit was $552.4 million, up 13.9% from $485.0 million last year. Gross profit as a percent of revenues was 46.9%, up from 44.8% in 2008. Gross profit for 2009 was unfavorably impacted by $0.7 million of restructuring costs for our regulated returns management services business.

Earnings per diluted share for 2009 increased to $2.03 from $1.68 per diluted share for 2008. Earnings per diluted share for 2008 were unfavorably impacted by an arbitration settlement and an impairment of fixed assets. Earnings per diluted share for 2009 were unfavorably impacted by transactional expenses related to acquisitions and restructuring costs for our regulated returns management services business, which were offset partially by the net release of prior years' tax reserves. Adjusted for these charges, non-GAAP earnings per diluted share increased from $1.73 in 2008 to $2.09 in 2009, or 21.3% (see table below):

Table to reconcile GAAP EPS to non-GAAP EPS*


Three months ended December 31,


Years ended December 31,
        2009           2008           Change $           Change%         2009           2008           Change $           Change%
GAAP EPS         $0.52           $0.45         $0.07         15.6     %         $2.03               $1.68         $0.34         20.3     %

Transactional expenses related to acquisitions         0.02         -                         0.08             -                 

Arbitration settlement         -         -                         -             0.04                 

Impairment of fixed assets         -         0.00                         -             0.00                 

Restructuring costs         0.01         -                         0.01             -                 

Net release of prior years' tax reserve         -         -                         

(0.02


)
        -                 

Non-GAAP EPS (adjusted)         $0.55         $0.45         $0.10         22.0     %         $2.09             $1.73         $0.37         21.3     %

* In accordance with generally accepted accounting principles (GAAP), reported earnings per share include the after-tax impact of the items identified in the table. The Company's management believes that by adjusting reported earnings per share to exclude the effect of these non-operational items, the resulting earnings per share presents a more meaningful, operationally-oriented depiction of company performance. The Company's management excludes these items from its results when evaluating operating performance and, along with other factors, in determining management compensation.

Cash flow from operations was $277.2 million for the full year of 2009. Cash flow and increased loan balances were used to strengthen our business by acquisitions, capital expenditures and share repurchases.

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

Conference call to be held February 4, 2010 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 March 4th by dialing 800-642-1687, access code 46903856. 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)

            December 31,
            2009             2008
            (unaudited)             (audited)
ASSETS                         
Current Assets:                         
Cash and cash equivalents         $     15,767             $     9,095     
Short-term investments             1,131                 1,408     
Accounts receivable, less allowance for doubtful                         
accounts of $8,709 in 2009 and $6,616 in 2008             179,770                 168,598     
Deferred income taxes             14,087                 16,821     
Prepaid expenses             12,421                 11,273     
Other current assets             23,364                   17,235     
Total Current Assets             246,540                 224,430     
Property, plant and equipment, net             246,154                 207,144     
Other assets:                         
Goodwill             1,394,091                 1,135,778     
Intangible assets, less accumulated amortization of                         
$18,546 in 2009 and $14,116 in 2008             269,454                 170,624     
Other             26,564                   21,322     
Total other assets             1,690,109                   1,327,724     
Total Assets         $     2,182,803               $     1,759,298     

LIABILITIES AND SHAREHOLDERS' EQUITY                         
Current Liabilities:                         
Current portion of long-term debt         $     65,932             $     38,880     
Accounts payable             47,608                 33,612     
Accrued liabilities             90,078                 93,487     
Deferred revenues             14,954                   13,663     
Total Current Liabilities             218,572                   179,642     
Long-term debt, net of current portion             922,919                 753,846     
Deferred income taxes             173,892                 147,287     
Other liabilities             10,247                 7,885     
Shareholders' Equity:                         
Common stock (par value $0.01 per share, 120,000,000 shares                         
authorized, 84,715,005 issued and outstanding in 2009,                         
85,252,879 issued and outstanding in 2008)             847                 852     
Additional paid-in capital             47,522                 67,776     
Accumulated other comprehensive loss             (12,292     )             (32,075     )
Retained earnings             809,618                   633,927     
Total Stericycle, Inc. Shareholders' Equity             845,695                   670,480     
Noncontrolling Interest             11,478                 158     
Total Shareholders' Equity             857,173                   670,638     
Total Liabilities and Shareholders' Equity         $     2,182,803               $     1,759,298     

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

            Three Months Ended             Years Ended
            December 31,             December 31,
            (unaudited)             (unaudited)             (audited)
            2009             2008             2009             2008
            $           % of Rev             $           % of Rev             $           % of Rev             $           % of Rev

Revenues         $     313,542             100.0     %         $     274,011             100.0     %         $     1,177,736             100.0     %         $     1,083,679             100.0     %

Cost of revenues             165,696             52.8     %             148,755             54.3     %             624,636             53.0     %             598,650             55.2     %
Restructuring Costs             704                 0.2     %             -                 0.0     %             704                 0.2     %             -                 0.0     %

Gross profit             147,142             46.9     %             125,256             45.7     %             552,396             46.9     %             485,029             44.8     %

Selling, general and administrative expenses             60,206             19.2     %             51,098             18.6     %             222,483             18.9     %             199,171             18.4     %
Amortization             1,570                 0.5     %             1,095                 0.4     %             5,390                 0.5     %             4,039                 0.4     %

Total SG&A expense and amortization             61,776                 19.7     %             52,193                 19.0     %             227,873                 19.3     %             203,210                 18.8     %

Income from operations before                                                                                 
acquisition, integration, and other expenses             85,366             27.2     %             73,063             26.7     %             324,523             27.6     %             281,819             26.0     %

Transactional expenses related to acquisitions             1,915             0.6     %             -             0.0     %             7,333             0.6     %             -             0.0     %
Restructuring costs and                                                                                 
impairment of fixed assets             905             0.3     %             472             0.2     %             905             0.1     %             472             0.0     %
Arbitration settlement and related costs             -             0.0     %             -             0.0     %             -             0.0     %             5,595             0.5     %
Acquisition integration expenses             630                 0.2     %             274                 0.1     %             1,096                 0.1     %             1,513                 0.1     %

Income from operations             81,916             26.1     %             72,317             26.4     %             315,189             26.8     %             274,239             25.3     %

Other income (expense):                                                                                 
Interest income             42             0.0     %             186             0.1     %             313             0.0     %             930             0.1     %
Interest expense             (8,884     )         -2.8     %             (8,219     )         -3.0     %             (34,445     )         -2.9     %             (33,104     )         -3.1     %
Other expense, net             (1,105     )           -0.4     %             (1,433     )           -0.5     %             (3,369     )           -0.3     %             (2,998     )           -0.3     %

Total other income (expense)             (9,947     )           -3.2     %             (9,466     )           -3.5     %             (37,501     )           -3.2     %             (35,172     )           -3.2     %

Income before income taxes             71,969             23.0     %             62,851             22.9     %             277,688             23.6     %             239,067             22.1     %

Income tax expense             26,811                 8.6     %             23,663                 8.6     %             101,299                 8.6     %             90,296                 8.3     %

Net income             45,158                 14.4     %             39,188                 14.3     %             176,389                 15.0     %             148,771                 13.7     %

Net income attributable to                                                                                 
noncontrolling interests             550             0.2     %             56             0.0     %             698             0.1     %             63             0.0     %

Net income attributable to Stericycle, Inc.         $     44,608                 14.2     %         $     39,132                 14.3     %         $     175,691                 14.9     %         $     148,708                 13.7     %

Earnings per share-diluted         $     0.52                       $     0.45                       $     2.03                       $     1.68               

Weighted average number of                                                                                 
common shares outstanding-diluted             86,353,095                           87,614,558                           86,744,003                           88,335,832               

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

            For the Years Ended
            December 31,
            2009             2008
            (unaudited)             (audited)
Operating Activities:                         
Net income         $     176,389             $     148,771     
Adjustments to reconcile net income to net cash                         
provided by operating activities:                         
Restructuring costs and impairment of fixed assets             1,609                 472     
Write-off of note receivable related to joint venture             -                 798     
Stock compensation expense             14,638                 11,755     
Excess tax benefit of stock options exercised             (10,905     )             (9,319     )
Depreciation             34,600                 30,109     
Amortization             5,390                 4,039     
Deferred income taxes             24,401                 26,522     
Changes in operating assets and liabilities, net of                         
effect of acquisitions:                         
Accounts receivable             12,567                 (12,998     )
Accounts payable             2,420                 (7,041     )
Accrued liabilities             19,316                 19,517     
Deferred revenues             89                 1,597     
Other assets             (3,268     )             (3,667     )

Net cash provided by operating activities             277,246                   210,555     

Investing Activities:                         
Payments for acquisitions and international                         

investments, net of cash acquired
            (311,891     )             (84,947     )
Proceeds from maturity/(purchases) of                         
short-term investments             385                 (463     )
Proceeds from sale of property and equipment             1,227                 -     
Capital expenditures             (39,910     )             (47,520     )

Net cash used in investing activities             (350,189     )             (132,930     )

Financing Activities:                         
Repayment of long-term debt             (19,023     )             (13,866     )
Net repayments on senior credit facility             (59,605     )             (23,073     )
Proceeds from term loan             215,000                 -     
Proceeds from private placement of long-term notes             -                 100,000     
Payments of deferred financing costs             (3,635     )             (236     )
Principal payments on capital lease obligations             (1,106     )             (527     )
Purchase/cancellation of treasury stock             (75,686     )             (167,338     )
Proceeds from other issuances of common stock             14,922                 17,839     
Excess tax benefit of stock options exercised             10,905                   9,319     

Net cash provided by/(used in) financing activities             81,772                 (77,882     )
Effect of exchange rate changes on cash             (2,157     )             (7,756     )
Net increase/(decrease) in cash and cash equivalents             6,672                 (8,013     )
Cash and cash equivalents at beginning of period             9,095                   17,108     

Cash and cash equivalents at end of period         $     15,767               $     9,095     
Non-cash activities:                         
Net issuances of notes payable for certain acquisitions         $     38,090             $     106,074     

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