Stericycle: Results for Q2 2009

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Stericycle, Inc. eported 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     


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

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