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Stericycle Posts Fourth Quarter Impacted by Settlement Charge

Date: February 6, 2008

Source: Stericycle Inc.

Stericycle, Inc. Reports Results for Fourth Quarter and Full Year 2007

 

Stericycle, Inc. (NASDAQ: SRCL), today reported financial results for the fourth quarter and the full year 2007.

FOURTH QUARTER RESULTS

Revenues for the quarter ended December 31, 2007 were $251.6 million, up 20.5% from $208.7 million in the same quarter last year. Acquisitions less than 12 months old contributed approximately $17.9 million to the growth in revenues for the quarter. Gross profit was $112.4 million, up 20.8% from $93.0 million in the same quarter last year. Gross profit as a percent of revenues was 44.7% versus 44.6% in the fourth quarter of 2006.

After the effect of the charges described in the reconciliation table below, generally accepted accounting principles (“GAAP”) net income for the fourth quarter of 2007 was $24.1 million or $0.27 per diluted share compared with GAAP net income of $29.0 million or $0.32 per diluted share for the same quarter last year. The impact of the charges described in the reconciliation table was to reduce net income by $9.8 million or $0.11 per diluted share. The adjusted non-GAAP net income for the fourth quarter of 2007 was $33.9 million or $0.38 per diluted share compared with non-GAAP net income of $28.4 million or $0.31 per diluted share for the fourth quarter of 2006.

During the second quarter of 2007 we completed a 2-for-1 stock split. All historical per share numbers have been adjusted for the split.

Conference call to be held February 6, 2008 at 4:00 p.m. Central time–Dial 866-814-1912 atleast5 minutes before start time. If you are unable to participate on the call, a replay will be available through March 5th by dialing 888-266-2081, access code 1182011. To hear a live simulcast of the call over the internet on www.ccbn.com, or to access an audio archive of the call, go to the Investor Relations page on Stericycle’s website at www.stericycle.com.

 

STERICYCLE, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP INFORMATION TO NON-GAAP INFORMATION
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
 
 
Three Months Ended
December 31,
 
Year Ended
December 31,
2007
 
2006
2007
 
2006
 
GAAP net income
$
24,098
$
29,045
$
118,378
$
105,270
 
Excluded charges, net of tax:
Australia arbitration award
8,607
--
8,607
--
Other (see notes (1) and (2) below)
1,219
(1)
(625)
656
(2)
168
 
Non-GAAP net income
$
33,924
$
28,420
$
127,641
$
105,438
 
GAAP earnings per share- diluted
$
0.27
$
0.32
$
1.32
$
1.16
Non-GAAP earnings per share- diluted
$
0.38
$
0.31
$
1.42
$
1.16

 

(1) The other charges listed above in the fourth quarter of 2007 consist of the following items detailed on the attached Consolidated Statements of Income; (i) we divested the over the counter products portion of our Scherer Labs assets which resulted in a gain; (ii) we wrote down the White Rose Environmental trade name as a result of the name change of our subsidiary in the United Kingdom; and (iii) we wrote down our investment in Medam, B.A., an Argentina joint venture. The write down of our investment in Argentina was a result of the legal restructuring of the business operations. The above items were partially offset by the receipt of proceeds from one of our insurance carriers for coverage related to the 3CI class action litigation settlement.

(2) The other charges listed above for the entire year of 2007 consist of the items discussed in (1) above and the following additional items: (i) we recorded a gain on the divestiture of selected assets of Sterile Technologies, Ltd., one of our subsidiaries in the United Kingdom; (ii) we wrote down the permit intangible for a treatment facility in the United Kingdom that was no longer being used; and (iii) we also wrote down equipment that had been permanently idled. In addition, we received proceeds from another one of our insurance carriers for coverage related to the 3CI class action litigation settlement.

FULL YEAR RESULTS

For the full year ended December 31, 2007, revenues increased to $932.8 million, up 18.1% from $789.6 million in 2006. Gross profit was $417.9 million, up 19.5% from $349.9 million in 2006. Gross profit as a percent of revenues was 44.8% versus 44.3% last year.

GAAP net income for the year was $118.4 million or $1.32 per diluted share compared with GAAP net income of $105.3 million or $1.16 per diluted share.

Non-GAAP net income for the year was $127.6 million, or $1.42 per diluted share compared to non-GAAP net income for 2006 of $105.4 million or $1.16 per diluted share. Non-GAAP net income and earnings per diluted share for 2007 and 2006 exclude the same items described in the table above.

Cash flow from operations was $174.0 million for 2007. Cash flow and increased loan balances were used to strengthen our business and funded $114.8 million in acquisitions and international investments, $103.7 million in stock repurchases and $48.4 million in capital spending.

USE OF NON-GAAP FINANCIAL MEASURES

Stericycle’s management believes that non-GAAP measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses that may not be indicative of our core business operating results. Stericycle believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Stericycle’s performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to historical performance. We include these non-GAAP financial measures because we believe they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. The non-GAAP information excludes items such as special charges, which may have a material effect on our net income and net income per share calculated in accordance with GAAP. We exclude these charges and the related tax benefit from the charges when analyzing our financial results as the items are distinguishable events and have no impact to our ongoing results of operations. We believe that by viewing our results of operations excluding these charges, investors are given an indication of the ongoing results of our operations.

For more information about Stericycle, please visit our 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 difficulties in completing the integration of acquired businesses, changes in governmental regulation of medical waste collection and treatment, and increases in transportation and other operating costs, as well as the various 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)
 
 
  December 31,   December 31,
2007 2006
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 17,108 $ 13,492
Short-term investments 1,256 2,548
Accounts receivable, less allowance for
doubtful accounts of $6,157 in 2007
and $5,411 in 2006		 157,435 130,354
Deferred tax asset 13,510 16,072
Asset group held for sale - 33,674
Other current assets 20,967 22,462
Total current assets 210,276 218,602
Property, plant and equipment, net 193,039 156,953
Other assets:
Goodwill 1,033,333 813,973
Intangible assets, less accumulated
amortization of $12,230 in 2007 and
$11,454 in 2006		 152,689 115,879
Other 18,822 22,499
Total other assets 1,204,844 952,351
Total assets $ 1,608,159 $ 1,327,906
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 22,003 $ 22,681
Accounts payable 40,049 25,033
Accrued liabilities 75,571 75,434
Deferred revenue 12,095 11,662
Liability group held for sale - 7,221
Total current liabilities 149,718 142,031
Long-term debt, net of current portion 613,781 443,115
Deferred income taxes 125,041 105,521
Other liabilities 5,544 12,158
Common shareholders' equity:
Common stock (par value $0.01 per
share, 120,000,000 shares authorized,
87,410,653 issued and outstanding in
2007, 88,503,930 issued and outstanding
in 2006)		 874 443
Additional paid in capital 197,462 252,568
Accumulated other comprehensive income 30,520 5,229
Retained earnings 485,219 366,841
Total shareholders' equity 714,075 625,081
Total liabilities and shareholders' equity $ 1,608,159 $ 1,327,906

 

STERICYCLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE DATA)
                 
Three Months Ended Year Ended
December 31, December 31,
(unaudited) (unaudited)   (audited)
2007 2006 2007 2006
$     % of Rev $     % of Rev $     % of Rev $     % of Rev
 
Revenues $ 251,550 100.0 % $ 208,697 100.0 % $ 932,767 100.0 % $ 789,637 100.0 %
 
Cost of revenues 139,196     55.3 % 115,667     55.4 % 514,846     55.2 % 439,770     55.7 %
 
Gross profit 112,354 44.7 % 93,030 44.6 % 417,921 44.8 % 349,867 44.3 %
 
Selling, general and administrative expenses 48,369 19.2 % 36,892 17.7 % 173,080 18.6 % 141,400 17.9 %
Amortization 978     0.4 % 493     0.2 % 3,657     0.4 % 2,966     0.4 %
 
Total SG&A expense and amortization 49,347     19.6 % 37,385   17.9 % 176,737     18.9 % 144,366     18.3 %
 
Income from operations before acquisition integration and other expenses 63,007 25.0 % 55,645 26.7 % 241,184 25.9 % 205,501 26.0 %
 
Gain on sale of assets (201 ) -0.1 % - 0.0 % (2,099 ) -0.2 % - 0.0 %
Impairment of intangible assets 2,041 0.8 % - 0.0 % 2,269 0.2 % - 0.0 %
Impairment of fixed assets - 0.0 % - 0.0 % 1,261 0.1 % 300 0.0 %
Arbitration award and related costs 13,904 5.5 % - 0.0 % 13,904 1.5 % - 0.0 %
Acquisition integration expenses 26     0.0 % 1,625     0.8 % 1,305     0.1 % 3,439     0.4 %
 
Income from operations 47,237 18.8 % 54,020 25.9 % 224,544 24.1 % 201,762 25.6 %
 
Other income (expense):
Interest Income 345 0.1 % 361 0.2 % 1,590 0.2 % 1,358 0.2 %
Interest expense (9,125 ) -3.6 % (7,450 ) -3.6 % (33,965 ) -3.6 % (28,419 ) -3.6 %
Write down of investment (2,930 ) -1.2 % - 0.0 % (2,930 ) -0.3 % (1,000 ) -0.1 %
Insurance proceeds 2,800 1.1 % 1,025 0.5 % 3,300 0.4 % 1,025 0.1 %
Other expense, net (269 )   -0.1 % (342 )   -0.2 % (1,299 )   -0.1 % (2,152 )   -0.3 %
 
Total other income (expense) (9,179 )   -3.6 % (6,406 )   -3.1 % (33,304 )   -3.6 % (29,188 )   -3.7 %
 
Income before income taxes 38,058 15.1 % 47,614 22.8 % 191,240 20.5 % 172,574 21.9 %
 
Income tax expense 13,960     5.5 % 18,569     8.9 % 72,862     7.8 % 67,304     8.5 %
 
Net income $ 24,098     9.6 % $ 29,045     13.9 % $ 118,378     12.7 % $ 105,270     13.3 %
 
Earnings per share-diluted $ 0.27   $ 0.32   $ 1.32   $ 1.16  
 
Weighted average number of common shares outstanding-diluted 89,801,677   90,665,780   89,933,242   90,529,998  

 

STERICYCLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
 
For the year ended
December 31,
2007 2006
  (unaudited)   (audited)
Operating Activities:
Net income $ 118,378 $ 105,270
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of assets (2,099 ) -
Impairment of fixed assets 1,261 300
Impairment of intangibles 2,275 -
Write down of investment 2,930 1,000
Stock compensation expense 10,714 10,610
Excess tax benefit of disqualifying
dispositions of stock options and exercise
of non-qualified stock options		 (8,054 ) (8,427 )
Depreciation 27,480 24,070
Amortization 3,657 2,966
Deferred income taxes 17,265 12,937
Changes in operating assets and liabilities,
net of effect of acquisitions
Accounts receivable (11,400 ) (14,742 )
Other assets 2,551 3,794
Accounts payable 6,987 (6,003 )
Accrued liabilities 1,566 28,107
Deferred revenue 537   280  
 
Net cash provided by operating activities 174,048   160,162  
 
Investing Activities:
Payments for acquisitions and international
investments, net of cash acquired		 (114,781 ) (164,015 )
Proceeds from maturity/(purchases) of short-term investments 1,301 (1,828 )
Proceeds from sale of assets 26,616 -
Proceeds from sale of property and equipment - 832
Capital expenditures (48,397 ) (36,414 )
 
Net cash used in investing activities (135,261 ) (201,425 )
 
Financing Activities:
Proceeds from issuance of note payable - 5,953
Repayment of long-term debt (30,447 ) (30,735 )
Net borrowings on senior credit facility 77,686 96,464
Principal payments on capital lease obligations (212 ) (816 )
Payment of deferred financing costs (606 ) (453 )
Excess tax benefit of stock options exercised 8,054 8,427
Purchase/cancellation of treasury stock (103,679 ) (42,757 )
Proceeds from other issuances of common stock 16,569   16,464  
 
Net cash (used in) provided by financing activities (32,635 ) 52,547
Effect of exchange rate changes on cash (2,536 ) (5,617 )
Net decrease in cash and cash equivalents 3,616 5,667
Cash and cash equivalents at beginning of period 13,492   7,825  
 
Cash and cash equivalents at end of period $ 17,108   $ 13,492  
Non-cash activities:
Net issuances of notes payable for certain acquisitions $ 112,509 $ 30,157
Net issuances of common stock for certain acquisitions $ 13,667 $ 750

 

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