Stericycle, Inc. Reports Results for the Fourth Quarter and Full Year Ended 2015


LAKE FOREST, Ill., Feb. 04, 2016 (GLOBE NEWSWIRE) -- Stericycle, Inc. (NASDAQ:SRCL) today reported financial results for the fourth quarter and the full year of 2015.

FOURTH QUARTER RESULTS
Revenues for the quarter ended December 31, 2015 were $888.3 million, up $211.4 million or 31.2%, from $676.9 million in the fourth quarter last year. Acquisitions contributed approximately $200.0 million in revenues to the current period’s growth. Revenues increased 35.2% compared to the prior period when adjusted for unfavorable foreign exchange impact of $26.9 million.

Gross profit, reported in accordance with U.S. generally accepted accounting principles (“GAAP”), was $380.4 million, up 33.5% from $285.0 million in the fourth quarter last year. GAAP gross profit as a percent of revenues was 42.8% compared to 42.1% in the fourth quarter last year. Non-GAAP gross profit, when adjusted for various items identified in the second of the following tables, was $380.9 million, up 33.5% from $285.4 million in the fourth quarter last year. Non-GAAP gross profit as a percent of revenues was 42.9% compared to 42.2% in the fourth quarter last year.

GAAP earnings per diluted share decreased 16.4% to $0.80 from $0.96 in the fourth quarter last year. Non-GAAP earnings per diluted share, when adjusted for various items identified in the third of the following tables, decreased 0.9% to $1.11 from $1.12 in the fourth quarter last year. See tables below.

FULL-YEAR RESULTS
Revenues for the full year 2015 were $2.99 billion, up $430.3 million or 16.8%, from $2.56 billion in the same period last year. Acquisitions contributed approximately $378.5 million in revenues to the current year’s growth. Revenues increased 21.2% compared with the prior period when adjusted for unfavorable foreign exchange impact of $110.2 million.

GAAP gross profit was $1.27 billion, up 15.7% from $1.09 billion in the same period last year. GAAP gross profit as a percent of revenues was 42.4% compared to 42.8% in the same period last year. Non-GAAP gross profit, when adjusted for various items identified in the second of the following tables, was $1.27 billion, up 15.5% from $1.10 billion in the same period as last year. Non-GAAP gross profit as a percent of revenues was 42.5% compared to 42.9% in the same period last year.

GAAP earnings per diluted share decreased 21.7% to $2.96 from $3.79 in 2014. Non-GAAP earnings per diluted share, when adjusted for various items identified in the third of the following tables, increased 3.0% to $4.40 from $4.27. See tables below.

The following table shows our calculations of organic revenue growth (in millions)(1)

 Three Months Ended December 31, Years Ended December 31,
   Change   Change
  2015  2014 $%   2015  2014 $%
Total As Reported Revenues (GAAP)$  888.3 $  676.9 $  211.4  31.2% $ 2,985.9 $ 2,555.6 $  430.3  16.8%
Adjustment for Foreign Exchange 26.9   26.9    110.2   110.2  
Subtotal (non-GAAP): 915.2  676.9  238.2  35.2%  3,096.1  2,555.6  540.5  21.2%
          
Adjustment for Acquisitions (206.6) (6.7) (200.0)   (439.1) (60.6) (378.5) 
Adjustment for Regulated Returns and
Recall Management Services
 (20.4) (16.1) (4.4)   (87.4) (80.5) (7.0) 
Total revenues, as adjusted (non-GAAP):$  688.1 $  654.2 $  33.9  5.2% $ 2,569.6 $ 2,414.5 $  155.1  6.4%
          
Domestic/ International Breakdown:         
Domestic Revenues$651.1 $477.6 $173.5  36.3% $2,165.0 $1,788.4 $376.6  21.1%
International Revenues 237.2  199.3  37.9  19.0%  820.9  767.2  53.7  7.0%
Total As Reported Revenues (GAAP)$  888.3 $  676.9 $  211.4  31.2% $ 2,985.9 $ 2,555.6 $  430.3  16.8%

(1) For internal purposes, we exclude the impact of foreign exchange, revenues attributed to acquisitions closed within the preceding 12 months, and revenue from our regulated returns and recall management services when we evaluate organic revenue growth.

This table and the Company’s internal use of non-GAAP adjusted revenues are not intended to imply, and should not be interpreted as implying, that non-GAAP adjusted revenues are a better measure of internal growth or the Company’s performance, as compared to GAAP revenues.

Table to reconcile GAAP Gross Profit to Non-GAAP Gross Profit (in millions)(2)

 Three Months Ended December 31, Years Ended December 31,
  2015   2014   2015   2014 
 $% of Rev $% of Rev $% of Rev $% of Rev
GAAP Gross Profit$380.4  42.8% $285.0  42.1% $1,266.2  42.4% $1,094.4  42.8%
Plant Conversion Expenses 0.5  0.1%  0.4  0.1%  1.5  0.1%  2.9  0.1%
Non-GAAP Gross Profit$380.9  42.9% $285.4  42.2% $1,267.7  42.5% $1,097.3  42.9%

(2) In accordance with GAAP, reported Gross Profit includes the impact of the items identified in this table. For internal purposes, including the determination of management compensation, the Company excludes these items from results when evaluating operating performance.

This table and the Company’s internal use of non-GAAP Gross Profit are not intended to imply, and should not be interpreted as implying, that non-GAAP Gross Profit is a better measure of performance than GAAP Gross Profit.

Table to reconcile GAAP EPS to Non-GAAP EPS(3)

 Three Months Ended December 31, Years Ended December 31,
   Change   Change
  2015  2014 $%  2015  2014 $%
GAAP EPS$  0.80 $  0.96 $ (0.16) (16.4)% $  2.96 $  3.79 $ (0.82) (21.7)%
Acquisition Expenses a 0.00  0.03     0.34  0.14   
Integration Expenses a 0.15  0.08     0.39  0.19   
Litigation Expenses a 0.05  0.02     0.46  0.05   
Changes in Fair Value of Contingent
  Consideration a
-- (0.06)    (0.01) (0.02)  
Impairment of intangible assets a 0.02 --    0.02 --  
Plant Conversion and Restructuring
  Expenses a
 0.04  0.09     0.18  0.12   
Add Back Convertible Preferred
  Stock Dividend b
 0.12 --    0.14 --  
Reallocation of EPS Related to
  Convertible Preferred Stock If-
  Converted Method b
 (0.07)--    (0.08)--  
Non-GAAP EPS (Adjusted)$  1.11 $  1.12 $ (0.01) (0.9)% $  4.40   $  4.27 $  0.13  3.0%
Diluted Weighted Average Number
  of Common Shares Outstanding
  Under If-Converted Method
 91,430,668  86,194,513     87,810,927  86,233,612   

(3a) In accordance with GAAP, reported earnings per diluted share (EPS) include the after-tax impact of the items identified. For internal purposes, including the determination of management compensation, the Company excludes these items from results when evaluating operating performance.

(3b) For purposes of determining non-GAAP EPS, the Company (1) adds back the mandatory convertible preferred stock dividend; and (2) deducts the EPS impact of the items identified above and the mandatory convertible preferred stock dividend using the “if-converted” method.  Under the “if-converted” method used in determining our non-GAAP EPS, the items identified above and the preferred dividend applicable to the convertible preferred stock is added back to net income attributable to Stericycle, the numerator. The Mandatory Convertible Preferred shares are assumed to be converted to common shares at the beginning of the period or, if later, at the time of issuance, and the resulting common shares are included in the denominator.

This table and the Company’s internal use of non-GAAP earnings per diluted share are not intended to imply, and should not be interpreted as implying, that non-GAAP earnings per diluted share is a better measure of performance than GAAP earnings per diluted share.

Cash flow from operations was $390.3 million and $448.5 million for the full years of 2015 and 2014, respectively.

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, 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.

FOR FURTHER INFORMATION CONTACT:

Investor Relations 847-607-2012

Conference call to be held February 4, 2016 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 855-859-2056, access code 21498985. To hear a live simulcast of the call or access the audio archive, visit the investor relations page on www.stericycle.com.

STERICYCLE, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED BALANCE SHEETS 
(IN THOUSANDS) 
(UNAUDITED) 
       
  December 31, 
   2015    2014  
ASSETS      
Current Assets:      
Cash and cash equivalents$ 55,634  $ 22,236  
Short-term investments  69    380  
Accounts receivable, net  614,494    465,473  
Prepaid expenses  46,740    30,632  
Other current assets  44,891    33,173  
Total Current Assets  761,828    551,894  
Property, plant and equipment, net  665,602    460,408  
Goodwill  3,676,326    2,418,832  
Intangible assets, net  1,833,561    909,645  
Other assets  43,553    32,523  
Total Assets$ 6,980,870  $ 4,373,302  
       
LIABILITIES AND EQUITY      
Current Liabilities:      
Current portion of long-term debt$ 161,409  $ 131,969  
Accounts payable  149,202    114,596  
Accrued liabilities  196,087    131,743  
Deferred revenues  16,989    21,624  
Other current liabilities  64,105    60,975  
Total Current Liabilities  587,792    460,907  
Long-term debt, net of current portion  3,052,639    1,527,246  
Deferred income taxes  517,587    403,847  
Other liabilities  76,667    64,117  
Equity:      
Mandatory convertible preferred stock  8    -  
Common stock  849    849  
Additional paid-in capital  1,141,999    289,211  
Accumulated other comprehensive loss  (282,632)   (138,419) 
Retained earnings  1,868,014    1,743,371  
Total Stericycle, Inc. Equity  2,728,238    1,895,012  
Noncontrolling interests  17,947    22,173  
Total Equity  2,746,185    1,917,185  
Total Liabilities and Equity$ 6,980,870  $ 4,373,302  

 

STERICYCLE, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA) 
(UNAUDITED) 
       
 Three Months Ended  Years Ended 
  December 31,  December 31, 
  2015    2014    2015    2014  
 $% of Rev  $% of Rev  $% of Rev  $% of Rev 
       
Revenues$ 888,304  100.0% $ 676,947  100.0% $ 2,985,908  100.0% $ 2,555,601  100.0% 
Cost of revenues ("COR") exclusive of depreciation                
and adjusting items shown below  488,523  55.0%   378,182  55.9%   1,656,573  55.5%   1,401,797  54.9% 
Depreciation  18,919  2.1%   13,415  2.0%   61,642  2.1%   56,478  2.2% 
Total cost of revenues  507,442  57.1%  391,597  57.8%   1,718,215  57.5%  1,458,275  57.1% 
               
Gross profit (non-GAAP)  380,862  42.9%   285,350  42.2%   1,267,693  42.5%   1,097,326  42.9% 
                
Selling, general and administrative expenses ("SG&A")                
exclusive of depreciation, amortization and adjusting                
items shown below  177,556  20.0%   112,563  16.6%   539,944  18.1%   433,865  17.0% 
Depreciation  7,519  0.8%   3,121  0.5%   20,272  0.7%   15,446  0.6% 
Amortization  18,541  2.1%   8,478  1.3%   45,498  1.5%   32,692  1.3% 
Total SG&A expense  203,616  22.9%   124,162  18.3%   605,714  20.3%   482,003  18.9% 
                
Income from operations (non-GAAP) exclusive of           
adjusting items shown below  177,246  20.0%   161,188  23.8%   661,979  22.2%   615,323  24.1% 
            
Adjusting items:                
Plant conversion expenses (COR)  507  0.1%  381  0.1%   1,508  0.1%  2,915  0.1% 
Acquisition expenses (SG&A)  (818) -0.1%  2,661  0.4%   39,138  1.3%  13,333  0.5% 
Integration expenses (SG&A)  20,432  2.3%   11,343  1.7%   51,689  1.7%   25,968  1.0% 
Change in fair value of contingent consideration (SG&A)  -  0.0%   (5,405) -0.8%   (640) 0.0%   (1,452) -0.1% 
Impairment of intangible assets (SG&A)  1,781  0.2%   -  0.0%   1,781  0.1%   -  0.0% 
Restructuring and plant conversion expenses (SG&A)  4,160  0.5%   10,114  1.5%   21,240  0.7%   11,649  0.5% 
Litigation expenses (SG&A)  645  0.1%   3,331  0.5%   59,651  2.0%   6,574  0.3% 
                
Income from operations (GAAP)  150,539  16.9%   138,763  20.5%   487,612  16.3%   556,336  21.8% 
                
Other income (expense):                
Interest expense, net  (24,908) -2.8%   (18,139) -2.7%   (77,274) -2.6%   (66,022) -2.6% 
Other income/ (expense), net  4,525  0.5%   (1,177) -0.2%   569  0.0%   (2,746) -0.1% 
                
Total other expense  (20,383) -2.3%   (19,316) -2.9%   (76,705) -2.6%   (68,768) -2.7% 
                
Income before income taxes  130,156  14.7%   119,447  17.6%   410,907  13.8%   487,568  19.1% 
                
Income tax expense  51,537  5.8%   36,789  5.4%   142,862  4.8%   159,422  6.2% 
                
Net income  78,619  8.9%   82,658  12.2%   268,045  9.0%   328,146  12.8% 
                
Less: net (loss)/ income attributable to noncontrolling interests  (289) 0.0%   132  0.0%   967  0.0%   1,690  0.1% 
                
Net income attributable to Stericycle, Inc.  78,908  8.9%   82,526  12.2%   267,078  8.9%   326,456  12.8% 
                
Less: mandatory convertible preferred stock dividend  10,107  1.1%   -  0.0%   11,791  0.4%   -  0.0% 
                
Net income attributable to Stericycle, Inc.                
Common Shareholders$ 68,801  7.7% $ 82,526  12.2% $ 255,287  8.5% $ 326,456  12.8% 
                
Earnings per share - diluted$ 0.80   $ 0.96   $ 2.96   $ 3.79   
                
Weighted average number of                
common shares outstanding - diluted  85,949,461     86,194,513     86,162,609     86,233,612   

 

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
      
   
  December 31,
   2015    2014 
Operating Activities:     
Net income$ 268,045  $ 328,146 
Adjustments to reconcile net income to net cash     
provided by operating activities:     
Stock compensation expense  21,750    17,773 
Excess tax benefit of stock options exercised  (16,897)   (17,906)
Depreciation  81,914    71,924 
Amortization  45,498    32,692 
Deferred income taxes  (6,715)   16,550 
Other, net  7,467    8,932 
Changes in operating assets and liabilities, net of     
effect of acquisitions:     
Accounts receivable  (55,890)   (34,116)
Accounts payable  26,366    (5,712)
Accrued liabilities  23,133    21,279 
Deferred revenue  (4,615)   1,017 
Other assets and liabilities  294    7,921 
      
Net cash provided by operating activities  390,350    448,500 
      
Investing Activities:     
Payments for acquisitions, net of cash acquired  (2,419,437)   (374,321)
Proceeds from/ (purchases of) investments  294    (1,957)
Capital expenditures  (114,761)   (86,496)
      
Net cash used in investing activities  (2,533,904)   (462,774)
      
Financing Activities:     
Repayments of long-term debt and other obligations  (93,172)   (101,231)
Proceeds from foreign bank debt  53,747    205,086 
Repayments of foreign bank debt  (87,308)   (193,284)
Proceeds from term loan  1,550,000    - 
Repayments of term loan  (300,000)   - 
Proceeds from private placement of long-term note  600,000    - 
Repayments of private placement of long-term note  (100,000)   - 
Proceeds from senior credit facility  1,907,402    1,413,026 
Repayments of senior credit facility  (2,004,385)   (1,216,031)
Repayments of capital lease obligations  (3,865)   (5,826)
Payments of deferred financing costs  (9,903)   (2,280)
Payment for hedge  (8,833)   - 
Purchases and cancellations of treasury stock  (130,576)   (194,066)
Proceeds from issuance of mandatory convertible preferred stock  746,900    - 
Dividends paid on mandatory convertible preferred stock  (10,106)   - 
Proceeds from issuances of common stock  60,124    51,852 
Excess tax benefit of stock options exercised  16,897    17,906 
Payments to noncontrolling interests  (5,714)   (5,201)
      
Net cash provided by/ (used in) financing activities  2,181,208    (30,049)
Effect of exchange rate changes on cash  (4,256)   (608)
Net increase/ (decrease) in cash and cash equivalents  33,398    (44,931)
Cash and cash equivalents at beginning of period  22,236    67,167 
      
Cash and cash equivalents at end of period$ 55,634  $ 22,236 
      
Non-cash activities:     
Net issuance of obligations for acquisitions$ 80,189  $ 145,938