Conference call to be held April 28, 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 May 28th by dialing 855-859-2056, access code 21514993. To hear a live simulcast of the call or access the audio archive, visit the investor relations page on www.stericycle.com.
LAKE FOREST, Ill., April 28, 2016 (GLOBE NEWSWIRE) -- Stericycle, Inc. (NASDAQ:SRCL), today reported financial results for the first quarter of 2016.
Revenues for the quarter ended March 31, 2016 were $874.2 million, up 31.8% from $663.3 million in the first quarter of last year. Acquisitions contributed approximately $194.5 million to the current period’s growth in revenues. Revenues increased 35.4% compared to the prior period when adjusted for unfavorable foreign exchange impacts of $23.8 million.
Gross profit, reported in accordance with U.S. generally accepted accounting principles (“GAAP”), was $369.2 million, up 31.2% from $281.3 million in the first quarter of last year. GAAP gross profit as a percent of revenue was 42.2% compared to 42.4% in the first quarter of 2015. Non-GAAP gross profit, when adjusted as identified in the second of the following tables, was $369.4 million, an increase of 31.3% from $281.3 million in the first quarter of last year. Non-GAAP gross profit as a percent of revenues was 42.3% compared to 42.4% in the first quarter of 2015.
GAAP earnings per diluted share decreased 11.1% to $0.78 from $0.87 in the first quarter of 2015. Non-GAAP earnings per diluted share, when adjusted for various items identified in the third of the following tables, decreased 3.4% to $1.11 from $1.15. See tables below.
Cash flow from operations was $156.9 million and $132.6 million for the three months ended March 31, 2016 and 2015, respectively.
The following table shows our calculations of organic revenue growth (in millions)(1)
| Three Months Ended March 31, | ||||||||||||||||
| Change | ||||||||||||||||
| 2016 | 2015 | $ | % | |||||||||||||
| Total as Reported Revenues (GAAP) | $ | 874.2 | $ | 663.3 | $ | 210.9 | 31.8 | % | ||||||||
| Adjustment for Foreign Exchange | 23.8 | 23.8 | ||||||||||||||
| Subtotal (non-GAAP) | 898.0 | 663.3 | 234.7 | 35.4 | % | |||||||||||
| Adjustment for Acquisitions | (201.5 | ) | (7.0 | ) | (194.5 | ) | ||||||||||
| Adjustment for Regulated Recall and Returns Management Services | (24.8 | ) | (20.0 | ) | (4.8 | ) | ||||||||||
| Total Revenues, as Adjusted (non-GAAP) | $ | 671.8 | $ | 636.3 | $ | 35.4 | 5.6 | % | ||||||||
| Domestic/ International Breakdown: | ||||||||||||||||
| Domestic Revenues | $ | 649.7 | $ | 472.2 | $ | 177.5 | 37.6 | % | ||||||||
| International Revenues | 224.5 | 191.1 | 33.4 | 17.5 | % | |||||||||||
| Total as Reported Revenues (GAAP) | $ | 874.2 | $ | 663.3 | $ | 210.9 | 31.8 | % | ||||||||
(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 March 31, | ||||||||||||||||
| 2016 | 2015 | |||||||||||||||
| $ | % of Rev | $ | % of Rev | |||||||||||||
| GAAP Gross Profit | $ | 369.2 | 42.2 | % | $ | 281.3 | 42.4 | % | ||||||||
| Plant Conversion Expenses | 0.2 | 0.0 | % | - | 0.0 | % | ||||||||||
| Non-GAAP Gross Profit | $ | 369.4 | 42.3 | % | $ | 281.3 | 42.4 | % | ||||||||
(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 March 31, | ||||||||||||||||
| Change | ||||||||||||||||
| 2016 | 2015 | $ | % | |||||||||||||
| GAAP EPS | $ | 0.78 | $ | 0.87 | $ | (0.10 | ) | -11.1 | % | |||||||
| Acquisition Expenses a | 0.02 | 0.04 | ||||||||||||||
| Integration Expenses a | 0.14 | 0.07 | ||||||||||||||
| Litigation Expenses a | 0.01 | 0.01 | ||||||||||||||
| Changes in Fair Value of Contingent Consideration a | (0.03 | ) | (0.01 | ) | ||||||||||||
| Plant Conversion and Restructuring Expenses a | 0.00 | 0.10 | ||||||||||||||
| Amortization Expense a, c | 0.14 | 0.07 | ||||||||||||||
| Add Back Convertible Preferred Stock Dividend b | 0.12 | 0.00 | ||||||||||||||
| Reallocation of EPS Related to Convertible Preferred Stock If-Converted Method b | (0.07 | ) | 0.00 | |||||||||||||
| Non-GAAP EPS (Adjusted) | $ | 1.11 | $ | 1.15 | $ | (0.04 | ) | -3.4 | % | |||||||
| Diluted Weighted Average Number of Common Shares Outstanding Under If-Converted Method | 91,496,877 | 86,357,006 | ||||||||||||||
(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.
(3c) Beginning the quarter ended March 31, 2016, the Company has started to exclude amortization expense from non-GAAP EPS. For comparable reporting, the Company’s previously reported 2015 results are adjusted to reflect the change.
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 operating performance than GAAP earnings per diluted share.
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.
| STERICYCLE, INC. AND SUBSIDIARIES | ||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
| (IN THOUSANDS) | ||||||||||
| (UNAUDITED) | ||||||||||
| March 31, | December 31, | |||||||||
| 2016 | 2015 | |||||||||
| ASSETS | ||||||||||
| Current Assets: | ||||||||||
| Cash and cash equivalents | $ | 45,655 | $ | 55,634 | ||||||
| Short-term investments | 64 | 69 | ||||||||
| Accounts receivable, net | 622,709 | 614,494 | ||||||||
| Prepaid expenses | 46,198 | 46,740 | ||||||||
| Other current assets | 42,732 | 44,891 | ||||||||
| Total Current Assets | 757,358 | 761,828 | ||||||||
| Property, plant and equipment, net | 677,525 | 665,602 | ||||||||
| Goodwill | 3,790,016 | 3,758,177 | ||||||||
| Intangible assets, net | 1,840,844 | 1,842,561 | ||||||||
| Other assets | 46,801 | 49,282 | ||||||||
| Total Assets | $ | 7,112,544 | $ | 7,077,450 | ||||||
| LIABILITIES AND EQUITY | ||||||||||
| Current Liabilities: | ||||||||||
| Current portion of long-term debt | $ | 114,066 | $ | 161,409 | ||||||
| Accounts payable | 133,779 | 149,202 | ||||||||
| Accrued liabilities | 218,933 | 197,329 | ||||||||
| Deferred revenues | 17,543 | 16,989 | ||||||||
| Other current liabilities | 68,192 | 62,420 | ||||||||
| Total Current Liabilities | 552,513 | 587,349 | ||||||||
| Long-term debt, net of current portion | 3,038,083 | 3,052,639 | ||||||||
| Deferred income taxes | 617,011 | 608,272 | ||||||||
| Other liabilities | 86,448 | 81,352 | ||||||||
| Equity: | ||||||||||
| Mandatory convertible preferred stock | 8 | 8 | ||||||||
| Common stock | 848 | 849 | ||||||||
| Additional paid-in capital | 1,172,962 | 1,143,020 | ||||||||
| Accumulated other comprehensive loss | (265,018 | ) | (282,631 | ) | ||||||
| Retained earnings | 1,897,636 | 1,868,645 | ||||||||
| Total Stericycle, Inc. Equity | 2,806,436 | 2,729,891 | ||||||||
| Noncontrolling interests | 12,053 | 17,947 | ||||||||
| Total Equity | 2,818,489 | 2,747,838 | ||||||||
| Total Liabilities and Equity | $ | 7,112,544 | $ | 7,077,450 | ||||||
| STERICYCLE, INC. AND SUBSIDIARIES | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
| (IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA) | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| Three Months Ended | ||||||||||||||||
| March 31, | ||||||||||||||||
| 2016 | 2015 | |||||||||||||||
| $ | % of Rev | $ | % of Rev | |||||||||||||
| Revenues | $ | 874,181 | 100.0 | % | $ | 663,319 | 100.0 | % | ||||||||
| Cost of revenues ("COR") exclusive of depreciation and adjusting items shown below | 482,120 | 55.2 | % | 367,340 | 55.4 | % | ||||||||||
| Depreciation | 22,641 | 2.6 | % | 14,648 | 2.2 | % | ||||||||||
| Total cost of revenues | 504,761 | 57.7 | % | 381,988 | 57.6 | % | ||||||||||
| Gross profit (non-GAAP) | 369,420 | 42.3 | % | 281,331 | 42.4 | % | ||||||||||
| Selling, general and administrative expenses ("SG&A") exclusive of depreciation and adjusting items shown below | 181,569 | 20.8 | % | 115,431 | 17.4 | % | ||||||||||
| Depreciation | 7,499 | 0.9 | % | 4,118 | 0.6 | % | ||||||||||
| Total SG&A expense | 189,068 | 21.6 | % | 119,549 | 18.0 | % | ||||||||||
| Income from operations (non-GAAP) exclusive of adjusting items shown below | 180,352 | 20.6 | % | 161,782 | 24.4 | % | ||||||||||
| Adjusting items: | ||||||||||||||||
| Plant conversion expenses (COR) | 236 | 0.0 | % | - | 0.0 | % | ||||||||||
| Amortization (SG&A) | 18,274 | 2.1 | % | 8,797 | 1.3 | % | ||||||||||
| Acquisition expenses (SG&A) | 2,990 | 0.3 | % | 3,296 | 0.5 | % | ||||||||||
| Integration expenses (SG&A) | 19,268 | 2.2 | % | 8,886 | 1.3 | % | ||||||||||
| Change in fair value of contingent consideration (SG&A) | (2,644 | ) | -0.3 | % | (675 | ) | -0.1 | % | ||||||||
| Restructuring and plant conversion expenses (SG&A) | 5 | 0.0 | % | 12,302 | 1.9 | % | ||||||||||
| Litigation expenses (SG&A) | 1,300 | 0.1 | % | 2,123 | 0.3 | % | ||||||||||
| Income from operations (GAAP) | 140,923 | 16.1 | % | 127,053 | 19.2 | % | ||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense, net | (24,041 | ) | -2.8 | % | (18,598 | ) | -2.8 | % | ||||||||
| Other income/ (expense), net | (1,251 | ) | -0.1 | % | (598 | ) | -0.1 | % | ||||||||
| Total other expense | (25,292 | ) | -2.9 | % | (19,196 | ) | -2.9 | % | ||||||||
| Income before income taxes | 115,631 | 13.2 | % | 107,857 | 16.3 | % | ||||||||||
| Income tax expense | 38,036 | 4.4 | % | 32,047 | 4.8 | % | ||||||||||
| Net income | 77,595 | 8.9 | % | 75,810 | 11.4 | % | ||||||||||
| Less: net income attributable to noncontrolling interests | 809 | 0.1 | % | 352 | 0.1 | % | ||||||||||
| Net income attributable to Stericycle, Inc. | 76,786 | 8.8 | % | 75,458 | 11.4 | % | ||||||||||
| Less: mandatory convertible preferred stock dividend | 10,106 | 1.2 | % | - | 0.0 | % | ||||||||||
| Net income attributable to Stericycle, Inc. common shareholders | $ | 66,680 | 7.6 | % | $ | 75,458 | 11.4 | % | ||||||||
| Earnings per share - diluted | $ | 0.78 | $ | 0.87 | ||||||||||||
| Weighted average number of common shares outstanding - diluted | 85,845,501 | 86,357,006 | ||||||||||||||
| STERICYCLE, INC. AND SUBSIDIARIES | ||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
| (IN THOUSANDS) | ||||||||||
| (UNAUDITED) | ||||||||||
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2016 | 2015 | |||||||||
| Operating Activities: | ||||||||||
| Net income | $ | 77,595 | $ | 75,810 | ||||||
| Adjustments to reconcile net income to net cash | ||||||||||
| provided by operating activities: | ||||||||||
| Stock compensation expense | 6,105 | 5,487 | ||||||||
| Excess tax benefit of stock options exercised | - | (8,222 | ) | |||||||
| Depreciation | 30,140 | 18,766 | ||||||||
| Amortization | 18,274 | 8,797 | ||||||||
| Deferred income taxes | 6,932 | (2,957 | ) | |||||||
| Other, net | (2,644 | ) | 5,313 | |||||||
| Changes in operating assets and liabilities, net of | ||||||||||
| effect of acquisitions and divestitures: | ||||||||||
| Accounts receivable | (3,918 | ) | (14,491 | ) | ||||||
| Accounts payable | (15,203 | ) | 5,443 | |||||||
| Accrued liabilities | 21,151 | 35,924 | ||||||||
| Deferred revenue | 487 | (628 | ) | |||||||
| Other assets and liabilities | 18,030 | 3,312 | ||||||||
| Net cash provided by operating activities | 156,949 | 132,554 | ||||||||
| Investing Activities: | ||||||||||
| Payments for acquisitions, net of cash acquired | (24,884 | ) | (34,210 | ) | ||||||
| Proceeds from investments | 7 | 257 | ||||||||
| Proceeds from sale of property and equipment | 766 | - | ||||||||
| Capital expenditures | (34,185 | ) | (21,356 | ) | ||||||
| Net cash used in investing activities | (58,296 | ) | (55,309 | ) | ||||||
| Financing Activities: | ||||||||||
| Repayments of long-term debt and other obligations | (6,879 | ) | (9,780 | ) | ||||||
| Proceeds from foreign bank debt | 15,607 | 4,851 | ||||||||
| Repayments of foreign bank debt | (18,721 | ) | (38,252 | ) | ||||||
| Proceeds from term loan | - | 250,000 | ||||||||
| Repayments of term loan | (171,000 | ) | - | |||||||
| Proceeds from senior credit facility | 457,959 | 394,097 | ||||||||
| Repayments of senior credit facility | (353,520 | ) | (670,254 | ) | ||||||
| Repayments of capital lease obligations | (1,381 | ) | (988 | ) | ||||||
| Payment for hedge | - | (8,833 | ) | |||||||
| Purchases and cancellations of treasury stock | (37,693 | ) | (11,516 | ) | ||||||
| Dividends paid on mandatory convertible preferred stock | (10,106 | ) | - | |||||||
| Proceeds from issuances of common stock | 22,310 | 27,452 | ||||||||
| Excess tax benefit of stock options exercised | - | 8,222 | ||||||||
| Payments to noncontrolling interests | (4,997 | ) | (2,603 | ) | ||||||
| Net cash used in financing activities | (108,421 | ) | (57,604 | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (211 | ) | (3,594 | ) | ||||||
| Net (decrease)/ increase in cash and cash equivalents | (9,979 | ) | 16,047 | |||||||
| Cash and cash equivalents at beginning of period | 55,634 | 22,236 | ||||||||
| Cash and cash equivalents at end of period | $ | 45,655 | $ | 38,283 | ||||||
| Non-cash activities: | ||||||||||
| Net issuances of obligations for acquisitions | $ | 13,013 | $ | 21,543 | ||||||