Stericycle, Inc. Reports Results for the Second Quarter and

Conference call to be held July 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 August 28th by dialing 855-859-2056, access code 21516790. 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., July 28, 2016 (GLOBE NEWSWIRE) -- Stericycle, Inc. (NASDAQ:SRCL), today reported financial results for the second quarter and year to date 2016.

SECOND QUARTER RESULTS

Revenues for the quarter ended June 30, 2016 were $891.6 million, up 24.6% from $715.7 million in the second quarter of last year. Acquisitions contributed approximately $185.9 million to the current period’s growth in revenues. Revenues increased 27.4% compared to the prior period when adjusted for unfavorable foreign exchange impacts of $20.0 million. Organic revenues grew 1.4%, or 3.3% when adjusted for manufacturing and industrial services. See Tables 1A-1C below.

Gross profit, reported in accordance with U.S. generally accepted accounting principles (“GAAP”), was $381.1 million, up 25.0% from $304.8 million in the second quarter of last year. GAAP gross profit as a percentage of revenue was 42.7% compared to 42.6% in the second quarter of 2015. Non-GAAP gross profit, when adjusted for plant conversion expenses as identified in Table 2 below, was $381.6 million, an increase of 25.0% from $305.3 million in the second quarter of last year. Non-GAAP gross profit as a percentage of revenues was 42.8% compared to 42.7% in the second quarter of 2015.

GAAP earnings per diluted share decreased 57.3% to $0.43 from $1.02 in the second quarter of 2015. Non-GAAP earnings per diluted share, when adjusted for various items, decreased 1.6% to $1.18 from $1.20. See Tables 3 and 4 below.

FIRST SIX MONTHS RESULTS

Revenues for the six months ended June 30, 2016 were $1.77 billion, up 28.0% from $1.38 billion in the same period last year. Acquisitions contributed approximately $380.4 million to the current year’s growth in revenues. Revenues increased 31.2% compared with the prior period when adjusted for unfavorable foreign exchange impact of $43.8 million. Organic revenues grew 3.7%, or 5.2% when adjusted for manufacturing and industrial services. See Tables 1A-1C below.

GAAP gross profit was $750.3 million, up 28.0% from $586.2 million in the same period last year. GAAP gross profit as a percentage of revenues remained flat at 42.5% for the six months ended June 30, 2016 and 2015. Non-GAAP gross profit, when adjusted for plant conversion expenses as identified in Table 2 below, was $751.0 million, up 28.0% from $586.7 million in the same period as last year. Non-GAAP gross profit as a percentage of revenues remained flat at 42.5% for the six months ended June 30, 2016 and 2015.

GAAP earnings per diluted share decreased 10.5% to $1.21 from $1.35 in 2015. Non-GAAP earnings per diluted share, when adjusted for various items, decreased 1.7% to $2.29 from $2.33. See Tables 3 and 4 below.

Cash flow from operations for the six months ended June 30, 2016 was $245.4 million, up 37.4% from $178.7 million in the same period last year.

PRESENTATION OF NON-GAAP INFORMATION

This press release includes certain non-GAAP financial measures, as defined in the SEC’s Regulation G. The Company reports its financial results in compliance with GAAP, but believes that also discussing non-GAAP financial measures allows for a better period over period comparison by removing the impact of items that, in management’s view, do not reflect the Company’s underlying operating performance. These measures are also used to evaluate senior management and are a factor in determining their at-risk compensation.

Adjusted diluted earnings per share, adjusted net income, adjusted gross profit, and adjusted sales growth are described in the Reconciliation of Certain Non-GAAP Measures section of this document.

These non-GAAP financial measures should not be considered in isolation or as a substitute for GAAP financial results, but should be read in conjunction with the unaudited condensed consolidated statement of income and other information presented herein. The non-GAAP financial measures in the press release may differ from similar measures used by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP measure is included in the accompanying tables.

DISCUSSION OF ADJUSTING ITEMS FOR NON-GAAP MEASURES

For the purpose of evaluating revenues, we present non-GAAP revenues to show the impact of foreign currency, revenues from acquisitions and Manufacturing and Industrial Services (“M&I”). Management reviews and analyzes revenues excluding the effect of foreign currency translation and revenue from acquisitions because we believe this better represents the Company’s underlying business trends, including organic revenue growth. Separate presentation of M&I allows for visibility of a revenue stream that has shown greater volatility than our other service lines.

For the purpose of evaluating operating performance, we present our financials to show the impact of income and expenses in our non-GAAP earnings related to acquisitions. These adjustments include acquisition expense, integration expense, amortization expense, and change in fair value of contingent consideration. This allows comparison of period over period results without the impact of acquisitions-related expenses.

For the purpose of evaluating operating performance, we additionally present our financials to show the impact of expenses in our non-GAAP earnings related to litigation expense, restructuring and plant conversion expenses, and contract exit costs to allow for period over period comparison of financials without the impact of charges that may not occur each year and if so, are due to different factors.

For the purpose of calculating the ultimate impact of our mandatory convertible preferred stock, we show the impact to our EPS by excluding the mandatory convertible preferred stock dividend and using the “if-converted” method of share dilution. This provides the reader insight to how our diluted shares will be affected after these preferred shares are converted to common shares.

RECONCILIATION OF CERTAIN NON-GAAP MEASURES

The following tables show our reconciliation of GAAP Revenue growth to Non-GAAP Revenue growth:

Table 1 - A

	Three Months Ended June 30,
	*In millions*									*Percentage Growth (%)*
Global Revenue Details by Service	2016			2015			Growth			Organic			Acquisitions			Foreign Exchange			Total
Regulated Waste and Compliance Services	$	517.2		$	516.0		$	1.2			2.2	%		0.7	%		(2.6	%)		0.2	%
Secure Information Destruction Services		190.5			-			190.5		N/A			N/A			N/A			N/A
Communication and Related Services		82.5			82.1			0.5			(1.3	%)		3.1	%		(1.2	%)		0.6	%
Manufacturing and Industrial Services		101.4			117.6			(16.3	)		(8.9	%)		(0.2	%)		(4.7	%)		(13.8	%)
Total Global Revenues, as Reported		891.6			715.7			175.9			*1.4*	%		*26.0*	%		*(2.8*	%)		*24.6*	%
Less: Manufacturing and Industrial Services		(101.4	)		(117.6	)
Total Revenues, as Adjusted (Non-GAAP)	$	790.2		$	598.0		$	192.2			*3.3*	%		*31.3*	%		*(2.4*	%)		*32.1*	%

Domestic Revenues	$	657.1		$	518.2		$	139.0			(0.2	%)		27.0	%		–			26.8	%
International Revenues		234.5			197.5			37.0			5.6	%		23.2	%		(10.1	%)		18.7	%
Total Global Revenues, as Reported	$	891.6		$	715.7		$	175.9			*1.4*	%		*26.0*	%		*(2.8*	%)		*24.6*	%

Table 1 - B

	Six Months Ended June 30,
	*In millions*									*Percentage Growth (%)*
Global Revenue Details by Service	2016			2015			Growth			Organic			Acquisitions			Foreign Exchange			Total
Regulated Waste and Compliance Services	$	1,021.2		$	1,013.4		$	7.8			3.1	%		0.7	%		(3.0	%)		0.8	%
Secure Information Destruction Services		375.2			-			375.2		N/A			N/A			N/A			N/A
Communication and Related Services		170.5			154.4			16.1			8.5	%		3.3	%		(1.4	%)		10.4	%
Manufacturing and Industrial Services		198.9			211.2			(12.3	)		(5.4	%)		4.9	%		(5.3	%)		(5.8	%)
Total Global Revenues, as Reported		1,765.8			1,379.0			386.8			*3.7*	%		*27.5*	%		*(3.2*	%)		*28.0*	%
Less: Manufacturing and Industrial Services		(198.9	)		(211.2	)
Total Revenues, as Adjusted (Non-GAAP)	$	1,566.8		$	1,167.8		$	399.0			*5.2*	%		*31.7*	%		*(2.8*	%)		*34.2*	%

Domestic Revenues	$	1,306.8		$	990.4		$	316.4			2.8	%		29.2	%		–			31.9	%
International Revenues		459.0			388.6			70.4			6.1	%		23.3	%		(11.3	%)		18.1	%
Total Global Revenues, as Reported	$	1,765.8		$	1,379.0		$	386.8			*3.7*	%		*27.5*	%		*(3.2*	%)		*28.0*	%

Table 1 - C

In millions
	Three Months Ended June 30, 2016			Six Months Ended June 30, 2016
Organic	$	10.0		$	50.2
Acquisitions		185.9			380.4
Foreign Exchange		(20.0	)		(43.8	)
Total Growth	$	175.90		$	386.80

The following table shows our reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit:

Table 2

In millions
	Three Months Ended June 30,										Six Months Ended June 30,
	2016					2015					2016					2015
	$		% of Rev			$		% of Rev			$		% of Rev			$		% of Rev
Gross Profit, as Reported	$	381.1		42.7	%	$	304.8		42.6	%	$	750.3		42.5	%	$	586.2		42.5	%
Plant Conversion Expenses		0.5		0.1	%		0.5		0.1	%		0.8		0.0	%		0.5		0.0	%
Gross Profit, as Adjusted (Non-GAAP)	$	381.6		42.8	%	$	305.3		42.7	%	$	751.0		42.5	%	$	586.7		42.5	%

The following tables show our reconciliation of GAAP Net Income Attributable to Stericycle, Inc. Common Shareholders to Non-GAAP Net Income Attributable to Stericycle, Inc. Common Shareholders:

Table 3

In millions, except share and per share data
	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Net Income Attributable to Stericycle, Inc. Common Shareholders, As Reported	$	37.3		$	87.8		$	104.0		$	116.8
Adjustments:
Acquisition Expenses		2.6			3.0			5.6			6.3
Integration Expenses		22.6			8.9			41.8			17.8
Litigation Expenses		2.7			(0.2	)		4.0			75.5
Changes in Fair Value of Contingent Consideration		-			0.0			(2.6	)		(0.6	)
Restructuring and Plant Conversion Expenses		0.9			3.1			1.2			15.4
Contract Exit Costs		12.7			-			12.7			-
Amortization Expense ^a		50.9			8.9			69.2			17.7
Add Back Convertible Preferred Stock Dividend		10.0			-			20.1			-
Total Adjustments		102.4			23.8			152.0			132.0
Tax Effect of above adjustments ^b		(31.9	)		(8.2	)		(46.8	)		(48.0	)
Net Income Attributable to Stericycle, Inc. Common Shareholders, as Adjusted (Non-GAAP)	$	107.8		$	103.4		$	209.1		$	200.8
EPS, as Reported	$	0.43		$	1.02		$	1.21		$	1.35
EPS, as Adjusted (Non-GAAP)	$	1.18		$	1.20		$	2.29		$	2.33
Weighted average number of common shares outstanding - diluted		85,760,686			86,221,034			85,798,892			86,292,816
Additional Dilution Under If-Converted Method		5,624,138			-			5,637,758			-
Diluted Weighted Average Number of Common Shares Outstanding Under If-Converted Method		91,384,824			86,221,034			91,436,650			86,292,816

a) Beginning in 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.
b) The tax effect of the adjustments is calculated based on applying the appropriate tax rate for the jurisdictions in which the adjustment occurred for the respective periods.

The following table shows our reconciliation of GAAP EPS to Non-GAAP EPS:

Table 4

	Three Months Ended June 30,												Six Months Ended June 30,
							Change												Change
	2016			2015			$			%			2016			2015			$			%
EPS, as Reported	$	0.43		$	1.02		$	(0.58	)		-57.3	%	$	1.21		$	1.35		$	(0.14	)		-10.5	%
Acquisition Expenses		0.02			0.03									0.04			0.06
Integration Expenses		0.17			0.07									0.31			0.13
Litigation Expenses		0.02			(0.01	)								0.03			0.53
Changes in Fair Value of Contingent Consideration		0.00			0.00									(0.03	)		(0.01	)
Restructuring and Plant Conversion Expenses		0.01			0.03									0.01			0.12
Contract Exit Costs		0.10			0.00									0.10			0.00
Amortization Expense		0.39			0.07									0.52			0.14
Add Back Convertible Preferred Stock Dividend		0.12			0.00									0.23			0.00
Reallocation of EPS Related to Convertible Preferred Stock		(0.08	)		0.00									(0.15	)		0.00
EPS, as Adjusted (Non-GAAP)	$	1.18		$	1.20		$	(0.02	)		-1.6	%	$	2.29		$	2.33		$	(0.04	)		-1.7	%
Diluted Weighted Average Number of Common Shares Outstanding Under If-Converted Method		91,384,824			86,221,034									91,436,650			86,292,816

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
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

	June 30,			December 31,
	2016			2015
ASSETS
Current Assets:
Cash and cash equivalents	$	44,320		$	55,634
Short-term investments		64			69
Accounts receivable, net		627,135			614,494
Prepaid expenses		58,566			46,740
Other current assets		40,277			44,891
Total Current Assets		770,362			761,828
Property, plant and equipment, net		707,060			665,602
Goodwill		3,558,283			3,758,177
Intangible assets, net		2,078,234			1,842,561
Other assets		32,429			36,995
Total Assets	$	7,146,368		$	7,065,163

LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt	$	109,868		$	161,409
Accounts payable		145,069			149,202
Accrued liabilities		182,814			197,329
Deferred revenues		17,132			16,989
Other current liabilities		62,221			62,420
Total Current Liabilities		517,104			587,349

Long-term debt, net of current portion		3,008,588			3,040,352
Deferred income taxes		705,873			608,272
Other liabilities		85,724			81,352
Equity:
Mandatory convertible preferred stock		8			8
Common stock		850			849
Additional paid-in capital		1,183,140			1,143,020
Accumulated other comprehensive loss		(297,558	)		(282,631	)
Retained earnings		1,931,807			1,868,645
Total Stericycle, Inc. Equity		2,818,247			2,729,891
Noncontrolling interests		10,832			17,947
Total Equity		2,829,079			2,747,838
Total Liabilities and Equity	$	7,146,368		$	7,065,163

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

	Three Months Ended June 30,												Six Months Ended June 30,
	2016						2015						2016						2015
	$			% of Rev			$			% of Rev			$			% of Rev			$			% of Rev

Revenues	$	891,621			100.0	%	$	715,689			100.0	%	$	1,765,802			100.0	%	$	1,379,008			100.0	%
Cost of revenues ("COR") exclusive of depreciation		486,915			54.6	%		396,793			55.4	%		969,271			54.9	%		764,133			55.4	%
Depreciation		23,611			2.6	%		14,072			2.0	%		46,252			2.6	%		28,720			2.1	%
Total cost of revenues		510,526			57.3	%		410,865			57.4	%		1,015,523			57.5	%		792,853			57.5	%

Gross profit, as reported		381,095			42.7	%		304,824			42.6	%		750,279			42.5	%		586,155			42.5	%
Gross profit, as adjusted (non-GAAP)		381,612			42.8	%		305,338			42.7	%		751,032			42.5	%		586,669			42.5	%

Selling, general and administrative expenses ("SG&A") exclusive of depreciation		273,287			30.7	%		145,673			20.4	%		494,049			28.0	%		369,333			26.8	%
Depreciation		8,100			0.9	%		4,387			0.6	%		15,599			0.9	%		8,505			0.6	%
Total SG&A expense, as reported		281,387			31.6	%		150,060			21.0	%		509,648			28.9	%		377,838			27.4	%
Total SG&A expense, as adjusted (non-GAAP)		189,509			21.3	%		126,823			17.7	%		378,577			21.4	%		246,372			17.9	%

Income from operations, as reported		99,708			11.2	%		154,764			21.6	%		240,631			13.6	%		208,317			15.1	%
Income from operations, as adjusted (non-GAAP) exclusive of adjusting items shown below		192,103			21.5	%		178,515			24.9	%		372,455			21.1	%		340,297			24.7	%

Adjusting items:
Plant conversion expenses (COR)		517			0.1	%		514			0.1	%		753			0.0	%		514			0.0	%
Acquisition expenses (SG&A)		2,607			0.3	%		2,986			0.4	%		5,597			0.3	%		6,282			0.5	%
Integration expenses (SG&A)		22,578			2.5	%		8,924			1.2	%		41,846			2.4	%		17,810			1.3	%
Litigation expenses (SG&A)		2,664			0.3	%		(173	)		0.0	%		3,964			0.2	%		75,450			5.5	%
Change in fair value of contingent consideration (SG&A)		-			0.0	%		35			0.0	%		(2,644	)		-0.1	%		(640	)		0.0	%
Restructuring and plant conversion expenses (SG&A)		412			0.0	%		2,544			0.4	%		417			0.0	%		14,846			1.1	%
Contract exit costs (SG&A)		12,708			1.4	%		-			0.0	%		12,708			0.7	%		-			0.0	%
Amortization (SG&A)		50,909			5.7	%		8,921			1.2	%		69,183			3.9	%		17,718			1.3	%
Total adjustments		92,395			10.4	%		23,751			3.3	%		131,824			7.5	%		131,980			9.6	%

Other income (expense):
Interest expense, net		(24,358	)		-2.7	%		(16,390	)		-2.3	%		(48,399	)		-2.7	%		(34,988	)		-2.5	%
Other income/ (expense), net		(2,118	)		-0.2	%		(1,604	)		-0.2	%		(3,369	)		-0.2	%		(2,202	)		-0.2	%
Total other expense		(26,476	)		-3.0	%		(17,994	)		-2.5	%		(51,768	)		-2.9	%		(37,190	)		-2.7	%

Income before income taxes		73,232			8.2	%		136,770			19.1	%		188,863			10.7	%		171,127			12.4	%

Income tax expense		27,002			3.0	%		48,493			6.8	%		65,038			3.7	%		53,558			3.9	%

Net income		46,230			5.2	%		88,277			12.3	%		123,825			7.0	%		117,569			8.5	%

Less: net income attributable to noncontrolling interests		196			0.0	%		447			0.1	%		1,005			0.1	%		799			0.1	%

Net income attributable to Stericycle, Inc.		46,034			5.2	%		87,830			12.3	%		122,820			7.0	%		116,770			8.5	%

Less: mandatory convertible preferred stock dividend		10,021			1.1	%		-			0.0	%		20,127			1.1	%		-			0.0	%
Less: gain on repurchase of preferred stock		(1,280	)		-0.1	%		-			0.0	%		(1,280	)		-0.1	%		-			0.0	%

Net income attributable to Stericycle, Inc. common shareholders	$	37,293			4.2	%	$	87,830			12.3	%	$	103,973			5.9	%	$	116,770			8.5	%

Earnings per share - diluted	$	0.43					$	1.02					$	1.21					$	1.35

Weighted average number of common shares outstanding - diluted		85,760,686						86,221,034						85,798,892						86,292,816

STERICYCLE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
	Six Months Ended June 30,
	2016			2015
Operating Activities:
Net income	$	123,825		$	117,569
Adjustments to reconcile net income to net cash
provided by operating activities:
Stock compensation expense		11,557			10,904
Excess tax benefit of stock options exercised		-			(10,899	)
Depreciation		61,851			37,225
Amortization		69,183			17,718
Deferred income taxes		4,515			(8,390	)
Other, net		(2,644	)		5,686
Changes in operating assets and liabilities, net of
effect of acquisitions and divestitures:
Accounts receivable		(12,888	)		(51,041	)
Accounts payable		(1,496	)		21,019
Accrued liabilities		(13,303	)		51,071
Deferred revenue		305			(3,156	)
Other assets and liabilities		4,535			(9,046	)
Net cash provided by operating activities		245,440			178,660

Investing Activities:
Payments for acquisitions, net of cash acquired		(42,097	)		(61,766	)
Proceeds from investments		7			271
Proceeds from sale of property and equipment		1,355			-
Capital expenditures		(67,133	)		(46,794	)
Net cash used in investing activities		(107,868	)		(108,289	)

Financing Activities:
Repayments of long-term debt and other obligations		(31,789	)		(39,590	)
Proceeds from foreign bank debt		27,619			18,363
Repayments of foreign bank debt		(36,953	)		(43,769	)
Proceeds from term loan		-			250,000
Repayments of term loan		(250,000	)		-
Proceeds from senior credit facility		902,817			879,024
Repayments of senior credit facility		(715,653	)		(1,072,468	)
Repayments of capital lease obligations		(2,605	)		(1,951	)
Payment for hedge		-			(8,833	)
Payments for repurchase of common stock		(40,814	)		(85,149	)
Payments for repurchase of convertible preferred stock		(5,025	)		-
Dividends paid on mandatory convertible preferred stock		(20,127	)		-
Proceeds from issuances of common stock		30,308			39,208
Excess tax benefit of stock options exercised		-			10,899
Payments to noncontrolling interests		(6,961	)		(2,603	)
Net cash used in financing activities		(149,183	)		(56,869	)
Effect of exchange rate changes on cash and cash equivalents		297			(2,782	)
Net (decrease)/ increase in cash and cash equivalents		(11,314	)		10,720
Cash and cash equivalents at beginning of period		55,634			22,236

Cash and cash equivalents at end of period	$	44,320		$	32,956

Non-cash activities:
Net issuances of obligations for acquisitions	$	23,069		$	47,827

Stericycle, Inc. Reports Results for the Second Quarter and Year to Date 2016

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