Stericycle, Inc.

Table of Contents

PART I. – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

STERICYCLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these financial statements.

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STERICYCLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

The accompanying notes are an integral part of these financial statements.

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STERICYCLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these financial statements.

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STERICYCLE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Unless the context requires otherwise, “we”, “us” or “our” refers to Stericycle, Inc. and its subsidiaries on a consolidated basis.

NOTE 1 – BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; but the Company believes the disclosures in the accompanying condensed consolidated financial statements are adequate to make the information presented not misleading.  In our opinion, all adjustments necessary for a fair presentation for the periods presented have been reflected and are of a normal recurring nature.  These condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and notes thereto for the year ended December 31, 2007,2008, as filed wit h our Annual Report on Form 10-K for the year ended December 31, 2007.2008.  The results of operations for the sixthree months ended June 30, 2008March 31, 2009 are not necessarily indicative of the results that may be achieved for the entire year ending December 31, 2008.2009.

NOTE 2 – ACQUISITIONS AND DIVESTITURE

During the quarter ended March 31, 2008,2009, we completed two acquisitions.  We acquired selected assets of athree domestic medical waste business and all the stock of a regulated waste business in Canada.  Effective for the month ended March 31, 2008, we dissolved our relationship in a United Kingdom joint venture, White Rose Sharpsmart Limited that was formed in October 2001, prior to our acquisition of White Rose Environmental Limited in June 2004.  This joint venture was previously consolidated in our financial statements.  

During the quarter ended June 30, 2008, we completed three acquisitions.  We acquired selected assets of two domestic regulated waste businesses and 90% ofcompleted the stock offunding on a medical waste business in Chile.2008 acquisition.

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The aggregate net purchase price of our acquisitions including adjustments for purchase accounting, during the six monthsquarter ended June 30, 2008March 31, 2009 was approximately $63.9$18.2 million, of which $33.4approximately $12.9 million in cash payments related to transactions that closed in 2008 and were disbursed in early January 2009, and three acquisitions closed at the end of the quarter ended March 31, 2009 for $5.3 million, of which $3.4 million was paid in cash and $30.5$1.9 million was paid by the issuance of promissory notes.  For financial reporting purposes, these acquisition transactionsour 2009 acquisitions were accounted for using the purchaseacquisition method of accounting.  The purchase prices of these acquisitions, in excess of acquired tangible assets, have been primarily allocated to goodwill and are preliminary pending completion of certain intangible asset

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valuations.  The results of operations of these acquired businesses have been included in the consolidated statements of income from the dates of acquisition.acq uisition.  These acquisitions resulted in recognition of goodwill in our financial statements reflecting the complementary strategic fit that the acquired businesses brought to us.

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NOTE 3 – INCOME TAXES

We and our subsidiaries file U.S. federal income tax returns and income tax returns in various states and foreign jurisdictions.  With a few exceptions, we are no longer subject to U.S. federal, state, local, or non-U.S. income tax examinations by tax authorities for years before 2001.  Tax2002.  The Internal Revenue Service (“IRS”) concluded an examination of the Company's U.S. income tax return for 2004; subsequent tax years 2005 and 2006 remain open and subject to examination by the IRS, and ourIRS. Our subsidiaries in foreign countries have tax years open ranging from 2002 through 2006.2008.

The total amount of incomeunrecognized tax contingency reservebenefits as of June 30,March 31, 2009 and 2008 iswas $8.2 million and $3.7 million, respectively, which includesincluded immaterial amounts of interest and penalties and is reflected as a liability on the balance sheet. The amount of incomeunrecognized tax contingency reservebenefits that, if recognized, would affect the effective tax rate is approximately $3.7$8.2 million.  At June 30, 2008, the balances have not materially changed nor do we expect a material increase or decrease to these balances over the next twelve months. We recognize interest and penalties accrued related to income tax reserves in income tax expense.  This method of accounting is consistent with prior years.

The following table summarizes the changes in unrecognized tax positions during the quarter ended March 31, 2009:

NOTE 4 – STOCK BASED COMPENSATION

At June 30, 2008March 31, 2009 we had stock options outstanding under the following plans:

(i)

theThe 2008 Incentive Stock Plan, which our stockholders approved in May 2008;

(ii)

the 2005 Incentive Stock Plan, which our stockholders approved in April 2005;

(iii)

the 2000 Nonstatutory Stock Option Plan, which our Board of Directors adopted in February 2000;

(iv)

the 1997 Stock Option Plan, which expired in January 2007;2008;

(v)

the Directors Stock Option Plan, which expired in May 2006;

(vi)

the 1995 Incentive Compensation Plan, which expired in July 2005;

(vii)

and our Employee Stock Purchase Plan, which our stockholders approved in May 2001.

The following table sets forth the expense related to stock compensation:

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The following table sets forth the tax benefits related to stock compensation:

The Black-Scholes option-pricing model is used in determining the fair value of each option grant using the assumptions noted in the table below.  The expected term of options granted is based on historical experience and represents the period of time that awards granted are expected to be outstanding.  Expected volatility is based upon historical volatility of the company’s stock.  The expected dividend yield is zero.  The risk-free interest rate is based upon the U.S. Treasury yield rates of a comparable period.

The assumptions that we used in the Black-Scholes model are as follows:

The weighted average grant date fair value of the stock options granted during the three and six months ended June 30,March 31, 2009 and 2008 was $11.70 and 2007, was $16.33 and $12.93, and $13.51 and $11.20,$13.00, respectively.

Stock option activity for the sixthree months ended June 30, 2008,March 31, 2009, was as follows:

The total intrinsic value of options exercised for the three and six months ended June 30,March 31, 2009 and 2008 and 2007 was $14.7$4.2 million and $9.1 million, and $21.2 million and $12.8

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$6.4 million, respectively.  Intrinsic value is measured using the fair market value at the date of the exercise (for options exercised) or at June 30, 2008March 31, 2009 (for outstanding options), less the applicable exercise price.

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As of June 30, 2008,March 31, 2009, there was $16.4$29.0 million of total unrecognized compensation expense, related to non-vested stock options, which is expected to be recognized over a weighted averageweighted-average period of 1.952.09 years.

NOTE 5 – COMMON STOCK

During the quarterquarters ended March 31, 2009 and 2008, we repurchased on the open market, and subsequently cancelled, 536,346 and 1,482,185 shares of common stock.stock, respectively.  The weighted average repurchase price was $47.59 and $53.56 per share.share, respectively.

During the quarter ended June 30, 2008,March 31, 2009, we repurchased on the open market, and subsequently cancelled, 984,533 shares of common stock.  The weighted average repurchase price was $52.49 per share, with $9.9settled in cash $2.5 million of cash paid for the repurchase settling at the beginningshare repurchases that were executed in December 2008.  In addition, there was $0.5 million of July 2008.current quarter share repurchases that were not settled as of March 31, 2009.

NOTE 6 – NET INCOME PER COMMON SHARE

The following table sets forth the computation of basic and diluted net income per share:

NOTE 7 – COMPREHENSIVE INCOME

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The components of total comprehensive income are net income, the change in cumulative currency translation adjustments and gains and losses on derivative instruments qualifying as cash flow hedges.  The following table sets forth the

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components of total comprehensive income for the three and six months ended June 30, 2008March 31, 2009 and 2007:2008:

NOTE 8 – GUARANTEE

We have guaranteed a loan to JPMorganChase Bank N.A. on behalf of Shiraishi-Sogyo Co. Ltd (“Shiraishi”).  Shiraishi is a customer in Japan that is expanding their medical waste management business and has a one yearsix month loan with a current balance of $4.5$5.1 million with JPMorganChase Bank N.A. that expires in May 2009.  The loan with JPMorganChase and our associated guarantee is in the process of being extended beyond May 2010.  

NOTE 9 – GOODWILL

We have two geographical reporting segments, United States and Foreign Countries, both of which have goodwill.  The changes in the carrying amount of goodwill, net of amortization, for the sixthree months ended June 30, 2008March 31, 2009 were as follows:

During the quarter ended June 30, 2008 we performed our annual goodwill impairment evaluation for our three reporting units, Domestic Regulated Medical Waste, Domestic Regulated Returns Management, and Foreign Countries, and determined that none of our recorded goodwill was impaired.  During this evaluation we calculated the fair value of the reporting units by multiplying their Earnings Before Interest, Tax, Depreciation and Amortization (“EBITDA”) for the prior twelve months times a

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valuation multiple.  The valuation multiple is the average market price of our stock for the prior twelve month period times the outstanding shares at June 30, 2008, divided by the trailing twelve month EBITDA.  This EBITDA multiple is an indication of the fair value of the company, per the marketplace.  The fair value was then compared to the reporting units’ book value and determined to be in excess of the book value by a considerable margin.  The book value was determined by subtracting their total liabilities from their total assets.  We complete our annual impairment analysis of our indefinite lived intangibles (facility permits) during the quarter ended December 31 of each year.

NOTE 10 – LEGAL PROCEEDINGS

We operate in a highly regulated industry and must deal with regulatory inquiries or investigations from time to time that may be instituted for a variety of reasons.  We are also involved in a variety of civil litigation from time to time.

On April 19, 2008 Stericycle and Daniels Corporation (UK) Limited (“Daniels UK”), a subsidiary of Daniels Sharpsmart Pty Limited (“Daniels”), and certain affiliated companies entered into a settlement of arbitration proceedings in the United Kingdom prior to any award by the arbitrator.  At the same time, we entered into settlements with other subsidiaries of Daniels resolving various disputes, and we finalized the payment of the legal fees that SteriCorp Limited had been awarded under the arbitrator’s award.  In connection with these net settlements, we recognized a total pre-tax expense of $5.5 million, or an after-tax expense of $3.4 million for the six months ended June 30, 2008.

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NOTE 11 – NEW ACCOUNTING STANDARDS

Effective January 1, 2008,2009 we adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements, for all financial assets and liabilities and for nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) No. 157-2 delayed the adoption date for nonfinancial assets and liabilities that are measured at fair value on a non-recurring basis, such as goodwill and identifiable intangible assets until January 1, 2009.  We do not believe the adoption of SFAS No. 157 for our non-financial assets and liabilities, effective January 1, 2009, will have a material impact on our consolidated financial statements.  Our adoption of SFAS No. 157 did not require a cumulative effect adjustment to the opening balance of our retained earnings.  See Note 13 - Fair Value Measurements.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115" (“SFAS No. 159”).  SFAS No. 159 allows measurement at fair value of eligible financial assets and liabilities that are not otherwise measured at fair value.  If the fair value option for an eligible item is elected, unrealized gains and losses for that item are reported in current earnings at each subsequent reporting date.  SFAS No. 159 also establishes presentation and disclosure requirements designed to draw comparisons

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between the different measurement attributes that we elect for similar types of assets and liabilities.  SFAS No. 159 is effective for fiscal years beginning after November 15, 2007.  We do not have any financial assets or liabilities for which we elect the fair value option under SFAS No. 159.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) replaces SFAS No. 141, Business Combinations. SFAS No. 141(R) requires the acquiring entity in a business combination to recognize the full fair value of assets acquired and liabilities assumed in the transaction; requires certain contingent assets and liabilities acquired to be recognized at their fair values on the acquisition date; requires contingent consideration to be recognized at its fair value on the acquisition date and changes in the fair value to be recognized in earnings until settled; requires the expensing of most transaction and restructuring costs; and generally requires the reversals of valuation allowances related to acquired deferred tax assets and changes to acquired income tax uncertainties to also be recognized in earni ngs.ea rnings.  This new accounting standard is effectiverequires the company to recognize expenses to the income statement that were previously accounted for financial statements issuedas acquisition accounting and reflected on the balance sheet.  Net income for fiscal years beginning after December 15, 2008.  We are currently evaluating the provisionsfirst quarter of 2009 included the effect of $0.4 million of charges related to the adoption of SFAS No. 141(R) to determine.  Because of the potentialinherent uncertainty of the number, structure and complexity of the acquisitions that we may complete in the future and the magnitude of the transaction expenses that we may incur in completing these acquisitions, the future impact if any,of the adoption will haveof SFAS No. 141(R) is not reasonably estimable.

Effective January 1, 2009 we adopted SFAS Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS No. 160”).  The objective of SFAS No. 160 is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements.  SFAS No. 160 requires that minority interests be identified and presented on the consolidated statements of income in the equity section, but separate from the parent’s equity;  that changes in the parent’s ownership interest be accounted for consistently and similarly as equity transactions; in a deconsolidation situation, any remaining noncontrolling equity investment and gain or loss on the deconsolidation is to be measured at fair value; that entities provide sufficient disclosures that clearly distinguish between the ownership interests of the parent and the interests of the noncontrolling owner.  For the quarter ended March 31, 2009, the adoption of SFAS No. 160 did not result in a material impact to our financial position and results of operations.statements.

In March 2008, the FASB issuedEffective January 1, 2009 we adopted SFAS Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”), to enhance the disclosure regarding the Company’s derivative and hedging activities to improve the transparency of financial reporting.  This statement is effective for fiscal years beginning after November 15, 2008.  As SFAS No. 161 only requires enhanced disclosures, this standard will have no impact on the financial position, results of operations, or cash flows of the Company.

NOTE 12 – GEOGRAPHIC INFORMATION

Management has determined that we have two reportable segments, United States and Foreign Countries based on our consideration of the criteria detailed in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.”  Revenues

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are attributed to countries based on the location of customers.  Inter-company revenues recorded by the United States for work performed in Canada, which are immaterial, are eliminated prior to reporting United States revenues.  The same accounting principles and critical accounting policies are used in the preparation of the financial statements for both reporting segments.

Detailed information for our United States reporting segment is as follows:

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Detailed information for our Foreign Countries reporting segment is as follows:

NOTE 13 – FAIR VALUE MEASUREMENTS

We adopted SFAS No. 157 “Fair Value Measurements” (“SFAS No. 157”) on January 1, 2008, which clarifies that fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. Under SFAS No. 157, fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of our company. Unobservable inputs are those that reflect the company’s assumptions about what market participantsp articipants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three levels of the fair value hierarchy defined by SFAS No. 157 are as follows:

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As required by SFAS No. 157, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels. The impact of our creditworthiness has been considered in the fair value measurements noted below. In addition, under SFAS No. 157, the fair value measurement of a liability must reflect the nonperformance risk of an entity.

At June 30, 2008,March 31, 2009, we have $12.4$9.1 million in cash and cash equivalents, and $1.1$3.0 million of short termshort-term investments that we carry on our books at fair value using Level 1 inputs.  

We have a cash flow hedge with an objective to offset foreign currency exchange risk to the U.S. dollar equivalent cash inflows on the settlement of a GBP denominated intercompany loan.  The fair value of the hedge was calculated using Level 2 inputs and was recorded as a liabilitycurrent asset of $2.4$2.5 million as of June 30,March 31, 2009 and as a liability of $2.3 million as of March 31, 2008.

We have three cash flow hedges with the objective to offset variable interest rate expense on a portion of our revolver debt with fixed rate expense.  The notional amount of our three hedges is $225.0 million.  The fair value of the hedge is calculated using Level 2 inputs and is recorded as a liability of $4.1 million.

There were no movements of items between fair value hierarchies.

NOTE 14 – NEW BORROWINGSDERIVATIVE INSTRUMENTS

In July 2004, we entered into four forward contracts, of which three have settled, to hedge a GBP Sterling-based intercompany loan between our US-based subsidiary, Stericycle International L.L.C. and our subsidiary in the United Kingdom, Stericycle International Ltd.  The subsidiary borrowed the funds for the purchase of White Rose.  The remaining forward contract aligns with the anticipated repayment schedule of the loan and expires in July 2009.  Initially, we did not elect hedge accounting on the forward contracts and had recognized the change in value of the hedges through other income

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(expense).  This amount was generally offset by the currency adjustment to the intercompany receivable.

On April 15,October 1, 2005, we prospectively designated these existing forward contracts as cash flow hedges and are using hedge accounting.  The objective of our cash flow hedges is to offset the foreign exchange risk to the U.S. dollar equivalent cash inflows on the settlement of the GBP denominated intercompany loan.  At March 31, 2009, the fair market value of the hedge was recorded as a current asset of $2.5 million.  As of March 31, 2009, the total notional amount of hedges outstanding is GBP 8.0 million.  At March 31, 2009, the hedges were determined to be 100% effective.

In October 2008, weStericycle entered into a note purchase agreement with nine institutional purchasers whereby we issued and sold to the purchasers $100three interest rate swap contracts covering $225 million of our 5.64%borrowings outstanding under our senior notes due April 15, 2015 (the “Notes”).credit facility.  The notes bearobjective of the swap is to reduce the risk of volatile interest atexpense by fixing the rate.  The contracts are as follows:

We entered into the interest rate swaps in order to manage the risk of interest rate changes to our interest expense.  The interest rate swaps are designated as cash flow hedges; the notional amounts and all other significant terms of the swap agreement are matched to the provisions and terms of the variable rate debt hedged.  The fair market of the three hedges is recorded as a liability of $4.1 million.  At March 31, 2009, the hedges were determined to be 100% effective.  Gains or losses on hedges are reclassified into interest expense when the effect of the hedged item is recognized in earnings.  The fair market value was determined using market data inputs to calculate expected future interest rates.  The cash streams attributable to the difference between expected future rates and the fixed rate of 5.64% per annum. Interestpayable is payable in arrears semi-annually on April 15 and October 15 beginning on October 15, 2008, and principal is payablediscounted to arrive at the maturityfair value of the notes on April 15, 2015.three hedges.

The Notes are unsecured obligations and rank pari passu with our obligations under our senior unsecured credit facility pursuant to our credit agreement with Bank of America, N.A. and the other lenders party to the credit agreement. We applied the proceeds from the sale of the Notes to reduce our borrowings under our senior unsecured credit facility.  The Notes contain customary events of default, including our failure to pay any principal, interest or other amount when due, our violation of our affirmative or negative covenants or a breach of our representations and warranties. Upon the occurrence of an event of default, payment of the Notes may be accelerated by the holders of the notes.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We were incorporated in 1989 and presently serve a very diverse customer base of approximately 402,900420,000 customers throughout the United States, United Kingdom, Canada, Mexico, Canada, Ireland, Argentina, Chile and Puerto Rico.  We have fully integrated networks including processing centers and transfer and collection sites.  We use these networks to provide a broad range of services to our customers including regulated

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medical waste management services and regulated return management services.  Regulated medical waste management services include servicing a variety of customers to remove and process waste while regulated return management services are physical services provided to companies and individual businesses that assist with the handling of products that are being removed from the supply chain due to recalls and expiration.  

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These services also include advanced notification technology that is used to communicate specific instructions to the users of the product.  Our waste treatment technologies include autoclaving, incineration, chemical treatment and our proprietary electro-thermal-deactivation system.  In addition, we have technology licensing agreements with companies located in Japan, Brazil, and South Africa.

Other than the adoption of SFAS No. 157141 (R) Business Combinations, (see Note-13 Fair Value Measurements)Note 11 – New Accounting Standards, for the impact on the financial statements), there were no material changes in the Company’s critical accounting policies since the filing of its 20072008 Form 10-K.  As discussed in the 20072008 Form 10-K, the preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the amount of reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported.  Actual results may differ from those estimates.

THREE MONTHS ENDED JUNE 30, 2008MARCH 31, 2009 COMPARED TO THREE MONTHS ENDED JUNE 30, 2007MARCH 31, 2008

The following summarizes the Company’s operations:

Revenues:  Our revenues increased $44.9$22.3 million, or 19.3%8.8%, to $277.8$277.1 million in 20082009 from $232.9$254.8 million in 2007.2008.  Domestic revenues increased $28.8$27.8 million or

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15.8%, 14.3% to $211.0$222.0 million from $182.2$194.3 million in 20072008 as internal revenue growth for domestic small account customers increased by approximately $11.3$10.9 million, or approximately 12%10%, and internal revenue growth for large quantity customers increased by approximately $4.4$4.0 million, or approximately 8%6%. Internal revenue growth for returns management was $1.3decreased by $2.0 million, and domestic acquisitions less than one year old contributed approximately $11.8$14.9 million to the increase in domestic revenues.

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International revenues increased $16.1decreased $5.4 million to $66.8$55.1 million, or 31.8%9.0%, from $50.7$60.5 million in 2007.2008.  Internal growth in the international segment contributed $8.9$5.9 million, or 17.5%10% to the increase in increasedinternational revenues, before taking into consideration the effect of exchange rates and acquisitions.  The effect of exchange rate fluctuations favorablyunfavorably impacted international revenues approximately $1.1$16.1 million while acquisitions less than one year old contributed an additional $6.1$4.8 million in international revenues.

Cost of Revenues:  Our cost of revenues increased $26.3$8.1 million, or 20.5%5.7%, to $154.6$149.3 million during 20082009 from $128.3$141.2 million during 2007.2008.  Our domestic cost of revenues increased $17.9$12.5 million, or 19.1%12.3%, to $111.3$113.8 million from $93.4$101.3 million in 20072008 as a result of costs related to a proportional increase in revenues from acquisitions and internal growth.  Our international cost of revenues increased $8.4decreased $4.4 million, or 24.2%11.0% to $43.3$35.5 million from $34.9$39.9 million in 20072008 as a result of costs related to proportional increasedecrease in revenues from acquisitions and internal revenue growth.primarily driven by the impact of exchange rates.  Our company wide gross margin percentage decreasedincreased to 44.3%46.1% during 2009 from 44.6% during 2008 from 44.9% during 2007 primarily due to an increasea decrease in fuel and energy costs.

Selling, General and Administrative Expenses:  Selling, general and administrative expenses, including acquisition related costs, increased $7.3$4.2 million, or 16.4%8.7%, to $52.1$53.0 million, for the quarter ended June 30, 2008March 31, 2009 from $44.8$48.8 million for the comparable quarter in 2007.2008.  As a percentage of revenue, these costs decreased by 0.5%were flat for the quarter ended June 30, 2008March 31, 2009 compared to the same period in 2007.2008.

Income from Operations:  Income from operations increased to $70.9$74.2 million for the quarter ended June 30, 2008March 31, 2009 from $60.0$59.5 million for the comparable quarter in 2007,2008, an increase of 18.2%24.7%.  During the quarter ended June 30, 2008, we recognized additionalThis increase is partially attributed to a business dispute settlement and related costs of $0.1 million.  During the quarter ended June 30, 2007 wethat were recognized a gain on sale of assets of $1.1 million, partially offset by $0.6 million in idled fixed assets write-offs and $0.2 million write-off of intangible permit.

Net Interest Expense:  Net interest expense increased to $8.0 million during the quarter ended June 30,March 31, 2008 from $7.7of $5.4 million, which did not repeat during the comparable quarter in 2007 due to increased borrowings related to stock repurchases and acquisitions partially offset by lower interest rates.  

Income Tax Expense:  Income tax expense increased to $23.7 million for the quarter ended June 30, 2008 from $20.0 million for the comparable quarter in 2007.  The increase was due to higher taxable income.  The effective tax rates for the quarters ended June 30, 2008 and 2007 were 38.0% and 38.5%, respectively.

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SIX MONTHS ENDED JUNE 30, 2008 COMPARED TO SIX MONTHS ENDED JUNE 30, 2007

The following summarizes the Company’s operations: