Stericycle (SRCL) 8-K Results of Operations and Financial Condition

EXHIBIT 99.1

FOR FURTHER INFORMATION CONTACT:        FOR IMMEDIATE RELEASE

Dan Ginnetti 847-607-2069

Conference call to be held February 5, 2015 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 5th by dialing 855-859-2056, access code 39404156. To hear a live simulcast of the call or access the audio archive, visit the investor relations page on www.stericycle.com.

STERICYCLE, INC. REPORTS RESULTS

FOR THE FOURTH QUARTER AND FULL YEAR ENDED 2014

Lake Forest, Illinois, February 5, 2015—Stericycle, Inc. (NASDAQ:SRCL), today reported financial results for the fourth quarter and full year of 2014.

FOURTH QUARTER RESULTS

Revenues for the quarter ended December 31, 2014 were $676.9 million, up $109.0 million or 19.2% from $567.9 million in the fourth quarter last year. Acquisitions contributed approximately $93.1 million to the current period’s growth in revenues. Revenues increased 22.2% compared to the prior period when adjusted for unfavorable foreign exchange impact of $17.0 million. Gross profit, reported in accordance with U.S. generally accepted accounting principles (“GAAP”), was $285.0 million, up 12.5% from $253.3 million in the fourth quarter last year. GAAP gross profit as a percent of revenues was 42.1% compared to 44.6% in the fourth quarter of 2013. Non-GAAP gross profit, when adjusted for various items identified in the second of the following tables, was $285.4 million, up 11.7% from $255.4 million in the fourth quarter last year. Non-GAAP gross profit as a percent of revenues was 42.2% compared to 45.0% in the fourth quarter of 2013. GAAP earnings per diluted share increased 6.7% to $0.96 from $0.90 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, increased 13.2% to $1.12 from $0.99. See tables below.

FULL-YEAR RESULTS

Revenues for the full year 2014 were $2.56 billion, up 19.3% from $2.14 billion in 2013. Acquisitions contributed approximately $301.6 million to the current year’s growth in revenues. Revenues increased 20.8% compared with the prior period when adjusted for unfavorable foreign exchange impact of $33.6 million. GAAP gross profit was $1.09 billion, up 13.5% from $964.6 million in 2013. GAAP gross profit as a percent of revenues was 42.8% compared to 45.0% in 2013. Non-GAAP gross profit, when adjusted for various items identified in the second of the following tables, was $1.10 billion, up 13.5% from $967.2 million in 2013. Non-GAAP gross profit as a percent of revenues was 42.9% compared to 45.1% in 2013. GAAP earnings per diluted share increased 6.3% to $3.79 from $3.56 in 2013. Non-GAAP earnings per diluted share, when adjusted for various items identified in the third of the following tables, increased 13.8% to $4.27 from $3.75. 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
	2014		2013		$		%		2014		2013		$		%
Total As Reported Revenues (GAAP)	$	676.9	$	567.9	$	109.0	19.2	%	$	2,555.6	$	2,142.8	$	412.8	19.3	%
Adjustment for Foreign Exchange	17.0				17.0				33.6				33.6
Subtotal (non-GAAP):	693.9		567.9		126.0		22.2	%	2,589.2		2,142.8		446.4		20.8	%
Adjustment for Acquisitions	(93.70)		(0.60)		(93.10)				(311.50)		(9.90)		(301.60)
Adjustment for Regulated Returns and Recall Management Services	(16.10)		(26.50)		10.4				(80.50)		(97.80)		17.3
Subtotal (non-GAAP):	$	584.1	$	540.8	$	43.3	8.0	%	$	2,197.2	$	2,035.1	$	162.1	8.0	%
Domestic/ International Breakdown:
Domestic Revenues	$	479.7	$	394.6	$	85.1	21.6	%	$	1,796.8	$	1,506.6	$	290.2	19.3	%
International Revenues	197.2		173.3		23.9		13.8	%	758.8		636.2		122.6		19.3	%
Total As Reported Revenues (GAAP)	$	676.9	$	567.9	$	109.0	19.2	%	$	2,555.6	$	2,142.8	$	412.8	19.3	%

(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 thousands)⁽²⁾ 

	Three Months Ended December 31,								Years Ended December 31,
	2014				2013				2014				2013
	$		% of Rev		$		% of Rev		$		% of Rev		$		% of Rev
GAAP Gross Profit		$284,969	42.1	%		$253,285	44.6	%		$1,094,411	42.8	%		$964,634	45.0	%
Plant Conversion Expenses	381		0.1	%	--		--		2,915		0.1	%	423		0.0	%
Litigation Expenses	--		--		2,120		0.4	%	--		--		2,120		0.1	%
Non-GAAP Gross Profit		$285,350	42.2	%		$255,405	45.0	%		$1,097,326	42.9	%		$967,177	45.1	%

(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
	2014		2013		$		%		2014		2013		$		%
GAAP EPS	$	0.96	$	0.90	$	0.06	6.7	%	$	3.79	$	3.56	$	0.22	6.3	%
Acquisition Expenses	0.03		0.05						0.14		0.12
Integration Expenses	0.08		0.02						0.19		0.05
Change in Fair Value of Contingent   Consideration	(0.060)		(0.20)						(0.020)		(0.030)
Litigation Expenses	0.02		0.01						0.05		0.02
Plant Conversion and Restructuring   Expenses	0.09		0.01						0.12		0.02
Impairment of Intangible Assets	--		0.02						--		0.01
Non-GAAP EPS (Adjusted)	$	1.12	$	0.99	$	0.13	13.2	%	$	4.27	$	3.75	$	0.52	13.8	%

(3) In accordance with GAAP, reported earnings per share (EPS) include the after-tax 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 earnings per share are not intended to imply, and should not be interpreted as implying, that non-GAAP earnings per share is a better measure of performance than GAAP earnings per share.

Cash flow from operations was $448.5 million and $405.3 million for the full years of 2014 and 2013, 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, increases in transportation and other operating costs, the level of governmental enforcement of regulations governing regulated waste collection and treatment, our ability to execute our acquisition strategy and to integrate acquired businesses, competition and demand for services in the regulated waste industry, political, economic and currency risks related to our foreign operations, impairments of goodwill or other indefinite-lived intangibles, exposure to environmental liabilities, 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)

	December 31,
	2014			2013
ASSETS
Current Assets:
Cash and cash equivalents	$	22,236		$	67,167
Short-term investments	380			413
Accounts receivable, net	465,473			388,996
Deferred income taxes	28,322			18,031
Prepaid expenses	33,498			28,379
Other current assets	31,572			37,279
Total Current Assets	581,481			540,265
Property, plant and equipment, net	460,408			358,967
Goodwill	2,418,832			2,231,582
Intangible assets, net	909,645			720,035
Other assets	30,840			37,124
Total Assets	$	4,401,206		$	3,887,973
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	131,969		$	150,380
Accounts payable	114,596			89,146
Accrued liabilities	131,743			107,445
Deferred revenues	21,624			18,826
Other current liabilities	59,190			50,387
Total Current Liabilities	459,122			416,184
Long-term debt, net of current portion	1,527,246			1,280,663
Deferred income taxes	431,643			396,119
Other liabilities	66,010			27,469
Equity:
Common stock	849			855
Additional paid-in capital	289,211			195,110
Accumulated other comprehensive loss	(138,419		)	(56,468		)
Retained earnings	1,743,371			1,610,964
Total Stericycle, Inc. Equity	1,895,012			1,750,461
Noncontrolling interest	22,173			17,077
Total Equity	1,917,185			1,767,538
Total Liabilities and Equity	$	4,401,206		$	3,887,973

STERICYCLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)

	Three Months Ended December 31,										Years Ended December 31,
	2014					2013					2014					2013
	$			% of Rev		$			% of Rev		$			% of Rev		$			% of Rev
Revenues	$	676,947		100.0	%	$	567,899		100.0	%	$	2,555,601		100.0	%	$	2,142,807		100.0	%
Cost of revenues ("COR") - exclusive of depreciation, and adjusting items shown below	378,182			55.9	%	299,347			52.7	%	1,401,797			54.9	%	1,125,627			52.5	%
Depreciation	13,415			2.0	%	13,147			2.3	%	56,478			2.2	%	50,003			2.3	%
Total cost of revenues	391,597			57.8	%	312,494			55.0	%	1,458,275			57.1	%	1,175,630			54.9	%
Gross profit (non-GAAP)	285,350			42.2	%	255,405			45.0	%	1,097,326			42.9	%	967,177			45.1	%
Selling, general and administrative expenses ("SG&A") - exclusive of depreciation, amortization, and adjusting items shown below	112,563			16.6	%	99,728			17.6	%	433,865			17.0	%	372,091			17.4	%
Depreciation	3,121			0.5	%	2,965			0.5	%	15,446			0.6	%	11,338			0.5	%
Amortization	8,478			1.3	%	7,183			1.3	%	32,692			1.3	%	27,067			1.3	%
Total SG&A expense	124,162			18.3	%	109,876			19.3	%	482,003			18.9	%	410,496			19.2	%
Income from operations (non-GAAP) - exclusive of adjusting items shown below	161,188			23.8	%	145,529			25.6	%	615,323			24.1	%	556,681			26.0	%
Adjusting items:
Plant conversion expenses (COR)	381			0.1	%	—			0.0	%	2,915			0.1	%	423			0.0	%
Litigation expenses (COR)	—			0.0	%	2,120			0.4	%	—			0.0	%	2,120			0.1	%
Acquisition expenses (SG&A)	2,661			0.4	%	4,037			0.7	%	13,333			0.5	%	10,275			0.5	%
Integration expenses (SG&A)	11,343			1.7	%	2,819			0.5	%	25,968			1.0	%	6,521			0.3	%
Change in fair value of contingent consideration (SG&A)	(5,405		)	(0.8	)%	(1,971		)	(0.3	)%	(1,452		)	(0.1	)%	(2,278		)	(0.1	)%
Litigation expenses (SG&A)	3,331			0.5	%	—			0.0	%	6,574			0.3	%	116			0.0	%
Plant conversion and restructuring expenses (SG&A)	10,114			1.5	%	2,012			0.4	%	11,649			0.5	%	2,480			0.1	%
Impairment of intangible assets (SG&A)	—			0.0	%	1,405			0.2	%	—			0.0	%	1,405			0.1	%
Income from operations (GAAP)	138,763			20.5	%	135,107			23.8	%	556,336			21.8	%	535,619			25.0	%
Other income (expense):
Interest expense, net	(18,139		)	(2.7	)%	(15,341		)	(2.7	)%	(66,022		)	(2.6	)%	(54,949		)	(2.6	)%
Other expense, net	(1,177		)	(0.2	)%	(25		)	0.0	%	(2,746		)	(0.1	)%	(2,924		)	(0.1	)%
Total other expense	(19,316		)	(2.9	)%	(15,366		)	(2.7	)%	(68,768		)	(2.7	)%	(57,873		)	(2.7	)%
Income before income taxes	119,447			17.6	%	119,741			21.1	%	487,568			19.1	%	477,746			22.3	%
Income tax expense	36,789			5.4	%	41,154			7.2	%	159,422			6.2	%	164,662			7.7	%
Net income	82,658			12.2	%	78,587			13.8	%	328,146			12.8	%	313,084			14.6	%
Less: net income attributable to noncontrolling interests	132			0.0	%	423			0.1	%	1,690			0.1	%	1,712			0.1	%
Net income attributable to Stericycle, Inc.	$	82,526		12.2	%	$	78,164		13.8	%	$	326,456		12.8	%	$	311,372		14.5	%
Earnings per share- diluted	$	0.96				$	0.90				$	3.79				$	3.56
Weighted average number of common shares outstanding - diluted	86,194,513					87,107,437					86,233,612					87,391,988

STERICYCLE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

	Years Ended December 31,
	2014			2013
OPERATING ACTIVITIES:
Net income	$	328,146		$	313,084
Adjustments to reconcile net income to net cash provided by operating activities:
Stock compensation expense	17,773			17,457
Excess tax benefit of stock options exercised	(17,906		)	(17,153		)
Depreciation	71,924			61,341
Amortization	32,692			27,067
Deferred income taxes	16,550			30,930
Change in fair value of contingent consideration	(1,452		)	(2,278		)
Other	10,384			3,381
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable	(34,116		)	(54,767		)
Accounts payable	(5,712		)	7
Accrued liabilities	21,279			4,547
Deferred revenues	1,017			(1,319		)
Other assets and liabilities	7,921			23,010
Net cash provided by operating activities	448,500			405,307
INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired	(374,321		)	(161,936		)
(Purchases of)/ proceeds from investments	(1,957		)	73
Capital expenditures	(86,496		)	(73,109		)
Net cash used in investing activities	(462,774		)	(234,972		)
FINANCING ACTIVITIES:
Repayments of long-term debt and other obligations	(101,231		)	(88,507		)
Borrowings on foreign bank debt	205,086			218,968
Repayments on foreign bank debt	(193,284		)	(201,967		)
Borrowings on senior credit facility	1,413,026			1,029,718
Repayments on senior credit facility	(1,216,031		)	(984,979		)
Payments on capital lease obligations	(5,826		)	(4,024		)
Payments of deferred financing costs	(2,280		)	—
Purchases and cancellations of treasury stock	(194,066		)	(163,700		)
Proceeds from issuance of common stock	51,852			42,345
Excess tax benefit of stock options exercised	17,906			17,153
Payments to noncontrolling interests	(5,201		)	(1,026		)
Net cash used in financing activities	(30,049		)	(136,019		)
Effect of exchange rate changes on cash and cash equivalents	(608		)	(1,809		)
Net (decrease)/ increase in cash and cash equivalents	(44,931		)	32,507
Cash and cash equivalents at beginning of period	67,167			34,660
Cash and cash equivalents at end of period	$	22,236		$	67,167
NON-CASH ACTIVITIES:
Issuances of obligations for acquisitions	$	145,938		$	100,101
Issuance of obligations for noncontrolling interests	—			6,119