Form 8-K STERICYCLE INC For: Oct 27

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

Current Report

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 27, 2016

 

 

 

Stericycle, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

28161 North Keith Drive

Lake Forest, Illinois 60045

(Address of principal executive offices including zip code)

(847) 367-5910

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CR 230.425)

☐    Soliciting material pursuant to Rule 425 under the Securities Act (17 CFR 240.14a-12)

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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Item 2.02    Results of Operations and Financial Condition

On October 27, 2016 Stericycle, Inc. issued a press release announcing its financial results for the quarter ended September 30, 2016. A copy of this press release is attached hereto as Exhibit 99.1 and incorporated by reference.

Item 9.01    Financial Statements and Exhibits

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

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EXHIBIT INDEX

 

 

EXHIBIT 99.1

FOR FURTHER INFORMATION CONTACT:

Investor Relations 847-607-2012

STERICYCLE, INC. REPORTS RESULTS

FOR THE THIRD QUARTER AND YEAR TO DATE 2016

Lake Forest, Illinois, October 27, 2016—Stericycle, Inc. (NASDAQ: SRCL), today reported financial results for the third quarter and year to date 2016.

THIRD QUARTER HIGHLIGHTS COMPARED TO PRIOR YEAR:

THIRD QUARTER RESULTS

Revenues for the quarter ended September 30, 2016 were $890.1 million, up 23.9% from $718.6 million in the third quarter of last year. Acquisitions contributed approximately $184.7 million to the current period’s growth in revenues.  Revenues increased 26.4% compared to the third quarter of last year when adjusted for unfavorable foreign exchange impacts of $18.3 million. Organic revenues grew 0.7%, or 1.6% when adjusted for manufacturing and industrial services. See Tables 1A-1C.

Gross profit, reported in accordance with U.S. generally accepted accounting principles (“GAAP”), was $379.3 million, up 26.6% from $299.7 million in the third quarter of last year.  GAAP gross profit as a percentage of revenue was 42.6% compared to 41.7% in the third quarter of last year. Non-GAAP gross profit, when adjusted for contract exit costs and plant conversion expenses as identified in Table 2, was $381.0 million, an increase of 26.9% from $300.2 million in the third quarter of last year. Non-GAAP gross profit as a percentage of revenues was 42.8% compared to 41.8% in the third quarter of last year.

“We were able to maintain consistent margin performance in the quarter despite revenue headwinds from previously discussed pricing pressure and softness in the manufacturing and industrial market,” said Charlie Alutto, President and Chief Executive Officer.

GAAP earnings per diluted share decreased 11.1% to $0.72 from $0.81 in the third quarter of last year. Non-GAAP earnings per diluted share, when adjusted for various items, increased 7.8% to $1.24 from $1.15 in the third quarter of last year. See Tables 3 and 4.

“Our record free cash flow in the quarter allowed us to accelerate our capital allocation strategy, contributing to our EPS growth,” said Dan Ginnetti, Chief Financial Officer. “We were able to significantly reduce our debt by approximately $100 million, repurchase 265,000 of mandatory convertible preferred stock, and close five acquisitions.” 

NINE MONTHS HIGHLIGHTS COMPARED TO PRIOR YEAR:

FIRST NINE MONTHS RESULTS

Revenues for the nine months ended September 30, 2016 were $2.66 billion, up 26.6% from $2.10 billion in the same period last year. Acquisitions contributed approximately $565.1 million to the current year’s growth in revenues. Revenues increased 29.6% compared to the same period last year when adjusted for unfavorable foreign exchange impact of $62.1 million. Organic revenues grew 2.6%, or 3.9% when adjusted for manufacturing and industrial services. See Tables 1A-1C.

GAAP gross profit was $1.13 billion, up 27.5% from $885.8 million in the same period last year. GAAP gross profit as a percentage of revenues was 42.5% compared to 42.2% in the same period last year. Non-GAAP gross profit, when adjusted for contract exit costs and plant conversion expenses as identified in Table 2, was $1.13 billion, up 27.6% from

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$886.8 million in the same period as last year. Non-GAAP gross profit as a percentage of revenues was 42.6% compared to 42.3% in the same period last year.

GAAP earnings per diluted share decreased 10.6% to $1.93 from $2.16 in the same period last year. Non-GAAP earnings per diluted share, when adjusted for various items, increased 1.7% to $3.53 from $3.47 in the same period last year. See Tables 3 and 4.

Cash flow from operations for the nine months ended September 30, 2016 was $417.8 million, up 42.4% from $293.3 million in the same period last year.

CONFERENCE CALL INFORMATION

Conference call to be held October 27, 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 November 27th by dialing 855-859-2056, access code 21518012. To hear a live simulcast of the call or access the audio archive, visit the investor relations page on www.stericycle.com.

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 the change in fair value of contingent consideration. This allows for comparison of period over period results without the impact of acquisition-related expenses.

For the purpose of evaluating operating performance, we additionally present our financials to show the impact of certain expenses and income in our non-GAAP earnings 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 periods presented, these adjustments include litigation expense, restructuring and plant conversion expenses, contract exit costs, and insurance proceeds.

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.

 

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RECONCILIATION OF CERTAIN NON-GAAP MEASURES

 

Table 1 – A: RECONCILIATION OF GAAP TO NON-GAAP REVENUE GROWTH – QTD Q3

 

 

 

Table 1 – B: RECONCILIATION OF GAAP TO NON-GAAP REVENUE GROWTH – YTD Q3

 

 

 

Table 1 – C: DISAGGREGATED REVENUE GROWTH – 2016

 

 

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Table 2: RECONCILIATION OF GAAP TO NON-GAAP GROSS PROFIT

 

 

Table 3: RECONCILIATION OF GAAP TO NON-GAAP NET INCOME ATTRIBUTABLE TO STERICYCLE COMMON SHAREHOLDERS

 

 

 

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Table 4: RECONCILIATION OF GAAP TO NON-GAAP EPS

 

 

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.

 

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