Stericycle, Inc. (Nasdaq: SRCL) today reported results for the
first quarter ended March 31, 2020.
Revenues for the quarter were $785.0 million, a
decrease of 5.4% from $830.1 million in the first quarter of last
year. Revenues increased 2.4% excluding divestitures, foreign
exchange and changes in sorted office paper (“SOP”) pricing.
Loss from operations in the quarter was $30.4 million, compared to
loss from operations of $4.2 million in the first quarter of last
year. Excluding the impact of divestitures and goodwill
impairment, income from operations was $27.9 million, an increase
of $16.6 million from the first quarter of last year. Net
loss was $20.1 million, or $0.22 diluted loss per share, compared
with net loss of $37.8 million, or $0.42 diluted loss per share, in
the first quarter of last year. Adjusted income from
operations was $93.8 million, or 11.9% of revenues, compared with
$105.0 million, or 12.6% of revenues in the first quarter of last
year. Adjusted diluted earnings per share was $0.52 compared
to $0.57 in the 2019 comparable period.
KEY BUSINESS HIGHLIGHTS:
- The Company delivered organic
growth in the quarter, the first time since 2017, as it continues
to drive results from its quality of revenue initiatives.
Growth in Regulated Waste and Compliance Services (“RWCS”) and
Secure Information Destruction (“SID”), excluding the impact of SOP
pricing, was 3.3% and 1.4%, respectively.
- Cash flow from operations for the
first quarter was $82.1 million, compared to $36.2 million for the
first quarter of 2019. Free Cash Flow for the quarter was
$42.5 million, compared to an outflow of $29.9 million in the first
quarter of last year, an increase of $72.4 million.
- Stericycle completed the
divestiture of the Domestic Environmental Solutions business on
April 6, 2020, for approximately $462.5 million in cash, achieving
a significant milestone in its portfolio rationalization and debt
reduction efforts.
- Stericycle’s regulated medical
waste transportation and treatment facilities are federally
designated as essential facilities and remain open to provide safe,
compliant disposal of medical waste to healthcare customers.
“In the face of these unprecedented times, we
are proud of our team members who stand among the essential service
providers to support the fight against COVID-19. Across the
country and around the globe, our regulated medical waste
operations continue to support the critical needs of the healthcare
industry,” said Cindy J. Miller, Chief Executive Officer. “As
a partner to the healthcare industry, we will continue to provide
leadership with specialized services for emerging healthcare
demands, educational resources from our Coronavirus Knowledge
Center, and safe, compliant medical waste treatment. Now more
than ever we are demonstrating the value of our brand and our
commitment to protect what matters.”
“Specific to the quarter, we were ahead of our
internal financial plans through January and February, which
enabled us to deliver another consecutive quarter of organic
revenue growth in our core regulated medical waste and secure
information destruction services. Additionally, we delivered
Free Cash Flow for the quarter that exceeded our expectations,”
Miller added. “We started to see the business impact of the
economic shut-down due to COVID-19 during March, primarily in our
secure information destruction services. To manage costs in
alignment with revenues, we have leveraged a centralized,
disciplined and operationally-focused approach to reduce or defer
operating and capital expenditures.”
FIRST QUARTER FINANCIAL RESULTS
U.S. Generally Accepted Accounting Principles (GAAP)
Results
- Revenues for the quarter ended
March 31, 2020, were $785.0 million, compared to $830.1 million in
the first quarter of last year. The decline was due to
divestitures, which reduced revenues by $38.4 million, and
macroeconomic factors of SOP pricing and foreign exchange rates,
which reduced revenues by $16.4 million and $10.5 million,
respectively. Organic revenue growth for RWCS, SID, excluding
SOP pricing impact, and Manufacturing and Industrial (“M&I”)
was 3.3%, 1.4%, and 2.2% respectively.
- Loss from operations in the quarter
was $30.4 million, compared to loss from operations of $4.2 million
in the first quarter of last year. Excluding the impact of
divestitures and goodwill impairment, income from operations was
$27.9 million, an increase of $16.6 million from the first quarter
of last year. This improvement was the result of lower
selling, general and administrative expenses (“SG&A”) primarily
related to reduced consulting and professional fees for litigation,
compliance and material weakness remediation of $27.1 million, plus
margin improvement of $4.2 million, partially offset by the SOP
pricing impact of $16.4 million.
- Net loss was $20.1 million, or
$0.22 diluted loss per share, compared with $37.8 million, or $0.42
diluted loss per share, in the first quarter of last year.
This reflects the previously highlighted significant charges and
operational items, as well as a tax benefit related to the U.S.
CARES Act of $39.4 million, which primary relates to our ability to
now carryback Net Operating Losses to prior years that had higher
tax rates. Additionally, there was lower interest expense of
$2.6 million due to lower debt balances and reduced interest
rates.
- Cash flow from operations for the
first quarter was $82.1 million, compared to $36.2 million for the
first quarter of 2019. The current quarter primarily reflects
lower payments for annual incentive compensation of $19.0 million,
accounts payable timing of $10.5 million, and prepaid software of
$8.0 million compared to the prior year.
- Cash paid for capital expenditures
for the first quarter was $39.6 million as compared to $66.1
million in the first quarter of 2019, primarily driven by timing of
investments in the ERP implementation and lower capital
expenditures due to disciplined capital management.
Non-GAAP Results
- Adjusted income from operations was $93.8 million, compared to
$105.0 million in the first quarter of last year. The
decrease was driven by SOP pricing of $16.4 million, which was
partially offset by margin improvement of $4.2 million.
- Adjusted diluted earnings per share
was $0.52, compared to $0.57 in the first quarter of last year,
primarily due to lower SOP pricing, which was partially offset by
margin improvement, a lower Adjusted effective tax rate and related
tax expense and lower interest expense.
- Free Cash Flow for the quarter was
$42.5 million, compared to an outflow of $29.9 million in the first
quarter of last year, an increase of $72.4 million, as a result of
improved cash flow from operations and lower capital expenditures
as described above.
NON-GAAP FINANCIAL MEASURES
Non-GAAP financial measures are reconciled to
the most comparable U.S. GAAP measures in the schedules attached
hereto.
RECENT EVENTS
On April 6, 2020, Stericycle completed the
divestiture of the Domestic Environmental Solutions business to
Harsco Corporation (NYSE: HSC) for approximately $462.5 million in
cash. Stericycle will continue to offer unused consumer
pharmaceutical take-back services and provide hazardous waste
services to healthcare customers. Harsco will provide
transportation and disposal services to Stericycle under a
long-term service agreement. Stericycle applied net proceeds
from the divestiture to pay down outstanding debt.
The Company is appreciative of government
efforts to stimulate the economy and expects positive impacts to
cash flow from operations as a result of the U.S. CARES Act.
Similar tax concessions and other stimulus measures have been
granted either before or after March 31, 2020 by certain foreign
and U.S. state jurisdictions which the Company continues to
evaluate. The Company anticipates cash refunds under certain
provisions of the U.S. CARES Act to be approximately $100 million
in 2020. Additionally, the Company anticipates deferring
payments associated with employer-related payroll taxes of
approximately $20 million and is pursuing credits in 2020 under the
U.S. CARES Act. Internationally, the Company is actively
pursuing payment deferrals or credits under the various programs
for indirect tax and social matters.
FINANCIAL GUIDANCE
Given the magnitude and duration of the uncertain economic
outlook in light of the COVID-19 pandemic, Stericycle today
announced that it is withdrawing financial guidance for the
full-year 2020.
CONFERENCE CALL INFORMATION
Stericycle is holding its first quarter earnings
conference call on Thursday, May 7, 2020, at 8:00 a.m. central
time. Dial (888) 317-6003 in the U.S., (866) 605-3851 in
Canada, or (412) 317-6061 if outside the U.S./Canada at least 10
minutes before the call begins. Upon dialing the number, you
will be prompted to enter the Elite Entry Number 1018395.
Presentation materials will be posted prior to the conference call
at http://investors.stericycle.com. To listen to the webcast
via the internet or access an audio replay of the call, visit
http://investors.stericycle.com.
ABOUT STERICYCLE
Stericycle, Inc., (Nasdaq: SRCL) is a U.S. based
business-to-business services company and leading provider of
compliance-based solutions that protect people and brands, promote
health and safeguard the environment. Stericycle serves
customers in the U.S. and 18 countries worldwide with solutions for
regulated medical waste management, secure information destruction,
compliance, customer contact, and brand protection. For more
information about Stericycle, please
visit www.stericycle.com.
SAFE HARBOR STATEMENT
This document may contain forward-looking
statements as defined in the Private Securities Litigation Reform
Act of 1995. When we use words such as “believes,” “expects,”
“anticipates,” “estimates” “may,” “plan,” “will,” “goal” or similar
expressions, we are making forward-looking statements.
Forward-looking statements are prospective in nature and are not
based on historical facts, but rather on current expectations and
projections of our management about future events and are therefore
subject to risks and uncertainties, which could cause actual
results to differ materially from the future results expressed or
implied by the forward-looking statements. Factors that could
cause such differences include, among others, developments in the
COVID-19 pandemic and the resulting impact on the results of
operations, precautions we have taken to safeguard the health and
safety of our employees which may make certain of our business
processes less efficient, measures taken by governmental
authorities to prevent the spread of COVID-19 which could disrupt
our supply chain, result in disruptions in transportation services
and restrictions on the ability of our employees to travel, result
in temporary closure of our facilities or the facilities of our
customers and suppliers, affect the volume of paper processed by
our secure information destruction business and the revenue
generated from the sale of SOP, disruptions in our relationships
with our employees as a result of certain cost-saving measures, an
economic slowdown in the U.S. and other countries resulting from
the outbreak of COVID-19, SOP pricing volatility, foreign exchange
rate volatility in the jurisdictions in which we operate, the
volume and size of any recall events, 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, the level of government
enforcement of regulations governing regulated waste collection and
treatment or the proper handling and protection of personal and
confidential information, decreases in the volume of regulated
wastes or personal and confidential information collected from
customers, the ability to implement our ERP system, charges related
to portfolio rationalization or the failure of divestitures to
achieve the desired results, failure to consummate transactions
with respect to non-core businesses, the obligations to service
substantial indebtedness and comply with the covenants and
restrictions contained in our credit agreements and notes, a
downgrade in our credit rating resulting in an increase in
interest expense, political, economic, inflationary and other risks
related to our foreign operations, the outcome of pending or future
litigation or investigations including with respect to the U.S.
Foreign Corrupt Practices Act, changing market conditions in
the healthcare industry, competition and demand for services in the
regulated waste and secure information destruction industries,
failure to maintain an effective system of internal control over
financial reporting, delays or failures in implementing remediation
efforts with respect to existing or future material weaknesses,
disruptions in or attacks on information technology systems, as
well as other factors described in our filings with the U.S.
Securities and Exchange Commission, including our Annual Report on
Form 10-K and subsequent Quarterly Reports on Forms 10-Q. 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 disclaim any obligation to update or revise any
forward-looking or other statements contained herein other than in
accordance with legal and regulatory obligations.
STERICYCLE, INC. |
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF (LOSS)
INCOME |
|
(In millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2020 |
|
% of Revenue |
|
|
2019 |
|
% of Revenue |
|
% Change |
|
Revenues |
$ |
785.0 |
|
|
100.0 |
% |
|
$ |
830.1 |
|
|
100.0 |
% |
|
(5.4 |
%) |
Cost of revenues |
|
498.4 |
|
|
63.5 |
% |
|
|
533.0 |
|
|
64.2 |
% |
|
(6.5 |
%) |
Gross
profit |
|
286.6 |
|
|
36.5 |
% |
|
|
297.1 |
|
|
35.8 |
% |
|
(3.5 |
%) |
Selling, general and
administrative expenses |
|
258.7 |
|
|
33.0 |
% |
|
|
285.8 |
|
|
34.4 |
% |
|
(9.5 |
%) |
Divestiture losses (gains),
net |
|
58.3 |
|
|
7.4 |
% |
|
|
(5.4 |
) |
|
-0.7 |
% |
nm |
|
Goodwill impairment |
|
- |
|
|
0.0 |
% |
|
|
20.9 |
|
|
2.5 |
% |
|
(100.0 |
%) |
Loss from
operations |
|
(30.4 |
) |
|
-3.9 |
% |
|
|
(4.2 |
) |
|
-0.5 |
% |
nm |
|
Interest expense, net |
|
(25.0 |
) |
|
-3.2 |
% |
|
|
(27.6 |
) |
|
-3.3 |
% |
|
(9.4 |
%) |
Other expense, net |
|
(2.9 |
) |
|
-0.4 |
% |
|
|
(2.2 |
) |
|
-0.3 |
% |
|
31.8 |
% |
Loss before income
taxes |
|
(58.3 |
) |
|
-7.4 |
% |
|
|
(34.0 |
) |
|
-4.1 |
% |
|
71.5 |
% |
Income tax benefit (expense) |
|
38.4 |
|
|
4.9 |
% |
|
|
(3.6 |
) |
|
-0.4 |
% |
nm |
|
Net loss |
|
(19.9 |
) |
|
-2.5 |
% |
|
|
(37.6 |
) |
|
-4.5 |
% |
|
(47.1 |
%) |
Net income attributable to
noncontrolling interests |
|
(0.2 |
) |
|
0.0 |
% |
|
|
(0.2 |
) |
|
0.0 |
% |
|
– |
|
Net loss attributable to
Stericycle, Inc. common shareholders |
$ |
(20.1 |
) |
|
-2.6 |
% |
|
$ |
(37.8 |
) |
|
-4.6 |
% |
|
(46.8 |
%) |
Loss per common share
attributable to Stericycle, Inc. common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.22 |
) |
|
|
|
|
$ |
(0.42 |
) |
|
|
|
|
(47.6 |
%) |
Diluted |
$ |
(0.22 |
) |
|
|
|
|
$ |
(0.42 |
) |
|
|
|
|
(47.6 |
%) |
Weighted average number
of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
91.3 |
|
|
|
|
|
|
90.7 |
|
|
|
|
|
|
|
Diluted |
|
91.3 |
|
|
|
|
|
|
90.7 |
|
|
|
|
|
|
|
nm - percentage change not
meaningful
UNAUDITED STATISTICS - U.S. GAAP AND ADJUSTED
MEASURES |
|
(In millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
% of Revenue |
|
|
|
|
|
% of Revenue |
|
Statistics - U.S.
GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
65.9 |
% |
|
|
|
|
|
(10.7 |
%) |
|
|
|
Statistics -
Adjusted (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted gross profit |
$ |
286.6 |
|
|
36.5 |
% |
|
$ |
300.7 |
|
|
36.2 |
% |
Adjusted selling, general and
administrative expenses |
$ |
192.8 |
|
|
24.6 |
% |
|
$ |
195.7 |
|
|
23.6 |
% |
Adjusted income from
operations |
$ |
93.8 |
|
|
11.9 |
% |
|
$ |
105.0 |
|
|
12.6 |
% |
Adjusted net income
attributable to common shareholders |
$ |
47.1 |
|
|
6.0 |
% |
|
$ |
51.6 |
|
|
6.2 |
% |
Adjusted effective tax
rate |
|
28.4 |
% |
|
|
|
|
|
32.4 |
% |
|
|
|
Adjusted diluted earnings per
share |
$ |
0.52 |
|
|
|
|
|
$ |
0.57 |
|
|
|
|
Adjusted diluted shares
outstanding |
|
91.5 |
|
|
|
|
|
|
90.8 |
|
|
|
|
(1) Adjusted financial measures are Non-GAAP
measures and exclude adjusting items as described and reconciled to
comparable U.S. GAAP financial measures in the Reconciliation of
U.S. GAAP to Non-GAAP Financial Measures contained in this Press
Release.
STERICYCLE, INC. |
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS |
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
March 31, 2020 |
|
|
December 31, 2019 |
|
ASSETS |
|
|
|
|
|
|
|
Current
Assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
36.0 |
|
|
$ |
34.7 |
|
Accounts receivable, net |
|
418.0 |
|
|
|
544.3 |
|
Prepaid expenses |
|
151.5 |
|
|
|
60.7 |
|
Other current assets |
|
46.6 |
|
|
|
66.9 |
|
Assets held-for-sale |
|
551.1 |
|
|
|
- |
|
Total Current Assets |
|
1,203.2 |
|
|
|
706.6 |
|
Property, plant and equipment,
net |
|
727.6 |
|
|
|
798.5 |
|
Operating lease right-of-use
assets |
|
385.1 |
|
|
|
435.0 |
|
Goodwill |
|
2,782.2 |
|
|
|
2,982.2 |
|
Intangible assets, net |
|
1,188.6 |
|
|
|
1,422.4 |
|
Other assets |
|
66.5 |
|
|
|
92.3 |
|
Total
Assets |
$ |
6,353.2 |
|
|
$ |
6,437.0 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
|
Current portion of long-term
debt |
$ |
101.4 |
|
|
$ |
103.1 |
|
Bank overdrafts |
|
2.8 |
|
|
|
1.9 |
|
Accounts payable |
|
203.6 |
|
|
|
220.1 |
|
Accrued liabilities |
|
242.4 |
|
|
|
296.6 |
|
Operating lease
liabilities |
|
82.0 |
|
|
|
94.8 |
|
Other current liabilities |
|
41.8 |
|
|
|
40.4 |
|
Liabilities held-for-sale |
|
144.5 |
|
|
|
- |
|
Total Current Liabilities |
|
818.5 |
|
|
|
756.9 |
|
|
|
|
|
|
|
|
|
Long-term debt, net |
|
2,518.8 |
|
|
|
2,559.3 |
|
Long-term operating lease
liabilities |
|
319.6 |
|
|
|
356.1 |
|
Deferred income taxes |
|
334.7 |
|
|
|
295.1 |
|
Long-term taxes payable |
|
45.9 |
|
|
|
70.7 |
|
Other liabilities |
|
35.5 |
|
|
|
64.2 |
|
Total
Liabilities |
|
4,073.0 |
|
|
|
4,102.3 |
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
Common stock |
|
0.9 |
|
|
|
0.9 |
|
Additional paid-in
capital |
|
1,212.7 |
|
|
|
1,205.7 |
|
Retained earnings |
|
1,419.8 |
|
|
|
1,442.4 |
|
Accumulated other
comprehensive loss |
|
(357.2 |
) |
|
|
(318.1 |
) |
Total Stericycle, Inc.’s
Equity |
|
2,276.2 |
|
|
|
2,330.9 |
|
Noncontrolling interests |
|
4.0 |
|
|
|
3.8 |
|
Total Equity |
|
2,280.2 |
|
|
|
2,334.7 |
|
Total Liabilities and
Equity |
$ |
6,353.2 |
|
|
$ |
6,437.0 |
|
STERICYCLE, INC. |
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2020 |
|
|
2019 |
|
OPERATING
ACTIVITIES: |
|
|
|
|
|
|
|
Net loss |
$ |
(19.9 |
) |
|
$ |
(37.6 |
) |
Adjustments to reconcile net
loss to net cash from operating activities: |
|
|
|
|
|
|
|
Depreciation |
|
28.0 |
|
|
|
31.8 |
|
Intangible amortization |
|
31.9 |
|
|
|
37.8 |
|
Stock-based compensation expense |
|
5.1 |
|
|
|
4.3 |
|
Deferred income taxes |
|
(0.4 |
) |
|
|
7.3 |
|
Goodwill impairment |
|
- |
|
|
|
20.9 |
|
Divestiture losses (gains), net |
|
58.3 |
|
|
|
(5.4 |
) |
Asset impairments, loss (gain) on disposal of property plant and
equipment and other charges |
|
3.9 |
|
|
|
3.4 |
|
Other, net |
|
0.1 |
|
|
|
(0.4 |
) |
Changes in operating assets
and liabilities, net of the effects of acquisitions, held-for-sale
reclassifications and divestitures: |
|
|
|
|
|
|
|
Accounts receivable |
|
(1.2 |
) |
|
|
(2.2 |
) |
Prepaid expenses |
|
(32.7 |
) |
|
|
(11.7 |
) |
Accounts payable |
|
9.3 |
|
|
|
(1.2 |
) |
Accrued liabilities |
|
(7.7 |
) |
|
|
(18.4 |
) |
Other assets and liabilities |
|
7.4 |
|
|
|
7.6 |
|
Net cash from
operating activities |
|
82.1 |
|
|
|
36.2 |
|
INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
Capital expenditures |
|
(39.6 |
) |
|
|
(66.1 |
) |
Payments for acquisitions, net of cash acquired |
|
- |
|
|
|
(0.3 |
) |
Proceeds from divestitures of businesses |
|
- |
|
|
|
13.6 |
|
Other, net |
|
(0.5 |
) |
|
|
0.5 |
|
Net cash from
investing activities |
|
(40.1 |
) |
|
|
(52.3 |
) |
FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
Repayments of long-term debt and other obligations |
|
(6.7 |
) |
|
|
(6.8 |
) |
(Repayments of) proceeds from foreign bank debt, net |
|
(2.6 |
) |
|
|
5.5 |
|
Repayments of term loan |
|
(43.8 |
) |
|
|
(11.9 |
) |
Net proceeds from senior credit facility |
|
16.2 |
|
|
|
51.9 |
|
Proceeds from (repayments of) bank overdrafts, net |
|
1.2 |
|
|
|
(6.9 |
) |
Payments of capital lease obligations |
|
(1.3 |
) |
|
|
(0.8 |
) |
Payments of debt issuance costs |
|
(1.4 |
) |
|
|
- |
|
Proceeds from issuance of common stock, net of (payments of) taxes
from withheld shares |
|
(1.2 |
) |
|
|
0.3 |
|
Net cash from
financing activities |
|
(39.6 |
) |
|
|
31.3 |
|
Effect of exchange rate
changes on cash and cash equivalents |
|
(1.1 |
) |
|
|
(1.3 |
) |
Net change in cash and cash
equivalents |
|
1.3 |
|
|
|
13.9 |
|
Cash and cash equivalents at
beginning of period |
|
34.7 |
|
|
|
34.3 |
|
Cash and cash
equivalents at end of period |
$ |
36.0 |
|
|
$ |
48.2 |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW
INFORMATION: |
|
|
|
|
|
|
|
Net issuances of obligations
for acquisitions |
$ |
- |
|
|
$ |
0.3 |
|
Capital expenditures in
accounts payable |
$ |
33.1 |
|
|
$ |
16.9 |
|
Interest paid during the
period, net of capitalized interest |
$ |
35.6 |
|
|
$ |
21.7 |
|
Income taxes paid during the
period, net of refunds |
$ |
0.4 |
|
|
$ |
0.5 |
|
Free Cash Flow (1) |
$ |
42.5 |
|
|
$ |
(29.9 |
) |
(1) Free Cash Flow is calculated as Net cash flow
from operating activities less Capital expenditures.
Table 1–A: REVENUES CHANGES BY SERVICE
AND GEOGRAPHY (UNAUDITED) – THREE MONTHS ENDED
MARCH 31, 2020
|
Three Months Ended March 31, |
|
|
In millions |
|
|
|
|
Components of Change (%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic |
|
|
|
|
|
|
|
|
2020 |
|
2019 |
|
Change ($) |
|
Change (%) |
|
SOP Related |
|
Other |
|
Divestitures |
|
Foreign Exchange(1) |
|
Revenues by Service |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated Waste and Compliance
Services (2) |
$ |
467.3 |
|
$ |
469.2 |
|
$ |
(1.9 |
) |
|
(0.4 |
%) |
|
– |
|
|
3.3 |
% |
|
(2.1 |
%) |
|
(1.6 |
%) |
Secure Information Destruction
Services |
|
218.1 |
|
|
232.0 |
|
|
(13.9 |
) |
|
(6.0 |
%) |
|
(7.1 |
%) |
|
1.4 |
% |
|
– |
|
|
(0.3 |
%) |
Communication and Related
Services (3) |
|
33.6 |
|
|
61.2 |
|
|
(27.6 |
) |
|
(45.1 |
%) |
|
– |
|
|
(0.5 |
%) |
|
(44.4 |
%) |
|
(0.2 |
%) |
Manufacturing and Industrial
Services (2) |
|
66.0 |
|
|
67.7 |
|
|
(1.7 |
) |
|
(2.5 |
%) |
|
– |
|
|
2.2 |
% |
|
(1.9 |
%) |
|
(2.8 |
%) |
Total Revenues |
$ |
785.0 |
|
$ |
830.1 |
|
$ |
(45.1 |
) |
|
(5.4 |
%) |
|
(2.0 |
%) |
|
2.4 |
% |
|
(4.6 |
%) |
|
(1.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by
Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
$ |
627.5 |
|
$ |
631.5 |
|
$ |
(4.0 |
) |
|
(0.6 |
%) |
|
(2.2 |
%) |
|
1.6 |
% |
|
– |
|
|
(0.0 |
%) |
International |
|
130.4 |
|
|
148.6 |
|
|
(18.2 |
) |
|
(12.2 |
%) |
|
(1.8 |
%) |
|
5.9 |
% |
|
(9.4 |
%) |
|
(6.9 |
%) |
All Other |
|
27.1 |
|
|
50.0 |
|
|
(22.9 |
) |
|
(45.8 |
%) |
|
– |
|
|
3.0 |
% |
|
(48.8 |
%) |
|
– |
|
Total Revenues |
$ |
785.0 |
|
$ |
830.1 |
|
$ |
(45.1 |
) |
|
(5.4 |
%) |
|
(2.0 |
%) |
|
2.4 |
% |
|
(4.6 |
%) |
|
(1.3 |
%) |
See footnote descriptions below Table 1 – B.
Table 1–B: DISAGGREGATED REVENUES CHANGE
(UNAUDITED)
(In millions) |
|
|
Three Months
EndedMarch 31,
2020 |
|
Organic - SOP Related |
$ |
(16.4 |
) |
Organic - Other |
|
20.2 |
|
Total Organic |
|
3.8 |
|
Divestitures |
|
(38.4 |
) |
Foreign exchange |
|
(10.5 |
) |
Total Change |
$ |
(45.1 |
) |
(1) The comparisons at constant currency
rates (foreign exchange) reflect comparative local currency
balances at prior period’s foreign exchange rates. Stericycle
calculated these percentages by taking current period reported
Revenues less the respective prior period reported Revenues,
divided by the prior period reported Revenues, all at the
respective prior period’s foreign exchange rates. This
measure provides information on the change in Revenues assuming
that foreign currency exchange rates have not changed between the
prior and the current period. Management believes the use of
this measure aids in the understanding of changes in Revenues
without the impact of foreign currency.
(2) For the three months ended March 31,
2020 and 2019, RWCS revenues include Hazardous Waste Solutions of
$79.6 million and $71.7 million, respectively.
For the three months ended March 31, 2019, RWCS
and M&I revenues include $6.8 million and $4.4 million,
respectively, associated with Chile and Mexico operations, which
were divested in 2019.
(3) For the three months ended March 31,
2020 and 2019, CRS revenues include Communication Services of $14.2
million and $41.7 million, respectively, and Expert Solutions of
$19.4 million and $19.5 million, respectively.
For the three months ended March 31, 2019, CRS
revenues include $27.2 million associated with North America
telephone answering service (“TAS”), retail pharmaceutical returns
service, and UK texting business which were divested in 2019.
RECONCILIATION OF U.S. GAAP TO NON-GAAP
FINANCIAL MEASURES (UNAUDITED)Table 2-A: THREE
MONTHS ENDED MARCH 31, 2020 AND 2019
(In millions, except per share data) |
|
|
Three Months Ended March 31, 2020 |
|
|
Gross Profit |
|
|
Selling, General and Administrative
Expenses |
|
|
(Loss) Income from Operations (b) |
|
|
Net (Loss) Income Attributable to Common Shareholders
(c) |
|
|
Diluted (Loss)
Earnings Per Share |
|
U.S. GAAP Financial Measures |
$ |
286.6 |
|
|
$ |
258.7 |
|
|
$ |
(30.4 |
) |
|
$ |
(20.1 |
) |
|
$ |
(0.22 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Transformation (1) |
|
- |
|
|
|
(18.0 |
) |
|
|
18.0 |
|
|
|
13.4 |
|
|
|
0.15 |
|
Intangible Amortization (2) |
|
- |
|
|
|
(31.9 |
) |
|
|
31.9 |
|
|
|
24.0 |
|
|
|
0.26 |
|
Acquisition and Integration (3) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Operational Optimization (4) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Divestitures (including Divestiture Losses (Gains), net) (5) |
|
- |
|
|
|
(3.0 |
) |
|
|
61.3 |
|
|
|
59.1 |
|
|
|
0.65 |
|
Litigation, Settlements and Regulatory Compliance (6) |
|
- |
|
|
|
(4.4 |
) |
|
|
4.4 |
|
|
|
3.3 |
|
|
|
0.04 |
|
Asset Impairments (7) |
|
- |
|
|
|
(4.0 |
) |
|
|
4.0 |
|
|
|
2.9 |
|
|
|
0.03 |
|
Goodwill Impairment (8) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other (9) |
|
- |
|
|
|
(4.6 |
) |
|
|
4.6 |
|
|
|
3.9 |
|
|
|
0.04 |
|
U.S. CARES Act (10) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(39.4 |
) |
|
|
(0.43 |
) |
Total Adjustments |
|
- |
|
|
|
(65.9 |
) |
|
|
124.2 |
|
|
|
67.2 |
|
|
|
0.74 |
|
Adjusted Financial
Measures (a) |
$ |
286.6 |
|
|
$ |
192.8 |
|
|
$ |
93.8 |
|
|
$ |
47.1 |
|
|
$ |
0.52 |
|
(In millions, except per share data) |
|
|
Three Months Ended March 31, 2019 |
|
|
Gross Profit |
|
|
Selling, General and Administrative Expenses |
|
|
(Loss) Income from Operations (b) |
|
|
Net (Loss) Income Attributable to Common Shareholders
(c) |
|
|
Diluted (Loss) Earnings
Per Share |
|
U.S. GAAP Financial Measures |
$ |
297.1 |
|
|
$ |
285.8 |
|
|
$ |
(4.2 |
) |
|
$ |
(37.8 |
) |
|
$ |
(0.42 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Transformation (1) |
|
- |
|
|
|
(20.5 |
) |
|
|
20.5 |
|
|
|
15.8 |
|
|
|
0.17 |
|
Intangible Amortization (2) |
|
- |
|
|
|
(37.8 |
) |
|
|
37.8 |
|
|
|
28.9 |
|
|
|
0.32 |
|
Acquisition and Integration (3) |
|
- |
|
|
|
(1.9 |
) |
|
|
1.9 |
|
|
|
1.5 |
|
|
|
0.02 |
|
Operational Optimization (4) |
|
2.0 |
|
|
|
(1.6 |
) |
|
|
3.6 |
|
|
|
3.0 |
|
|
|
0.03 |
|
Divestitures (including Divestiture Losses (Gains), net) (5) |
|
- |
|
|
|
(2.6 |
) |
|
|
(2.8 |
) |
|
|
(3.5 |
) |
|
|
(0.04 |
) |
Litigation, Settlements and Regulatory Compliance (6) |
|
- |
|
|
|
(9.8 |
) |
|
|
9.8 |
|
|
|
8.7 |
|
|
|
0.10 |
|
Asset Impairments (7) |
|
1.6 |
|
|
|
- |
|
|
|
1.6 |
|
|
|
1.1 |
|
|
|
0.01 |
|
Goodwill Impairment (8) |
|
- |
|
|
|
- |
|
|
|
20.9 |
|
|
|
20.9 |
|
|
|
0.23 |
|
Other (9) |
|
- |
|
|
|
(15.9 |
) |
|
|
15.9 |
|
|
|
13.0 |
|
|
|
0.15 |
|
U.S. CARES Act (10) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total Adjustments |
|
3.6 |
|
|
|
(90.1 |
) |
|
|
109.2 |
|
|
|
89.4 |
|
|
|
0.99 |
|
Adjusted Financial
Measures (a) |
$ |
300.7 |
|
|
$ |
195.7 |
|
|
$ |
105.0 |
|
|
$ |
51.6 |
|
|
$ |
0.57 |
|
|
|
(In millions, except per share data) |
|
|
Q1 2020 Change Compared to Q1 2019 |
|
|
Gross Profit |
|
|
Selling, General and Administrative Expenses |
|
|
(Loss) Income
from Operations |
|
|
Net (Loss) Income Attributable to Common
Shareholders |
|
|
Diluted (Loss) Earnings Per Share |
|
U.S. GAAP Financial Measures |
$ |
(10.5 |
) |
|
$ |
(27.1 |
) |
|
$ |
(26.2 |
) |
|
$ |
17.7 |
|
|
$ |
0.20 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Transformation |
|
- |
|
|
|
2.5 |
|
|
|
(2.5 |
) |
|
|
(2.4 |
) |
|
|
(0.02 |
) |
Intangible Amortization |
|
- |
|
|
|
5.9 |
|
|
|
(5.9 |
) |
|
|
(4.9 |
) |
|
|
(0.06 |
) |
Acquisition and Integration |
|
- |
|
|
|
1.9 |
|
|
|
(1.9 |
) |
|
|
(1.5 |
) |
|
|
(0.02 |
) |
Operational Optimization |
|
(2.0 |
) |
|
|
1.6 |
|
|
|
(3.6 |
) |
|
|
(3.0 |
) |
|
|
(0.03 |
) |
Divestitures (including Divestiture Losses (Gains), net) |
|
- |
|
|
|
(0.4 |
) |
|
|
64.1 |
|
|
|
62.6 |
|
|
|
0.69 |
|
Litigation, Settlements and Regulatory Compliance |
|
- |
|
|
|
5.4 |
|
|
|
(5.4 |
) |
|
|
(5.4 |
) |
|
|
(0.06 |
) |
Asset Impairments |
|
(1.6 |
) |
|
|
(4.0 |
) |
|
|
2.4 |
|
|
|
1.8 |
|
|
|
0.02 |
|
Goodwill Impairment |
|
- |
|
|
|
- |
|
|
|
(20.9 |
) |
|
|
(20.9 |
) |
|
|
(0.23 |
) |
Other |
|
- |
|
|
|
11.3 |
|
|
|
(11.3 |
) |
|
|
(9.1 |
) |
|
|
(0.11 |
) |
U.S. CARES Act |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(39.4 |
) |
|
|
(0.43 |
) |
Total Adjustments |
|
(3.6 |
) |
|
|
24.2 |
|
|
|
15.0 |
|
|
|
(22.2 |
) |
|
|
(0.25 |
) |
Adjusted Financial
Measures |
$ |
(14.1 |
) |
|
$ |
(2.9 |
) |
|
$ |
(11.2 |
) |
|
$ |
(4.5 |
) |
|
$ |
(0.05 |
) |
The following table provides pre-tax adjustments categorized as
follows:
(In millions) |
|
|
Three Months Ended March 31, |
|
|
2020 |
|
|
2019 |
|
Non-Cash Related |
$ |
51.5 |
|
|
$ |
19.1 |
|
Cash Related |
|
40.8 |
|
|
|
52.3 |
|
Intangible Amortization |
|
31.9 |
|
|
|
37.8 |
|
Total |
$ |
124.2 |
|
|
$ |
109.2 |
|
For the three months ended March 31, 2020 and
2019, Loss from operations was $30.4 million and $4.2 million,
respectively, on a U.S. GAAP basis, and Income from operations was
$27.9 million and $11.3 million, excluding the impact of
Divestiture losses (gains), net and Goodwill impairment.
Non-cash related adjustments include the
following:
(In millions) |
|
|
Three Months Ended March 31, 2020 |
|
|
Impairments of Property Plant and Equipment |
|
|
Impairments of Intangibles |
|
|
Goodwill Impairment |
|
|
Divestiture Losses (Gains),
net |
|
|
Total |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational Optimization (4) |
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Divestiture Losses (Gains), net (5) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
47.5 |
|
|
|
47.5 |
|
Asset Impairments (7) |
|
- |
|
|
|
4.0 |
|
|
|
- |
|
|
|
- |
|
|
|
4.0 |
|
Goodwill Impairment (8) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total Non-Cash
Charges |
$ |
- |
|
|
$ |
4.0 |
|
|
$ |
- |
|
|
$ |
47.5 |
|
|
$ |
51.5 |
|
(In millions) |
|
|
Three Months Ended March 31, 2019 |
|
|
Impairments of Property Plant and Equipment |
|
|
Impairments of Intangibles |
|
|
Goodwill Impairment |
|
|
Divestiture Losses (Gains),
net |
|
|
Total |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational Optimization (4) |
$ |
2.0 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2.0 |
|
Divestiture Losses (Gains), net (5) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5.4 |
) |
|
|
(5.4 |
) |
Asset Impairments (7) |
|
1.6 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1.6 |
|
Goodwill Impairment (8) |
|
- |
|
|
|
- |
|
|
|
20.9 |
|
|
|
- |
|
|
|
20.9 |
|
Total Non-Cash
Charges |
$ |
3.6 |
|
|
$ |
- |
|
|
$ |
20.9 |
|
|
$ |
(5.4 |
) |
|
$ |
19.1 |
|
U.S. GAAP results for the three months ended March 31, 2020 and
2019 include:
(1) Business Transformation: In 2020, Selling,
general and administrative expenses (“SG&A”) includes $18.0
million of expenses related to our ERP implementation, of which
$10.4 million related to consulting and professional fees, $2.6
million related to software usage/maintenance fees, $3.6 million
related to internal costs, and $1.4 million of other related
costs. In 2019, SG&A includes $2.0 million of expenses
related to investments in cost savings and business capabilities,
of which $0.4 million related to consulting and professional fees,
$0.3 million related to internal costs, and $1.3 million of other
related expenses; $13.3 million related to our ERP implementation,
of which $6.5 million related to consulting and professional fees,
$4.3 million related to software usage/maintenance fees, $1.9
million related to internal costs, and $0.5 million of other
related costs; and $5.3 million of exit costs – employee
termination.
(2) Intangible Amortization: Intangible
amortization expense from acquisitions.
(3) Acquisition and Integration: There were no
acquisitions in the first quarter of 2020. In 2019, SG&A
includes $1.8 million of acquisition expenses and $0.1 million of
integration expenses related to acquisitions completed in the
U.S. During the first quarter of 2019, we completed 1
acquisition.
(4) Operational Optimization: In 2019, Cost of
revenues (“COR”) includes a $2.0 million non-cash impairment charge
related to long-lived assets in our North America reportable
segment; SG&A includes $1.6 million mostly related to site
closure costs in Latin America.
(5) Divestitures (including Divestiture Losses
(Gains), net): 2020 includes a $58.3 million impairment related to
the divestiture of the Domestic Environmental Solutions business
(inclusive of $10.8 million of related deal costs) and $3.0 million
in SG&A for consulting and professional fees associated with
our Portfolio Rationalization efforts. 2019 includes a $5.4
million gain on divestiture of a business in the U.K. and $2.6
million in SG&A for consulting and professional fees associated
with our Portfolio Rationalization efforts.
(6) Litigation, Settlements, and Regulatory
Compliance: In 2020 and 2019, SG&A includes $4.4 million and
$9.8 million, respectively, in regulatory compliance, consulting
and professional fees related to certain litigation matters.
(7) Asset Impairments: In 2020, SG&A
includes $4.0 million of non-cash impairment charges related to
intangible assets in our Domestic CRS reporting unit as a result of
a discontinuation of a certain service line. In 2019, COR
includes $1.6 million related to software non-cash impairment
charges as a result of rationalization of applications primarily in
our Domestic CRS reporting unit.
(8) Goodwill Impairment: In 2019, we recorded
non-cash goodwill impairment charges of $20.9 million related to
our Latin America reporting unit.
(9) Other: In 2020 and 2019, SG&A includes
$4.6 million and $15.9 million, respectively, of consulting and
professional fees related to internal control remediation
activities as well as the implementation of new accounting
standards. In 2020 and 2019, Other expense, net includes a
foreign exchange loss of $0.4 million and $1.1 million,
respectively, related to the re-measurement of net monetary assets
held in Argentina as a result of its designation as a highly
inflationary economy.
(10) U.S. CARES Act: In 2020, we recorded a
$39.4 million tax benefit related to the U.S. CARES Act related to
our ability to carryback net operating losses to prior years that
had higher tax rates.
(a) The Non-GAAP financial measures contained in
this press release are reconciled to the most comparable measures
calculated in accordance with U.S. GAAP in the schedules attached
to this release. Management believes the Non-GAAP financial
measures are useful measures of Stericycle’s performance because
they provide additional information about Stericycle’s operations
and exclude certain adjusting items, allowing better evaluation of
underlying business performance and better period-to-period
comparability. Additionally, the Company uses such Non-GAAP
financial measures in evaluating business unit and management
performance. All Non-GAAP financial measures are intended to
supplement the applicable U.S. GAAP measures and should not be
considered in isolation from, or a replacement for, financial
measures prepared in accordance with U.S. GAAP and may not be
comparable to or calculated in the same manner as Non-GAAP
financial measures published by other companies.
(b) (Loss) Income from Operations and Adjusted
Income from Operations provide the basis for other financial
measures.
(c) Under the Net (Loss) Income Attributable to
Common Shareholders column, adjustments are shown net of tax in
aggregate of $57.3 million and $20.9 million for the three months
ended March 31, 2020 and 2019, respectively, based on applying the
statutory tax rate for the jurisdictions in which the adjustment
occurred or, by adjusting the tax effect to consider the impact of
applying an annual effective tax rate on an interim basis.
FOR FURTHER INFORMATION CONTACT:
Stericycle Investor Relations 847-607-2012
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