Stericycle, Inc. (Nasdaq: SRCL) today reported results for the
second quarter ended June 30, 2019 and updated guidance for the
full year.
Revenues for the quarter were $845.8 million, a
decrease of 4.2% from $883.3 million in the second quarter of last
year. Income from operations in the quarter was $25.3
million, compared to $62.4 million in the second quarter of last
year. Net loss was $30.5 million, or $0.33 diluted loss per
share, compared with net income of $26.6 million, or $0.31 diluted
earnings per share, in the second quarter of last year.
Adjusted EBITDA was $137.7 million, or 16.3% of revenues, compared
with $190.9 million, or 21.6% of revenues in the second quarter of
last year. Adjusted diluted earnings per share was $0.56,
compared to $1.17 in the 2018 comparable period.
KEY BUSINESS HIGHLIGHTS:
- Regulated Waste and Compliance Services (“RWCS”) grew organic
revenues 1.4%, the first increase in two years.
- Secure Information Destruction organic revenues, excluding
sorted office paper (“SOP”), increased 4.3%.
- The Company continued to make significant progress towards
implementation of its global ERP system.
“We continue to make progress on key business
priorities, including the development of our global ERP system and
the overall transformation of the business,” said Cindy J. Miller,
Chief Executive Officer. “We are encouraged by revenue growth
in our core businesses this quarter which reflects the early impact
of our quality of revenue initiatives. We were disappointed with
our profitability, which was negatively affected by sorted office
paper pricing and higher than expected costs. Looking to the
second half of 2019, we are acutely focused on key priorities to
drive long-term growth and shareholder value.”
SECOND QUARTER FINANCIAL RESULTS
U.S. Generally Accepted Accounting Principles (GAAP)
Results
- Revenues for the quarter ended June 30, 2019 were $845.8
million, compared to $883.3 million in the second quarter of last
year. Macroeconomic factors, including the effect of foreign
exchange rates and SOP pricing, reduced revenues by $20.6 million
and $8.7 million, respectively. Divestitures net of
acquisitions reduced revenues by $10.6 million. Organic growth in
Secure Information Destruction and RWCS was offset by lower SOP
pricing and lower recall activity in Communication and Related
Services.
- Income from operations in the quarter was $25.3 million,
compared to $62.4 million in the second quarter of last year.
This variance was primarily due to the flow through of SOP pricing
and pricing pressure in RWCS and higher operating costs which
increased as a percent of revenue, including third-party hazardous
waste disposal and equipment maintenance and rental costs. Selling,
general and administrative (“SG&A”) expenses as a percent of
revenue were slightly favorable.
- Net loss was $30.5 million, or $0.33 diluted loss per share,
compared with net income of $26.6 million, or $0.31 diluted
earnings per share, in the second quarter of last year, primarily
due to operational factors described above and a one-time pre-tax
charge of $26.7 million related to loss on early extinguishment of
debt and related charges from the debt refinancing in the second
quarter.
- Cash flow from operations year to date was $71.0 million,
compared to $231.0 million during the same period last year.
The decrease was primarily a result of the net loss for the period
and a change in net working capital. Capital expenditures
year to date were $108.2 million, including $40.8 million for the
ERP implementation, compared to $64.0 million last year, including
$3.7 million associated with the ERP implementation.
Non-GAAP Results
- Adjusted EBITDA was $137.7 million, compared to $190.9 million
in the second quarter of last year. This variance was
primarily driven by macroeconomic factors impacting revenues and
higher operating costs, including third-party hazardous waste
disposal and equipment maintenance and rental costs discussed
above, and higher SG&A expenses which increased as a percent of
revenues and were primarily driven by higher bad debt expense,
internal control investments, and a one-time insurance
reserve.
- Adjusted diluted earnings per share was $0.56, compared to
$1.17 in the second quarter of last year, primarily due to
macroeconomic factors and operating costs, higher interest expense
and the absence of gains on share repurchases this quarter as
compared to the second quarter of 2018.
- Free cash flow inclusive of capital expenditures was an outflow
of ($37.2) million dollars as a result of the net loss for the
period, the expected increase in capital expenditures due to the
ERP implementation and a change in net working capital.
NON-GAAP FINANCIAL MEASURES
Actual Non-GAAP financial measures are reconciled to the most
comparable GAAP measures in the schedules attached hereto.
FINANCIAL GUIDANCE
Stericycle updated its financial guidance for
the full-year 2019, as summarized in the table below. The
revised guidance reflects the significant decline in SOP pricing,
the impact of foreign exchange rates, higher interest expense, and
continuing cost pressures. The Company’s guidance is based on
currently known items and certain business assumptions including
current foreign exchange rates and estimates for SOP pricing.
The guidance only includes acquisitions and divestitures that
closed through the second quarter of 2019.
(In millions, except per share data) |
Revenues |
$3,345 - $3,405 |
Adjusted
EBITDA(1) (2) |
$575-$615 |
Adjusted diluted
earnings per share (2) |
$2.50 to $2.85 |
Capital
expenditures |
$170 - $190 |
(1) Adjusted Earnings Before Interest, Tax,
Depreciation and Amortization (Adjusted EBITDA) is Income from
operations excluding certain adjusting items, Depreciation and
Intangible Amortization.(2) Guidance presented is on an
Adjusted (non-GAAP) basis because it is not possible to predict or
provide without unreasonable effort a reconciliation reflecting the
impact of future acquisitions, divestitures, certain litigation,
settlements and regulatory compliance matters, business
transformation, intangible amortization, operational optimization,
certain other items or the impact of highly inflationary accounting
on operations in Argentina or other unanticipated events, which
would be included in reported (U.S. GAAP) results and could be
material.
CONFERENCE CALL INFORMATION
The Company is holding a conference call today,
August 1, 2019, 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 4668043. 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 the
Company’s investor relations site
at 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
more than one million customers in all 50 U.S. states and 20
countries worldwide with solutions for regulated 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. When we use words such as "believes," "expects,"
"anticipates," "estimates" 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, 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 or execute on
Business Transformation initiatives and achieve the anticipated
benefits and cost savings, charges related to the portfolio
rationalization strategy or the failure of this strategy to achieve
the desired results, failure to consummate strategic alternative
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 June 30, |
|
|
Six Months Ended June 30, |
|
|
2019 |
|
2018 |
|
% Change |
|
|
2019 |
|
2018 |
|
% Change |
|
Revenues |
$ |
845.8 |
|
$ |
883.3 |
|
|
(4.2 |
%) |
|
$ |
1,675.9 |
|
$ |
1,778.3 |
|
|
(5.8 |
%) |
Cost of
revenues |
|
543.2 |
|
|
530.0 |
|
|
2.5 |
% |
|
|
1,076.2 |
|
|
1,066.5 |
|
|
0.9 |
% |
Gross
profit |
|
302.6 |
|
|
353.3 |
|
|
(14.4 |
%) |
|
|
599.7 |
|
|
711.8 |
|
|
(15.7 |
%) |
Selling, general
and administrative expenses |
|
277.3 |
|
|
290.9 |
|
|
(4.7 |
%) |
|
|
557.7 |
|
|
595.3 |
|
|
(6.3 |
%) |
Goodwill
impairment |
|
- |
|
|
- |
|
nm |
|
|
|
20.9 |
|
|
- |
|
nm |
|
Income from
operations |
|
25.3 |
|
|
62.4 |
|
|
(59.5 |
%) |
|
|
21.1 |
|
|
116.5 |
|
|
(81.9 |
%) |
Interest expense,
net |
|
(33.6 |
) |
|
(24.6 |
) |
|
36.6 |
% |
|
|
(61.2 |
) |
|
(49.6 |
) |
|
23.4 |
% |
Loss on early
extinguishment of debt |
|
(23.1 |
) |
|
- |
|
nm |
|
|
|
(23.1 |
) |
|
- |
|
nm |
|
Other expense,
net |
|
(1.8 |
) |
|
(0.6 |
) |
nm |
|
|
|
(4.0 |
) |
|
(0.6 |
) |
nm |
|
(Loss)
income before income taxes |
|
(33.2 |
) |
|
37.2 |
|
|
(189.2 |
%) |
|
|
(67.2 |
) |
|
66.3 |
|
|
(201.4 |
%) |
Income tax benefit
(expense) |
|
3.0 |
|
|
(9.6 |
) |
|
(131.3 |
%) |
|
|
(0.6 |
) |
|
(16.2 |
) |
|
(96.3 |
%) |
Net (loss)
income |
|
(30.2 |
) |
|
27.6 |
|
|
(209.4 |
%) |
|
|
(67.8 |
) |
|
50.1 |
|
|
(235.3 |
%) |
Net (income) loss
attributable to noncontrolling interests |
|
(0.3 |
) |
|
0.1 |
|
nm |
|
|
|
(0.5 |
) |
|
0.1 |
|
nm |
|
Net (loss)
income attributable to Stericycle, Inc. |
|
(30.5 |
) |
|
27.7 |
|
|
(210.1 |
%) |
|
|
(68.3 |
) |
|
50.2 |
|
|
(236.1 |
%) |
Mandatory
convertible preferred stock dividend |
|
- |
|
|
(8.3 |
) |
|
(100.0 |
%) |
|
|
- |
|
|
(17.1 |
) |
|
(100.0 |
%) |
Gain on repurchase
of preferred stock |
|
- |
|
|
7.2 |
|
|
(100.0 |
%) |
|
|
- |
|
|
14.5 |
|
|
(100.0 |
%) |
Net (loss)
income attributable to Stericycle, Inc. common
shareholders |
$ |
(30.5 |
) |
$ |
26.6 |
|
|
(214.7 |
%) |
|
$ |
(68.3 |
) |
$ |
47.6 |
|
|
(243.5 |
%) |
(Loss)
earnings per common share attributable to Stericycle, Inc. common
shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.33 |
) |
$ |
0.31 |
|
|
(206.5 |
%) |
|
$ |
(0.75 |
) |
$ |
0.56 |
|
|
(233.9 |
%) |
Diluted |
$ |
(0.33 |
) |
$ |
0.31 |
|
|
(206.5 |
%) |
|
$ |
(0.75 |
) |
$ |
0.55 |
|
|
(236.4 |
%) |
Weighted
average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
91.0 |
|
|
85.6 |
|
|
|
|
|
|
90.9 |
|
|
85.6 |
|
|
|
|
Diluted |
|
91.0 |
|
|
85.8 |
|
|
|
|
|
|
90.9 |
|
|
85.8 |
|
|
|
|
nm - percentage change not
meaningful
STATISTICS - U.S. GAAP AND ADJUSTED MEASURES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
% of Revenue |
|
|
|
|
|
% of Revenue |
|
|
|
|
|
% of Revenue |
|
|
|
|
|
% of Revenue |
|
Statistics - U.S. GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit |
$ |
302.6 |
|
|
35.8 |
% |
|
$ |
353.3 |
|
|
40.0 |
% |
|
$ |
599.7 |
|
|
35.8 |
% |
|
$ |
711.8 |
|
|
40.0 |
% |
Selling, general
and administrative expenses |
$ |
277.3 |
|
|
32.8 |
% |
|
$ |
290.9 |
|
|
32.9 |
% |
|
$ |
557.7 |
|
|
33.3 |
% |
|
$ |
595.3 |
|
|
33.5 |
% |
Income from
operations |
$ |
25.3 |
|
|
3.0 |
% |
|
$ |
62.4 |
|
|
7.1 |
% |
|
$ |
21.1 |
|
|
1.3 |
% |
|
$ |
116.5 |
|
|
6.6 |
% |
Effective tax
rate |
|
9.0 |
% |
|
|
|
|
|
25.8 |
% |
|
|
|
|
|
(0.9 |
%) |
|
|
|
|
|
24.4 |
% |
|
|
|
Statistics - Adjusted (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted gross
profit |
$ |
304.8 |
|
|
36.0 |
% |
|
$ |
353.3 |
|
|
40.0 |
% |
|
$ |
605.5 |
|
|
36.1 |
% |
|
$ |
711.8 |
|
|
40.0 |
% |
Adjusted
selling, general and administrative expenses |
$ |
199.2 |
|
|
23.6 |
% |
|
$ |
195.1 |
|
|
22.1 |
% |
|
$ |
394.9 |
|
|
23.6 |
% |
|
$ |
395.1 |
|
|
22.2 |
% |
Adjusted income
from operations |
$ |
105.6 |
|
|
12.5 |
% |
|
$ |
158.2 |
|
|
17.9 |
% |
|
$ |
210.6 |
|
|
12.6 |
% |
|
$ |
316.7 |
|
|
17.8 |
% |
Depreciation -
cost of revenues |
$ |
26.4 |
|
|
3.1 |
% |
|
$ |
26.0 |
|
|
2.9 |
% |
|
$ |
52.3 |
|
|
3.1 |
% |
|
$ |
50.2 |
|
|
2.8 |
% |
Depreciation -
selling, general and administrative expenses |
$ |
6.5 |
|
|
0.8 |
% |
|
$ |
6.7 |
|
|
0.8 |
% |
|
$ |
12.4 |
|
|
0.7 |
% |
|
$ |
13.3 |
|
|
0.7 |
% |
Intangible
amortization |
$ |
36.9 |
|
|
4.4 |
% |
|
$ |
32.9 |
|
|
3.7 |
% |
|
$ |
74.7 |
|
|
4.5 |
% |
|
$ |
64.8 |
|
|
3.6 |
% |
EBITDA |
$ |
95.1 |
|
|
11.2 |
% |
|
$ |
128.0 |
|
|
14.5 |
% |
|
$ |
160.5 |
|
|
9.6 |
% |
|
$ |
244.8 |
|
|
13.8 |
% |
Adjusted
EBITDA |
$ |
137.7 |
|
|
16.3 |
% |
|
$ |
190.9 |
|
|
21.6 |
% |
|
$ |
274.5 |
|
|
16.4 |
% |
|
$ |
380.2 |
|
|
21.4 |
% |
Adjusted net
income attributable to common shareholders |
$ |
51.2 |
|
|
6.1 |
% |
|
$ |
106.1 |
|
|
12.0 |
% |
|
$ |
102.8 |
|
|
6.1 |
% |
|
$ |
216.2 |
|
|
12.2 |
% |
Adjusted
effective tax rate |
|
30.6 |
% |
|
|
|
|
|
25.7 |
% |
|
|
|
|
|
31.4 |
% |
|
|
|
|
|
25.1 |
% |
|
|
|
Adjusted diluted
earnings per share |
$ |
0.56 |
|
|
|
|
|
$ |
1.17 |
|
|
|
|
|
$ |
1.13 |
|
|
|
|
|
$ |
2.39 |
|
|
|
|
Adjusted diluted
shares outstanding (2018 using if-converted method) |
|
91.1 |
|
|
|
|
|
|
90.5 |
|
|
|
|
|
|
91.0 |
|
|
|
|
|
|
90.6 |
|
|
|
|
(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) |
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
2019 |
|
|
2018 |
|
ASSETS |
|
|
|
|
|
|
|
Current
Assets: |
|
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
34.5 |
|
|
$ |
34.3 |
|
Accounts
receivable, net |
|
613.7 |
|
|
|
599.6 |
|
Prepaid
expenses |
|
97.8 |
|
|
|
50.0 |
|
Other current
assets |
|
73.1 |
|
|
|
63.4 |
|
Total Current Assets |
|
819.1 |
|
|
|
747.3 |
|
Property, plant
and equipment, net |
|
786.2 |
|
|
|
743.5 |
|
Operating lease
right-of-use assets |
|
393.2 |
|
|
|
- |
|
Goodwill |
|
3,195.1 |
|
|
|
3,222.2 |
|
Intangible
assets, net |
|
1,562.8 |
|
|
|
1,637.7 |
|
Other
assets |
|
113.3 |
|
|
|
104.8 |
|
Total
Assets |
$ |
6,869.7 |
|
|
$ |
6,455.5 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
|
Current portion
of long-term debt |
$ |
117.3 |
|
|
$ |
104.3 |
|
Bank
overdrafts |
|
2.2 |
|
|
|
14.8 |
|
Accounts
payable |
|
229.4 |
|
|
|
225.8 |
|
Accrued
liabilities |
|
303.8 |
|
|
|
340.8 |
|
Operating lease
liabilities |
|
89.5 |
|
|
|
- |
|
Other current
liabilities |
|
42.0 |
|
|
|
47.5 |
|
Total Current Liabilities |
|
784.2 |
|
|
|
733.2 |
|
|
|
|
|
|
|
|
|
Long-term debt,
net |
|
2,697.2 |
|
|
|
2,663.9 |
|
Long-term
operating lease liabilities |
|
317.2 |
|
|
|
- |
|
Deferred income
taxes |
|
360.2 |
|
|
|
307.3 |
|
Long-term taxes
payable |
|
76.1 |
|
|
|
83.3 |
|
Other
liabilities |
|
72.6 |
|
|
|
70.7 |
|
Total
Liabilities |
|
4,307.5 |
|
|
|
3,858.4 |
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
Common
stock |
|
0.9 |
|
|
|
0.9 |
|
Additional
paid-in capital |
|
1,192.8 |
|
|
|
1,162.6 |
|
Retained
earnings |
|
1,720.9 |
|
|
|
1,789.2 |
|
Accumulated
other comprehensive loss |
|
(356.6 |
) |
|
|
(365.3 |
) |
Total Stericycle, Inc.’s
Equity |
|
2,558.0 |
|
|
|
2,587.4 |
|
Noncontrolling
interests |
|
4.2 |
|
|
|
9.7 |
|
Total Equity |
|
2,562.2 |
|
|
|
2,597.1 |
|
Total
Liabilities and Equity |
$ |
6,869.7 |
|
|
$ |
6,455.5 |
|
STERICYCLE, INC. |
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
2019 |
|
|
2018 |
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
Net (loss)
income |
$ |
(67.8 |
) |
|
$ |
50.1 |
|
Adjustments to
reconcile net (loss) income to net cash from operating
activities: |
|
|
|
|
|
|
|
Depreciation |
|
64.7 |
|
|
|
63.5 |
|
Intangible amortization |
|
74.7 |
|
|
|
64.8 |
|
Loss on early extinguishment of debt and related charges |
|
26.5 |
|
|
|
|
|
Stock-based compensation expense |
|
10.0 |
|
|
|
12.8 |
|
Deferred income taxes |
|
12.8 |
|
|
|
(13.6 |
) |
Goodwill and other impairment charges and gains on divestiture of
businesses, net |
|
23.7 |
|
|
|
18.9 |
|
Other, net |
|
0.9 |
|
|
|
(1.5 |
) |
Changes in
operating assets and liabilities, net of the effect of acquisitions
and divestitures: |
|
|
|
|
|
|
|
Accounts receivable |
|
(14.0 |
) |
|
|
(23.5 |
) |
Prepaid expenses |
|
(22.4 |
) |
|
|
(2.6 |
) |
Accounts payable |
|
3.6 |
|
|
|
13.8 |
|
Accrued liabilities |
|
(50.6 |
) |
|
|
39.2 |
|
Other assets and liabilities |
|
8.9 |
|
|
|
9.1 |
|
Net cash
from operating activities |
|
71.0 |
|
|
|
231.0 |
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
Capital expenditures |
|
(108.2 |
) |
|
|
(64.0 |
) |
Payments for acquisitions, net of cash acquired |
|
(0.3 |
) |
|
|
(29.0 |
) |
Proceeds from divestiture of businesses |
|
13.6 |
|
|
|
8.2 |
|
Other, net |
|
1.8 |
|
|
|
1.4 |
|
Net cash
from investing activities |
|
(93.1 |
) |
|
|
(83.4 |
) |
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Repayments of long-term debt and other obligations |
|
(21.1 |
) |
|
|
(29.8 |
) |
Net proceeds from (repayments of) foreign bank debt |
|
4.5 |
|
|
|
(4.7 |
) |
Proceeds from Term Loan |
|
365.0 |
|
|
|
- |
|
Repayments of Term Loan |
|
(23.8 |
) |
|
|
(23.8 |
) |
Proceeds from issuance of Senior Notes |
|
600.0 |
|
|
|
- |
|
Net proceeds from (repayments of) Senior Credit Facility |
|
202.4 |
|
|
|
(59.3 |
) |
Repayments of private placement notes |
|
(1,075.0 |
) |
|
|
- |
|
Payments on early extinguishment of debt |
|
(20.4 |
) |
|
|
- |
|
(Repayments of) proceeds from bank overdrafts, net |
|
(12.1 |
) |
|
|
0.2 |
|
Payments of capital lease obligations |
|
(1.3 |
) |
|
|
(2.7 |
) |
Payments of debt issuance costs |
|
(8.8 |
) |
|
|
- |
|
Proceeds from issuance of common stock, net of shares withheld for
tax |
|
13.9 |
|
|
|
8.8 |
|
Payments for repurchase of mandatory convertible preferred
stock |
|
- |
|
|
|
(14.8 |
) |
Dividends paid on mandatory convertible preferred stock |
|
- |
|
|
|
(17.1 |
) |
Net cash
from financing activities |
|
23.3 |
|
|
|
(143.2 |
) |
Effect of
exchange rate changes on cash and cash equivalents |
|
(1.0 |
) |
|
|
(1.6 |
) |
Net change in
cash and cash equivalents |
|
0.2 |
|
|
|
2.8 |
|
Cash and cash
equivalents at beginning of period |
|
34.3 |
|
|
|
42.2 |
|
Cash and
cash equivalents at end of period |
$ |
34.5 |
|
|
$ |
45.0 |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
Net issuances of
obligations for acquisitions |
$ |
0.3 |
|
|
$ |
21.7 |
|
Capital
expenditures in accounts payable |
$ |
30.6 |
|
|
$ |
5.5 |
|
Interest paid
during the period, net of capitalized interest |
$ |
48.8 |
|
|
$ |
42.5 |
|
Income taxes
paid during the period, net of refunds |
$ |
6.5 |
|
|
$ |
18.4 |
|
Free cash flow
(1) |
$ |
(37.2 |
) |
|
$ |
167.0 |
|
(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 –
THREE MONTHS ENDED JUNE 30,
2019
|
Three Months Ended June 30, |
|
|
In millions |
|
|
|
|
Components of Change (%) |
|
|
2019 |
|
2018 |
|
Change ($) |
|
Change (%) |
|
Organic |
|
|
Acquisitions |
|
Divestitures |
|
Foreign Exchange(3) |
|
Revenues by Service |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated Waste and Compliance
Services (1) |
$ |
475.0 |
|
$ |
483.8 |
|
$ |
(8.8 |
) |
|
(1.8 |
%) |
|
1.4 |
% |
|
|
0.1 |
% |
|
(0.5 |
%) |
|
(2.8 |
%) |
Secure Information Destruction
Services |
|
229.4 |
|
|
230.0 |
|
|
(0.6 |
) |
|
(0.3 |
%) |
|
0.5 |
% |
(4) |
|
0.3 |
% |
|
– |
|
|
(1.1 |
%) |
Communication and Related
Services (2) |
|
63.2 |
|
|
81.3 |
|
|
(18.1 |
) |
|
(22.2 |
%) |
|
(16.7 |
%) |
|
|
– |
|
|
(5.0 |
%) |
|
(0.5 |
%) |
Manufacturing and Industrial
Services |
|
78.2 |
|
|
88.2 |
|
|
(10.0 |
) |
|
(11.3 |
%) |
|
(0.7 |
%) |
|
|
– |
|
|
(5.7 |
%) |
|
(4.9 |
%) |
Total Revenues |
$ |
845.8 |
|
$ |
883.3 |
|
$ |
(37.5 |
) |
|
(4.2 |
%) |
|
(0.8 |
%) |
|
|
0.1 |
% |
|
(1.3 |
%) |
|
(2.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by
Geography |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic and Canada |
$ |
700.4 |
|
$ |
711.7 |
|
$ |
(11.3 |
) |
|
(1.6 |
%) |
|
(1.2 |
%) |
(5) |
|
0.2 |
% |
|
(0.4 |
%) |
|
(0.2 |
%) |
International |
|
145.4 |
|
|
171.6 |
|
|
(26.2 |
) |
|
(15.3 |
%) |
|
1.1 |
% |
|
|
– |
|
|
(5.3 |
%) |
|
(11.1 |
%) |
Total Revenues |
$ |
845.8 |
|
$ |
883.3 |
|
$ |
(37.5 |
) |
|
(4.2 |
%) |
|
(0.8 |
%) |
|
|
0.1 |
% |
|
(1.3 |
%) |
|
(2.2 |
%) |
See footnote descriptions below Table 1 – C.
Table 1 – B: REVENUES CHANGES BY SERVICE
AND GEOGRAPHY –SIX MONTHS ENDED JUNE 30,
2019
|
Six Months Ended June 30, |
|
|
In millions |
|
|
|
|
Components of Change (%) |
|
|
2019 |
|
2018 |
|
Change ($) |
|
Change (%) |
|
Organic |
|
|
Acquisitions |
|
Divestitures |
|
Foreign Exchange(3) |
|
Revenues by Service |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated Waste and Compliance
Services (1) |
$ |
944.2 |
|
$ |
981.2 |
|
$ |
(37.0 |
) |
|
(3.8 |
%) |
|
(0.3 |
%) |
|
|
0.1 |
% |
|
(0.5 |
%) |
|
(3.1 |
%) |
Secure Information Destruction
Services |
|
461.4 |
|
|
449.9 |
|
|
11.5 |
|
|
2.6 |
% |
|
2.4 |
% |
(6) |
|
1.5 |
% |
|
– |
|
|
(1.3 |
%) |
Communication and Related
Services (2) |
|
124.4 |
|
|
173.2 |
|
|
(48.8 |
) |
|
(28.2 |
%) |
|
(24.0 |
%) |
|
|
– |
|
|
(3.5 |
%) |
|
(0.7 |
%) |
Manufacturing and Industrial
Services |
|
145.9 |
|
|
174.0 |
|
|
(28.1 |
) |
|
(16.2 |
%) |
|
(4.0 |
%) |
|
|
– |
|
|
(7.3 |
%) |
|
(4.9 |
%) |
Total Revenues |
$ |
1,675.9 |
|
$ |
1,778.3 |
|
$ |
(102.4 |
) |
|
(5.8 |
%) |
|
(2.3 |
%) |
|
|
0.4 |
% |
|
(1.3 |
%) |
|
(2.6 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by
Geography |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic and Canada |
$ |
1,379.2 |
|
$ |
1,426.4 |
|
$ |
(47.2 |
) |
|
(3.3 |
%) |
|
(3.3 |
%) |
(7) |
|
0.6 |
% |
|
(0.3 |
%) |
|
(0.3 |
%) |
International |
|
296.7 |
|
|
351.9 |
|
|
(55.2 |
) |
|
(15.7 |
%) |
|
1.6 |
% |
|
|
– |
|
|
(5.3 |
%) |
|
(12.0 |
%) |
Total Revenues |
$ |
1,675.9 |
|
$ |
1,778.3 |
|
$ |
(102.4 |
) |
|
(5.8 |
%) |
|
(2.3 |
%) |
|
|
0.4 |
% |
|
(1.3 |
%) |
|
(2.6 |
%) |
See footnote descriptions below Table 1 – C.
Table 1 – C: DISAGGREGATED REVENUES
CHANGE
(In millions) |
|
|
|
|
|
|
Three Months Ended June 30, 2019 |
|
|
Six Months Ended June 30, 2019 |
|
Organic (8) |
$ |
(6.3 |
) |
|
$ |
(41.2 |
) |
Acquisitions |
|
1.1 |
|
|
|
7.9 |
|
Divestitures |
|
(11.7 |
) |
|
|
(23.6 |
) |
Foreign
exchange |
|
(20.6 |
) |
|
|
(45.5 |
) |
Total Change |
$ |
(37.5 |
) |
|
$ |
(102.4 |
) |
(1) Regulated Waste and Compliance
Services consists of Medical Waste and Compliance Solutions and
Hazardous Waste Solutions.
(2) Communication and Related
Services consists of Communication Services and Expert
Solutions.
(3) 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.
Organic percentage change for Secure Information
Destruction Services includes the impact of SOP price
movements.
(4) Excluding SOP price impact,
organic percentage change is 4.3% for the three months ended June
30, 2019 (see Table 1-A).
(5) Excluding SOP price impact,
Domestic and Canada organic percentage change is (0.2%) for the
three months ended June 30, 2019 (see Table 1-A).
(6) Excluding SOP price impact,
organic percentage change is 3.1% for the six months ended June 30,
2019 (see Table 1-B).
(7) Excluding SOP price impact,
Domestic and Canada organic percentage change is (3.1%) for the six
months ended June 30, 2019 (see Table 1-B).
(8) Excluding SOP price impact,
organic revenue increased $1.1 million and decreased ($38.3)
million for the three and six months ended June 30, 2019,
respectively (see Table 1-C).
RECONCILIATION OF U.S. GAAP TO NON-GAAP
FINANCIAL MEASURES (UNAUDITED)
Table 2-A: THREE MONTHS ENDED JUNE 30,
2019 AND 2018
(In millions, except per share data) |
|
|
Three Months Ended June 30, 2019 |
|
|
Gross Profit |
|
|
Selling, General and Administrative Expenses |
|
|
Income from Operations (b) |
|
|
Net (Loss) Income Attributable to Common Shareholders
(c) |
|
|
Diluted (Loss) Earnings Per Share |
|
U.S.
GAAP Financial Measures |
$ |
302.6 |
|
|
$ |
277.3 |
|
|
$ |
25.3 |
|
|
$ |
(30.5 |
) |
|
$ |
(0.33 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Transformation (1) |
|
- |
|
|
|
(14.0 |
) |
|
|
14.0 |
|
|
|
10.5 |
|
|
|
0.12 |
|
Intangible Amortization (2) |
|
- |
|
|
|
(36.9 |
) |
|
|
36.9 |
|
|
|
28.0 |
|
|
|
0.31 |
|
Acquisition and Integration (3) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Operational Optimization (4) |
|
2.2 |
|
|
|
(1.4 |
) |
|
|
3.6 |
|
|
|
2.9 |
|
|
|
0.03 |
|
Divestitures (5) |
|
- |
|
|
|
(4.9 |
) |
|
|
4.9 |
|
|
|
3.7 |
|
|
|
0.04 |
|
Litigation, Settlements and Regulatory Compliance (6) |
|
- |
|
|
|
(9.1 |
) |
|
|
9.1 |
|
|
|
7.4 |
|
|
|
0.08 |
|
Impairment (7) |
|
- |
|
|
|
(2.1 |
) |
|
|
2.1 |
|
|
|
2.0 |
|
|
|
0.02 |
|
Other (8) |
|
- |
|
|
|
(9.7 |
) |
|
|
9.7 |
|
|
|
7.4 |
|
|
|
0.07 |
|
Capital Allocation (9) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19.8 |
|
|
|
0.22 |
|
Adjusted
Financial Measures (a) |
$ |
304.8 |
|
|
$ |
199.2 |
|
|
$ |
105.6 |
|
|
$ |
51.2 |
|
|
$ |
0.56 |
|
|
|
(In millions, except per share data) |
|
|
Three Months Ended June 30, 2018 |
|
|
Gross Profit |
|
|
Selling, General and Administrative Expenses |
|
|
Income from Operations (b) |
|
|
Net Income Attributable to Common Shareholders
(c) |
|
|
Diluted Earnings Per Share |
|
U.S.
GAAP Financial Measures |
$ |
353.3 |
|
|
$ |
290.9 |
|
|
$ |
62.4 |
|
|
$ |
26.6 |
|
|
$ |
0.31 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Transformation (1) |
|
- |
|
|
|
(21.8 |
) |
|
|
21.8 |
|
|
|
16.0 |
|
|
|
0.19 |
|
Intangible Amortization (2) |
|
- |
|
|
|
(32.9 |
) |
|
|
32.9 |
|
|
|
24.6 |
|
|
|
0.29 |
|
Acquisition and Integration (3) |
|
- |
|
|
|
(1.8 |
) |
|
|
1.8 |
|
|
|
1.6 |
|
|
|
0.02 |
|
Operational Optimization (4) |
|
- |
|
|
|
(7.0 |
) |
|
|
7.0 |
|
|
|
5.0 |
|
|
|
0.06 |
|
Divestitures (5) |
|
- |
|
|
|
(13.0 |
) |
|
|
13.0 |
|
|
|
9.6 |
|
|
|
0.11 |
|
Litigation, Settlements and Regulatory Compliance (6) |
|
- |
|
|
|
(16.4 |
) |
|
|
16.4 |
|
|
|
12.2 |
|
|
|
0.14 |
|
Impairment (7) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other (8) |
|
- |
|
|
|
(2.9 |
) |
|
|
2.9 |
|
|
|
2.2 |
|
|
|
0.02 |
|
Capital Allocation (9) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8.3 |
|
|
|
0.03 |
|
Adjusted
Financial Measures (a) |
$ |
353.3 |
|
|
$ |
195.1 |
|
|
$ |
158.2 |
|
|
$ |
106.1 |
|
|
$ |
1.17 |
|
U.S. GAAP results for the three months ended June 30, 2019 and
2018 include:
(1) Business Transformation2019: Selling, general and
administrative expenses (“SG&A”) include $6.7 million of
consulting and professional fees, $3.0 million of internal costs,
$2.0 million of software usage/maintenance fees, $0.8 million of
accelerated depreciation, and $1.5 million of other related
expenses.2018: SG&A includes $15.6 million of consulting and
professional services, $3.0 million related to internal costs, $1.6
million related to exit costs – employee termination, $0.8 million
of software usage/maintenance fees, and $0.8 million of other
related expenses.
(2) Intangible Amortization2019 and 2018: SG&A includes
$36.9 million and $32.9 million, respectively, of intangible
amortization expense from acquisitions.
(3) Acquisition and Integration2019: Limited
integration activity and we did not close any acquisitions during
the second quarter of 2019.2018: SG&A includes $2.4 million of
acquisition expenses, offset by $0.5 million of net other
integration credits, and a $0.1 million favorable change in the
fair value of contingent consideration. During the second
quarter of 2018, we completed 6 acquisitions.
(4) Operational Optimization2019: Cost of
revenues (“COR”) includes $2.2 million of charges in the
International Regulated Waste and Compliance Services (“RWCS”)
reportable segment, of which a $1.9 million non-cash charge related
to impairment of long-lived assets and $0.3 million related to
closure and exit costs – other in the United Kingdom
(“U.K.”). SG&A includes $1.4 million of charges in the
International RWCS reportable segment, of which $0.2 million
related to employee termination, $0.4 million non-cash charge
related to impairment of long-lived assets in Latin America, and
$0.8 million of site closure costs in APAC.2018: SG&A includes
$2.0 million of charges in the Domestic and Canada RWCS reportable
segment (of which $1.0 million related to non-cash impairment
charges for long-lived assets, $0.9 million related to improving
operational efficiency such as optimizing overall logistics and
sales functions primarily for Secure Information Destruction
locations, and $0.1 million related to closure/consolidation of
facilities in Canada), $4.0 million in the International RWCS
reportable segment (of which $1.8 million non-cash charges related
to impairment of long-lived assets and rationalization of a
tradename and $2.2 million related to closure and exit costs), and
$1.0 million of charges in All Other related to
closure/consolidation of call centers in Domestic Communication and
Related Services.
(5) Divestitures2019: SG&A includes $4.9
million for consulting and professional fees associated with
non-core portfolio rationalization efforts, mostly in the U.S.2018:
SG&A includes $6.9 million of non-cash impairment charges
related to the change in fair value of assets held for sale in the
U.S., $5.8 million of professional fees associated with non-core
portfolio rationalization efforts in the U.S., and $0.3 million of
non-cash asset impairment charges arising from changes in the fair
value of assets sold in the U.K.
(6) Litigation, Settlements, and Regulatory
Compliance2019 and 2018: SG&A includes $9.1 million and $16.4
million, respectively, of legal, settlement and regulatory
compliance expenses, consulting and professional fees related to
certain litigation matters.
(7) Impairment2019: SG&A includes $2.1
million related to non-cash impairment charges, of which $0.4
million related to long-lived assets in our Domestic and Canada
RWCS reportable segment and $1.7 million related to permits and
customer list in our International RWCS reportable segment.
(8) Other2019: SG&A includes $9.7 million of
consulting and professional services related to internal control
remediation activities as well as the implementation of new
accounting standards. Other expense, net includes a foreign
exchange loss of $0.2 million related to the re-measurement of net
monetary assets held in Argentina as a result of its designation as
a highly inflationary economy.2018: SG&A includes $2.9 million
of consulting and professional services related to the
implementation of new accounting standards as well as internal
control remediation activities.
(9) Capital Allocation2019: Pre-tax loss on
early extinguishment of debt of $23.1 million, comprising a make
whole premium of $20.4 million, due under the terms of certain of
the private placement notes, and $2.7 million related to
unamortized debt issuance costs, associated with repayments of our
private placement notes. We also incurred $0.2 million of
debt modification charges associated with the execution of the
Fourth Amendment, which are recorded in Interest expense, net and
charges of $3.4 million related to the write-off of the unamortized
portion of premiums associated with interest rate locks executed in
connection with the issuance of certain of the private placement
notes, which are recorded in Interest expense, net. The
impact of these items, net of tax, was $19.8 million.2018: Includes
dividends on our Series A mandatory convertible preferred stock of
$8.3 million.For the purpose of calculating the ultimate EPS
impact, for the second quarter of 2018, of our mandatory
convertible preferred stock we show the impact by excluding the
mandatory convertible preferred stock dividend and using the
“if-converted” method of share dilution. This provides
insight to how our diluted share count was affected by the
potential conversion of the mandatory convertible preferred shares
prior to their actual conversion in September 2018.The impact of
excluding the preferred stock dividend from Adjusted Diluted EPS
was $0.10 for the second quarter of 2018. The increase in
diluted shares outstanding under the “if-converted” method was 4.8
million for the second quarter of 2018. The impact of all
adjusting items under the “if-converted” method to our Adjusted
Diluted EPS has a dilutive effect of $0.07 for the second quarter
of 2018.
(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) 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 $25.6 million and $24.6 million for the three months
ended June 30, 2019 and 2018, 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.
The following table presents a reconciliation of Income from
Operations to Earnings Before Interest, Tax, Depreciation and
Amortization (EBITDA):
(In millions) |
|
|
Three Months Ended June 30, |
|
|
2019 |
|
|
2018 |
|
Income
from operations |
$ |
25.3 |
|
|
$ |
62.4 |
|
Depreciation |
|
32.9 |
|
|
|
32.7 |
|
Intangible amortization |
|
36.9 |
|
|
|
32.9 |
|
EBITDA |
$ |
95.1 |
|
|
$ |
128.0 |
|
The following table presents the calculation of Adjusted
Earnings Before Interest, Tax, Depreciation and Amortization
(Adjusted EBITDA):
(In millions) |
|
|
Three Months Ended June 30, |
|
|
2019 |
|
|
2018 |
|
Adjusted
income from operations |
$ |
105.6 |
|
|
$ |
158.2 |
|
Depreciation(1) |
|
32.1 |
|
|
|
32.7 |
|
Adjusted
EBITDA |
$ |
137.7 |
|
|
$ |
190.9 |
|
(1) Excludes depreciation charges of
$0.8 million that are included in Business Transformation.
Table 2-B: SIX MONTHS ENDED JUNE 30, 2019
AND 2018
(In millions, except per share data) |
|
|
Six Months Ended June 30, 2019 |
|
|
Gross Profit |
|
|
Selling, General and Administrative Expenses |
|
|
Income from Operations (b) |
|
|
Net (Loss) Income Attributable to Common Shareholders
(c) |
|
|
Diluted (Loss) Earnings Per Share (d) |
|
U.S.
GAAP Financial Measures |
$ |
599.7 |
|
|
$ |
557.7 |
|
|
$ |
21.1 |
|
|
$ |
(68.3 |
) |
|
$ |
(0.75 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Transformation (1) |
|
- |
|
|
|
(34.5 |
) |
|
|
34.5 |
|
|
|
26.3 |
|
|
|
0.29 |
|
Intangible Amortization (2) |
|
- |
|
|
|
(74.7 |
) |
|
|
74.7 |
|
|
|
56.9 |
|
|
|
0.63 |
|
Acquisition and Integration (3) |
|
- |
|
|
|
(1.9 |
) |
|
|
1.9 |
|
|
|
1.5 |
|
|
|
0.02 |
|
Operational Optimization (4) |
|
4.2 |
|
|
|
(3.0 |
) |
|
|
7.2 |
|
|
|
5.9 |
|
|
|
0.06 |
|
Divestitures (5) |
|
- |
|
|
|
(2.1 |
) |
|
|
2.1 |
|
|
|
0.2 |
|
|
|
- |
|
Litigation, Settlements and Regulatory Compliance (6) |
|
- |
|
|
|
(18.9 |
) |
|
|
18.9 |
|
|
|
16.1 |
|
|
|
0.18 |
|
Impairment (7) |
|
1.6 |
|
|
|
(2.1 |
) |
|
|
24.6 |
|
|
|
24.0 |
|
|
|
0.26 |
|
Other (8) |
|
- |
|
|
|
(25.6 |
) |
|
|
25.6 |
|
|
|
20.4 |
|
|
|
0.22 |
|
Capital Allocation (9) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19.8 |
|
|
|
0.22 |
|
Adjusted
Financial Measures (a) |
$ |
605.5 |
|
|
$ |
394.9 |
|
|
$ |
210.6 |
|
|
$ |
102.8 |
|
|
$ |
1.13 |
|
(In millions, except per share data) |
|
|
Six Months Ended June 30, 2018 |
|
|
Gross Profit |
|
|
Selling, General and Administrative Expenses |
|
|
Income from Operations (b) |
|
|
Net Income Attributable to Common Shareholders
(c) |
|
|
Diluted Earnings Per Share (d) |
|
U.S.
GAAP Financial Measures |
$ |
711.8 |
|
|
$ |
595.3 |
|
|
$ |
116.5 |
|
|
$ |
47.6 |
|
|
$ |
0.55 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Transformation (1) |
|
- |
|
|
|
(43.9 |
) |
|
|
43.9 |
|
|
|
32.4 |
|
|
|
0.38 |
|
Intangible Amortization (2) |
|
- |
|
|
|
(64.8 |
) |
|
|
64.8 |
|
|
|
48.3 |
|
|
|
0.56 |
|
Acquisition and Integration (3) |
|
- |
|
|
|
(5.9 |
) |
|
|
5.9 |
|
|
|
4.8 |
|
|
|
0.06 |
|
Operational Optimization (4) |
|
- |
|
|
|
(15.9 |
) |
|
|
15.9 |
|
|
|
11.6 |
|
|
|
0.14 |
|
Divestitures (5) |
|
- |
|
|
|
(17.1 |
) |
|
|
17.1 |
|
|
|
13.3 |
|
|
|
0.16 |
|
Litigation, Settlements and Regulatory Compliance (6) |
|
- |
|
|
|
(43.9 |
) |
|
|
43.9 |
|
|
|
32.5 |
|
|
|
0.38 |
|
Impairment (7) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other (8) |
|
- |
|
|
|
(8.7 |
) |
|
|
8.7 |
|
|
|
6.6 |
|
|
|
0.07 |
|
Capital Allocation (9) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19.1 |
|
|
|
0.09 |
|
Adjusted
Financial Measures (a) |
$ |
711.8 |
|
|
$ |
395.1 |
|
|
$ |
316.7 |
|
|
$ |
216.2 |
|
|
$ |
2.39 |
|
U.S. GAAP results for the six months ended June 30, 2019 and
2018 include:
(1) Business Transformation2019: SG&A include $14.3 million
of consulting and professional fees, $5.2 million of internal
costs, $5.3 million related to exit costs - employee terminations,
$6.4 million of software usage/maintenance fees, $0.8 million of
accelerated depreciation, and $2.5 million of other related
expenses.2018: SG&A includes $33.8 million of consulting and
professional services, $5.5 million related to internal costs, $2.1
million related to exit costs – employee termination, $1.4 million
of software usage/maintenance fees, and $1.1 million of other
related expenses.
(2) Intangible Amortization2019 and 2018: SG&A includes
$74.7 million and $64.8 million, respectively, of intangible
amortization expense from acquisitions.
(3) Acquisition and Integration2019: 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 six months of 2019, we completed 1
acquisition.2018: SG&A includes $4.1 million of acquisition
expenses, $1.4 million of integration expenses mostly related to
acquisitions completed in the U.S., and a $0.4 million unfavorable
change in the fair value of contingent consideration. During
the first six months of 2018, we completed 15 acquisitions.
(4) Operational Optimization2019: COR includes a
$2.0 million non-cash impairment charge related to long-lived
assets in our Domestic and Canada RWCS reportable segment and $2.2
million of charges in the International RWCS reportable segment, of
which a $1.9 million non-cash charge related to impairment of
long-lived assets and $0.3 million related to closure and exit
costs – other in the U.K. SG&A includes $0.1 million of
charges in our Domestic and Canada RWCS reportable segment and $2.9
million of charges in the International RWCS reportable segment (of
which $0.2 million related to employee termination, $0.4 million
non-cash charge related to impairment of long-lived assets, $1.5
million of charges related to site clean-up costs in Latin America,
and $0.8 million of site closure costs in APAC).2018: SG&A
includes $3.4 million of charges in the Domestic and Canada RWCS
reportable segment (of which $1.0 million related to non-cash
impairment charges for long-lived assets, $2.3 million related to
improving operational efficiency such as optimizing overall
logistics and sales functions primarily for Secure Information
Destruction locations, and $0.1 million related to
closure/consolidation of facilities in Canada), $9.9 million in the
International RWCS reportable segment (of which $6.5 million
related to non-cash impairment charges related to long-lived
assets, customer relationships, operating permits and
rationalization of a tradename, $3.2 million related to closure and
exit costs, and $0.2 million related to exit costs – employee
termination), and $2.6 million of charges in All Other related to
closure/consolidation of call centers in Communication and Related
Services.
(5) Divestitures2019: SG&A includes a $5.8
million gain on divestiture of a business in the U.K. and $7.9
million of consulting and professional fees associated with
non-core portfolio rationalization efforts, mostly in the U.S.2018:
SG&A includes $6.9 million of non-cash asset impairment charges
arising from changes in the fair value of assets held for sale in
the U.S., $5.8 million of professional fees associated with
non-core portfolio rationalization efforts in the U.S., and $4.4
million of non-cash impairment charges arising from changes in the
fair value of assets sold in the U.K.
(6) Litigation, Settlements, and Regulatory
Compliance2019 and 2018: SG&A includes $18.9 million and $43.9
million, respectively, of legal, settlement and regulatory
compliance expenses, consulting and professional fees related to
certain litigation matters.
(7) Impairment2019: COR includes $1.6 million
related to non-cash impairment charges for software as a result of
rationalization of applications primarily in All Other.
SG&A includes $2.1 million related to non-cash impairment
charges, of which $0.4 million related to long-lived assets in our
Domestic and Canada RWCS reportable segment and $1.7 million
related to permits and customer list in our International RWCS
reportable segment.We also recorded a non-cash goodwill impairment
charge of $20.9 million related to our Latin America reporting
unit.
(8) Other2019: SG&A includes $25.6 million
of consulting and professional services related to internal control
remediation activities as well as the implementation of new
accounting standards. Other expense, net includes a foreign
exchange loss of $1.3 million related to the re-measurement of net
monetary assets held in Argentina as a result of its designation as
a highly inflationary economy.2018: SG&A includes $8.7 million
of consulting and professional services related to the
implementation of new accounting standards as well as internal
control remediation activities.
(9) Capital Allocation2019: Pre-tax loss on
early extinguishment of debt of $23.1 million, comprising a make
whole premium of $20.4 million, due under the terms of certain of
the private placement notes, and $2.7 million related to
unamortized debt issuance costs, associated with repayments of our
private placement notes. We also incurred $0.2 million of
debt modification charges associated with the execution of the
Fourth Amendment, which are recorded in Interest expense, net and
charges of $3.4 million related to the write-off of the unamortized
portion of premiums associated with interest rate locks executed in
connection with the issuance of certain of the private placement
notes, which are recorded in Interest expense, net. The
impact of these items, net of tax, was $19.8 million.2018: Interest
expense, net includes $2.7 million of pre-tax debt modification
charges related to amending our credit agreements in connection
with certain non-recurring matters.2018 includes dividends on our
Series A mandatory convertible preferred stock of $17.1 million.For
the purpose of calculating the ultimate EPS impact, for the first
six months of 2018, of our mandatory convertible preferred stock we
show the impact by excluding the mandatory convertible preferred
stock dividend and using the “if-converted” method of share
dilution. This provides insight to how our diluted share
count was affected by the potential conversion of the mandatory
convertible preferred shares prior to their actual conversion in
September 2018.As a result of this conversion in September 2018,
the preferred stock had no impact on Adjusted Diluted EPS or the
diluted shares outstanding for the first six months of 2019.The
impact of excluding the preferred stock dividend from Adjusted
Diluted EPS was $0.20 for the first six months of 2018. The
increase in diluted shares outstanding under the “if-converted”
method was 4.8 million for the first six months of 2018. The
impact of all adjusting items under the “if-converted” method to
our Adjusted Diluted EPS has a dilutive effect of $0.13 for the
first six months of 2018.
(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) 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 $46.5 million and $51.4 million for the six months
ended June 30, 2019 and 2018, 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.
(d) EPS calculated on a quarterly basis, and, as
such, the amounts may not total the calculated full-year EPS.
The following table presents a reconciliation of Income from
Operations to Earnings Before Interest, Tax, Depreciation and
Amortization (EBITDA):
(In millions) |
|
|
Six Months Ended June 30, |
|
|
2019 |
|
|
2018 |
|
Income
from operations |
$ |
21.1 |
|
|
$ |
116.5 |
|
Depreciation |
|
64.7 |
|
|
|
63.5 |
|
Intangible amortization |
|
74.7 |
|
|
|
64.8 |
|
EBITDA |
$ |
160.5 |
|
|
$ |
244.8 |
|
The following table presents the calculation of Adjusted
Earnings Before Interest, Tax, Depreciation and Amortization
(Adjusted EBITDA):
(In millions) |
|
|
Six Months Ended June 30, |
|
|
2019 |
|
|
2018 |
|
Adjusted
income from operations |
$ |
210.6 |
|
|
$ |
316.7 |
|
Depreciation(1) |
|
63.9 |
|
|
|
63.5 |
|
Adjusted
EBITDA |
$ |
274.5 |
|
|
$ |
380.2 |
|
(1) Excludes depreciation charges of
$0.8 million that are included in Business Transformation.
FOR FURTHER INFORMATION CONTACT:
Stericycle Investor Relations 847-607-2012
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