Stericycle, Inc. (Nasdaq: SRCL) today reported results for the
third quarter ended September 30, 2019.
Revenues for the quarter were $833.1 million, a
decrease of 2.6% from $854.9 million in the third quarter of last
year. Loss from operations in the quarter was $34.5 million,
inclusive of non-cash impairment charges of $82.4 million
associated with classifying certain assets and liabilities as
held-for-sale as part of the Company’s portfolio rationalization,
compared to income from operations of $68.3 million in the third
quarter of last year. Net loss was $59.2 million, or $0.65
diluted loss per share, compared with net income of $17.5 million,
or $0.20 diluted earnings per share, in the third quarter of last
year. Adjusted EBITDA was $150.5 million, or 18.1% of
revenues, compared with $183.9 million, or 21.5% of revenues in the
third quarter of last year. Adjusted diluted earnings per
share was $0.80, compared to $1.03 in the 2018 comparable
period.
KEY BUSINESS HIGHLIGHTS:
- Stericycle announced important
progress on its portfolio rationalization as it divested of
non-core operations in Mexico and two service lines within
Communication and Related Services (“CRS”) during October.
- Organic revenue in core businesses
showed continued strength with 6.1% organic growth in Secure
Information Destruction, excluding the impact of sorted office
paper (“SOP”) pricing, and 1.6% organic growth in Regulated Waste
and Compliance Services (“RWCS”).
- Positive free cash flow for the
quarter was $77.2 million, bringing the year to date total to $40.0
million. This enabled a net debt reduction of approximately $83.0
million, the largest decrease since the third quarter of 2017.
“Our third quarter results reflect the early and
positive impact from the execution of our key business priorities,”
said Cindy J. Miller, Chief Executive Officer. “We saw the
benefit of our revenue quality initiatives with another quarter of
organic revenue growth within our core businesses, and we delivered
Adjusted EBITDA improvement over the prior two quarters. We
generated strong free cash flow in the quarter, enabling us to make
the largest quarterly net debt reduction since the third quarter of
2017. Additionally, we divested of three non-core businesses
during October, progressing our portfolio rationalization
efforts.”
THIRD QUARTER FINANCIAL RESULTS
U.S. Generally Accepted Accounting Principles (GAAP)
Results
- Revenues for the quarter ended
September 30, 2019 were $833.1 million, compared to $854.9 million
in the third quarter of last year. The decline was due to
macroeconomic factors of SOP pricing and foreign exchange rates,
which reduced revenues by $18.4 million and $13.3 million,
respectively, and a $12.7 million decline in CRS primarily due to
fewer recall events. Revenues in core businesses continued
their positive trend with $14.0 million organic growth excluding
paper pricing in Secure Information Destruction and $7.4 million
organic growth in RWCS.
- Loss from operations in the quarter
was $34.5 million, compared to income from operations of $68.3
million in the third quarter of last year. Excluding non-cash
impairment charges of $82.4 million related to the three
divestitures, income from operations was $47.9 million, a decrease
of $20.4 million from 2018. The decrease was driven by $20.5
million from SOP pricing and foreign exchange and $11.0 million in
higher hazardous waste operating costs partially offset by $8.0
million related to a favorable litigation settlement and lower
incentive compensation.
- Net loss was $59.2 million, or
$0.65 diluted loss per share, compared with net income of $17.5
million, or $0.20 diluted earnings per share, in the third quarter
of last year, primarily due to operational items previously
highlighted, a lower effective tax rate on a loss from operations,
and the absence of gains on share repurchases this quarter as
compared to the third quarter of 2018.
- Cash flow from operations year to
date was $201.2 million, compared to $89.9 million during the
comparable period last year. In 2018, cash flow from
operations was reduced by the Small Quantity customer class action
settlement payment of $295.0 million. Excluding the
settlement payment, cash flow from operations decreased by $183.7
million primarily due to lower operating performance in 2019 as
previously highlighted and payments for annual incentive
compensation and prepaid software.
- Capital expenditures year to date
were $161.2 million, including $70.8 million for the ERP
implementation, compared to $96.9 million for the comparable period
in 2018, including $8.2 million for the ERP implementation.
Non-GAAP Results
- Adjusted EBITDA was $150.5 million, compared to $183.9 million
in the third quarter of last year. The decrease was primarily
driven by $20.5 million from SOP pricing and foreign exchange
impact and $11.0 million in higher operating costs related to
hazardous waste operations.
- Adjusted diluted earnings per share
was $0.80, compared to $1.03 in the third quarter of last year,
primarily due to SOP pricing, foreign exchange impacts, higher
operating costs, higher interest expense, and the absence of gains
on share repurchases this quarter as compared to the third quarter
of 2018, partially offset by a tax benefit.
- Positive free cash flow for the
quarter was $77.2 million, bringing the year to date total to $40.0
million. This enabled a net debt reduction of approximately $83.0
million, the largest decrease since the third quarter of 2017.
NON-GAAP FINANCIAL MEASURES
Non-GAAP financial measures are reconciled to
the most comparable GAAP measures in the schedules attached
hereto.
RECENT EVENTS
During October 2019, Stericycle made important
progress on portfolio rationalization and closed on three
divestitures. The divestitures included the North American
telephone answering services business and a retail pharmaceutical
returns business, both of which report sales in our CRS service
lines, and substantially all operations in Mexico, for which
revenue is reported in RWCS and Manufacturing and Industrial
(“M&I”). Gross proceeds of $38.1 million from the three
transactions will be used to reduce net debt in the fourth
quarter. During September 2019, the Company approved plans to
sell these businesses. Accordingly, as of September 30, 2019,
the related assets and liabilities were classified as held-for-sale
which resulted in non-cash impairment charges of $82.4 million in
the third quarter of 2019.
In a separate press release issued on October 1,
Stericycle announced S. Cory White was appointed Executive Vice
President and Chief Commercial Officer. Mr. White joined
Stericycle in April 2019 as Executive Vice President of CRS and
brings more than 20 years of commercial experience, including
expertise in both healthcare and business transformations.
The Company’s former Chief Commercial Officer, William J. Seward,
departed the company to pursue a senior level commercial role with
his former employer.
FINANCIAL GUIDANCE
Stericycle updated its financial guidance for
the full-year 2019 to reflect the impact of divestitures closed
through October 31, as summarized in the table below. The
Company’s guidance is based on currently known items and certain
business assumptions including current foreign exchange rates and
estimates for SOP pricing.
Guidance
for Full-Year 2019 |
(In millions, except per share data) |
Revenues |
$3,300 - $3,335 |
Adjusted EBITDA(1) (2) |
$575 -$595 |
Adjusted diluted earnings per
share (2) |
$2.55 to $2.70 |
Capital expenditures |
$180 - $200 |
Minimum free cash flow |
$50 |
(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, and 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,
October 31, 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 5351870. 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 September 30, |
|
|
Nine Months Ended September
30, |
|
|
2019 |
|
2018 |
|
% Change |
|
|
2019 |
|
2018 |
|
% Change |
|
Revenues |
$ |
833.1 |
|
$ |
854.9 |
|
|
(2.6 |
%) |
|
$ |
2,509.0 |
|
$ |
2,633.2 |
|
|
(4.7 |
%) |
Cost of revenues |
|
537.8 |
|
|
519.4 |
|
|
3.5 |
% |
|
|
1,614.0 |
|
|
1,585.9 |
|
|
1.8 |
% |
Gross
profit |
|
295.3 |
|
|
335.5 |
|
|
(12.0 |
%) |
|
|
895.0 |
|
|
1,047.3 |
|
|
(14.5 |
%) |
Selling, general and
administrative expenses |
|
247.4 |
|
|
267.2 |
|
|
(7.4 |
%) |
|
|
805.1 |
|
|
851.1 |
|
|
(5.4 |
%) |
Held-for-sale impairments |
|
82.4 |
|
|
- |
|
nm |
|
|
|
82.4 |
|
|
11.4 |
|
nm |
|
Goodwill impairment |
|
- |
|
|
- |
|
nm |
|
|
|
20.9 |
|
|
- |
|
nm |
|
(Loss) income from
operations |
|
(34.5 |
) |
|
68.3 |
|
|
(150.5 |
%) |
|
|
(13.4 |
) |
|
184.8 |
|
|
(107.3 |
%) |
Interest expense, net |
|
(29.9 |
) |
|
(27.7 |
) |
|
7.9 |
% |
|
|
(91.1 |
) |
|
(77.3 |
) |
|
17.9 |
% |
Loss on early extinguishment of
debt |
|
- |
|
|
- |
|
nm |
|
|
|
(23.1 |
) |
|
- |
|
nm |
|
Other expense, net |
|
(3.2 |
) |
|
(6.2 |
) |
|
(48.4 |
%) |
|
|
(7.2 |
) |
|
(6.8 |
) |
|
5.9 |
% |
(Loss) income before
income taxes |
|
(67.6 |
) |
|
34.4 |
|
|
(296.5 |
%) |
|
|
(134.8 |
) |
|
100.7 |
|
|
(233.9 |
%) |
Income tax benefit (expense) |
|
8.6 |
|
|
(10.9 |
) |
|
(178.9 |
%) |
|
|
8.0 |
|
|
(27.1 |
) |
|
(129.5 |
%) |
Net (loss)
income |
|
(59.0 |
) |
|
23.5 |
|
|
(351.1 |
%) |
|
|
(126.8 |
) |
|
73.6 |
|
|
(272.3 |
%) |
Net (income) loss attributable to
noncontrolling interests |
|
(0.2 |
) |
|
- |
|
nm |
|
|
|
(0.7 |
) |
|
0.1 |
|
nm |
|
Net (loss) income
attributable to Stericycle, Inc. |
|
(59.2 |
) |
|
23.5 |
|
|
(351.9 |
%) |
|
|
(127.5 |
) |
|
73.7 |
|
|
(273.0 |
%) |
Mandatory convertible preferred
stock dividend |
|
- |
|
|
(8.4 |
) |
|
(100.0 |
%) |
|
|
- |
|
|
(25.5 |
) |
|
(100.0 |
%) |
Gain on repurchase of preferred
stock |
|
- |
|
|
2.4 |
|
|
(100.0 |
%) |
|
|
- |
|
|
16.9 |
|
|
(100.0 |
%) |
Net (loss) income
attributable to Stericycle, Inc. common shareholders |
$ |
(59.2 |
) |
$ |
17.5 |
|
|
(438.3 |
%) |
|
$ |
(127.5 |
) |
$ |
65.1 |
|
|
(295.9 |
%) |
(Loss) earnings per
common share attributable to Stericycle, Inc. common
shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.65 |
) |
$ |
0.20 |
|
|
(424.9 |
%) |
|
$ |
(1.40 |
) |
$ |
0.76 |
|
|
(284.4 |
%) |
Diluted |
$ |
(0.65 |
) |
$ |
0.20 |
|
|
(424.9 |
%) |
|
$ |
(1.40 |
) |
$ |
0.76 |
|
|
(284.4 |
%) |
Weighted average number
of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
91.1 |
|
|
86.7 |
|
|
|
|
|
|
91.0 |
|
|
85.9 |
|
|
|
|
Diluted |
|
91.1 |
|
|
86.8 |
|
|
|
|
|
|
91.0 |
|
|
86.1 |
|
|
|
|
nm - percentage change not meaningful
|
|
UNAUDITED STATISTICS - U.S. GAAP AND ADJUSTED
MEASURES(In millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
% of Revenue |
|
|
|
|
|
% of Revenue |
|
|
|
|
|
% of Revenue |
|
|
|
|
|
% of Revenue |
|
Statistics -
U.S. GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ |
295.3 |
|
|
35.4 |
% |
|
$ |
335.5 |
|
|
39.2 |
% |
|
$ |
895.0 |
|
|
35.7 |
% |
|
$ |
1,047.3 |
|
|
39.8 |
% |
Selling, general and
administrative expenses |
$ |
247.4 |
|
|
29.7 |
% |
|
$ |
267.2 |
|
|
31.3 |
% |
|
$ |
805.1 |
|
|
32.1 |
% |
|
$ |
851.1 |
|
|
32.3 |
% |
Held-for-sale impairments |
$ |
82.4 |
|
|
9.9 |
% |
|
$ |
- |
|
|
- |
|
|
$ |
82.4 |
|
|
3.3 |
% |
|
$ |
11.4 |
|
|
0.4 |
% |
Goodwill impairment |
$ |
- |
|
|
- |
|
|
$ |
- |
|
|
- |
|
|
$ |
20.9 |
|
|
0.8 |
% |
|
$ |
- |
|
|
- |
|
(Loss) income from
operations |
$ |
(34.5 |
) |
|
(4.1 |
%) |
|
$ |
68.3 |
|
|
8.0 |
% |
|
$ |
(13.4 |
) |
|
(0.5 |
%) |
|
$ |
184.8 |
|
|
7.0 |
% |
Net (loss) income attributable
to Stericycle, Inc. common shareholders |
$ |
(59.2 |
) |
|
(7.1 |
%) |
|
$ |
23.5 |
|
|
2.7 |
% |
|
$ |
(127.5 |
) |
|
(5.1 |
%) |
|
$ |
65.1 |
|
|
2.5 |
% |
Diluted (loss) earnings per
share |
$ |
(0.65 |
) |
|
|
|
|
$ |
0.20 |
|
|
|
|
|
$ |
(1.40 |
) |
|
|
|
|
$ |
0.76 |
|
|
|
|
Diluted shares
outstanding |
|
91.1 |
|
|
|
|
|
|
91.0 |
|
|
|
|
|
|
91.0 |
|
|
|
|
|
|
86.1 |
|
|
|
|
Effective tax rate |
|
12.7 |
% |
|
|
|
|
|
31.7 |
% |
|
|
|
|
|
5.9 |
% |
|
|
|
|
|
26.9 |
% |
|
|
|
Statistics - Adjusted
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted gross profit |
$ |
299.2 |
|
|
35.9 |
% |
|
$ |
343.3 |
|
|
40.2 |
% |
|
$ |
904.7 |
|
|
36.1 |
% |
|
$ |
1,055.1 |
|
|
40.1 |
% |
Adjusted selling, general and
administrative expenses |
$ |
180.4 |
|
|
21.7 |
% |
|
$ |
191.5 |
|
|
22.4 |
% |
|
$ |
575.3 |
|
|
22.9 |
% |
|
$ |
586.6 |
|
|
22.3 |
% |
Adjusted income from
operations |
$ |
118.8 |
|
|
14.3 |
% |
|
$ |
151.8 |
|
|
17.8 |
% |
|
$ |
329.4 |
|
|
13.1 |
% |
|
$ |
468.5 |
|
|
17.8 |
% |
Depreciation - cost of
revenues |
$ |
25.5 |
|
|
3.1 |
% |
|
$ |
24.8 |
|
|
2.9 |
% |
|
$ |
77.8 |
|
|
3.1 |
% |
|
$ |
75.0 |
|
|
2.8 |
% |
Depreciation - selling,
general and administrative expenses |
$ |
6.2 |
|
|
0.7 |
% |
|
$ |
7.3 |
|
|
0.9 |
% |
|
$ |
17.8 |
|
|
0.7 |
% |
|
$ |
20.6 |
|
|
0.8 |
% |
Depreciation - Business
Transformation |
$ |
0.2 |
|
|
- |
|
|
$ |
- |
|
|
- |
|
|
$ |
1.0 |
|
|
- |
|
|
$ |
- |
|
|
- |
|
Intangible amortization |
$ |
35.8 |
|
|
4.3 |
% |
|
$ |
31.8 |
|
|
3.7 |
% |
|
$ |
110.5 |
|
|
4.4 |
% |
|
$ |
96.6 |
|
|
3.7 |
% |
EBITDA |
$ |
33.0 |
|
|
4.0 |
% |
|
$ |
132.2 |
|
|
15.5 |
% |
|
$ |
192.7 |
|
|
7.7 |
% |
|
$ |
377.0 |
|
|
14.3 |
% |
Adjusted EBITDA |
$ |
150.5 |
|
|
18.1 |
% |
|
$ |
183.9 |
|
|
21.5 |
% |
|
$ |
425.0 |
|
|
16.9 |
% |
|
$ |
564.1 |
|
|
21.4 |
% |
Adjusted net income
attributable to common shareholders |
$ |
72.5 |
|
|
8.7 |
% |
|
$ |
93.5 |
|
|
10.9 |
% |
|
$ |
175.3 |
|
|
7.0 |
% |
|
$ |
309.7 |
|
|
11.8 |
% |
Adjusted effective tax
rate |
|
16.9 |
% |
|
|
|
|
|
26.0 |
% |
|
|
|
|
|
26.0 |
% |
|
|
|
|
|
25.4 |
% |
|
|
|
Adjusted diluted earnings per
share |
$ |
0.80 |
|
|
|
|
|
$ |
1.03 |
|
|
|
|
|
$ |
1.93 |
|
|
|
|
|
$ |
3.42 |
|
|
|
|
Adjusted diluted shares
outstanding (2018 using if-converted method) |
|
91.2 |
|
|
|
|
|
|
90.7 |
|
|
|
|
|
|
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) |
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
2019 |
|
|
2018 |
|
ASSETS |
|
|
|
|
|
|
|
Current
Assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
30.8 |
|
|
$ |
34.3 |
|
Accounts receivable, net |
|
562.8 |
|
|
|
599.6 |
|
Prepaid expenses |
|
72.6 |
|
|
|
50.0 |
|
Other current assets |
|
54.1 |
|
|
|
63.4 |
|
Assets held for sale |
|
30.2 |
|
|
|
- |
|
Total Current Assets |
|
750.5 |
|
|
|
747.3 |
|
Property, plant and equipment,
net |
|
785.7 |
|
|
|
743.5 |
|
Operating lease right-of-use
assets |
|
391.5 |
|
|
|
- |
|
Goodwill |
|
3,178.4 |
|
|
|
3,222.2 |
|
Intangible assets, net |
|
1,466.8 |
|
|
|
1,637.7 |
|
Other assets |
|
103.4 |
|
|
|
104.8 |
|
Total
Assets |
$ |
6,676.3 |
|
|
$ |
6,455.5 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
|
Current portion of long-term
debt |
$ |
111.9 |
|
|
$ |
104.3 |
|
Bank overdrafts |
|
4.1 |
|
|
|
14.8 |
|
Accounts payable |
|
216.9 |
|
|
|
225.8 |
|
Accrued liabilities |
|
319.8 |
|
|
|
340.8 |
|
Operating lease
liabilities |
|
88.4 |
|
|
|
- |
|
Other current liabilities |
|
37.2 |
|
|
|
47.5 |
|
Liabilities held for sale |
|
17.4 |
|
|
|
- |
|
Total Current Liabilities |
|
795.7 |
|
|
|
733.2 |
|
|
|
|
|
|
|
|
|
Long-term debt, net |
|
2,617.0 |
|
|
|
2,663.9 |
|
Long-term operating lease
liabilities |
|
320.7 |
|
|
|
- |
|
Deferred income taxes |
|
330.5 |
|
|
|
307.3 |
|
Long-term taxes payable |
|
66.4 |
|
|
|
83.3 |
|
Other liabilities |
|
68.7 |
|
|
|
70.7 |
|
Total
Liabilities |
|
4,199.0 |
|
|
|
3,858.4 |
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
Common stock |
|
0.9 |
|
|
|
0.9 |
|
Additional paid-in
capital |
|
1,196.5 |
|
|
|
1,162.6 |
|
Retained earnings |
|
1,661.7 |
|
|
|
1,789.2 |
|
Accumulated other
comprehensive loss |
|
(385.4 |
) |
|
|
(365.3 |
) |
Total Stericycle, Inc.’s
Equity |
|
2,473.7 |
|
|
|
2,587.4 |
|
Noncontrolling interests |
|
3.6 |
|
|
|
9.7 |
|
Total Equity |
|
2,477.3 |
|
|
|
2,597.1 |
|
Total Liabilities and
Equity |
$ |
6,676.3 |
|
|
$ |
6,455.5 |
|
|
|
STERICYCLE, INC. |
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2019 |
|
|
2018 |
|
OPERATING
ACTIVITIES: |
|
|
|
|
|
|
|
Net (loss) income |
$ |
(126.8 |
) |
|
$ |
73.6 |
|
Adjustments to reconcile net
(loss) income to net cash from operating activities: |
|
|
|
|
|
|
|
Depreciation |
|
96.6 |
|
|
|
95.6 |
|
Intangible amortization |
|
110.5 |
|
|
|
96.6 |
|
Loss on early extinguishment of debt and related charges |
|
26.5 |
|
|
|
- |
|
Stock-based compensation expense |
|
13.7 |
|
|
|
19.5 |
|
Deferred income taxes |
|
18.7 |
|
|
|
9.5 |
|
Goodwill and other impairment charges and losses (gains) on
divestiture of businesses, net |
|
108.1 |
|
|
|
26.8 |
|
Other, net |
|
0.6 |
|
|
|
(2.9 |
) |
Changes in operating assets
and liabilities, net of the effects of acquisitions, held-for-sale
impairments, and divestitures: |
|
|
|
|
|
|
|
Accounts receivable |
|
6.3 |
|
|
|
(1.8 |
) |
Prepaid expenses |
|
(28.3 |
) |
|
|
(22.5 |
) |
Accounts payable |
|
4.4 |
|
|
|
17.8 |
|
Accrued liabilities |
|
(30.5 |
) |
|
|
(226.2 |
) |
Other assets and liabilities |
|
1.4 |
|
|
|
3.9 |
|
Net cash from
operating activities |
|
201.2 |
|
|
|
89.9 |
|
INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
Capital expenditures |
|
(161.2 |
) |
|
|
(96.9 |
) |
Payments for acquisitions, net of cash acquired |
|
(0.2 |
) |
|
|
(39.6 |
) |
Proceeds from divestiture of businesses |
|
17.8 |
|
|
|
25.2 |
|
Other, net |
|
2.3 |
|
|
|
1.9 |
|
Net cash from
investing activities |
|
(141.3 |
) |
|
|
(109.4 |
) |
FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
Repayments of long-term debt and other obligations |
|
(38.2 |
) |
|
|
(44.9 |
) |
Net proceeds from (repayments of) foreign bank debt |
|
3.5 |
|
|
|
(6.2 |
) |
Proceeds from Term Loan |
|
365.0 |
|
|
|
- |
|
Repayments of Term Loan |
|
(40.2 |
) |
|
|
(35.6 |
) |
Proceeds from issuance of Senior Notes |
|
600.0 |
|
|
|
- |
|
Net proceeds from Senior Credit Facility |
|
150.8 |
|
|
|
145.1 |
|
Repayments of private placement notes |
|
(1,075.0 |
) |
|
|
- |
|
Payments on early extinguishment of debt |
|
(20.4 |
) |
|
|
- |
|
(Repayments of) proceeds from bank overdrafts, net |
|
(9.8 |
) |
|
|
0.9 |
|
Payments of capital lease obligations |
|
(2.4 |
) |
|
|
(5.1 |
) |
Payments of debt issuance costs |
|
(8.8 |
) |
|
|
- |
|
Proceeds from issuance of common stock, net of shares withheld for
tax |
|
16.2 |
|
|
|
20.1 |
|
Payments for repurchase of mandatory convertible preferred
stock |
|
- |
|
|
|
(17.2 |
) |
Dividends paid on mandatory convertible preferred stock |
|
- |
|
|
|
(25.5 |
) |
Payments to noncontrolling interest |
|
(0.7 |
) |
|
|
(0.2 |
) |
Net cash from
financing activities |
|
(60.0 |
) |
|
|
31.4 |
|
Effect of exchange rate
changes on cash and cash equivalents |
|
(3.4 |
) |
|
|
(2.1 |
) |
Net change in cash and cash
equivalents |
|
(3.5 |
) |
|
|
9.8 |
|
Cash and cash equivalents at
beginning of period |
|
34.3 |
|
|
|
42.2 |
|
Cash and cash
equivalents at end of period |
$ |
30.8 |
|
|
$ |
52.0 |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW
INFORMATION: |
|
|
|
|
|
|
|
Net issuances of obligations
for acquisitions |
$ |
0.3 |
|
|
$ |
27.7 |
|
Capital expenditures in
accounts payable |
$ |
22.3 |
|
|
$ |
18.2 |
|
Interest paid during the
period, net of capitalized interest |
$ |
69.7 |
|
|
$ |
62.2 |
|
Income taxes paid during the
period, net of refunds |
$ |
7.3 |
|
|
$ |
21.5 |
|
Free cash flow (1) |
$ |
40.0 |
|
|
$ |
(7.0 |
) |
(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 (UNAUDITED) – THREE MONTHS ENDED
SEPTEMBER 30, 2019
|
Three Months Ended September 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) (4) |
$ |
474.9 |
|
$ |
476.6 |
|
$ |
(1.7 |
) |
|
(0.4 |
%) |
|
1.6 |
% |
|
|
– |
|
|
(0.2 |
%) |
|
(1.8 |
%) |
Secure Information Destruction
Services |
|
222.6 |
|
|
227.6 |
|
|
(5.0 |
) |
|
(2.2 |
%) |
|
(2.0 |
%) |
(8) |
|
0.6 |
% |
|
– |
|
|
(0.8 |
%) |
Communication and Related
Services (2) (5) |
|
58.9 |
|
|
71.6 |
|
|
(12.7 |
) |
|
(17.7 |
%) |
|
(12.4 |
%) |
|
|
– |
|
|
(5.0 |
%) |
|
(0.3 |
%) |
Manufacturing and Industrial
Services(4) |
|
76.7 |
|
|
79.1 |
|
|
(2.4 |
) |
|
(3.0 |
%) |
|
0.4 |
% |
|
|
– |
|
|
– |
|
|
(3.4 |
%) |
Total Revenues |
$ |
833.1 |
|
$ |
854.9 |
|
$ |
(21.8 |
) |
|
(2.6 |
%) |
|
(0.7 |
%) |
|
|
0.2 |
% |
|
(0.5 |
%) |
|
(1.6 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by
Geography |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic and Canada (5) |
$ |
689.6 |
|
$ |
703.8 |
|
$ |
(14.2 |
) |
|
(2.0 |
%) |
|
(2.1 |
%) |
(9) |
|
0.2 |
% |
|
(0.1 |
%) |
|
(0.0 |
%) |
International (4) |
|
143.5 |
|
|
151.1 |
|
|
(7.6 |
) |
|
(5.0 |
%) |
|
5.9 |
% |
|
|
– |
|
|
(2.4 |
%) |
|
(8.5 |
%) |
Total Revenues |
$ |
833.1 |
|
$ |
854.9 |
|
$ |
(21.8 |
) |
|
(2.6 |
%) |
|
(0.7 |
%) |
(9) |
|
0.2 |
% |
|
(0.5 |
%) |
|
(1.6 |
%) |
See footnote descriptions below Table 1 – C.
Table 1 – B: REVENUES CHANGES BY SERVICE
AND GEOGRAPHY (UNAUDITED) – NINE MONTHS ENDED
SEPTEMBER 30, 2019
|
Nine Months Ended September 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) (6) |
$ |
1,419.1 |
|
$ |
1,457.8 |
|
$ |
(38.7 |
) |
|
(2.7 |
%) |
|
0.3 |
% |
|
|
0.1 |
% |
|
(0.4 |
%) |
|
(2.7 |
%) |
Secure Information Destruction
Services |
|
684.0 |
|
|
677.5 |
|
|
6.5 |
|
|
1.0 |
% |
|
0.9 |
% |
(10) |
|
1.2 |
% |
|
– |
|
|
(1.1 |
%) |
Communication and Related
Services (2) (7) |
|
183.3 |
|
|
244.8 |
|
|
(61.5 |
) |
|
(25.1 |
%) |
|
(20.6 |
%) |
|
|
– |
|
|
(4.0 |
%) |
|
(0.5 |
%) |
Manufacturing and Industrial
Services(6) |
|
222.6 |
|
|
253.1 |
|
|
(30.5 |
) |
|
(12.1 |
%) |
|
(2.6 |
%) |
|
|
– |
|
|
(5.0 |
%) |
|
(4.5 |
%) |
Total Revenues |
$ |
2,509.0 |
|
$ |
2,633.2 |
|
$ |
(124.2 |
) |
|
(4.7 |
%) |
|
(1.8 |
%) |
|
|
0.4 |
% |
|
(1.1 |
%) |
|
(2.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by
Geography |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic and Canada (7) |
$ |
2,068.8 |
|
$ |
2,130.2 |
|
$ |
(61.4 |
) |
|
(2.9 |
%) |
|
(2.9 |
%) |
(11) |
|
0.4 |
% |
|
(0.3 |
%) |
|
(0.1 |
%) |
International (6) |
|
440.2 |
|
|
503.0 |
|
|
(62.8 |
) |
|
(12.5 |
%) |
|
2.9 |
% |
|
|
– |
|
|
(4.4 |
%) |
|
(11.0 |
%) |
Total Revenues |
$ |
2,509.0 |
|
$ |
2,633.2 |
|
$ |
(124.2 |
) |
|
(4.7 |
%) |
|
(1.8 |
%) |
(11) |
|
0.4 |
% |
|
(1.1 |
%) |
|
(2.2 |
%) |
See footnote descriptions below Table 1 – C.
Table 1 – C: DISAGGREGATED REVENUES
CHANGE (UNAUDITED)
(In millions) |
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|
Nine Months Ended September 30, 2019 |
|
Organic (12) |
$ |
(5.6 |
) |
|
$ |
(46.8 |
) |
Acquisitions |
|
1.4 |
|
|
|
9.3 |
|
Divestitures |
|
(4.3 |
) |
|
|
(27.9 |
) |
Foreign exchange |
|
(13.3 |
) |
|
|
(58.8 |
) |
Total Change |
$ |
(21.8 |
) |
|
$ |
(124.2 |
) |
(1) Regulated Waste and Compliance
Services (“RWCS”) consists of Medical Waste and Compliance
Solutions and Hazardous Waste Solutions.(2)
Communication and Related Services (”CRS”) 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.(4) RWCS revenues include $3.4 million and
M&I revenues include $1.6 million associated with Mexico
operations.(5) CRS revenues include $23.7 million
telephone answering service (“TAS”) and retail pharmaceutical
returns service revenues.(6) RWCS revenues include
$10.2 million and M&I revenues include $3.8 million associated
with Mexico operations.(7) CRS revenues include $72.9
million TAS and retail pharmaceutical returns service revenues.
Organic percentage change for Secure Information
Destruction Services includes the impact of SOP price changes.
(8) Excluding SOP price impact,
organic percentage change is 6.1% for the three months ended
September 30, 2019 (see Table 1-A).(9) Excluding SOP
price impact, Domestic and Canada organic percentage change is 0.6%
and Total organic percentage change is 1.5% for the three months
ended September 30, 2019 (see Table 1-A).(10) Excluding SOP price
impact, organic percentage change is 4.1% for the nine months ended
September 30, 2019 (see Table 1-B).(11) Excluding SOP price impact,
Domestic and Canada organic percentage change is (1.9%) and Total
organic percentage change is (0.9%) for the nine months ended
September 30, 2019 (see Table 1-B).(12) Excluding SOP price impact,
organic revenue increased $12.8 million and decreased ($24.9)
million for the three and nine months ended September 30, 2019,
respectively (see Table 1-C).
RECONCILIATION OF U.S. GAAP TO NON-GAAP
FINANCIAL MEASURES (UNAUDITED)Table 2-A: THREE
MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(In millions, except per share data) |
|
|
Three Months Ended September 30, 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 |
$ |
295.3 |
|
|
$ |
247.4 |
|
|
$ |
(34.5 |
) |
|
$ |
(59.2 |
) |
|
$ |
(0.65 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Transformation (1) |
|
0.1 |
|
|
|
(17.0 |
) |
|
|
17.1 |
|
|
|
12.7 |
|
|
|
0.14 |
|
Intangible Amortization (2) |
|
- |
|
|
|
(35.8 |
) |
|
|
35.8 |
|
|
|
28.5 |
|
|
|
0.31 |
|
Acquisition and Integration (3) |
|
- |
|
|
|
(1.6 |
) |
|
|
1.6 |
|
|
|
1.5 |
|
|
|
0.02 |
|
Operational Optimization (4) |
|
3.8 |
|
|
|
(0.1 |
) |
|
|
3.9 |
|
|
|
3.3 |
|
|
|
0.04 |
|
Divestitures and Held-for-Sale Impairments (5) |
|
- |
|
|
|
(2.9 |
) |
|
|
85.3 |
|
|
|
75.7 |
|
|
|
0.83 |
|
Litigation, Settlements and Regulatory Compliance (6) |
|
- |
|
|
|
(2.4 |
) |
|
|
2.4 |
|
|
|
2.4 |
|
|
|
0.03 |
|
Impairment (including Goodwill Impairment)(7) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other (8) |
|
- |
|
|
|
(7.2 |
) |
|
|
7.2 |
|
|
|
7.6 |
|
|
|
0.08 |
|
Capital Allocation (9) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
U.S. Tax Reform(10) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total Adjustments |
|
3.9 |
|
|
|
(67.0 |
) |
|
|
153.3 |
|
|
|
131.7 |
|
|
|
1.45 |
|
Adjusted Financial
Measures (a) |
$ |
299.2 |
|
|
$ |
180.4 |
|
|
$ |
118.8 |
|
|
$ |
72.5 |
|
|
$ |
0.80 |
|
|
(In millions, except per share data) |
|
|
Three Months Ended September 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 |
$ |
335.5 |
|
|
$ |
267.2 |
|
|
$ |
68.3 |
|
|
$ |
17.5 |
|
|
$ |
0.20 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Transformation (1) |
|
7.8 |
|
|
|
(13.2 |
) |
|
|
21.0 |
|
|
|
15.6 |
|
|
|
0.18 |
|
Intangible Amortization (2) |
|
- |
|
|
|
(31.8 |
) |
|
|
31.8 |
|
|
|
23.6 |
|
|
|
0.27 |
|
Acquisition and Integration (3) |
|
- |
|
|
|
(1.6 |
) |
|
|
1.6 |
|
|
|
1.2 |
|
|
|
0.01 |
|
Operational Optimization (4) |
|
- |
|
|
|
(3.6 |
) |
|
|
3.6 |
|
|
|
2.8 |
|
|
|
0.03 |
|
Divestitures and Held-for-Sale Impairments (5) |
|
- |
|
|
|
(2.0 |
) |
|
|
2.0 |
|
|
|
1.6 |
|
|
|
0.02 |
|
Litigation, Settlements and Regulatory Compliance (6) |
|
- |
|
|
|
(17.3 |
) |
|
|
17.3 |
|
|
|
12.7 |
|
|
|
0.15 |
|
Impairment (including Goodwill Impairment)(7) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other (8) |
|
- |
|
|
|
(6.2 |
) |
|
|
6.2 |
|
|
|
9.7 |
|
|
|
0.12 |
|
Capital Allocation (9) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8.4 |
|
|
|
0.05 |
|
U.S. Tax Reform(10) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.4 |
|
|
|
0.00 |
|
Total Adjustments |
|
7.8 |
|
|
|
(75.7 |
) |
|
|
83.5 |
|
|
|
76.0 |
|
|
|
0.83 |
|
Adjusted Financial
Measures (a) |
$ |
343.3 |
|
|
$ |
191.5 |
|
|
$ |
151.8 |
|
|
$ |
93.5 |
|
|
$ |
1.03 |
|
U.S. GAAP results for the three months ended September 30, 2019
and 2018 include:
(1) Business Transformation2019: Cost of
Revenues (“COR”) includes $0.1 million of other related expenses.
Selling, general and administrative expenses (“SG&A”)
include $6.4 million of consulting and professional services, $5.4
million of software usage/maintenance fees, $3.5 million of
internal costs, $0.2 million of accelerated depreciation, and $1.5
million of other related expenses.2018: COR includes a $6.8 million
non-cash impairment charge for software and $1.0 million of other
related costs. SG&A includes $5.8 million of consulting
and professional services, $5.1 million related to internal costs,
$1.4 million of software usage/maintenance fees, $0.1 million
related to exit costs – employee termination, and $0.8 million of
other related expenses.
(2) Intangible Amortization2019 and 2018:
SG&A includes $35.8 million and $31.8 million, respectively, of
intangible amortization expense from acquisitions.
(3) Acquisition and Integration2019: SG&A
includes $1.6 million of acquisition expenses related to additional
amounts payable from a previous acquisition. There has been
no integration activity as we have completed integration of all
prior acquisitions. We did not complete any acquisitions
during the quarter.2018: SG&A includes $1.4 million of
acquisition expenses, $0.4 million of integration expenses, mostly
related to acquisitions completed in the U.S., and a $0.2 million
favorable change in the fair value of contingent
consideration. During the third quarter of 2018, we completed
4 acquisitions.
(4) Operational Optimization2019: COR includes
$3.8 million of charges in the International RWCS reportable
segment (of which $1.8 million related to non-cash
impairment charges for permits and other long-lived assets, $0.6
million related to closure and exit costs – other, and $0.3 million
related to exit costs – employee termination incurred in Europe and
Latin America and $1.1 million of other expenses primarily related
to additional charges incurred as a result of diverting waste
processing during conversion of one of our plants in Asia Pacific
(“APAC”)). SG&A includes $0.1 million closure and exit
costs – other incurred in the United Kingdom (“U.K.”).2018:
SG&A includes $1.3 million of charges in the Domestic and
Canada RWCS reportable segment (of which $1.1 million related
to improving operational efficiency such as optimizing overall
logistics and sales functions primarily for Secure Information
Destruction locations, and $0.2 million related to closure and exit
costs - other for consolidation of facilities in Canada), $0.7
million in the International RWCS reportable segment related to
closure and exit costs – other incurred in the U.K., and $1.6
million of charges in All Other (of which $1.1 million related to
exit costs – employee termination and $0.5 million related to
closure/consolidation of call centers in Domestic CRS).
(5) Divestitures and Held-for-Sale
Impairments2019: We recorded $82.4 million of non-cash
held-for-sale impairment charges during the period related to our
Portfolio Rationalization efforts. Approximately $42.3
million related to the CRS TAS and retail pharmaceutical returns
businesses, which were primarily included in All Other, and $40.1
million related to Mexico which was included in the International
RWCS reportable segment. SG&A includes $2.2 million for
consulting and professional fees associated with Portfolio
Rationalization efforts, mostly in the U.S. and a $0.7 million
charge related to the finalization of divestiture accounting
adjustments arising from the TextAnywhere divestiture in the
U.K.2018: SG&A includes $1.5 million of charges in the
International RWCS reportable segment related to the finalization
of divestiture accounting and estimated adjustment to consideration
arising from a disposal of a business in the U.K., $0.4 million of
professional fees associated with our Portfolio Rationalization
efforts in the U.S., and $0.1 million of non-cash asset impairment
charges in the Domestic and Canada RWCS reportable segment arising
from the sale of a business in the U.S.
(6) Litigation, Settlements, and Regulatory
Compliance2019 and 2018: SG&A includes $2.4 million and $17.3
million, respectively, of legal, settlements and regulatory
compliance expenses, and consulting and professional fees related
to certain litigation matters. 2019 included a settlement
insurance recovery of $6.3 million.
(7) Impairment (including Goodwill
Impairment)2019: There were no impairment charges in the three
months ended September 30, 2019 and 2018.
(8) Other2019: SG&A includes $7.2 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 $1.8 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 $6.2 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 $5.0 million related to the re-measurement of net
monetary assets held in Argentina a result of its designation as a
highly inflationary economy.
(9) Capital Allocation2018: Includes dividends
on our Series A mandatory convertible preferred stock of $8.4
million.For the purpose of calculating the ultimate EPS impact of
our mandatory convertible preferred stock, we showed 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 and the increase in diluted shares outstanding under the
“if-converted” method was 3.9 million for the third quarter of
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 third quarter of 2019.The impact
of all adjusting items under the “if-converted” method to our
Adjusted Diluted EPS had a dilutive effect of $0.05 for the third
quarter of 2018.
(10) Tax Reform2018: Income tax expense includes
a $0.4 million measurement period adjustments related to the
one-time mandatory transition tax on deemed repatriation arising
from the U.S. Tax Cuts and Job Act of 2017.(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 $23.5 million and $21.0 million for the three months
ended September 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 (Loss) income
from Operations to Earnings Before Interest, Tax, Depreciation and
Amortization (“EBITDA”) and the calculation of Adjusted Earnings
Before Interest, Tax, Depreciation and Amortization (“Adjusted
EBITDA”):
(In millions) |
|
|
Three Months Ended September 30, |
|
|
2019 |
|
|
2018 |
|
(Loss) income from operations(1) |
$ |
(34.5 |
) |
|
$ |
68.3 |
|
Depreciation(2) |
|
31.7 |
|
|
|
32.1 |
|
Intangible Amortization |
|
35.8 |
|
|
|
31.8 |
|
EBITDA |
|
33.0 |
|
|
|
132.2 |
|
Adjustments: |
|
|
|
|
|
|
|
Business Transformation |
|
17.1 |
|
|
|
21.0 |
|
Acquisition and Integration |
|
1.6 |
|
|
|
1.6 |
|
Operational Optimization |
|
3.9 |
|
|
|
3.6 |
|
Divestitures and Held-for-Sale Impairments |
|
85.3 |
|
|
|
2.0 |
|
Litigation, Settlements and Regulatory Compliance |
|
2.4 |
|
|
|
17.3 |
|
Impairment (including Goodwill Impairment) |
|
- |
|
|
|
- |
|
Other |
|
7.2 |
|
|
|
6.2 |
|
Capital Allocation |
|
- |
|
|
|
- |
|
U.S. Tax Reform |
|
- |
|
|
|
- |
|
Adjusted
EBITDA |
$ |
150.5 |
|
|
$ |
183.9 |
|
(1) (Loss) income from operations
was $(34.5) million on a U.S. GAAP basis and was $47.9 million
excluding Held-for-sale impairments of $82.4
million.(2) Excludes depreciation charges of $0.2
million that are included in Business Transformation.
Table 2-B: NINE MONTHS ENDED SEPTEMBER
30, 2019 AND 2018
(In millions, except per share data) |
|
|
Nine Months Ended September 30, 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 (d) |
|
U.S. GAAP Financial Measures |
$ |
895.0 |
|
|
$ |
805.1 |
|
|
$ |
(13.4 |
) |
|
$ |
(127.5 |
) |
|
$ |
(1.40 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Transformation (1) |
|
0.1 |
|
|
|
(51.5 |
) |
|
|
51.6 |
|
|
|
39.0 |
|
|
|
0.43 |
|
Intangible Amortization (2) |
|
- |
|
|
|
(110.5 |
) |
|
|
110.5 |
|
|
|
85.3 |
|
|
|
0.94 |
|
Acquisition and Integration (3) |
|
- |
|
|
|
(3.5 |
) |
|
|
3.5 |
|
|
|
3.1 |
|
|
|
0.03 |
|
Operational Optimization (4) |
|
8.0 |
|
|
|
(3.1 |
) |
|
|
11.1 |
|
|
|
9.3 |
|
|
|
0.10 |
|
Divestitures and Held-for-Sale Impairments (5) |
|
- |
|
|
|
(5.0 |
) |
|
|
87.4 |
|
|
|
75.9 |
|
|
|
0.83 |
|
Litigation, Settlements and Regulatory Compliance (6) |
|
- |
|
|
|
(21.3 |
) |
|
|
21.3 |
|
|
|
18.4 |
|
|
|
0.20 |
|
Impairment (including Goodwill Impairment)(7) |
|
1.6 |
|
|
|
(2.1 |
) |
|
|
24.6 |
|
|
|
24.0 |
|
|
|
0.26 |
|
Other (8) |
|
- |
|
|
|
(32.8 |
) |
|
|
32.8 |
|
|
|
28.0 |
|
|
|
0.32 |
|
Capital Allocation (9) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19.8 |
|
|
|
0.22 |
|
U.S. Tax Reform(10) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total Adjustments |
|
9.7 |
|
|
|
(229.8 |
) |
|
|
342.8 |
|
|
|
302.8 |
|
|
|
3.33 |
|
Adjusted Financial
Measures (a) |
$ |
904.7 |
|
|
$ |
575.3 |
|
|
$ |
329.4 |
|
|
$ |
175.3 |
|
|
$ |
1.93 |
|
|
|
(In millions, except per share data) |
|
|
Nine Months Ended September 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 |
$ |
1,047.3 |
|
|
$ |
851.1 |
|
|
$ |
184.8 |
|
|
$ |
65.1 |
|
|
$ |
0.76 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Transformation (1) |
|
7.8 |
|
|
|
(57.1 |
) |
|
|
64.9 |
|
|
|
48.0 |
|
|
|
0.56 |
|
Intangible Amortization (2) |
|
- |
|
|
|
(96.6 |
) |
|
|
96.6 |
|
|
|
71.9 |
|
|
|
0.84 |
|
Acquisition and Integration (3) |
|
- |
|
|
|
(7.5 |
) |
|
|
7.5 |
|
|
|
6.0 |
|
|
|
0.07 |
|
Operational Optimization (4) |
|
- |
|
|
|
(19.5 |
) |
|
|
19.5 |
|
|
|
14.4 |
|
|
|
0.17 |
|
Divestitures and Held-for-Sale Impairments (5) |
|
- |
|
|
|
(7.7 |
) |
|
|
19.1 |
|
|
|
14.9 |
|
|
|
0.17 |
|
Litigation, Settlements and Regulatory Compliance (6) |
|
- |
|
|
|
(61.2 |
) |
|
|
61.2 |
|
|
|
45.2 |
|
|
|
0.52 |
|
Impairment (including Goodwill Impairment)(7) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other (8) |
|
- |
|
|
|
(14.9 |
) |
|
|
14.9 |
|
|
|
16.3 |
|
|
|
0.19 |
|
Capital Allocation (9) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
27.5 |
|
|
|
0.14 |
|
U.S. Tax Reform(10) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.4 |
|
|
|
0.00 |
|
Total Adjustments |
|
7.8 |
|
|
|
(264.5 |
) |
|
|
283.7 |
|
|
|
244.6 |
|
|
|
2.66 |
|
Adjusted Financial
Measures (a) |
$ |
1,055.1 |
|
|
$ |
586.6 |
|
|
$ |
468.5 |
|
|
$ |
309.7 |
|
|
$ |
3.42 |
|
U.S. GAAP results for the nine months ended September 30, 2019
and 2018 include:
(1) Business Transformation2019: COR includes
$0.1 million of other related expenses. SG&A include
$20.7 million of consulting and professional services, $11.8
million of software usage/maintenance fees, $8.7 million of
internal costs, $5.3 million related to exit costs - employee
terminations, $1.0 million of accelerated depreciation, and $4.0
million of other related expenses.2018: COR includes a $6.8 million
non-cash impairment charge for software and $1.0 million of other
related costs. SG&A includes $39.6 million of consulting
and professional services, $10.6 million related to internal costs,
$2.8 million of software usage/maintenance fees, $2.2 million
related to exit costs – employee termination, and $1.9 million of
other related expenses.
(2) Intangible Amortization2019 and 2018:
SG&A includes $110.5 million and $96.6 million, respectively,
of intangible amortization expense from acquisitions.
(3) Acquisition and Integration2019: SG&A
includes $3.5 million of acquisition expenses. During the
first nine months of 2019, we completed 1 acquisition.2018:
SG&A includes $5.5 million of acquisition expenses, $1.8
million of integration expenses mostly related to acquisitions
completed in the U.S., and a $0.2 million unfavorable change in the
fair value of contingent consideration. During the first nine
months of 2018, we completed 19 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 $6.0
million of charges in the International RWCS reportable segment,
(of which $3.7 million of non-cash charges related to impairment of
permits and other long-lived assets, $0.9 million related to
closure and exit costs – other, $0.3 million related to exit costs
– employee termination incurred in Europe and Latin America, and
$1.1 million of other expenses primarily related to additional
charges incurred as a result of diverting waste processing during
conversion of one of our plants in APAC). SG&A includes
$0.1 million of charges in our Domestic and Canada RWCS reportable
segment and $3.0 million of charges in the International RWCS
reportable segment (of which $0.2 million related to exit costs -
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 $0.9 million of site
closure costs in APAC and Europe).2018: SG&A includes $4.6
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, $3.5 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), $10.6 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, $3.9 million related to closure and exit costs, and $0.2
million related to exit costs – employee termination), and $4.3
million of charges in All Other (of which $1.1 million related to
exit costs – employee termination and $3.2 million related to
closure/consolidation of call centers in Domestic CRS).
(5) Divestitures and Held-for-Sale
Impairments2019: We recorded $82.4 million of non-cash
held-for-sale impairment charges during the period related to our
Portfolio Rationalization efforts. Approximately $42.3
million related to the CRS TAS and retail pharmaceutical returns
businesses, respectively, which were primarily included in All
Other, and $40.1 million related to Mexico, which was included in
the International RWCS reportable segment. SG&A includes
a $5.1 million gain on the TextAnywhere divestiture in the U.K. and
$10.1 million of consulting and professional services associated
with Portfolio Rationalization efforts, mostly in the U.S.2018: We
recorded $11.4 million of non-cash held-for-sale impairment charges
of which $7.0 million related to the U.S. clean room and $$4.4
million related to the U.K. hazardous waste business.
SG&A includes $6.2 million of professional fees
associated with our Portfolio Rationalization efforts and $1.5
million of charges related to finalization of divestiture
accounting and estimated adjustment to consideration arising from a
disposal of a business in the U.K.
(6) Litigation, Settlements, and Regulatory
Compliance2019 and 2018: SG&A includes $21.3 million and $61.2
million, respectively, of legal, settlement and regulatory
compliance expenses and consulting and professional fees related to
certain litigation matters.
(7) Impairment (including Goodwill
Impairment)2019: 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
recognized a non-cash goodwill impairment charge of $20.9 million
in our Latin America reporting unit.2018: No impairments were
recorded in the nine months ended September 30, 2018.
(8) Other2019: SG&A includes $32.8 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 $3.1 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 $14.9 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 $5.0 million related to the re-measurement of net
monetary assets held in Argentina as a result of its designation as
a highly inflationary economy.
(9) Capital Allocation2019: Includes 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 $25.5 million.For
the purpose of calculating the ultimate EPS impact, for the first
nine months of 2018, of our mandatory convertible preferred stock
we showed 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 nine
months of 2019.The impact of excluding the preferred stock dividend
from Adjusted Diluted EPS was $0.30 and the increase in diluted
shares outstanding under the “if-converted” method was 4.5 million
for the first nine months of 2018. The impact of all
adjusting items under the “if-converted” method to our Adjusted
Diluted EPS had a dilutive effect of $0.18 for the first nine
months of 2018.
(10) Tax Reform2018: Income tax expense includes
a $0.4 million measurement period adjustments related to the
one-time mandatory transition tax on deemed repatriation arising
from the U.S. Tax Cuts and Job Act of 2017.(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 $70.0 million and $74.4 million for the nine months
ended September 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 is 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 (Loss) Income
from Operations to EBITDA and Adjusted EBITDA:
(In millions) |
|
|
Nine Months Ended September 30, |
|
|
2019 |
|
|
2018 |
|
(Loss) income from operations |
$ |
(13.4 |
) |
|
$ |
184.8 |
|
Depreciation(1) |
|
95.6 |
|
|
|
95.6 |
|
Intangible Amortization |
|
110.5 |
|
|
|
96.6 |
|
EBITDA |
|
192.7 |
|
|
|
377.0 |
|
Adjustments: |
|
|
|
|
|
|
|
Business Transformation |
|
51.6 |
|
|
|
64.9 |
|
Acquisition and Integration |
|
3.5 |
|
|
|
7.5 |
|
Operational Optimization |
|
11.1 |
|
|
|
19.5 |
|
Divestitures and Held-for-Sale Impairments |
|
87.4 |
|
|
|
19.1 |
|
Litigation, Settlements and Regulatory Compliance |
|
21.3 |
|
|
|
61.2 |
|
Impairment (including Goodwill Impairment) |
|
24.6 |
|
|
|
- |
|
Other |
|
32.8 |
|
|
|
14.9 |
|
Capital Allocation |
|
- |
|
|
|
- |
|
U.S. Tax Reform |
|
- |
|
|
|
- |
|
Adjusted
EBITDA |
$ |
425.0 |
|
|
$ |
564.1 |
|
(1) Excludes depreciation
charges of $1.0 million that are included in Business
Transformation.
FOR FURTHER INFORMATION CONTACT:
Stericycle Investor Relations 847-607-2012
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