Stericycle, Inc. (Nasdaq: SRCL) today reported results for the
first quarter ended March 31, 2019 and reaffirmed 2019 guidance.
Revenues for the quarter were $830.1 million, a
decrease of 7.3% from $895.0 million in the first quarter of last
year. The Company continued progress towards its Business
Transformation and made additional planned investments in the
development of its comprehensive enterprise resource planning (ERP)
platform. Net loss was $37.8 million, or $0.42 diluted loss
per share, compared with net income of $21.0 million, or $0.25
diluted earnings per share in the first quarter of last year.
Adjusted EBITDA was $136.8 million, or 16.5% of revenues, compared
with $189.3 million, or 21.2% of revenues in the first quarter of
last year. Adjusted diluted earnings per share was $0.57
compared to $1.21 in the 2018 comparable period.
“Revenues for the first quarter of 2019 reflect
year-over-year foreign exchange impact and expected softness in
recall activity. Our operational and financial performance
remains steady when considering significant weather impacts.
Given our performance, we remain confident in our guidance for
2019,” said Cindy Miller, Chief Executive Officer.
“We will complete the build phase of our ERP
this month and have moved into the test and train phases,
positioning us well for our 2020 implementation,” said
Miller. “Additionally, following today’s announcement
regarding the appointment of a new CFO and two key executives,
Stericycle’s new leadership team is complete, and we are focused on
driving long-term shareholder value.”
FIRST QUARTER FINANCIAL RESULTS
- Revenues for the quarter ended March 31, 2019 were $830.1
million compared to $895.0 million in the first quarter of last
year. The effect of foreign exchange rates reduced revenues
by $24.9 million and the expected declines within Communication and
Related Services (“CRS”), primarily due to declines in recall
activity, reduced organic revenues by $28.0 million.
Divestitures net of acquisitions reduced revenues by $5.1 million.
Revenues were also impacted by extreme weather conditions and
one less operating day compared to the same quarter last
year. Organic revenues decreased 3.9%, reflecting 4.3% growth
in Secure Information Destruction offset by CRS and the Regulated
Waste and Compliance Services (“RWCS”) business including
non-recurring project-related revenue in Q1 2018. See Tables
1-A and 1-B.
- Loss from operations in the quarter was $4.2 million, compared
to income from operations of $54.1 million in the first quarter of
last year, due to a non-cash goodwill impairment charge related to
Latin America, expected lower revenue, the impact of weather
conditions and one less operating day, and higher operating costs
that are not expected to continue in future periods.
- Adjusted EBITDA was $136.8 million, compared to $189.3 million
in the first quarter of last year. Adjusted EBITDA as a
percentage of revenues decreased to 16.5%, compared to 21.2% in the
first quarter of last year, due to expected lower revenue, the
impact of weather conditions and one less operating day, and higher
operating costs that are not expected to continue in future
periods. See Unaudited Condensed Consolidated Statements of
(Loss) Income and Table 2.
- Diluted loss per share was $0.42, compared to diluted earnings
per share of $0.25 in the first quarter of last year.
Adjusted diluted earnings per share was $0.57, compared to $1.21 in
the first quarter of last year, due to the matters impacting
revenues and loss from operations discussed above, higher interest
expense and effective tax rate, and the absence of gains on share
repurchases this quarter as compared to first quarter 2018.
See Unaudited Condensed Consolidated Statements of (Loss) Income
and Table 2.
- Cash flow from operations in the quarter was $36.2 million
compared to $110.4 million last year. The decrease was
primarily a result of the loss from operations and the timing of
net working capital movements. Free cash flow was further
impacted by the expected timing of capital expenditures, which were
$66.1 million, an increase of $37.6 million compared to the first
quarter of last year.
RECENT EVENTS
In a separate press release issued today,
Stericycle announced changes to its senior leadership team. Janet
H. Zelenka has been appointed Executive Vice President and Chief
Financial Officer, effective June 1, 2019. Dominic Culotta
has joined in the newly created role of Executive Vice President
and Chief Engineer. S. Cory White has joined as Executive
Vice President of Communication and Related Services. These
appointments represent the culmination of a plan to ensure the
Company has a senior leadership team with the right skills and
experience necessary to drive future performance and successful
execution of the Business Transformation.
The Company recently released its 2019 Corporate
Social Responsibility Overview which summarizes the benefits of the
company’s many sustainability services, efforts to improve safety
and minimize environmental impact, programs to support team
members, and community engagement. Read the overview at
https://www.stericycle.com/white-papers/corporate-social-responsibility-2019.
CONFERENCE CALL INFORMATION
The Company is holding a conference call today,
May 2, 2019, at 4:00 p.m. central time. Dial 866‑516‑6872 at least
5 minutes before start time. Presentation materials will be
posted prior to the conference call at
http://investors.stericycle.com. If you are unable to
participate on the call, a replay will be available for 30 days by
dialing 855‑859‑2056 or 404‑537‑3406, access code 3957119. To
hear a live simulcast of the call or access the audio archive,
visit the Company’s investor relations page
on 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 21 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 that involve risks and uncertainties, some of which are
beyond our control (for example, general economic and market
conditions). Statements pertaining to our portfolio
rationalization, business transformation, capital expenditures,
cost savings initiatives and remediation efforts with respect to
identified material weaknesses contain forward-looking
statements. When we use words such as "believes," "expects,"
"anticipates," "estimates" or similar expressions, we are making
forward-looking statements. Actual results could differ
significantly from the results described here. Factors that
could cause such differences include changes in governmental
regulation of the collection, transportation, treatment and
disposal of regulated waste or the proper handling and protection
of personal and confidential information, 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 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 Communication and Related Services or other
non-core businesses, potential charges related to a strategic
alternative transactions with respect to Communication and Related
Services, or the failure of any such transactions to achieve
desired results, the obligations to service substantial
indebtedness and comply with the covenants and restrictions
contained in private placement notes and credit agreements, a
downgrade in our credit rating resulting in an increase in
interest expense, political, economic, inflationary, currency 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, changes in the demand and price for recycled paper,
failure to maintain an effective system of internal control over
financial reporting, delays in implementing remediation efforts
with respect to existing material weaknesses, identification of
additional material weaknesses, failure of current remediation
efforts to address existing material weaknesses, disruptions in or
attacks on information technology systems, as well as other factors
described in 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. To the extent permitted
under applicable law, we make no commitment to disclose any
subsequent revisions to forward-looking statements.
|
|
STERICYCLE, INC. |
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
(LOSS) INCOME |
|
(In millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|
|
2019 |
|
2018 |
|
% Change |
|
Revenues |
$ |
830.1 |
|
$ |
895.0 |
|
|
(7.3 |
%) |
Cost of revenues |
|
533.0 |
|
|
536.5 |
|
|
(0.7 |
%) |
Gross
profit |
|
297.1 |
|
|
358.5 |
|
|
(17.1 |
%) |
Selling, general and
administrative expenses |
|
280.4 |
|
|
304.4 |
|
|
(7.9 |
%) |
Goodwill impairment |
|
20.9 |
|
|
- |
|
nm |
|
(Loss) income from
operations |
|
(4.2 |
) |
|
54.1 |
|
|
(107.8 |
%) |
Interest expense, net |
|
(27.6 |
) |
|
(25.0 |
) |
|
10.4 |
% |
Other expense, net |
|
(2.2 |
) |
|
- |
|
nm |
|
(Loss) income
before income taxes |
|
(34.0 |
) |
|
29.1 |
|
|
(216.8 |
%) |
Income tax expense |
|
(3.6 |
) |
|
(6.6 |
) |
|
(45.5 |
%) |
Net (loss)
income |
|
(37.6 |
) |
|
22.5 |
|
|
(267.1 |
%) |
Net income attributable to
noncontrolling interests |
|
(0.2 |
) |
|
- |
|
nm |
|
Net (loss) income
attributable to Stericycle, Inc. |
|
(37.8 |
) |
|
22.5 |
|
|
(268.0 |
%) |
Mandatory convertible
preferred stock dividend |
|
- |
|
|
(8.8 |
) |
|
(100.0 |
%) |
Gain on repurchase of
preferred stock |
|
- |
|
|
7.3 |
|
|
(100.0 |
%) |
Net (loss) income
attributable to Stericycle, Inc. common shareholders |
$ |
(37.8 |
) |
$ |
21.0 |
|
|
(280.0 |
%) |
(Loss) earnings
per common share attributable to Stericycle, Inc. common
shareholders: |
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.42 |
) |
$ |
0.25 |
|
|
(268.0 |
%) |
Diluted |
$ |
(0.42 |
) |
$ |
0.25 |
|
|
(268.0 |
%) |
Weighted average
number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
90.7 |
|
|
85.5 |
|
|
|
|
Diluted |
|
90.7 |
|
|
85.8 |
|
|
|
|
nm - percentage change not meaningful
STATISTICS - U.S. GAAP AND ADJUSTED
MEASURES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
% of Revenue |
|
|
|
|
|
% of Revenue |
|
Statistics - U.S. GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ |
297.1 |
|
|
35.8 |
% |
|
$ |
358.5 |
|
|
40.1 |
% |
Selling, general and
administrative expenses |
$ |
280.4 |
|
|
33.8 |
% |
|
$ |
304.4 |
|
|
34.0 |
% |
(Loss) income from
operations |
$ |
(4.2 |
) |
|
(0.5 |
%) |
|
$ |
54.1 |
|
|
6.0 |
% |
Effective tax rate |
|
(10.7 |
%) |
|
|
|
|
|
22.7 |
% |
|
|
|
Statistics -
Adjusted (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted gross
profit |
$ |
300.7 |
|
|
36.2 |
% |
|
$ |
358.5 |
|
|
40.1 |
% |
Adjusted selling,
general and administrative expenses |
$ |
195.7 |
|
|
23.6 |
% |
|
$ |
200.0 |
|
|
22.3 |
% |
Adjusted income from
operations |
$ |
105.0 |
|
|
12.6 |
% |
|
$ |
158.5 |
|
|
17.7 |
% |
Depreciation - cost of
revenues |
$ |
25.9 |
|
|
3.1 |
% |
|
$ |
24.2 |
|
|
2.7 |
% |
Depreciation - selling,
general and administrative expenses |
$ |
5.9 |
|
|
0.7 |
% |
|
$ |
6.6 |
|
|
0.7 |
% |
Intangible
amortization |
$ |
37.8 |
|
|
4.6 |
% |
|
$ |
31.9 |
|
|
3.6 |
% |
EBITDA |
$ |
65.4 |
|
|
7.9 |
% |
|
$ |
116.8 |
|
|
13.1 |
% |
Adjusted EBITDA |
$ |
136.8 |
|
|
16.5 |
% |
|
$ |
189.3 |
|
|
21.2 |
% |
Adjusted net income
attributable to common shareholders |
$ |
51.6 |
|
|
6.2 |
% |
|
$ |
110.1 |
|
|
12.3 |
% |
Adjusted effective tax
rate |
|
32.4 |
% |
|
|
|
|
|
24.5 |
% |
|
|
|
Adjusted diluted
earnings per share |
$ |
0.57 |
|
|
|
|
|
$ |
1.21 |
|
|
|
|
Adjusted diluted shares
outstanding (2018 using if-converted method) |
|
90.8 |
|
|
|
|
|
|
90.7 |
|
|
|
|
(1) Adjusted financial measures are Non-GAAP measures
and exclude adjusting items as described and reconciled to
comparable U.S. GAAP financial measures in the Reconciliation of
U.S. GAAP to Non-GAAP Financial Measures contained in this Press
Release.
STERICYCLE, INC. |
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS |
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
2019 |
|
|
2018 |
|
ASSETS |
|
|
|
|
|
|
|
Current
Assets: |
|
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
48.2 |
|
|
$ |
34.3 |
|
Accounts receivable,
net |
|
600.9 |
|
|
|
599.6 |
|
Prepaid expenses |
|
87.0 |
|
|
|
50.0 |
|
Other current
assets |
|
65.5 |
|
|
|
63.4 |
|
Total Current Assets |
|
801.6 |
|
|
|
747.3 |
|
Property, plant and
equipment, net |
|
760.0 |
|
|
|
743.5 |
|
Operating lease
right-of-use assets |
|
385.6 |
|
|
|
- |
|
Goodwill |
|
3,197.5 |
|
|
|
3,222.2 |
|
Intangible assets,
net |
|
1,599.7 |
|
|
|
1,637.7 |
|
Other assets |
|
106.3 |
|
|
|
104.8 |
|
Total
Assets |
$ |
6,850.7 |
|
|
$ |
6,455.5 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
|
Current portion of
long-term debt |
$ |
101.9 |
|
|
$ |
104.3 |
|
Bank overdrafts |
|
7.4 |
|
|
|
14.8 |
|
Accounts payable |
|
210.7 |
|
|
|
225.8 |
|
Accrued
liabilities |
|
331.5 |
|
|
|
340.8 |
|
Operating lease
liabilities |
|
92.8 |
|
|
|
- |
|
Other current
liabilities |
|
41.7 |
|
|
|
47.5 |
|
Total Current Liabilities |
|
786.0 |
|
|
|
733.2 |
|
|
|
|
|
|
|
|
|
Long-term debt,
net |
|
2,702.4 |
|
|
|
2,663.9 |
|
Long-term operating
lease liabilities |
|
297.5 |
|
|
|
- |
|
Deferred income
taxes |
|
347.7 |
|
|
|
307.3 |
|
Long-term taxes
payable |
|
74.4 |
|
|
|
83.3 |
|
Other liabilities |
|
72.2 |
|
|
|
70.7 |
|
Total
Liabilities |
|
4,280.2 |
|
|
|
3,858.4 |
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
Common stock |
|
0.9 |
|
|
|
0.9 |
|
Additional paid-in
capital |
|
1,171.2 |
|
|
|
1,162.6 |
|
Retained earnings |
|
1,751.4 |
|
|
|
1,789.2 |
|
Accumulated other
comprehensive loss |
|
(356.9 |
) |
|
|
(365.3 |
) |
Total Stericycle, Inc.’s
Equity |
|
2,566.6 |
|
|
|
2,587.4 |
|
Noncontrolling
interests |
|
3.9 |
|
|
|
9.7 |
|
Total Equity |
|
2,570.5 |
|
|
|
2,597.1 |
|
Total
Liabilities and Equity |
$ |
6,850.7 |
|
|
$ |
6,455.5 |
|
STERICYCLE, INC. |
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS |
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|
|
2019 |
|
|
2018 |
|
OPERATING
ACTIVITIES: |
|
|
|
|
|
|
|
Net (loss) income |
$ |
(37.6 |
) |
|
$ |
22.5 |
|
Adjustments to
reconcile net (loss) income to net cash from operating
activities: |
|
|
|
|
|
|
|
Depreciation |
|
31.8 |
|
|
|
30.8 |
|
Intangible amortization |
|
37.8 |
|
|
|
31.9 |
|
Stock-based compensation expense |
|
4.3 |
|
|
|
7.1 |
|
Deferred
income taxes |
|
7.3 |
|
|
|
(18.3 |
) |
Asset
impairment charges and gain on divestiture of business, net |
|
18.9 |
|
|
|
9.8 |
|
Other,
net |
|
(0.4 |
) |
|
|
(0.3 |
) |
Changes in operating
assets and liabilities, net of the effect of acquisitions and
divestitures: |
|
|
|
|
|
|
|
Accounts
receivable |
|
(2.2 |
) |
|
|
(6.8 |
) |
Prepaid
expenses |
|
(11.7 |
) |
|
|
13.6 |
|
Accounts
payable |
|
(1.2 |
) |
|
|
(19.4 |
) |
Accrued
liabilities |
|
(18.4 |
) |
|
|
31.9 |
|
Other
assets and liabilities |
|
7.6 |
|
|
|
7.6 |
|
Net cash from
operating activities |
|
36.2 |
|
|
|
110.4 |
|
INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
Capital
expenditures |
|
(66.1 |
) |
|
|
(28.5 |
) |
Payments
for acquisitions, net of cash acquired |
|
(0.3 |
) |
|
|
(15.9 |
) |
Proceeds
from divestiture of business |
|
13.6 |
|
|
|
- |
|
Other,
net |
|
0.5 |
|
|
|
0.3 |
|
Net cash from
investing activities |
|
(52.3 |
) |
|
|
(44.1 |
) |
FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
Repayments of long-term debt and other obligations |
|
(6.8 |
) |
|
|
(12.2 |
) |
Net
proceeds from (repayments of) foreign bank debt |
|
5.5 |
|
|
|
(0.9 |
) |
Repayments of term loan |
|
(11.9 |
) |
|
|
(11.9 |
) |
Net
proceeds from (repayment of) senior credit facility |
|
51.9 |
|
|
|
(29.0 |
) |
(Repayments of) proceeds from bank overdrafts, net |
|
(6.9 |
) |
|
|
5.5 |
|
Payments
of capital lease obligations |
|
(0.8 |
) |
|
|
(1.6 |
) |
Proceeds
from issuance of common stock, net of shares withheld for tax |
|
0.3 |
|
|
|
3.7 |
|
Payments
for repurchase of mandatory convertible preferred stock |
|
- |
|
|
|
(7.4 |
) |
Dividends
paid on mandatory convertible preferred stock |
|
- |
|
|
|
(8.8 |
) |
Net cash from
financing activities |
|
31.3 |
|
|
|
(62.6 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
(1.3 |
) |
|
|
3.5 |
|
Net change in cash and
cash equivalents |
|
13.9 |
|
|
|
7.2 |
|
Cash and cash
equivalents at beginning of period |
|
34.3 |
|
|
|
42.2 |
|
Cash and cash
equivalents at end of period |
$ |
48.2 |
|
|
$ |
49.4 |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
Net issuances of
obligations for acquisitions |
$ |
0.3 |
|
|
$ |
11.2 |
|
Capital expenditures in
accounts payable |
$ |
16.9 |
|
|
$ |
5.0 |
|
Interest paid during
the period, net of capitalized interest |
$ |
21.7 |
|
|
$ |
16.6 |
|
Income taxes paid
during the period, net of refunds |
$ |
0.5 |
|
|
$ |
2.6 |
|
RECONCILIATION OF U.S. GAAP TO NON-GAAP
FINANCIAL MEASURES (UNAUDITED)
Table 1 – A: RECONCILIATION OF REVENUES
TO ADJUSTED REVENUES –THREE MONTHS ENDED MARCH 31,
2019
|
|
Three Months Ended
March 31, |
|
|
|
In millions |
|
Percentage Change (%) |
|
|
|
2019 |
|
|
2018 |
|
|
Change |
|
Organic |
|
Acquisitions |
|
Divestitures |
|
Foreign Exchange(a) |
|
Change |
|
Revenues by
Service |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated Waste and
Compliance Services |
|
$ |
469.2 |
|
|
$ |
497.4 |
|
|
$ |
(28.2 |
) |
|
(2.0 |
%) |
|
0.2 |
% |
|
(0.5 |
%) |
|
(3.4 |
%) |
|
(5.7 |
%) |
Secure Information
Destruction Services |
|
|
232.0 |
|
|
|
219.9 |
|
|
|
12.1 |
|
|
4.3 |
% |
|
2.7 |
% |
|
– |
|
|
(1.5 |
%) |
|
5.5 |
% |
Communication and
Related Services |
|
|
61.2 |
|
|
|
91.9 |
|
|
|
(30.7 |
) |
|
(30.5 |
%) |
|
– |
|
|
(2.2 |
%) |
|
(0.7 |
%) |
|
(33.4 |
%) |
Manufacturing and
Industrial Services |
|
|
67.7 |
|
|
|
85.8 |
|
|
|
(18.1 |
) |
|
(7.3 |
%) |
|
– |
|
|
(8.8 |
%) |
|
(5.0 |
%) |
|
(21.1 |
%) |
Total Revenues |
|
$ |
830.1 |
|
|
$ |
895.0 |
|
|
$ |
(64.9 |
) |
|
(3.9 |
%) |
|
0.8 |
% |
|
(1.3 |
%) |
|
(2.9 |
%) |
|
(7.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues by
Geography |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic and
Canada |
|
$ |
678.8 |
|
|
$ |
714.7 |
|
|
$ |
(35.9 |
) |
|
(5.3 |
%) |
|
1.0 |
% |
|
(0.3 |
%) |
|
(0.4 |
%) |
|
(5.0 |
%) |
International |
|
|
151.3 |
|
|
|
180.3 |
|
|
|
(29.0 |
) |
|
1.9 |
% |
|
– |
|
|
(5.3 |
%) |
|
(12.7 |
%) |
|
(16.1 |
%) |
Total Revenues |
|
$ |
830.1 |
|
|
$ |
895.0 |
|
|
$ |
(64.9 |
) |
|
(3.9 |
%) |
|
0.8 |
% |
|
(1.3 |
%) |
|
(2.9 |
%) |
|
(7.3 |
%) |
Table 1 – B: DISAGGREGATED REVENUES
CHANGE
(In millions) |
|
|
Three Months Ended
March 31, 2019 |
|
Organic |
$ |
(34.9 |
) |
Acquisitions |
|
6.8 |
|
Divestitures |
|
(11.9 |
) |
Foreign exchange |
|
(24.9 |
) |
Total Change |
$ |
(64.9 |
) |
(a) 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.
Table 2: THREE MONTHS ENDED MARCH 31,
2019 AND 2018
(In millions, except per share
data) |
|
|
Three Months Ended March 31,
2019 |
|
|
|
Gross Profit |
|
|
Selling, General and Administrative
Expenses |
|
|
(Loss) Income from Operations (b) |
|
|
Net (Loss) Income Attributable to Common
Shareholders (c) |
|
|
Diluted (Loss) Earnings Per Share |
|
U.S. GAAP
Financial Measures |
|
$ |
297.1 |
|
|
$ |
280.4 |
|
|
$ |
(4.2 |
) |
|
$ |
(37.8 |
) |
|
$ |
(0.42 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
Transformation (1) |
|
|
- |
|
|
|
(20.5 |
) |
|
|
20.5 |
|
|
|
15.8 |
|
|
|
0.17 |
|
Intangible Amortization (2) |
|
|
- |
|
|
|
(37.8 |
) |
|
|
37.8 |
|
|
|
28.9 |
|
|
|
0.32 |
|
Acquisition and Integration (3) |
|
|
- |
|
|
|
(1.9 |
) |
|
|
1.9 |
|
|
|
1.5 |
|
|
|
0.02 |
|
Operational Optimization (4) |
|
|
2.0 |
|
|
|
(1.6 |
) |
|
|
3.6 |
|
|
|
3.0 |
|
|
|
0.03 |
|
Divestitures (5) |
|
|
- |
|
|
|
2.8 |
|
|
|
(2.8 |
) |
|
|
(3.5 |
) |
|
|
(0.04 |
) |
Litigation, Settlements and Regulatory Compliance (6) |
|
|
- |
|
|
|
(9.8 |
) |
|
|
9.8 |
|
|
|
8.7 |
|
|
|
0.10 |
|
Impairment (7) |
|
|
1.6 |
|
|
|
- |
|
|
|
22.5 |
|
|
|
22.0 |
|
|
|
0.24 |
|
Other
(8) |
|
|
- |
|
|
|
(15.9 |
) |
|
|
15.9 |
|
|
|
13.0 |
|
|
|
0.15 |
|
Capital
Allocation (9) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Adjusted
Financial Measures (a) |
|
$ |
300.7 |
|
|
$ |
195.7 |
|
|
$ |
105.0 |
|
|
$ |
51.6 |
|
|
$ |
0.57 |
|
(In millions, except per share
data) |
|
|
Three Months Ended March 31,
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 |
|
|
$ |
358.5 |
|
|
$ |
304.4 |
|
|
$ |
54.1 |
|
|
$ |
21.0 |
|
|
$ |
0.25 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
Transformation (1) |
|
|
|
- |
|
|
|
(22.1 |
) |
|
|
22.1 |
|
|
|
16.4 |
|
|
|
0.19 |
|
Intangible Amortization (2) |
|
|
|
- |
|
|
|
(31.9 |
) |
|
|
31.9 |
|
|
|
23.7 |
|
|
|
0.28 |
|
Acquisition and Integration (3) |
|
|
|
- |
|
|
|
(4.1 |
) |
|
|
4.1 |
|
|
|
3.2 |
|
|
|
0.04 |
|
Operational Optimization (4) |
|
|
|
- |
|
|
|
(8.9 |
) |
|
|
8.9 |
|
|
|
6.6 |
|
|
|
0.07 |
|
Divestitures (5) |
|
|
|
- |
|
|
|
(4.1 |
) |
|
|
4.1 |
|
|
|
3.7 |
|
|
|
0.04 |
|
Litigation, Settlements and Regulatory Compliance (6) |
|
|
|
- |
|
|
|
(27.5 |
) |
|
|
27.5 |
|
|
|
20.3 |
|
|
|
0.23 |
|
Impairment (7) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other
(8) |
|
|
|
- |
|
|
|
(5.8 |
) |
|
|
5.8 |
|
|
|
4.4 |
|
|
|
0.05 |
|
Capital
Allocation (9) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10.8 |
|
|
|
0.06 |
|
Adjusted
Financial Measures (a) |
|
|
$ |
358.5 |
|
|
$ |
200.0 |
|
|
$ |
158.5 |
|
|
$ |
110.1 |
|
|
$ |
1.21 |
|
|
U.S. GAAP results for the three months ended
March 31, 2019 and 2018 include:
(1) Business Transformation2019: Selling,
general and administrative expenses (“SG&A”) include $7.6
million of consulting and professional fees, $2.2 million of
internal costs, $5.3 million related to executive and employee
termination, $4.4 million of software usage/maintenance fees, and
$1.0 million of other related expenses.2018: SG&A includes
$18.2 million of consulting and professional services, $2.5 million
related to internal costs, $0.5 million related to exit costs –
employee termination, $0.6 of software usage/maintenance fees, and
$0.3 million of other related expenses.
(2) Intangible Amortization2019 and 2018:
SG&A includes $37.8 million and $31.9 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 quarter of 2019, we completed 1
acquisition.2018: SG&A includes $1.6 million of acquisition
expenses, $2.0 million of integration expenses mostly related to
acquisitions completed in the U.S., and a $0.5 million unfavorable
change in the fair value of contingent consideration. During
the first quarter of 2018, we completed 9 acquisitions.
(4) Operational Optimization2019: Cost of
revenues (“COR”) includes a $2.0 million non-cash charge related to
impairment of long-lived assets in our Domestic and Canada RCS
reportable segment; SG&A includes $0.1 million of charges in
our Domestic and Canada RCS reportable segment and $1.5 million of
charges in the International RCS reportable segment, mostly related
to site clean-up costs in Latin America.2018: SG&A includes
$1.4 million of charges in the Domestic and Canada RCS reportable
segment related to improving operational efficiency such as
optimizing overall logistics and sales functions primarily for
Secure Information Destruction locations, $5.9 million in the
International RCS reportable segment (of which $4.7 million
non-cash charges related to impairment of long-lived assets,
customer relationships and operating permits, $0.9 million related
to closure and exit costs – other, and $0.3 million related to exit
costs – employee termination), and $1.6 million 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 $3.0
million principally for professional fees associated with our
Portfolio Rationalization efforts mostly in the U.S.2018: SG&A
includes $4.1 million of non-cash impairment charges related to the
change in fair value of assets held for sale in the U.K.
(6) Litigation, Settlements, and Regulatory
Compliance2019 and 2018: SG&A includes $9.8 million and $27.5
million, respectively, in regulatory compliance, consulting and
professional services related to certain litigation matters.
(7) Impairment2019: COR includes $1.6 million
related to non-cash impairment charges related to software as a
result of rationalization of applications primarily in our Domestic
CRS reporting unit.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 $15.9 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 $1.1 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 $5.8 million
of consulting and professional services related to the
implementation of new accounting standards as well as internal
control remediation activities.
(9) Capital Allocation2018 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 $8.8 million.For the
purpose of calculating the ultimate EPS impact, for the first
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.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 quarter of 2019. The
impact of excluding the preferred stock dividend from Adjusted
Diluted EPS was $0.10 for the first quarter of 2018. The
increase in diluted shares outstanding under the “if-converted”
method was 4.9 million for the first quarter of 2018. The impact of
all adjusting items under the “if-converted” method to our Adjusted
Diluted EPS has a dilutive effect of $0.06 for the first 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) (Loss) Income from Operations and Adjusted
Income from Operations provide the basis for other financial
measures.
(c) Under the Net (Loss) Income Attributable to
Common Shareholders column, adjustments are shown net of tax in
aggregate of $20.9 million and $26.8 million for the three months
ended March 31, 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):
(In millions) |
|
|
Three Months Ended
March 31, |
|
|
2019 |
|
|
2018 |
|
(Loss) income
from operations |
$ |
(4.2 |
) |
|
$ |
54.1 |
|
Depreciation |
|
31.8 |
|
|
|
30.8 |
|
Intangible amortization |
|
37.8 |
|
|
|
31.9 |
|
EBITDA |
$ |
65.4 |
|
|
$ |
116.8 |
|
The following table presents the calculation of Adjusted
Earnings Before Interest, Tax, Depreciation and Amortization
(Adjusted EBITDA):
(In millions) |
|
|
Three Months Ended
March 31, |
|
|
2019 |
|
|
2018 |
|
Adjusted income
from operations |
$ |
105.0 |
|
|
$ |
158.5 |
|
Depreciation |
|
31.8 |
|
|
|
30.8 |
|
Adjusted
EBITDA |
$ |
136.8 |
|
|
$ |
189.3 |
|
FOR FURTHER INFORMATION CONTACT:
Investor Relations 847-607-2012
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