Stericycle Management Discusses Q1 2012 Results - Earnings Call Transcript

Stericycle (SRCL)

Q1 2012 Earnings Call

April 25, 2012 5:00 pm ET


Laura A. Murphy - Vice President of Corporate Finance

Frank J. M. ten Brink - Chief Financial Officer, Chief Accounting officer and Executive Vice President of Finance

Richard T. Kogler - Chief Operating Officer and Executive Vice President

Charles A. Alutto - President of Stericycle USA

Unknown Executive -


Ryan Daniels - William Blair & Company L.L.C., Research Division

Scott J. Levine - JP Morgan Chase & Co, Research Division

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

David R. Lewis - Morgan Stanley, Research Division

Richard C. Close - Avondale Partners, LLC, Research Division

Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division

Jason Rogers



Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the Stericycle Q1 Earnings Conference Call. [Operator Instructions] Thank you. Ms. Laura Murphy, Vice President of Finance, you may begin your conference call.

Laura A. Murphy

Welcome to Stericycle's quarterly conference call. Joining me on today's call will be Frank ten Brink, CFO; Rich Kogler, COO; Charlie Alluto, CEO-elect; and Mark Miller, Chairman and CEO. I will now read the Safe Harbor statement.

Statements by Stericycle in this conference call that are not strictly historical are forward-looking. Forward-looking statements involve known and unknown risks and should be viewed with caution. Factors described in the company's Form 10-Ks, 10-Qs, as well as its other filings with the SEC, could affect the company's actual results and could cause the company's actual results to differ materially from expected results. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events or circumstances after this date that may bear upon forward-looking statements.

I will now turn it over to Frank.

Frank J. M. ten Brink

Thanks, Laura. The results for the first quarter are as follows: revenues were $460.1 million, up 15.6% from $398.1 million. In Q1 '11, our internal growth, excluding returns and recall revenues, was up 8%; domestic revenues were $329.2 million, of which $293.4 million was domestic regulated waste and compliance services revenues, and $35.8 million was returns and recalls; domestic internal growth, excluding returns and recall revenues was up 9%, consisting of SQ, up 10%, and LQ, up 8%; international revenues were $130.9 million and internal growth, adjusted for unfavorable exchange impact of $3.3 million, was up 5%. Acquisitions contributed $41 million to the growth in the quarter. Gross profit was $205.3 million, or 44.6% of revenues, and SG&A expense was $84.9 million, or 18.5% of revenues. Net interest expense was $12.7 million.

Net income attributable to Stericycle was $64.9 million, or $0.75 per share on an as-reported basis, and $0.78, adjusted for acquisition and non-recurring expenses.

Balance sheet. At the end of the quarter, the revolver borrowings were approximately $477 million. The unused portion of the revolver debt at the end of the quarter was approximately $382 million. In the quarter, we repurchased over 38,000 shares of common stock in the open market in an amount of $2.9 million, and we have authorization to purchase an additional 4.3 million shares. Our capital spending was $17 million, and our DSO was 60 days. In Q1 year-to-date, the cash provided from operations was $99.6 million. And I will now turn it over to Rich.

Richard T. Kogler

Thanks, Frank. Worldwide, we continue to use our strong free cash flow to drive our growth through acquisitions. In the quarter, we closed 11 transactions, 6 domestic and 5 international. Our worldwide acquisition pool remains robust, with over $100 million in annualized revenues in multiple geographies and lines of business. At the end of the quarter, we had approximately 528,000 accounts, of which over 512,000 were small and the remainder were Large. Our customers continue to be excited about our expanding portfolio of services. For our SQ customers, these services include Steri-Safe and clinical compliance offerings. For our LQ customers, the growth drivers were Sharps Management, pharma waste and Integrated Waste Services. The strong growth we experienced in the quarter was fueled by the continued adoption of these additional service offerings. We remain very excited about our future growth opportunity because 80% of our LQ and 70% of our SQ customers only use one of our current service offerings, and as customers adopt our multiple services, this can more than double or triple their revenues.

For 2012, we anticipate internal growth rates for Small Quantity to be at 8% to 10%; Large quantity, 5% to 8%; international, 5% to 8%; and recall and returns revenues between $110 million and $120 million. We want to thank each member of our worldwide team for their strong performance and continued commitment to our customers and our shareholders. And I'll turn it over to Charlie.

Charles A. Alutto

Thanks, Rich. I would now like to provide insight on our current outlook for 2012. Please keep in mind that these are forward-looking statements. Revenues from acquisitions completed in the quarter were approximately $0.7 million and annualized are approximately $20 million. Keep in mind our guidance does not include future acquisitions, divestitures and acquisition expenses. For 2012, we believe the analyst EPS estimates will be in the range of $3.24 to $3.28, which we are comfortable with. We believe the analyst revenue estimates for 2012 will be in the range of $1.85 billion to $1.9 billion, depending on assumptions for growth and foreign exchange rates. We believe analysts will have estimates for free cash flow between $320 million to $325 million, with CapEx anticipated between $60 million to $65 million.

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