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Stericycle Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 5, 2010 04:00PM

Stericycle Inc. (SRCL) filed Quarterly Report for the period ended 2010-09-30. Stericycle Inc. has a market cap of $6.17 billion; its shares were traded at around $72.68 with a P/E ratio of 31.5 and P/S ratio of 5.1. Stericycle Inc. had an annual average earning growth of 15.4% over the past 10 years. GuruFocus rated Stericycle Inc. the business predictability rank of 4-star.

SRCL is in the portfolios of Ron Baron of Baron Funds, Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC, Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc.

Highlight of Business Operations:

Cost of Revenues: Our cost of revenues increased $38.0 million, or 24.2%, to $194.9 million during 2010 from $156.9 million during 2009. Our domestic cost of revenues increased $23.2 million, or 20.2%, to $137.8 million from $114.6 million in 2009 as a result of costs related to a proportional increase in revenues from acquisitions and internal growth. Our international cost of revenues increased $14.8 million, or 35.0%, to $57.1 million from $42.3 million in 2009 primarily driven by the impact of exchange rates and impact from integration of acquisitions. Our company wide gross margin percentage decreased to 46.3% during 2010 from 47.3% during 2009 primarily due to slightly higher fuel and energy costs as well as integration of lower margin newly acquired revenues and higher Regulated Returns Management revenues, offset by improvements in the base business margins.

Income Tax Expense: Income tax expense increased to $30.6 million for the quarter ended September 30, 2010 from $23.1 million for the comparable quarter in 2009. In September 2010 and 2009, we recognized $1.2 million and $1.8 million, respectively; of tax benefits related to prior years unrecognized tax positions, which positively impacted our diluted earnings per share by $0.01 and $0.02, respectively. The effective tax rates for the quarters ended September 30, 2010 and 2009 were 34.8% and 33.2%, respectively.

Revenues: Our revenues increased $181.7 million, or 21.0%, to $1.05 billion in 2010 from $864.2 million in 2009. Domestic revenues increased $114.9 million, or 17.0%, to $791.0 million from $676.1 million in 2009 as internal revenue growth for domestic small account customers increased by $34.7 million, or approximately 9%, and internal revenue growth for large quantity customers increased by $12.9 million, or approximately 6%. Internal revenues for returns management increased by $29.6 million resulting from larger recalls in the quarter. Internal revenues exclude acquisitions less than one year old. Total domestic regulated waste and returns management acquisitions less than one year old contributed approximately $37.7 million to the increase in domestic revenues.

Cost of Revenues: Our cost of revenues increased $102.0 million, or 22.2%, to $560.9 million during 2010 from $458.9 million during 2009. Our domestic cost of revenues increased $59.1 million, or 17.4%, to $399.0 million from $339.9 million in 2009 as a result of costs related to a proportional increase in revenues from acquisitions and internal growth. Our international cost of revenues increased $42.9 million, or 36.0% to $161.9 million from $119.0 million in 2009 as a result of costs related to a proportional increase in revenues, partially driven by the impact of exchange rates. Our company wide gross margin percentage decreased to 46.4% during 2010 from 46.9% during 2009 due to slightly higher energy expenses and the inclusion of lower margin acquired revenues.

Income from Operations: Income from operations increased to $276.8 million for the nine months ended September 30, 2010 from $233.3 million for the comparable period in 2009, an increase of 18.6%. During the nine months ended September 30, 2010, we recognized $3.2 million in expenses related to acquisitions, $2.0 million of restructuring costs of our regulated returns management service business, $0.5 million plant closure expense, and litigation settlement of $0.9 million, partially offset by a $3.0 million gain on sale of assets related to the MedServe divestiture. These non-core operational expenses totaled $3.6 million on pre-tax basis. During the nine months ended September 30, 2009, we recognized $5.4 million in expenses related to acquisitions.

Income Tax Expense: Income tax expense increased to $89.4 million for the nine months ended September 30, 2010 from $74.5 million for the comparable period in 2009. The increase was due to higher taxable income partially offset by a lower effective tax rate. In September 2010 and 2009, we recognized $1.2 million and $1.8 million, respectively; of tax benefits related to prior years unrecognized tax positions which positively impacted our diluted earnings per share by $0.01 and $0.02, respectively. The effective tax rates for the nine months ended September 30, 2010 and 2009 were 35.9% and 36.2%, respectively.

Read the The complete Report



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