Dan Ginnetti- VP, Finance Frank Ten Brink - EVP, CFO and CAO Richard Kogler - EVP, COO Charles Alutto - President and CEO

Nick Hiller - William Blair & Company Gary Bisbee - RBC Capital Markets, LLC Flavio Campos - Credit Suisse AG Albert Kaschalk - Wedbush Securities Inc. Scott Schneeberger - Oppenheimer & Co. Shlomo Rosenbaum - Stifel Nicolaus David Manthey - Robert W. Baird & Company, Inc Greg Halter - Great Lakes Review/Wellington Shields James Francescone - Morgan Stanley Kevin Steinke - Barrington Research Associates, Inc

Good afternoon. My name is Lorra, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Stericycle First Quarter Earnings Call. (Operator Instructions). Thank you. I will now turn the call over to Dan Ginnetti, VP of Finance. Please go ahead, sir.

Thank you, Lorra. Welcome to Stericycle's quarterly conference call. Joining me on today's call will be Frank Ten Brink, CFO; Rich Kogler, COO; and Charlie Alutto, 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-K, 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 Frank.

Thank you. The results for the first quarter are as follows: Revenues were $570 million, up 10.9% from $513.8 million in Q1, 2013. And internal growth, excluding returns and recall revenues was up 6.3%. Domestic revenues were $392.1 million of which $369 million was domestic regulated waste and compliance services and $23.1 million was recalls and returns. Domestic internal growth, excluding recalls and returns revenues was up 6.4% consisting of SQ up 8% and LQ up 5%. International revenues were $177.9 million. And internal growth adjusted for unfavorable exchange impact of $8.1 million was up 6%. Acquisitions contributed $32.9 million to the growth in the quarter. Gross profit was $255.5 million or 44.8% of revenues. SG&A expense including amortization was $110.8 million or 19.4% of revenues. Net interest expense was $14.9 million. And net income attributable to Stericycle was $79.1 million or $0.91 per share on an as-reported basis and $1.04 adjusted for acquisition and other non-recurring expenses. Now the balance sheet. Our covenant debt-to-EBITDA ratio was 2.0 at the end of the quarter. And the unused portion of our revolver debt at the end of the quarter was approximately $631 million. In the quarter, we repurchased 685,990 shares of common stock on the open market in an amount of $78.3 million. The Board has authorized the purchase of an additional 4.1 million shares and now at the end of the quarter we have authorization to purchase 5.7 million shares. Capital spend was $16.4 million in the quarter. The DSO was 62 days. And Q1 as reported cash from operations was $144.5 million and when adjusted for recall reimbursements discussed last call [and one-timer] [ph] cash from operations was $156.9 million. And now I will turn it over to Rich.

Thanks, Frank. In the quarter, we closed five transactions, two domestic and three international. The international acquisitions were in Portugal. Revenues from the five acquisitions were immaterial in the quarter and annualized are approximately $14.6 million. As announced on April 22, we completed the acquisition of the PSC Environmental services division which is expected to add approximately $165 million in revenue for the remainder of this year and annualized revenues are $240 million. The transaction is accretive to EPS this year. When combined with our existing business, we initially anticipate an unfavorable impact to our gross margin of 240 to 245 basis points on our full quarter basis. As synergies are realized over the next 12 months, our company gross margin will improve. We are very excited about this acquisition because it expands our operational infrastructure, increases our geographic reach, improves route and long haul efficiencies and reduces disposal costs. This transaction enhances our existing platform and increases profitability and revenue growth in both our healthcare and StrongPak retail service offerings. Following the completion of the PSC deal, our worldwide acquisition pool still remains robust with well over $100 million in annualized revenues in multiple geographies and lines of business. Looking ahead we remain excited about our expanding growth opportunities, our global acquisition strategy increases our customer base, providing long-term growth platform for selling multiple services such as compliance solutions, StrongPak, Sharps Management and pharma waste. And as customers adopt our multiple services they can more than triple the revenue. At the end of the quarter, we had approximately 569,000 accounts, of which approximately 549,000 were small, the remainder large. In closing, we want to welcome the over 1100 PSC team members that are joining this Stericycle family and of course we want to thank each member of our worldwide team for their strong performance and continued commitment to our customers, our shareholders and our value. And I'll turn it over to Charlie.

Thank you, Rich. I would now like to provide insights on our current guidance for 2014. Please keep in mind that these are forward looking statements and our guidance does not include future acquisition, divestures, integration, acquisition related and other non-recurring expenses. For 2014, we believe analysts' EPS estimates will be in the range of $4.22 to $4.26. This includes approximately $0.03 to $0.04 contribution from PSC Environmental mostly in the back half of the year. We believe the analysts' revenue estimates for 2014 will be in the range of $2.51 billion to $2.53 billion, depending on assumptions for growth and foreign exchange rates. This includes $165 million contribution from PSC Environmental. We anticipate 2014 internal growth rate to be SQ, 8% to 10%; LQ, 5% to 8%; international, 5% to 8%; and recall and returns revenues between $100 million to $115 million. With the addition of PSC Environmental, we expect our gross margins to be unfavorably impacted by 240 to 245 basis points on a full quarter basis. The impact in Q2 will be approximately 200 basis points due to the timing of the closing. Q3 impact will be 240 to 245 basis points and then improving sequentially thereafter as synergies are realized. We believe analysts will have estimates for 2014 free cash flow between $410 million to $417 million. 2014 CapEx is anticipated to be between $76 million to $80 million. Due to the impact of the one time tax adjustments in Q1, we expect the full year as reported tax rate to be 34.5%. This assumes the tax rate in each of the remaining quarters to be approximately 35.5%. In closing, we are very pleased with our first quarter 2014 results and remain excited about our multiple growth opportunities for 2014 and beyond. Thank you for your time today. We'll now answer any questions. As a reminder, please limit yourself to one question and one follow up question as necessary. Lorra, you can now open the Q&A queue.

(Operator Instructions). Your first question comes from the line of Ryan Daniels from William Blair. Your line is open. Nick Hiller - William Blair & Company: Hi, this is Nick Hiller in for Ryan Daniels. Thanks for taking my question. So can you just walk us through the logic on the PSC Environmental deal a bit meaning why now and what are some of the costs saving and logistics advantages you get with the assets and who are the main clients et cetera?

Sure on the why now question, Nick, with our growth in StrongPak and other healthcare haz waste PSC was a very good fit right now, perfect match given their geographical reach and operational infrastructure. Obviously, on the synergy side, it is an area that we have really good experience and that will be a long haul efficiencies, our route density and our disposable cost, and in the end the compliance team has great depth of experience in all aspects of the hazardous waste business so I think the timing was perfect for us and we really feel that PSC was a perfect match for Stericycle. Nick Hiller - William Blair & Company: Okay, and on PSC I think about 80% of business is kind of recurring in nature, what about the other 20%? I realize overall it will be a small percent of corporate revenues but what would cause ebbs and flows there?

Yes, those are more contracts or project based but they had very good revenue coming from reoccurring customers that come back to them, so even though they are not under reoccurring long-term contracts, they have a very good repeat business from customers.

Your next question comes from the line of Gary Bisbee of RBC Capital Markets. Please go ahead. Gary Bisbee - RBC Capital Markets, LLC: Hi, guys and congratulation on the quarter and the acquisition. I'll ask about the acquisition as well, but you had obviously significantly lower margins in the core business. And I guess can you talk through if this is really just a lack of revenue scale over the infrastructure or there are different operating cost, competitive dynamic or pricing or other things about this market opportunity that would be it a longer term, be it structurally lower margin than the core medical waste business.

Yes, so today this is a lower margin business for Stericycle but the combination will improve these margins through synergies and with the growth in margin will improve significantly over time when these synergies are realized and also part of that as you said is the utilization of the capacity that they have in their infrastructure. And we are not focused solely on the margin percentage as we said the criteria to do this deal was it was a very good strategic fit, it was a very good longer-term ROIC and IRR in the transaction and gives us great growth opportunities and support in the growth in StrongPak. Gary Bisbee - RBC Capital Markets, LLC: Okay, and then just following up on that the $240 million of revenue, is that largely in the haz waste area and I guess, I don't know what StrongPak was doing but let’s say $50 million to $100 million all of a sudden that would seem to indicate 30% to 35% market share of that opportunity, is that right or if not what other elements should I think about?

You are partially right, Gary. The $240 million is an SQ hazardous waste but it is not solely in the retail haz waste. So if you think about their business they have small quantities of hazardous waste, they augmented an on-site services compliance program, sustainability offerings and if you think of the different industry they go beyond the retail space. They are in things like life sciences, education, manufacturing and even within the retail space there are some segments of that we didn't previously service like home improvement centers. And I think the other thing to think about when we were talking about the StrongPak opportunity of a billion we were looking specifically at the retail haz base, I think conservatively to think now of this new service area and focus you can certainly double that market. But again we are focused on the SQ haz waste market.

Your next question comes from the line of Hamzah Mazari with Credit Suisse. Please go ahead. Flavio Campos - Credit Suisse AG: Hi, this is Flavio Campos. I'm standing in for Hamzah today. Just a quick question not directly on PSC. But when you're looking at this asset, did you also look at other assets on the market such as the EQ biometric quality company that ECOL just bought? And what made you decide to go for PSC over other assets such as like that one?

Yes, I think if you look at that certainly we looked at all options right. We have build versus buy options in the market place. But when we looked at other assets we really looked at the geographic reach and operational infrastructure of PSC and that's why we thought it was a perfect fit for us. If you think about the fact that they have 12 [PSC] [ph] facility where we had one and they have 22, 10 day location to our 18, it really was a good fit for our service offering in healthcare haz and the StrongPak business. Flavio Campos - Credit Suisse AG: Perfect, that's helpful. And just looking into like the base businesses since you guys posted some pretty good growth this quarter, you have historically said about 50% of your growth comes from price and volume and the rest from ancillary services, which of the ancillary services are the ones that growing faster right now and that you guys expect to grow faster in the future?

Yes, I think we talked about where the breakdown is, if you remember SQ is about 8% to 10% internal organic growth, about 40% to 50% of that is price and volume, the addition - the additional comes from additional services so the remainder comes from additional services and SQ that's historically Steri-Safe and StrongPak services. On LQ, the growth rate is 5% to 8%. Only about 10% to 20% comes from price and volume, the remainder comes from additional services like Rx Waste, Sharps Management and some StrongPak in there as well. Flavio Campos - Credit Suisse AG: Perfect, perfect, that's very helpful. And just a question, just a final question on the margin profile; you guys have touch on this a lot on the acquisition side already. But some of the ancillary services also have -- the additional services also have lower margin profile, you think that like with acquisition like PSC and the growth in the services side, does that put like long term margins, put some pressure on long-term margin profile or you guys are confident that through synergies you can keep current margins?

So in the next quarter we will see a drop because of the inclusion now PSC has Charlie said and in Q3 is going to be a full quarter but then you will see the improvement with the synergies really kicking in. So as Charlie kind of said what those rates were.

Your next question comes from the line of Al Kaschalk with Wedbush Securities. Your line is open. Al Kaschalk - Wedbush Securities Inc.: Good afternoon, guys. May be we can talk about 90% of the business that you own, can you give us a little bit of an update on how that performed in the quarter and in particular maybe address a little of the margin. I guess the gross margin may have been impacted by transaction cost but could you just help me through that?

Yes, so the gross margin if you look at last quarter which had the one time of the settlement and if you adjust for that you are at about 45% margin. So this quarter if you look at Q4 to Q1, the Q4 acquisition had about 10 bps negative impact, weather probably about 20 bps, foreign exchange was about 4 bps improvement and then the general business - those factors improved by about 11 bps to about then 44.8% for this quarter. Al Kaschalk - Wedbush Securities Inc.: Okay. Help us understand I guess may be it is to what extent this customer overlap already existing businesses, is there any attrition here or business that you need to give up or I know it is gotten to the regulatory clearance et cetera but I mean just help a little bit understand, is all of this I will say new growth new customer base et cetera?

Yes, I mean it is all new customer base for the most part I think when you think about their service and our service; we compliment each other very well. Both of us obviously are in this retail haz waste base, they had little bit in healthcare hazardous waste out but not much. But then have a lot of different small quantity customers, again I touched on manufacturing and life science, education, and I think at the end of the day is really their infrastructure which is a great match given that geographical reach we wanted, it gave us the TSDFs in a 10 days, so from service standpoint not a lot of overlap there, customers not really any. So that's really more operational if it fit our business and I think it is a really good platform to grow the business for many years to come. Al Kaschalk - Wedbush Securities Inc.: Have they said how many customers they have?

We did not just give that information, that's what we are working on. That's obviously thousands of locations that they service but next quarter you will see that included in our customer account.

Your next question comes from the line of Scott Schneeberger with Oppenheimer. Please go ahead Scott Schneeberger - Oppenheimer & Co.: Thanks, hey, guys. Following up on the margin in the quarter, you just mentioned weather was a negative 20 bps sequentially. Could you give a taste for how much of an impact that was year-over-year? It doesn't seem too meaningful and I wouldn't think it would be very meaningful in your business but just some more positioning around that. Thanks.

I think historically we have always had some weather impact and we managed it and it is been immaterial. And this year it was obviously more severe because how often does Atlanta get shutdown for two days. But as Frank said the impact was about 20 bps in the quarter. Scott Schneeberger - Oppenheimer & Co.: All right, thanks. I want to throw in on the tax rate -- thanks for the guidance for the remainder of the year. Could you speak a little bit about what was occurring in the first quarter and changes going forward? Thanks.

Yes, we had a situation where we had the tax deductibility of goodwill that was now achievable in Brazil on some acquisition that we have done where we became 100% owner and because of that it became deductible. And so that's one time entry and this lowers our cash tax obviously in future shares which are a great cash contribution in the future. Scott Schneeberger - Oppenheimer & Co.: Okay, thanks. That's my two. I'll come back later. Thanks.

Your next question comes from the line of Shlomo Rosenbaum with Stifel. Please go ahead. Shlomo Rosenbaum - Stifel Nicolaus: Thank you very much for taking my questions. I just want to get to the core business a little bit. If you look at what seems to be the regulated medical waste domestically, it looks like there was less than $1 million organic growth on a sequential basis. I have to go back about 10 years to see that small amount of sequential growth. Am I looking at something wrong? Or were you guys preoccupied with the business and the acquisition or how should I think of that?

So the overall growth rate were right in our range and so it was impacted a little bit by the weather as we said that having carry through the gross margin. It can vary Q-to-Q, the comparative a little bit versus a prior period but overall if there growth rate were right in the picture.

Probably it is domestically, Shlomo, somewhat were very similar Q3, 2013 Scott Schneeberger - Oppenheimer & Co.: You see what I am pointing at there on the sequential basis, up like 800,000? I would have thought just on the natural growth of your business would have been a little bigger than that.

Yes, it is also a little bit may be timing acquisition were not contributing in the quarter that were closed in the quarter. So have a little bit of that factor that can play in on the total number. Scott Schneeberger - Oppenheimer & Co.: Okay and can you just talk a little bit about the free cash flow potential of this business that you are buying when you get to the synergies kicking in more. You have raised the free cash flow guidance up like $7 million to $8 million? Given the size of this acquisition, I would think that there's a lot more to go when it is fully integrated. Can you give us some kind of outlook on that?

Yes, if you kind of look at on similar basis, a fully synergized with really no growth included yet which obviously there will be, you are looking at free cash flow of somewhere $17 to $18 million which we think is conservative but as you know we are conservative when we get these initial numbers. Capital spend on that business is not similar from what we are running in an overall business right around that 3.5% is what they have been running, and I think the combination we can get better capital utilization there and capacity utilization out of that.

Your next question comes from the line of Isaac Ro with Goldman Sachs. Your line is open.

Hi, guys. Thanks for taking my question. In fact it is actually Joel in for Issac. Just on the base business, can you provide us an update on the margin expansion initiative outside U.S. how those are tracking may be focusing particularly on Spain and Japan?

Yes, I think we talked about our international margin expansion. Depends on which country obviously some countries we have done a lot of acquisition and we are still looking to build the SQ base and asked about selling additional services. I think specifically the Spain, we followed up with several SQ acquisitions, we talked about rolling out clinical services so we are still in the power space for rolling out that clinical services which is equivalent Steri-Safe in Spain. And I think everything is on track with respect to Spain. And I think the other question you have with Japan. As you know, we are in the northern island of Hokkaido. That's really great improvements with some integration work they have done over the last 18 to 24 months. We feel really comfortable with that market and feel like we are on track in Japan as well.

And then just another one on PSC. Can you just touch on the revenue synergies that acquisition provide and then to what extent that those factored into your return map for the deal?

Yes, I think it is really, if you think about this infrastructure that came with the transaction and obviously a great team on the sales and operations side that's not combined with ours. There is a really good platform to continue to support the growth in StrongPak, they obviously had things going that they were going after that looks good and is growing for them. It has been a business; it has been growing over the years so again we look forward to good results from them going forward as combo with us.

Your next question comes from the line of David Manthey with Robert W. Baird & Co. Please go ahead. David Manthey - Robert W. Baird & Company, Inc: Hi, good afternoon. On this income tax adjustment in the first quarter, could you tell me what was that benefit in dollar terms? And second, you exclude a lot of things here to arrive at non-GAAP EPS, why wouldn't you exclude that?

So you can exclude, it was about $4.3 million or about $0.05 a share, so I could say it depends again on what the rates are that the different analysts have in their model as to a tax rate because that's what you really then comparing to. But it was about $4.3 million. David Manthey - Robert W. Baird & Company, Inc: And then in terms of the four items that you did exclude that you typically do, can you give us what the net income dollar values are, just give us a little more precision on that? And if you want to just put them on a bucket, that's fine. But I just want a net income dollar number that I can compare rather than EPS.

Let me follow up on that. I don't have it right in front of me but I will follow up with you on that.

Your next question comes from the line of Greg Halter with Great Lakes Review. Your line is open. Greg Halter - Great Lakes Review/Wellington Shields : Thank you and good afternoon. On the five deals that were announced, can you discuss what type those were?

Yes, they were four regulated waste transaction and one communication solutions transaction. Greg Halter - Great Lakes Review/Wellington Shields : And by location?

By location, there were three in Portugal, those were the three international and the other ones were in the United States Greg Halter - Great Lakes Review/Wellington Shields : And in Portugal, were all RMWs?

Yes, those were all RMWs. Greg Halter - Great Lakes Review/Wellington Shields : Right, and on the fuel cost side I just wondered if you could comment about that and what you see with prices going up again, even though --

I think change was about 5.6% of what we call total energy, that's fuel and energy and remember that's calculated only on the sectors where that applies to.

Your next question comes from the line of James Francescone with Morgan Stanley. Please go ahead. James Francescone - Morgan Stanley: Hey, guys, thanks for taking my question. Do you expect that having just done a relatively larger deal that your appetite or the pace of acquisitions going forward will change at all?

No, I don't think so. Our leverage on a pro forma basis is going to be at about 2.3, 2.4 compared to the two so we still have ample room and obviously the free cash flow that gets generated in the business supports also our acquisition. Our line has substantial usage still available underneath it. And again as Rich said we are well over $100 million still in annualized revenue of people who have discussions with. James Francescone - Morgan Stanley: But looking at that from maybe a slightly different angle, do you have any constraints on your ability to integrate deals of this size?

It happened in the past I mean if you think about it this one transaction makes it almost a little easier because we already has the team working very well together pre the deal was closed to work on what were the synergies when the deal closed everyone has their seat already assigned to them so they are well underway to make it work and so that team is right dedicated to it but that team doesn't get as much involved necessarily in the subsequent deals. The synergies that we are getting out at the PSC deal, they relate to long haul, route density, and disposal cost very much in the areas that we are very familiar with. So no I don't think the team is going to hold back and doing more stuff and it is from a total company point of view we are obviously doing it internationally, and in the different areas of our business. James Francescone - Morgan Stanley: And then if I could sneak in just one more financial one, do you have a sense of what the incremental amortization expense particularly from that deal is going to be?

We are still working at that but the estimate is roughly for D&A to be about $15 million and $15.5 million of which about $10 million is depreciation but that's still being worked on because that's all the purchase price allocations and things.

Your next question comes from the line of Kevin Steinke with Barrington Research. Your line is open. Kevin Steinke - Barrington Research Associates, Inc: Good afternoon. Just wondering what we should expect for SG&A as a percent of revenue for the remainder of the year.

Yes, Kevin, the PSC impact there is favorable so we have given before for the year to be about 19.3%, now it is closer to the 19%. So that is a good number for a year. Kevin Steinke - Barrington Research Associates, Inc: Okay, and I wanted to ask about Communication Solutions, what you are seeing on the organic sales front there. I think you talked about training your sales force last quarter on Communication Solutions.

Yes, Kevin, as we spoke in last quarter we just finished our national sales meeting, we spent a lot of time of that meeting focused on Communication Solutions and training our existing sales team on their capabilities in that area. Obviously, the long term goal is to start to working with our SQ and LQ sales team and leverage that relationship and out of that of meeting we are currently building our very strong sales pipeline which we feel will work that business ongoing in the future so I think we are on track there. Now the team is really hit the ground and running from our national sales meeting and now the pipeline is strong.

There are no further questions at this time. I'll turn the call back to Charlie Alutto.

Thanks, Lorra. We appreciate everyone taking time to participate in today's call. We look forward to seeing some of you on the road in next couple of months. Have a great night. Take care.

This concludes today's conference call. You may now disconnect.