Frank J. M. Ten Brink - Chief Financial Officer, Chief Administrative Officer, Chief Accounting officer and Executive Vice President of Finance Daniel V. Ginnetti - Vice President of Corporate Finance Richard T. Kogler - Chief Operating Officer and Executive Vice President Charles A. Alutto - Chief Executive Officer, President and Director

Ryan Daniels - William Blair & Company L.L.C., Research Division Albert Leo Kaschalk - Wedbush Securities Inc., Research Division Gary E. Bisbee - RBC Capital Markets, LLC, Research Division Shlomo H. Rosenbaum - Stifel, Nicolaus & Company, Incorporated, Research Division Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division Isaac Ro - Goldman Sachs Group Inc., Research Division James Francescone - Morgan Stanley, Research Division Sean Dodge - Jefferies LLC, Research Division David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division

Good afternoon. My name is Ian, and I will be your conference operator today. At this time, I would like to welcome everyone to the Stericycle second quarter earnings call. [Operator Instructions] Frank Ten Brink, CFO, you may now begin your conference. Frank J. M. Ten Brink: Thank you. Welcome to Stericycle's quarterly conference call. Joining me on today's call will be Rich Kogler, COO; Dan Ginnetti, CFO-elect; 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 10-K, 10-Q, 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 the forward-looking statements. I will now turn it over to Dan. Daniel V. Ginnetti: Thank you, Frank. The results for the second quarter are as follows. Revenues were $640.8 million, up 21.7% from $526.5 million in Q2 2013, and internal growth, excluding returns and recall revenues, was up 7.2%. Domestic revenues were $454.5 million, of which $429.8 million was domestic-regulated waste and compliance services and $24.7 million was recalls and returns. Domestic internal growth, excluding recalls and returns revenues, was up 8.3%, consisting of SQ, up 9%; and LQ, up 7%. International revenues were $186.3 million, and internal growth, adjusted for unfavorable exchange impact of $4.4 million, was up 5%. Acquisitions contributed $81.7 million to the growth in the quarter. Gross profit was $275.3 million or 43% of revenues. SG&A expense, including amortization, was $121.7 million or 19% of revenues. Net interest expense was $16.4 million. Net income attributable to Stericycle was $81.9 million or $0.95 per share on an as-reported basis and $1.03 adjusted for acquisitions and other nonrecurring expenses. Now for the balance sheet. Our covenant debt-to-EBITDA ratio was 2.38 at the end of the quarter. In the quarter, we increased our revolver line of credit from $1 billion to $1.2 billion. The new revolver will mature on June of 2019. The unused portion of the new revolver at the end of the quarter was approximately $512 million. In the quarter, we repurchased 527,243 shares of common stock on the open market in the amount of $58.8 million. At the end of the quarter, we have authorization to purchase 5.2 million shares. Our CapEx was $27.2 million [ph], slightly higher in this quarter due to the timing of planned upgrades. Our DSO was 62 days. Year-to-date, as-reported cash from operations was $238.3 million. When adjusted for recall reimbursement onetimers, from -- cash and operations was $262.1 million. I will now turn it over to Rich. Richard T. Kogler: Thank you, Dan. In the quarter, we closed 13 transactions, 3 domestic and 10 international. This excludes the previously announced PSC transaction. The international acquisitions were 2 in Romania, 2 in Chile, 1 in Portugal, 1 in Brazil, 1 in Spain, 1 in Canada, 1 in the U.K. and 1 in South Korea, which represents a new market for us. Revenues from the 13 acquisitions were $5.3 million in the quarter and annualized are approximately $39 million. Our worldwide acquisition pool remains robust, with well over $100 million in annualized revenues in multiple geographies and lines of business. I'm pleased to report that our previously announced acquisition of PSC Environmental Services division is performing well, and our integration plan is on track. As expected in Q2, the PSC acquisition unfavorably impacted gross margins by approximately 200 basis points. Per our previous guidance, gross margins in Q3, which is our first full quarter of this acquisition, will be impacted by an additional 40 to 45 basis points. Thereafter, gross margins will improve as synergies are realized. Looking ahead, we remain excited about our expanding growth opportunities. Our global acquisition strategy increases our customer base, providing a long-term growth platform for selling multiple services, such as compliance solutions, StrongPak, Sharps Management and pharma waste. As customers adopt our multiple services, it can more than triple their revenues. At the end of the quarter, we had approximately 594,300 accounts, of which approximately 573,600 were small, the remainder were large. In closing, we want to welcome our new team members in South Korea, and we want to thank each member of our worldwide team for their strong performance and continued commitment to our customers, our shareholders and our values. I'll now turn it over to Charlie. Charles A. Alutto: Thanks, Rich. I would now like to provide insight on our current guidance for 2014. Please keep in mind that these are forward-looking statements and our guidance does not include future acquisitions, divestitures, integration, acquisition-related and other nonrecurring expenses. For 2014, we believe analysts' EPS estimates will be in the range of $4.24 to $4.27. We believe analysts' revenue estimates for 2014 will be in the range of $2.54 billion to $2.57 billion, depending on assumptions for growth and foreign exchange rates. We anticipate 2014 internal growth rates to be SQ, 8% to 10%; LQ, 5% to 8%; international, 5% to 8%; and recall and returns revenues between $100 million and $110 million. We believe analysts will have estimates for 2014 free cash flow between $410 million to $417 million. 2014 CapEx is anticipated to be between $80 million to $84 million. We expect the full year as-reported tax rate to be 34.5%. This assumes a tax rate for the remainder of the year to be approximately 35%. In closing, we are very pleased with our second 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. [Operator Instructions] Ian, you can now open the queue.

Your first question comes from the line from Ryan Daniels from William Blair. Ryan Daniels - William Blair & Company L.L.C., Research Division: I guess, I want to hit on the PSC integration efforts. Maybe you can talk a little bit more deeply about the team that's involved there, maybe what their key goals are near term, what early feedback has been from your and their clients. And then it sounds like the synergies are on plan. So talk a little bit about that. Charles A. Alutto: Yes. If you remember, Ryan, let's go back. We talked about the synergies in this deal were mainly in 3 areas. It was in long haul, route density and disposal costs. We also talked about the fact that leading up to the closing during the -- waiting for the approval, we did get the teams together, especially on the IT side, and looked at our waste profiles and how can we get that -- those waste profiles into the PSC system. The systems are compatible. The good news is we've started to divert waste into our new structure, as well as we begin -- we began various integration efforts in things like sales, IT, finance, compliance and operations. So all in all, the integration is certainly on track, and we're tracking to those integration accretion numbers we've talked about on the previous call. Ryan Daniels - William Blair & Company L.L.C., Research Division: Okay, perfect. And maybe one for Dan. Given the noise with PSC acquisition and just everything else, can you give the gross margin bridge that you often provide to us so we can understand the core ins and outs there? Daniel V. Ginnetti: Yes. Thank you for that. The -- so coming off of Q1, we're at 44.82%. As expected, PSC impacted our gross margins unfavorably by about 202 basis points. The other acquisitions within the quarter further impacted it about 13 basis points. We had a small impact from foreign exchange of about 4 basis points. And then our improvement from both the normal course of business and recovery from the weather impact of Q1 was about 33 basis points up. And that's how we bridge to the 42.96%.

And your next question comes from the line of Al Kaschalk at Wedbush Securities. Albert Leo Kaschalk - Wedbush Securities Inc., Research Division: On the CapEx side, could you elaborate on maybe the changes or the investments that you're making there? Charles A. Alutto: Sure. I think as we've talk about, it's really just the timing of projects, and the projects are primarily upgrading some of our autoclave plants and the required Title V compliance work that we needed to do this year for our incinerator plant facilities. That needs to be done and completed by October, so we've kind of moved everything up just to get it done ahead of time. Albert Leo Kaschalk - Wedbush Securities Inc., Research Division: Have you -- are you running into any additional surprises or items of pleasant surprise as you're going through this analysis? Charles A. Alutto: No. I mean, actually, we're glad to see the plants are moving ahead. We're sticking to our full year guidance of $80 million to $84 million, which is kind of in line with where we've seen the company run in the low-3s, 3.1% to 3.3%. And even if you just take Q1 and Q2 and put them together, we're at an average of 3.6%, which is identical to Q2 half year last year. Albert Leo Kaschalk - Wedbush Securities Inc., Research Division: Is that -- I know we had a one limit, one follow-up. But still on that same topic, how does PSC impact CapEx plans going forward? I realize you're targeting this 3%, 3.5%. Charles A. Alutto: PSC is in the same range, and it's included in the guidance we're giving you now for this year.

And your next question comes from the line of Gary Bisbee at RBC Capital Markets. Gary E. Bisbee - RBC Capital Markets, LLC, Research Division: If we are to take a long view, like, say, 5 years from now, how should we think about the puts and takes around what the PSC, StrongPak profitability can look like in the future relative to what you do in the core business? Is it safe to say that without the high-margin compliance part of the offering with medical waste that it's likely always going to be lower? And if so, any sense of how much? Or how do we think about that? Charles A. Alutto: Yes. We think -- well, first of all, we need to integrate the businesses because we're going to see improvements of margins as we integrate into their infrastructure. And again, the thought process we had on the deal was we liked where their cities are located. It strategically fit in to our business. Obviously, longer term, we think, margins will also improve significantly because [indiscernible] the facilities they had were underutilized. And even with our volumes going into their plants, there is still a lot of capacity available at their facilities. Longer term, do we think this could be very influential to our SQ transactional med waste business. There's a good possibly for that. It seems more like a challenge at this point, but there isn't, right now, a compliance component like Steri-Safe but that could change over time as well. Gary E. Bisbee - RBC Capital Markets, LLC, Research Division: Okay. And then, the follow-up. Can we just get an update on how you're doing selling the SQ overseas and what market is that really working in? What are the -- maybe what are the gating factors to more quickly penetrating that? And I guess, along with that also, the compliance offerings that you've been selling overseas. I don't think we've got an update in a while in either of those. Charles A. Alutto: Yes. I think for SQ, you have -- I think on the SQ side, we've always been selling SQ type services when we go into a market. Generally, we enter a market traditionally by LQ type businesses and quickly follow-up with tuck-on acquisitions on the SQ side. So we've got SQ sales activity in virtually every market that we're in around the world. On the Clinical Services side, which I think was the second part of your question, if you take a look at Spain, which is our latest market entry, we've seen a really good adoption as we've launched Clinical Services into that specific geography. So I would say, on the international growth front, we're within our growth range. But we feel really good especially about international growth rates on the second half of the year. Gary E. Bisbee - RBC Capital Markets, LLC, Research Division: But is the SQ still like a tiny percentage of mix overseas? I mean, I remember you saying it was like less than 1/4 relative to 2/3 in the U.S. Is it still that range? Or is that been improving or increasing in the last year or so? Charles A. Alutto: It's been increasing. Of course, it varies country by country. The countries we've been in longer, the U.K. and Canada, has a bigger percentage than some of the newer market entries, like Spain and now South Korea.

Your next question comes from the line of Shlomo Rosenbaum at Stifel. Shlomo H. Rosenbaum - Stifel, Nicolaus & Company, Incorporated, Research Division: Can you -- Charlie, can you talk a little bit about the communications business, what you're seeing in terms of underlying growth? And just when do you expect that the growth of that business organically will start to be a contributing factor? Or to say it a different way, at what point in time will you need that to start contributing in order to be able to maintain that 6% to 8% organic growth rate that you guys are targeting? Charles A. Alutto: Yes. First of all, it is contributing to growth right now. So we are seeing growth, and it's within the bandwidth of our overall company average growth. I think the one thing we talked about earlier in the year, Shlomo, is about how we wanted to leverage the Stericycle sales force. So I want to maybe give you a good example of a recent win we had on a very large East Coast health care system, where we had med waste relationship and servicing for med waste. We did a little physician referral services there, but we really leveraged the medical waste relationship. And we recently awarded a contract that included after-hour answering services, appointment reminders, call overflow for approximately 26 clinics and over 100 physicians. And there's even more opportunity to grow that over the time. So I think as we've always said, we really feel that we are able to leverage our relationship, and I'm glad to see very early on in the process, as we've educated and trained our Steri sales force, that we're starting to see some wins. So it certainly is in the growth rate, it is growing. We think, long term, that's a great opportunity for us. Shlomo H. Rosenbaum - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And then just this is a kind of a housekeeping item. Can you go over the free cash flow normalized and go over the puts and takes over there in the quarter? Frank J. M. Ten Brink: Yes. I mean, free cash flow, we came in as reported $66.6 million and $194.7 million year-to-date. Keep in mind, we do an adjusted free cash flow on that. So we're going to -- we adjust for the repo reimbursement, which is about $4 million that's been out, so we're adding that back in. And then for some of the onetimers, about $7.3 million in the quarter. So if you adjust it, that's $77.8 million and $218.5 million for the year. Charles A. Alutto: And Shlomo, remember, Q2 is normally a lower free cash flow quarter because it's the quarter we make 2 tax payments. The Q1 and Q2 tax payments are made into the Q2 time frame.

And your next question comes from the line of Scott Schneeberger from Oppenheimer. Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division: I -- one thing I want to hit on is recall. It looked like a solid quarter, yet I think you took the high end of the guidance range down by $5 million. And that category is fairly bringing down revenue for many years. So I'm just curious. Is it just the environment? Is it you're spending less on marketing now and maybe allocating elsewhere? Just an update there, please. Charles A. Alutto: Yes. No, I mean, I think we've always described this business as having a certain amount of base organic growth that grows quite well. And then, we have sort of what we want to call those -- the blockbuster events or delivery events. And the only reason we slightly tweak guidance was because we didn't see any of those blockbuster events in the first 2 quarters. So we moved it down, the guidance down slightly than we anticipated. Hopefully, we don't want to in the back half of the year. But the regulatory environment continues to intensify out there, we continue to manage more and more events. And now our events are very well diversified among the different customer types, so we feel good about the business. Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division: Great. And then I'll try on South Korea. It sounds like it's interesting. If you could please elaborate there. Charles A. Alutto: Sure. Just a little some -- more information on South Korea. Obviously, 14th largest economy in the world. It's got a very strong regulatory and enforcement around regulated medical waste. It is a fragmented industry. So if you think about -- we talk about new countries that we want to go into, strong regulations, fragmented industry. Certainly, South Korea has both and as well as a sophisticated and an expanding health care market. And just to give some color around the market opportunity, we estimate the market opportunity being between $200 million and $250 million.

Your next question comes from the line of Isaac Ro at Goldman Sachs. Isaac Ro - Goldman Sachs Group Inc., Research Division: I want to ask another one about health care, specifically -- just in general, specifically with regards to health care reform, the ACA. It didn't sound like you're seeing a whole bunch of impact here from medical waste volumes tied to new coverage. But just curious if you had any updates on your plans in trying to get some of that business as it shows up and just your general views on how that'll pace in the back half of this year. Charles A. Alutto: Yes. I think we saw some good growth rates in the domestic business. I don't essentially tie that to the Affordable Care Act. I think, at this time, we see no material effect. I think, longer term, as we see more come into the ranks of insurance, we think that will grow, especially near the SQ space. We see it now on the retail clinics that are being built and run. We think there'll be opportunities for more of our services. I'd like to bring back to the Con Sol, when you see us sign a large East Coast health care system, specifically their clinics. As hospitals consolidate and start to branch out outside of the traditional 4 walls of large hospitals, those services specifically within Communication Solutions, play really well on that space, both after-hour answering, appointment reminders, call overflow. Those are traditionally services you would see in the SQ, but we're getting traction for them from our LQ customers as the lines blur between SQ and LQ in the U.S. health care market. Isaac Ro - Goldman Sachs Group Inc., Research Division: Great. Maybe a follow-up on that would be to your point on SQ. You obviously have a trend in the major retail pharmacies, where they are becoming more of these sort of mini clinics, if you will. I have to imagine that will create an opportunity for you guys to get closer to that channel. So be curious when you think that will be significant. How are you trying to pursue the opportunity? Charles A. Alutto: Yes. We still have -- we have some already today. As I said, that gives us an opportunity to get some hazard waste opportunities on StrongPak. We're starting to cross-sell the other way now where StrongPak is starting to get at the opportunity on medical waste coming from the retail side. It's a little bit too early. But I think when that segment grows, and it is growing, we're really in a great position to address that market, I think.

Your next question comes from the line of David Lewis at Morgan Stanley. James Francescone - Morgan Stanley, Research Division: This is actually James in for David. You did a nice job earlier of walking through the impact of PSC on the gross margin line. I was wondering if you can help us think through what the implications were for SG&A as well, which, obviously, had a nice tick down from the first quarter to second quarter. I mean, how much of that is organic improvement versus the impact of PSC? And how does PSC or any synergies you're expecting from there impact that line going forward? Frank J. M. Ten Brink: Yes. It's a great question, James. Thanks. In the quarter, PSC benefited our SG&A line by 25 basis points. And then, internally, we also improved about another 18 basis points and then you saw a little bit of improvement from partial quarter of some of the other acquisitions. And that's how we came in at 18.9%. Going forward, next quarter, I think you'll see about another 15 basis points improvement. We still believe that for the year, 19% SG&A is a good number. James Francescone - Morgan Stanley, Research Division: Okay. And then for the tax rate, we're still thinking 34.5%? Frank J. M. Ten Brink: For the year, 34.5%, yes, is a good tax rate. So that's going to put you in the second half somewhere in the 35% to 35.2% range.

And your last question comes from Sean Dodge, calling in from Morgan Stanley (sic) [Jefferies]. Sean Dodge - Jefferies LLC, Research Division: It's actually Jefferies. Charlie, we had talked previously about some changes you are testing to the Steri-Safe program here domestically, where you're going to be expanding your compliance offerings beyond just OSHA. So wondering if you could just flesh that out a bit for us. And what else is there compliance-wise you guys can help physicians with? Charles A. Alutto: Yes. Over the years, we've always looked to enhance the Steri-Safe offering. In recent years and really now, we have both HIPAA compliance program and hazardous waste disposal [ph]. Those are the ones that are part of the regulatory requirements for, especially, the SQ practitioners that just don't have the wherewithal and the expertise on their staff. We've been looking and have already launched an enhanced Steri-Safe offering. So we're looking at Steri-Safe as no longer just OSHA compliant. It's really safety and total compliance program for our customer base. Sean Dodge - Jefferies LLC, Research Division: Okay. I think I missed the last part, so this is something you've already rolled out here? And is it something you can charge a higher fee for? Charles A. Alutto: We started to roll out, and there are some additional fees associated with the new program that we've got [ph] correct.

And your next question comes from the line of David Manthey at Robert W. Baird. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: Question on the Com Sols business. Could you give us an idea of, like, a Beryl Health or a NotifyMD, what are the average monthly revenues per customer or per doc that they're experiencing right now? Charles A. Alutto: Yes. Usually, we look at it, Dave, on a per-physician basis. And in general, when you look at after-hour answering service or appointment reminder, in general, anywhere between $90 to $100 per physician per month. But there are other charges in there depending on how many calls and how many minutes, time that we use. So that's really from a NotifyMD. On the physician referral line or post-discharge call for Beryl Health, it varies. It could be tens of thousands of dollars per hospital. But it really depends on which service offering they're taking. More of that is based on how many agents we're going to have on and how many minutes we might be on the phone. So that varies per hospital. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: Okay. So not too far off from your targeted ranges. When you said it's contributing to the overall growth of the company and then you mentioned that it's growing in line with the overall growth rate of the company, did I hear that right? It would seem that you'd be seeing better growth there off a smaller base? Or is that not right? Charles A. Alutto: No. I think, if you think about that business, it's growing in the overall growth rate of domestic, not SQ, but domestic internal growth rate. So it's in that mid-single-digit range of growth for that business. Remember, we really are still consolidating a lot of the sales teams and just now leveraging the Stericycle team. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: Right. And when you offer that broadly, obviously, you'll expect that to grow much faster? Charles A. Alutto: Correct. It should, correct. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then final question on StrongPak. When you -- if you get a new StrongPak customer, a retailer, for example, let's say, 1,000 storefronts, do you count it as 1 customer or 1,000 customers? Frank J. M. Ten Brink: We cover that as 1,000. We do everything by locations that we service, sites. Charles A. Alutto: Sites, correct.

And there are no further questions. I'll return the conference to the presenters. Charles A. Alutto: Thank you. And we appreciate everyone taking time to participate on today's call. We will see some of you on the road later this quarter. Have a great evening, and enjoy the rest of your summer. Take care.

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