10Q Q3 2004 DOC

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WIbOxo/Cpn24IwqzlktLPzrsHVEBr0hXah5ssAguIpIOcTlvy6xV3UbypPZt1Hqp eWAVH7V4Ut0BJLMrr3ClKA== 0000861878-04-000018.txt : 20041105 0000861878-04-000018.hdr.sgml : 20041105 20041105112649 ACCESSION NUMBER: 0000861878-04-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041105 DATE AS OF CHANGE: 20041105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERICYCLE INC CENTRAL INDEX KEY: 0000861878 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 363640402 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21229 FILM NUMBER: 041121565 BUSINESS ADDRESS: STREET 1: 28161 NORTH KEITH DRIVE STREET 2: - CITY: LAKE FOREST STATE: IL ZIP: 60045 BUSINESS PHONE: 8473675910 MAIL ADDRESS: STREET 1: 28161 NORTH KEITH DRIVE STREET 2: - CITY: LAKE FOREST STATE: IL ZIP: 60045 10-Q 1 formq304.htm 10Q Q3 2004 DOC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004 or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to _________

Commission File Number 0-21229

Stericycle, Inc.
(Exact name of registrant as specified in its charter)

Delaware 36-3640402

(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)

28161 North Keith Drive
Lake Forest, Illinois 60045
(Address of principal executive offices including zip code)

(847) 367-5910
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ],

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES [X] NO [ ],

As of November 3, 2004 there were 45,015,558 shares of the Registrant's Common Stock outstanding.

Stericycle, Inc.
Table of Contents

PART I. Financial Information Page No.



Item 1. Financial Statements



       Condensed Consolidated Balance Sheets as of
         September 30, 2004 (Unaudited) and December 31, 2003 1



       Condensed Consolidated Statements of Income
         for the three and nine months ended September 30, 2004 and 2003 (Unaudited) 2



       Condensed Consolidated Statements of Cash Flows
         for the nine months ended September 30, 2004 and 2003 (Unaudited) 3



       Notes to Condensed Consolidated Financial Statements (Unaudited) 4



Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16



Item 3. Qualitative and Quantitative Disclosures about Market Risk 22



Item 4. Controls and Procedures 22



PART II. Other Information



Item 1. Legal Proceedings 23



Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities 23



Item 6. Exhibits 24



Signatures 25

Certifications 26

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


                                                                  September 30,  December 31
                                                                      2004        2003
                                                                  -----------   -----------
                                                                  (unaudited)
                             ASSETS
Current assets:
Cash and cash equivalents....................................... $     8,955         7,240
Short-term investments..........................................       1,658           641
Accounts receivable, less allowance for doubtful
  accounts of $4,579 in 2004 and $4,149 in 2003.................      77,000        59,711
Parts and supplies..............................................       3,910         3,244
Prepaid expenses................................................       6,013         7,339
Notes receivable................................................       3,423         2,223
Deferred tax asset..............................................      12,908        12,345
Other...........................................................       5,817         4,994
                                                                  -----------   -----------
         Total current assets...................................     119,684        97,737
Property, plant and equipment, net..............................     128,877        96,562
                                                                  -----------   -----------
Other assets:
Goodwill, net...................................................     527,003       464,946
Intangible assets, less accumulated amortization of
  $7,288 in 2004 and $5,459 in 2003.............................      34,493        31,642
Notes receivable................................................       9,517         7,717
Other...........................................................       8,269         8,858
                                                                  -----------   -----------
  Total other assets............................................     579,282       513,163
                                                                  -----------   -----------
         Total assets........................................... $   827,843   $   707,462
                                                                  ===========   ===========
             LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt............................... $     7,968   $     4,830
Accounts payable................................................      19,217        15,741
Accrued liabilities.............................................      47,696        43,436
Deferred revenue................................................       9,247         4,987
                                                                  -----------   -----------
         Total current liabilities..............................      84,128        68,994
                                                                  -----------   -----------
Long-term debt, net of current portion..........................     189,668       163,016
Deferred income taxes...........................................      54,900        42,277
Other liabilities...............................................       5,698         4,411
Redeemable preferred stock:
  Series A convertible preferred stock (par value $.01 share,
    75,000 shares authorized, 22,799 outstanding in 2003,
    liquidation preference of $24,814 at December 31, 2003)               --        20,944
Common shareholders' equity:
Common stock (par value $.01 per share, 80,000,000
  shares authorized, 45,146,098 issued and outstanding in
  in 2004, 41,868,515 issued and outstanding in 2003)...........         452           420
Additional paid-in capital......................................     318,173       290,631
Accumulated other comprehensive income..........................        (534)          530
Retained earnings...............................................     175,358       116,239
                                                                  -----------   -----------
Total shareholders' equity......................................     493,449       407,820
                                                                  -----------   -----------
  Total liabilities and shareholders' equity.................... $   827,843   $   707,462
                                                                  ===========   ===========

The accompanying notes are an integral part of these financial statements

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(unaudited)

Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ------------------------ 2004 2003 2004 2003 ----------- ------------ ----------- ------------ Revenues........................... $ 135,989 $ 113,228 $ 377,338 $ 338,674 Costs and expenses: Cost of revenues................. 71,806 60,369 197,037 183,210 Selling, general and administrative expenses........ 19,253 16,781 54,805 49,259 Depreciaton and amortization..... 6,324 4,243 16,244 12,542 Write off of fixed assets........ -- -- 1,155 -- Acquisition related costs........ 392 216 586 430 ----------- ----------- ----------- ----------- Total costs and expenses...... 97,775 81,609 269,827 245,441 ----------- ----------- ----------- ----------- Income from operations............. 38,214 31,619 107,511 93,233 ----------- ----------- ----------- ----------- Other income (expense): Interest income.................. 168 232 286 492 Interest expense................. (3,266) (2,829) (8,379) (10,141) Loan amendment fees (2004)/ debt extinguishment fees (2003) -- -- (333) (3,268) Other expense.................... (275) (641) (1,242) (1,847) ----------- ----------- ----------- ----------- Total other income (expense).. (3,373) (3,238) (9,668) (14,764) ----------- ----------- ----------- ----------- Income before income taxes......... 34,841 28,381 97,843 78,469 Income tax expense................. 13,713 11,210 38,724 31,095 ----------- ----------- ----------- ----------- Net income......................... $ 21,128 $ 17,171 $ 59,119 $ 47,374 =========== =========== =========== =========== Earnings per share - Basic......... $ 0.47 $ 0.41 $ 1.33 $ 1.15 =========== =========== =========== =========== Earnings per share - Diluted....... $ 0.46 $ 0.37 $ 1.28 $ 1.03 =========== =========== =========== =========== Weighted average number of common shares outstanding--Basic. 45,229,174 41,969,757 44,306,070 41,221,421 =========== =========== =========== =========== Weighted average number of common shares outstanding--Diluted...... 46,299,925 46,285,458 46,304,444 46,000,142 =========== =========== =========== ===========

The accompanying notes are an integral part of these financial statements

STERICYCLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)


                                                                       For the Nine
                                                                Months Ended September 30,
                                                                  ----------------------
                                                                     2004        2003
                                                                  ----------  ----------
OPERATING ACTIVITIES:
Net income...................................................... $   59,119  $   47,374
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Stock compensation expense..................................         21          76
    Write-off deferred financing fees...........................         --         484
    Deferred tax expense........................................     11,660       6,634
    Tax benefit of disqualifying dispositions of stock
      obtained via exercise of options..........................      6,159       5,645
    Loss on sale/write-off of fixed assets......................      1,470         212
    Depreciation................................................     14,445      11,467
    Amortization................................................      1,799       1,075
Changes in operating assets and liabilities, net of
  effect of acquisitions:
    Accounts receivable.........................................     (7,312)      2,699
    Parts and supplies..........................................       (141)        334
    Prepaid expenses and other assets...........................      3,109       7,539
    Accounts payable............................................     (3,904)     (5,002)
    Accrued liabilities.........................................     (2,639)      9,224
    Deferred revenue............................................       (851)        522
                                                                  ----------  ----------
Net cash provided by operating activities.......................     82,935      88,283
                                                                  ----------  ----------
INVESTING ACTIVITIES:
  Payments for acquisitions and international
    investments, net of cash acquired...........................    (68,227)    (33,411)
  Short-term investments........................................     (1,017)       (790)
  Proceeds from sale of equipment...............................         61         384
  Capital expenditures..........................................    (23,343)    (14,561)
                                                                  ----------  ----------
Net cash used in investing activities...........................    (92,526)    (48,378)
                                                                  ----------  ----------
FINANCING ACTIVITIES:
  Net proceeds from issuance of note payable....................     12,097       1,132
  Net borrowings/(repayments) of senior credit facility.........     32,000     (27,792)
  Repurchase of senior subordinated debt........................         --     (17,775)
  Repayment of long-term debt...................................    (30,822)     (3,714)
  Payments of deferred financing costs..........................         --        (395)
  Purchase of common stock......................................    (10,188)         --
  Principal payments on capital lease obligations...............       (734)       (913)
  Proceeds from issuances of common stock.......................     10,217       8,024
                                                                  ----------  ----------
Net cash provide by (used in) financing activities..............     12,570     (41,433)
Effect of exchange rate changes on cash.........................     (1,264)       (305)
                                                                  ----------  ----------
Net increase (decrease) in cash and cash equivalents............      1,715      (1,833)
Cash and cash equivalents at beginning of period................      7,240       8,375
                                                                  ----------  ----------
Cash and cash equivalents at end of period...................... $    8,955  $    6,542
                                                                  ==========  ==========

Non-cash activities:
Net issuances of common stock for certain acquisitions           $      420  $       70
Net issuances of notes payable for certain acquisitions          $   17,249  $       --

The accompanying notes are an integral part of these financial statements

STERICYCLE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004

Unless the context requires otherwise, "we", "us" or "our" refers to Stericycle, Inc. and its subsidiaries on a consolidated basis.

NOTE 1--BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; but the Company believes the disclosures in the accompanying condensed consolidated financial statements are adequate to make the information presented not misleading. In our opinion, all adjustments necessary for a fair presentation for the periods presented have been reflected and are of a normal recurring nature. These condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and notes thereto for the year ended December 31, 2003, as filed with our Annual Report on Form 10-K for the year ended December 31, 2003. The results of operations for the three and nine-month periods ended September 30, 2004 are not necessarily indicative of the results that may be achieved for the entire year ending December 31, 2004.

NOTE 2-ACQUISITIONS

During the quarter ended September 30, 2004, we completed the acquisition of selected assets of Texas Environmental Services, Inc. which operated in Texas. In addition, our Mexican subsidiary, Medam S.A. de C.V., acquired all of the common stock of Sterimed S.A. de C.V., and all the remaining stock of Proterm de Mexico JV. S.A. de C.V. The combined purchase price of the three acquisitions was $11.6 million, of which $9.1 million was paid in cash, $2.1 million was paid by the delivery of promissory notes and $0.4 million paid by the issuance of shares of our common stock. The acquisitions were not significant to our operations.

During the quarter ended June 30, 2004, our international subsidiary, Stericycle International LLC, through a wholly owned United Kingdom subsidiary, completed the acquisition of all the common stock of White Rose Environmental Limited, which operates in the United Kingdom. The purchase price of $63.8 million was paid with $52.3 million in cash and the delivery of a $11.5 million interest-free promissory note. The promissory note was recorded on our balance sheet at $10.2 million after calculating an imputed interest rate. The acquisition was not significant to our operations.

During the quarter ended March 31, 2004, we completed the acquisition of selected assets from American Waste Industries, Inc., which operated in Virginia, Maryland and North Carolina. The purchase price was $12.6 million, of which $7.6 million was paid in cash and $5.0 million was paid by the delivery of a promissory note. The acquisition was not significant to our operations.

NOTE 3--STOCK OPTIONS

During the quarter ended September 30, 2004, options to purchase 28,020 shares of common stock were granted to employees. These options vest ratably over a five-year period and have exercise prices of $45.40-$51.14 per share.
During the quarter ended June 30, 2004, options to purchase 35,650 shares of common stock were granted to employees. These options vest ratably over a five- year period and have exercise prices of $45.97-$50.18 per share. In addition options to purchase 34,904 shares of common stock were granted to outside directors. These options vest ratably over a one-year period and have an exercise price of $47.07 per share.
During the quarter ended March 31, 2004, options to purchase 636,545 shares of common stock were granted to employees. These options vest ratably over a five-year period and have exercise prices of $44.22-$47.93 per share. In addition warrants to purchase 3,500 shares of common stock were granted to outside consultants. These warrants vest ratably over a five-year period and have an exercise price of $44.22.

Pro forma information regarding net income and net income per share is required by FAS 123 as if we had accounted for our employee stock options granted subsequent to December 31, 1994 under the fair value method of that statement. Options granted were valued using the Black-Scholes option-pricing model.

Option value models require the input of highly subjective assumptions. Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing method does not necessarily provide a reliable single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the option-vesting period. Our pro forma information follows (in thousands, except for per share information):

Three Months Ended Nine Months Ended September, 30 September, 30 2004 2003 2004 2003 --------------------- --------------------- Stock options expense included in net income.................... $ -- $ -- $ 13 $ 46 --------- -------- --------- ---------- As reported net income............. $ 21,128 $ 17,171 $ 59,119 $ 47,374 Pro forma impact of stock options, net of tax....................... 1,637 1,519 5,129 5,155 --------- -------- --------- ---------- Pro forma net income............... $ 19,491 $ 15,652 $ 53,990 $ 42,219 Earnings per share ========= ======== ========= ========== Basic-as reported............. $ 0.47 $ 0.41 $ 1.33 $ 1.15 ========= ======== ========= ========== Basic-pro forma............... $ 0.43 $ 0.37 $ 1.22 $ 1.02 ========= ======== ========= ========== Diluted-as reported........... $ 0.46 $ 0.37 $ 1.28 $ 1.03 ========= ======== ========= ========== Diluted-pro forma............. $ 0.42 $ 0.34 $ 1.18 $ 0.93 ========= ======== ========= ========== NOTE 4--COMMON AND PREFERRED STOCK.

During the quarter ended September 30, 2004, options to purchase 124,510 shares of common stock were exercised at prices ranging from $6.28-$46.80 per share. During the quarter, we repurchased on the open market and subsequently cancelled 100,000 shares of common stock. The weighted average repurchase price was $45.28 per share.

During the quarter ended June 30, 2004, options to purchase 262,238 shares of common stock were exercised at prices ranging from $3.45- $46.80 per share. During the quarter, we repurchased on the open market and subsequently cancelled 30,000 shares of common stock. The weighted average repurchase price was $45.48 per share.

During the quarter ended March 31, 2004, options to purchase 277,835 shares of common stock were exercised at prices ranging from $4.00- $35.79 per share. During the quarter, we repurchased on the open market and subsequently cancelled 100,000 shares of common stock. The weighted average repurchase price was $42.93 per share.

At the December 31, 2003, there were 22,799 shares of our Series A convertible preferred stock outstanding, which were convertible into 2,835,930 shares of common stock. During the quarter ended March 31, 2004, the holders of the preferred stock converted 10,451 shares into 1,300,000 shares of our common stock. During the quarter ended June 30, 2004, the holders converted their remaining 12,348 shares of preferred stock into 1,535,930 shares of our common stock. As of June 30, 2004, no shares of our Series A convertible preferred stock remained outstanding.

NOTE 5--NET INCOME PER COMMON SHARE

The following table sets forth the computation of basic and diluted net income per share:

STERICYCLE, INC. AND SUBSIDIARIES

STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)



                                                  Three Months Ended        Nine Months Ended
                                                     September 30,            September 30,
                                               ------------------------  ------------------------
                                                  2004         2003         2004         2003
                                               -----------  ----------- ------------  -----------
Numerator:
   Numerator for basic earnings
      per share.............................. $    21,128  $    17,171  $    59,119  $    47,374
                                               -----------  -----------  -----------  -----------
Denominator:
  Denominator for basic earnings per share
    Weighted average shares..................  45,229,174   41,969,757   44,306,070   41,221,421
                                               -----------  -----------  -----------  -----------
  Effective of dilutive securities:
    Employee stock options...................   1,062,070    1,471,440    1,989,726    1,934,766
    Warrants.................................       8,681        8,591        8,648        8,287
    Convertible preferred stock..............           0    2,835,668            0    2,835,668
                                               -----------  -----------  -----------  -----------
  Dilutive potential shares..................   1,070,751    4,315,699    1,998,374    4,778,721
                                               -----------  -----------  -----------  -----------
  Denominator for diluted earnings
  per share-adjusted weighted
  average shares and assumed
  conversions................................  46,299,925   46,285,456   46,304,444   46,000,142
                                               ===========  ===========  ===========  ===========

Earnings per share - Basic................... $      0.47  $      0.41  $      1.33  $      1.15
                                               ===========  ===========  ===========  ===========

Earnings per share - Diluted................. $      0.46  $      0.37  $      1.28  $      1.03
                                               ===========  ===========  ===========  ===========

NOTE 6--COMPREHENSIVE INCOME

The components of total comprehensive income are net income, change in cumulative currency translation adjustments and the change in cumulative unrealized losses on derivative instruments recorded in accordance with FAS 133. The following table details the total comprehensive income for the current and prior year periods (in thousands).

                                                  Changes in Balance Sheet
                                                 -------------------------     Total
                                          Net      Currency     Derivative  Comprehensive
                                         Income  Translation    Instruments    Income
                                       ------------------------------------------------
Three months ended September 30, 2003  $  17,171  $    655      $      --   $   17,826
Three months ended September 30, 2004     21,128      (481)            --       20,647
Nine months ended September 30, 2003      47,374       571            232       48,177
Nine months ended September 30, 2004      59,119    (1,064)            --       58,055

NOTE 7--GOODWILL AND OTHER INTANGIBLES

We have two geographical reporting segments, United States and Foreign Countries, both of which have goodwill. The changes in the carrying amount of goodwill for the nine months ended September 30, 2004, was as follows (in thousands):

                                      United    Foreign
                                      States    Countries   Total
                                    ---------- --------- ----------
Balance as of January 1, 2004       $ 458,593  $  6,353  $ 464,946
Change due to currency fluctuation         --       429        429
Allocated to intangibles during year   (1,700)   (2,827)    (4,527)
Goodwill acquired during year          18,196    47,959     66,155
                                    ---------- --------- ----------
Balance as of September 30, 2004    $ 475,089  $ 51,914  $ 527,003
                                    ========== ========= ==========

According to FAS 142, other intangible assets will continue to be amortized over their useful lives. During the quarter ended March 31, 2004, we recorded at fair value the intangibles acquired in connection with our acquisition of Pharmacy Software Solutions, Inc., in December 2003, which previously had been included in goodwill. During the quarter ended September 30, 2004, we recorded at fair value the intangibles acquired in connection with our acquisition of American Waste Industries, Inc., Texas Environmental Services, Inc., and Sterimed S.A. de C.V., which had previously been included in goodwill. At September 30, 2004, we had $39.3 million in the goodwill account related to the White Rose Environmental Limited acquisition and $0.4 million related to the acquisition of Proterm de Mexico. The purchase price allocations for both of these acquisitions are preliminary pending completion of certain intangible asset valuations.

During the quarter ended June 30, 2004 we performed our annual goodwill impairment evaluation and determined that none of our recorded goodwill was impaired. During this evaluation we compared our gross market value to our book value. Our gross market value was calculated by multiplying our shares outstanding on June 30, 2004 by the average closing share price for the previous year. Our book value was determined by subtracting our current liabilities from our total assets. We complete our annual impairment analysis of our indefinite lived intangibles (facility permits) during the quarter ended December 31 of each year.

NOTE 8--NON-CONSOLIDATING JOINT VENTURES

During the quarter ended March 31, 2004 we sold our minority interest investment in Evertrade Medical Waste (Pty) Ltd, a South African joint venture and the associated current receivables and loans due from the joint venture. The balance of the notes receivable issued related to the sale is included in current and long term notes receivable balances on the balance sheet. No gain or loss was recognized on the disposition of these assets.

NOTE 9--NEW ACCOUNTING STANDARDS

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, and Interpretation of Accounting Research Bulletin (ARB) No. 51" (the "Interpretation"). The Interpretation introduced a new consolidation model, which determines control, and consolidation based on potential variability in gains and losses of the entity being evaluated for consolidation. The adoption of the Interpretation did not have an impact on our consolidated financial statements.

NOTE 10--GUARANTEES

During the quarter ended March 31, 2004, we agreed to provide a guarantee in the amount of $10.0 million to a Japanese bank on behalf of one of our Japanese customers. This guarantee is for a period of five years and the amount will be reduced as the customer repays its loan to the bank.

NOTE 11-LEGAL PROCEEDINGS

We operate in a highly regulated industry and must deal with regulatory inquiries or investigations from time to time that may be initiated for a variety of reasons.

During the quarter ended September 30, 2004, there were no material developments in any of the litigation that we previously reported and that we describe again in this note.

In January 2003, we were sued in federal court in Arizona by a private plaintiff claiming anticompetitive conduct in Arizona, Colorado and Utah from November 1997 to the present and seeking certification of the lawsuit as a class action on behalf of all customers of ours and of Browning Ferris Industries, Inc. in the three-state area during the period in question. Over the next three months, four similar suits were filed in federal court in Utah, Arizona, Colorado and New Mexico. In February and May 2003, two additional suits were filed, in federal court in Utah and Arizona, claiming substantially the same anticompetitive conduct but not seeking class action certification. In December 2003, an eighth suit was filed in federal court in Utah claiming monopolistic and other anticompetitive conduct in California during the prior four years and seeking certification of the suit as a class action on behalf of all California customers of ours during this four-year period. These eight suits were subsequently consolidated before the same judge in federal court in Utah. The first five suits were consolidated under one consolidated class action complaint; the next two suits were consolidated for discovery purposes; and the eighth suit was coordinated for discovery purposes. In June 2004 we settled, for an immaterial amount, the suit filed in May 2003, which, as noted, did not seek class action certification. We believe that this suit was without merit and that none of the remaining seven suits has any merit.

We and four of our current or former officers and directors are parties to a suit filed in state court in Louisiana in July 2002 by a shareholder of our majority-owned subsidiary, 3CI Complete Compliance Corporation ("3CI"). This suit, which was filed on behalf of the minority shareholders of 3CI and derivatively on behalf of 3CI itself, alleges, among other claims, that we, and the four directors of 3CI who were serving as our designees (and who were also officers or directors of ours) unjustly enriched Stericycle at the expense of 3CI and its other shareholders. The plaintiff seeks, among other relief, damages and an order requiring the buyout of 3CI's minority shareholders. In October 2003, the plaintiffs filed an amended complaint adding 3CI as a derivative defendant. This suit is still in the discovery stage. We believe that the plaintiff's claims are without merit.

In May 2003, 3CI, at the direction of its independent directors, filed a declaratory judgment action in state court in Texas to resolve a disagreement with us over the proper rate of conversion of the shares of 3CI's preferred stock held by our wholly-owned subsidiary, Waste Systems, Inc. ("WSI"). In August 2003, this action was dismissed by the court on procedural grounds and 3CI refiled its action as a new suit.

In October 2003, the plaintiff in the Louisiana lawsuit and others answered or intervened in 3CI's Texas lawsuit, naming us as a third-party defendant and making substantially the same claims made in the Louisiana lawsuit. WSI and we have denied these claims, and believe that they are without merit.

In September 2003, the full board of 3CI appointed a special committee consisting of 3CI's three independent directors to act on 3CI's behalf in respect of the dispute with us and WSI regarding the conversion rate of 3CI's preferred stock. In January 2004, the full board expanded the special committee's authority to include an investigation of all claims by the plaintiff in the Louisiana lawsuit and by the third-party plaintiffs in the Texas lawsuit, and to act on 3CI's behalf in respect of both lawsuits. The committee is currently conducting its investigation. We expect that the committee will complete its investigation during the fourth quarter of 2004.

NOTE 12--SUBSEQUENT EVENTS

In October 2004 we exercised our option to redeem all of our outstanding 12-3/8% senior subordinated notes in the aggregate principal amount of $50.9 million. The redemption is anticipated to occur on November 15, 2004. By the terms of the governing trust indenture, the redemption price will be 106.1875% of the principal amount of the notes redeemed plus accrued interest. We will thus incur a cash redemption premium expense of approximately $3.2 million in connection with the redemption, in addition to the payment of the accrued interest of $3.2 million. We will also incur approximately $1.1 million on non-cash accelerated amortization of financing fees associated with our senior subordinated notes. We anticipate drawing on our revolving credit facility to fund the repurchase.

NOTE 13--CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Payments under our senior subordinated notes (the Notes) are unconditionally guaranteed, jointly and severally, by certain of our 100% owned domestic subsidiaries (collectively, "the Guarantors"). Financial information concerning the Guarantors as of September 30, 2004 and December 31, 2003 and for the three and nine-month periods ended September 30, 2004 and 2003 is presented below for purposes of complying with the reporting requirements of the Guarantor subsidiaries. The financial information concerning the Guarantors is being presented through condensed consolidating financial statements since we have more than minimal independent operations and the guarantees are full and unconditional and are joint and several. Financial statements for the Guarantors have not been presented because management does not believe that such financial statements are material to investors.

CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2004
UNAUDITED



                                                                       COMBINED
                                                                      STERICYCLE      NON-
                                            STERICYCLE,  GUARANTOR   AND GUARANTOR  GUARANTOR
                                               INC.     SUBSIDIARIES SUBSIDIARIES  SUBSIDIARIES ELIMINATIONS CONSOLIDATED
                                            ----------  -----------  ------------  -----------  -----------  ------------
ASSETS
Current assets:
   Cash and cash equivalents.............. $      863  $        --  $        863  $     8,092  $        --  $      8,955
   Other current assets...................     90,503       22,539       113,042       25,245      (27,558)      110,729
                                            ----------  -----------  ------------  -----------  -----------  ------------
Total current assets......................     91,366       22,539       113,905       33,337      (27,558)      119,684
Property, plant and equipment,
   net....................................     95,301            7        95,308       33,569           --       128,877
Goodwill, net.............................    468,925        1,573       470,498       56,505           --       527,003
Investment in subsidiaries................    102,302        3,434       105,736           --     (105,736)           --
Other assets..............................     42,622        2,310        44,932        7,347           --        52,279
                                            ----------  -----------  ------------  -----------  -----------  ------------
Total assets.............................. $  800,516  $    29,863  $    830,379  $   130,758  $  (133,294) $    827,843
                                            ==========  ===========  ============  ===========  ===========  ============
LIABILITIES AND SHAREHOLDERS'
   EQUITY
Current liabilities:
   Current portion of
     long-term debt....................... $    7,259  $        --  $      7,259  $       709  $        --  $      7,968
   Other current liabilities..............     75,264          185        75,449       28,269      (27,558)       76,160
                                            ----------  -----------  ------------  -----------  -----------  ------------
Total current liabilities.................     82,523          185        82,708       28,978      (27,558)       84,128
Long-term debt, net of current
   portion................................    167,181           --       167,181       22,487           --       189,668
Other liabilities.........................     57,363           --        57,363        3,235           --        60,598
Common shareholders' equity...............    493,449       29,678       523,127       76,058     (105,736)      493,449
                                            ----------  -----------  ------------  -----------  -----------  ------------
Total liabilities and
   shareholders' equity................... $  800,516  $    29,863  $    830,379  $   130,758  $  (133,294) $    827,843
                                            ==========  ===========  ============  ===========  ===========  ============

CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2003



                                                                       COMBINED
                                                                      STERICYCLE      NON-
                                            STERICYCLE,  GUARANTOR   AND GUARANTOR  GUARANTOR
                                               INC.     SUBSIDIARIES SUBSIDIARIES  SUBSIDIARIES ELIMINATIONS CONSOLIDATED
                                            ----------  -----------  ------------  -----------  -----------  ------------
ASSETS
Current assets:
   Cash and cash equivalents.............. $    5,766  $        --  $      5,766  $     1,474  $        --  $      7,240
   Other current assets...................     84,300       19,738       104,038        8,620      (22,161)       90,497
                                            ----------  -----------  ------------  -----------  -----------  ------------
Total current assets......................     90,066       19,738       109,804       10,094      (22,161)       97,737
Property, plant and equipment,
   net....................................     86,769           10        86,779        9,783           --        96,562
Goodwill, net.............................    447,485        5,226       452,711       12,235           --       464,946
Investment in subsidiaries................     45,223          829        46,052           --      (46,052)           --
Other assets..............................     49,009        3,221        52,230        1,731       (5,744)       48,217
                                            ----------  -----------  ------------  -----------  -----------  ------------
Total assets.............................. $  718,552  $    29,024  $    747,576  $    33,843  $   (73,957) $    707,462
                                            ==========  ===========  ============  ===========  ===========  ============
LIABILITIES AND SHAREHOLDERS'
   EQUITY
Current liabilities:
   Current portion of
     long-term debt....................... $    4,819  $        --  $      4,819  $        11  $        --  $      4,830
   Other current liabilities..............     79,079           --        79,079        7,246      (22,161)       64,164
                                            ----------  -----------  ------------  -----------  -----------  ------------
Total current liabilities.................     83,898           --        83,898        7,257      (22,161)       68,994
Long-term debt, net of current
   portion................................    160,794           --       160,794        7,966       (5,744)      163,016
Other liabilities.........................     45,096           --        45,096        1,592           --        46,688
Redeemable preferred stock................     20,944           --        20,944           --           --        20,944
Common shareholders' equity...............    407,820       29,024       436,844       17,028      (46,052)      407,820
                                            ----------  -----------  ------------  -----------  -----------  ------------
Total liabilities and
   shareholders' equity................... $  718,552  $    29,024  $    747,576  $    33,843  $   (73,957) $    707,462
                                            ==========  ===========  ============  ===========  ===========  ============

CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2004
UNAUDITED



                                                                       COMBINED
                                                                      STERICYCLE      NON-
                                            STERICYCLE,  GUARANTOR   AND GUARANTOR  GUARANTOR
                                               INC.     SUBSIDIARIES SUBSIDIARIES  SUBSIDIARIES ELIMINATIONS CONSOLIDATED
                                            ----------  -----------  ------------  -----------  -----------  ------------
Revenues.................................. $  111,833  $       680  $    112,513  $    24,039  $      (563) $    135,989

Cost of revenues..........................     59,911          331        60,242       17,143         (563)       76,822
Selling, general, and
   administrative expenses................     16,496          122        16,618        3,943           --        20,561
Acquisition related costs.................        392           --           392           --           --           392
                                            ----------  -----------  ------------  -----------  -----------  ------------
Total costs and expenses..................     76,799          453        77,252       21,086         (563)       97,775
                                            ----------  -----------  ------------  -----------  -----------  ------------
Income from operations....................     35,034          227        35,261        2,953           --        38,214
Equity in net income of
   subsidiaries...........................      1,667         (115)        1,552           --       (1,552)           --
Other (expense) income, net...............     (2,852)          31        (2,821)        (552)          --        (3,373)
                                            ----------  -----------  ------------  -----------  -----------  ------------
Income before income taxes................     33,849          143        33,992        2,401       (1,552)       34,841
Income tax expense (benefit)..............     12,721           89        12,810          903           --        13,713
                                            ----------  -----------  ------------  -----------  -----------  ------------
Net income (loss)......................... $   21,128  $        54  $     21,182  $     1,498  $    (1,552) $     21,128
                                            ==========  ===========  ============  ===========  ===========  ============

CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2003
UNAUDITED



                                                                       COMBINED
                                                                      STERICYCLE      NON-
                                            STERICYCLE,  GUARANTOR   AND GUARANTOR  GUARANTOR
                                               INC.     SUBSIDIARIES SUBSIDIARIES  SUBSIDIARIES ELIMINATIONS CONSOLIDATED
                                            ----------  -----------  ------------  -----------  -----------  ------------
Revenues.................................. $   99,378  $     5,780  $    105,158  $     8,861  $      (791) $    113,228

Cost of revenues..........................     54,354        4,324        58,678        5,799         (749)       63,728
Selling, general, and
   administrative expenses................     14,836          904        15,740        1,925           --        17,665
Acquisition related costs.................        216           --           216           --           --           216
                                            ----------  -----------  ------------  -----------  -----------  ------------
Total costs and expenses..................     69,406        5,228        74,634        7,724         (749)       81,609
                                            ----------  -----------  ------------  -----------  -----------  ------------
Income from operations....................     29,972          552        30,524        1,137          (42)       31,619
Equity in net income of
   subsidiaries...........................      1,779          315         2,094           --       (2,094)           --
Other (expense) income, net...............     (3,087)          16        (3,071)        (209)          42        (3,238)
                                            ----------  -----------  ------------  -----------  -----------  ------------
Income before income taxes................     28,664          883        29,547          928       (2,094)       28,381
Income tax expense (benefit)..............     11,493          214        11,707         (497)          --        11,210
                                            ----------  -----------  ------------  -----------  -----------  ------------
Net income (loss)......................... $   17,171  $       669  $     17,840  $     1,425  $    (2,094) $     17,171
                                            ==========  ===========  ============  ===========  ===========  ============

CONDENSED CONSOLIDATING STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2004
UNAUDITED



                                                                       COMBINED
                                                                      STERICYCLE      NON-
                                            STERICYCLE,  GUARANTOR   AND GUARANTOR  GUARANTOR
                                               INC.     SUBSIDIARIES SUBSIDIARIES  SUBSIDIARIES ELIMINATIONS CONSOLIDATED
                                            ----------  -----------  ------------  -----------  -----------  ------------
Revenues.................................. $  331,846  $     1,596  $    333,442  $    45,639  $    (1,743) $    377,338

Cost of revenues..........................    179,058          714       179,772       31,652       (1,743)      209,681
Selling, general, and
   administrative expenses................     49,261          432        49,693        8,712           --        58,405
Write-down of treatment related fixed asse      1,129           --         1,129           26           --         1,155
Acquisition related costs.................        586           --           586           --           --           586
                                            ----------  -----------  ------------  -----------  -----------  ------------
Total costs and expenses..................    230,034        1,146       231,180       40,390       (1,743)      269,827
                                            ----------  -----------  ------------  -----------  -----------  ------------
Income from operations....................    101,812          450       102,262        5,249           --       107,511
Equity in net income of
   subsidiaries...........................      3,269          191         3,460           --       (3,460)           --
Other (expense) income, net...............     (8,602)          53        (8,549)      (1,119)          --        (9,668)
                                            ----------  -----------  ------------  -----------  -----------  ------------
Income before income taxes................     96,479          694        97,173        4,130       (3,460)       97,843
Income tax expense (benefit)..............     37,360          176        37,536        1,188           --        38,724
                                            ----------  -----------  ------------  -----------  -----------  ------------
Net income................................ $   59,119  $       518  $     59,637  $     2,942  $    (3,460) $     59,119
                                            ==========  ===========  ============  ===========  ===========  ============

CONDENSED CONSOLIDATING STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2003
UNAUDITED



                                                                       COMBINED
                                                                      STERICYCLE      NON-
                                            STERICYCLE,  GUARANTOR   AND GUARANTOR  GUARANTOR
                                               INC.     SUBSIDIARIES SUBSIDIARIES  SUBSIDIARIES ELIMINATIONS CONSOLIDATED
                                            ----------  -----------  ------------  -----------  -----------  ------------
Revenues.................................. $  298,269  $    16,807  $    315,076  $    26,009  $    (2,411) $    338,674

Cost of revenues..........................    166,325       11,878       178,203       17,293       (2,308)      193,188
Selling, general, and
   administrative expenses................     43,344        3,006        46,350        5,473           --        51,823
Acquisition related costs.................        430           --           430           --           --           430
                                            ----------  -----------  ------------  -----------  -----------  ------------
Total costs and expenses..................    210,099       14,884       224,983       22,766       (2,308)      245,441
                                            ----------  -----------  ------------  -----------  -----------  ------------
Income from operations....................     88,170        1,923        90,093        3,243         (103)       93,233
Equity in net income of
   subsidiaries...........................      4,079          660         4,739           --       (4,739)           --
Other (expense) income, net...............    (14,292)          41       (14,251)        (616)         103       (14,764)
                                            ----------  -----------  ------------  -----------  -----------  ------------
Income before income taxes................     77,957        2,624        80,581        2,627       (4,739)       78,469
Income tax expense (benefit)..............     30,583          738        31,321         (226)          --        31,095
                                            ----------  -----------  ------------  -----------  -----------  ------------
Net income (loss)......................... $   47,374  $     1,886  $     49,260  $     2,853  $    (4,739) $     47,374
                                            ==========  ===========  ============  ===========  ===========  ============

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2004
UNAUDITED



                                                                       COMBINED
                                                                      STERICYCLE      NON-
                                            STERICYCLE,  GUARANTOR   AND GUARANTOR  GUARANTOR
                                               INC.     SUBSIDIARIES SUBSIDIARIES  SUBSIDIARIES ELIMINATIONS CONSOLIDATED
                                            ----------  -----------  ------------  -----------  -----------  ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net cash provided by
     operating activities................. $   81,546  $        --  $     81,546  $     1,389  $        --  $     82,935
                                            ----------  -----------  ------------  -----------  -----------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures...................    (20,501)          --       (20,501)      (2,842)          --       (23,343)
   Proceeds from sale of equipment........         59           --            59            2                         61
   Payments for acquisitions and
     international investments, net of
     cash acquired........................    (14,857)         (10)      (14,867)     (53,360)          --       (68,227)
   Short-term  investments................        181           --           181       (1,198)          --        (1,017)
                                            ----------  -----------  ------------  -----------  -----------  ------------
Net cash used in investing activities         (35,118)         (10)      (35,128)     (57,398)          --       (92,526)
                                            ----------  -----------  ------------  -----------  -----------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net repayments of senior credit facilit     32,000           --        32,000           --           --        32,000
   Principal payments on capital lease
     obligations..........................       (713)          --          (713)         (21)          --          (734)
   Repayment of long term debt............    (29,535)          --       (29,535)      (1,287)          --       (30,822)
   Purchase of treasury stock.............    (10,188)          --       (10,188)          --           --       (10,188)
   Net proceeds from issuance
     of notes payable.....................         --           --            --       12,097           --        12,097
   Proceeds from issuance of common
     stock................................     10,217           --        10,217           --           --        10,217
    Intercompany financing of acquisitions    (53,112)          10       (53,102)      53,102           --            --
                                            ----------  -----------  ------------  -----------  -----------  ------------
Net cash provided by (used in) financing a    (51,331)          10       (51,321)      63,891           --        12,570
                                            ----------  -----------  ------------  -----------  -----------  ------------
Effect of exchange rate changes on cash...         --           --            --       (1,264)          --        (1,264)
                                            ----------  -----------  ------------  -----------  -----------  ------------
Net (decrease) increase in cash and
   cash equivalents....................... $   (4,903) $        --  $     (4,903) $     6,618  $        --         1,715
                                            ==========  ===========  ============  ===========  ===========
Cash and cash equivalents at beginning
   of period..............................                                                                         7,240
                                                                                                             ------------
Cash and cash equivalents at end of
   period.................................                                                                  $      8,955
                                                                                                             ============

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2003
UNAUDITED



                                                                       COMBINED
                                                                      STERICYCLE      NON-
                                            STERICYCLE,  GUARANTOR   AND GUARANTOR  GUARANTOR
                                               INC.     SUBSIDIARIES SUBSIDIARIES  SUBSIDIARIES ELIMINATIONS CONSOLIDATED
                                            ----------  -----------  ------------  -----------  -----------  ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net cash provided by
     operating activities................. $   85,714  $      (203) $     85,511  $     2,772  $        --  $     88,283
                                            ----------  -----------  ------------  -----------  -----------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures...................    (12,802)        (254)      (13,056)      (1,505)          --       (14,561)
   Proceeds from sale of equipment........        323           --           323           61                        384
   Payments for acquisitions and
     international investments, net of
     cash acquired........................     (4,982)     (27,932)      (32,914)        (497)          --       (33,411)
   Short-term  investments................       (558)          --          (558)        (232)          --          (790)
                                            ----------  -----------  ------------  -----------  -----------  ------------
Net cash used in investing activities         (18,019)     (28,186)      (46,205)      (2,173)          --       (48,378)
                                            ----------  -----------  ------------  -----------  -----------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net borrowings on senior credit facilit    (27,792)          --       (27,792)          --           --       (27,792)
   Principal payments on capital lease
     obligations..........................       (747)        (183)         (930)          17           --          (913)
   Net proceeds from issuance
     of notes payable.....................         --           --            --        1,132           --         1,132
   Repayments on long-term debt...........     (2,575)          --        (2,575)      (1,139)          --        (3,714)
   Payments of deferred financing costs...       (395)          --          (395)          --           --          (395)
   Repurchase of senior subordinated debt.    (17,775)          --       (17,775)          --           --       (17,775)
   Proceeds from issuance of common
     stock................................      8,024           --         8,024           --           --         8,024
   Intercompany financing of acquisitions.    (27,932)      27,932            --           --           --            --
                                            ----------  -----------  ------------  -----------  -----------  ------------
Net cash provided by (used in) financing a    (69,192)      27,749       (41,443)          10           --       (41,433)
                                            ----------  -----------  ------------  -----------  -----------  ------------
Effect of exchange rate changes on cash...         --           --            --         (305)          --          (305)
                                            ----------  -----------  ------------  -----------  -----------  ------------
Net (decrease) increase in cash and
   cash equivalents....................... $   (1,497) $      (640) $     (2,137) $       304  $        --        (1,833)
                                            ==========  ===========  ============  ===========  ===========
Cash and cash equivalents at beginning
   of period..............................                                                                         8,375
                                                                                                             ------------
Cash and cash equivalents at end of
   period.................................                                                                  $      6,542
                                                                                                             ============

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We were incorporated in March 1989. We provide compliance services including regulated medical waste collection, transportation and treatment services to our customers and related training and education programs and consulting services. We also sell ancillary supplies and transport pharmaceuticals, photographic chemicals, lead foil and amalgam for recycling in selected geographic service areas. We are also expanding into international markets through acquisitions, joint ventures and/or by licensing our proprietary technology and selling associated equipment.

THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2003

The following summarizes (in thousands) the Company's operations:


                                                            Three Months Ended September 30,
                                                       -----------------------------------------
                                                              2004                  2003
                                                       ------------------    -------------------
                                                          $         %           $           %
                                                       --------  --------    --------    -------
Revenues............................................. $135,989     100.0   $ 113,228      100.0
Cost of revenues.....................................   71,806      52.8      60,369       53.3
Depreciation.........................................    5,016       3.7       3,359        3.0
Write-down of treatment related fixed assets...........      0       0.0           0        0.0
                                                       --------  --------    --------    -------
Total cost of revenues...............................   76,822      56.5      63,728       56.3
Gross profit.........................................   59,167      43.5      49,500       43.7
Selling, general and
  administrative expenses............................   19,253      14.2      16,781       14.8
Depreciation.........................................      703       0.5         495        0.4
Amortization.........................................      605       0.4         389        0.3
Acquisition related costs............................      392       0.3         216        0.2
                                                       --------  --------    --------    -------
Total selling, general and administrative expenses...   20,953      15.4      17,881       15.8
Income from operations...............................   38,214      28.1      31,619       27.9
Net income...........................................   21,128      15.5      17,171       15.2
Earnings per share-diluted........................... $   0.46             $    0.37

Revenues. Revenues increased $22.8 million, or 20.1%, to $136.0 million during the quarter ended September 30, 2004 from $113.2 million during the comparable quarter in 2003 as a result of acquisitions completed during 2004 and our continued strategy of focusing on sales to higher- margin small quantity customers. International equipment related revenues were $2.1 million during the quarter as compared to $0.2 million during the comparable quarter in 2003. This increase is a result of the delivery of a large portion of an order of ETD equipment to a customer in Japan during 2004. During the quarter ended September 30, 2004, acquisitions less than one year old contributed approximately $17.0 million to the increase in our revenues from 2003. For the quarter, our base internal revenue growth for small quantity customers increased approximately 9% while revenues from large quantity customers decreased by approximately 4% because of our program of improving lower-margin accounts. This margin improvement program identifies large quantity customers with margins below internally acceptable thresholds and we make adjustments to pricing or service in an effort to improve the margin. These adjustments may result in our not renewing the customer contract and therefore may result in a reduction of revenues.

We believe the size of the regulated medical waste market in the United States remained relatively stable during the quarter.

Cost of revenues. Cost of revenues increased by $13.1 million to $76.8 million during the quarter ended September 30, 2004 from $63.7 million during the comparable quarter in 2003. This increase in primarily related to our increased revenues. Our gross margin percentage decreased to 43.5% during the quarter from 43.7% during the same quarter in 2003 as the increased revenues from the international acquisitions, which have lower gross margins, reduced gross margins by approximately 230 basis points. This was partially offset by an increase in gross margins on our domestic business by approximately 190 basis points as we continued to realize improvements from our ongoing programs to improve the margins on our large quantity business and increased our number of small quantity customers electing our Steri- Safe^SM program from 65,000 to 84,000. This improvement in gross margin was partially offset by an increase in energy costs in 2004 versus the prior year.

Selling, general and administrative expenses. Selling, general and administrative expenses, including acquisition related costs, increased to $21.0 million for the quarter ended September 30, 2004 from $17.9 million for the comparable quarter in 2003. The increase was the result of higher spending related to our acquisitions and strategic marketing programs such as BioSystems, Steri-Safe^SM and our other new initiatives, partially offset by lower bad debt expense. Amortization expense increased to $0.6 million during the quarter from $0.4 million in the same quarter in 2003. This increase was the result of intangibles identified relative to acquisitions completed throughout 2003. Selling, general and administrative expenses as a percent of revenues decreased to 15.4% during the quarter from 15.8% during the comparable quarter in 2003.

Income from operations. Income from operations increased to $38.2 million for the quarter ended September 30, 2004 from $31.6 million for the comparable quarter in 2003. The increase was due to higher gross profit, partially offset by the higher selling, general and administrative expenses during the quarter. Income from operations as a percentage of revenue increased to 28.1% during the quarter from 27.9% during the same quarter in 2003 as a result of the factors described above.

Net interest expense. Net interest expense increased to $3.1 million during the quarter ended September 30, 2004 from $2.6 million during the comparable quarter in 2003 due to higher debt outstanding and modestly higher interest rates.

Income tax expense. Income tax expense increased to $13.7 million for the quarter ended September 30, 2004 from $11.2 million for the comparable quarter in 2003. The increase was due to higher taxable income partially offset by a lower effective tax rate. The effective tax rates for the quarters ended September 30, 2004 and 2003 were 39.4% and 39.5%, respectively.

NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2003

The following summarizes (in thousands) the Company's operations:


                                                            Nine Months Ended September, 30
                                                       -----------------------------------------
                                                               2004                  2003
                                                       ------------------    -------------------
                                                          $         %           $           %
                                                       --------  --------    --------    -------
Revenues............................................. $377,338     100.0   $ 338,674      100.0
Cost of revenues.....................................  197,037      52.2     183,210       54.1
Depreciation.........................................   12,644       3.4       9,978        2.9
Write-down of treatment related fixed assets.........    1,155       0.3           0        0.0
                                                       --------  --------    --------    -------
Total cost of revenues...............................  210,836      55.9     193,188       57.0
Gross profit.........................................  166,502      44.1     145,486       43.0
Selling, general and
  administrative expenses............................   54,805      14.5      49,259       14.5
Depreciation.........................................    1,801       0.5       1,489        0.4
Amortization.........................................    1,799       0.5       1,075        0.3
Acquisition related costs............................      586       0.2         430        0.1
                                                       --------  --------    --------    -------
Total selling, general and administrative expenses...   58,991      15.6      52,253       15.4
Income from operations...............................  107,511      28.5      93,233       27.5
Net income...........................................   59,119      15.7      47,374       14.0
Earnings per share-diluted........................... $   1.28             $    1.03

Revenues. Revenues increased $38.7 million, or 11.4%, to $377.3 million during the nine months ended September 30, 2004 from $338.7 million during the comparable period in 2003 as a result of increased revenues from acquisitions and our continued strategy of focusing on sales to higher- margin small quantity customers. International equipment related revenues were $7.9 million during the period as compared to $1.3 million during the comparable period in 2003. This increase is a result of the delivery of a large portion of an order of ETD equipment to a customer in Japan during 2004. During the nine months ended September 30, 2004, acquisitions less than one year old contributed approximately $24.4 million to the increase in our revenues from 2003. For the period, our base internal revenue growth for small quantity customers increased approximately 9% while revenues from large quantity customers decreased by approximately 6% because of our program of improving lower-margin accounts. This margin improvement program identifies large quantity customers with margins below internally acceptable thresholds and we make adjustments to pricing or service in an effort to improve the margin. These adjustments may result in our not renewing the customer contract and therefore may result in a reduction of revenues.

We believe the size of the regulated medical waste market in the United States remained relatively stable during the period.

Cost of revenues. Cost of revenues increased by $17.6 million to $210.8 million during the nine months ended September 30, 2004 from $193.2 million during the comparable period in 2003. This increase is primarily related to our increased revenues and a write-off of $1.2 million in incineration treatment related fixed assets during the period in 2004. Our gross margin percentage increased to 44.1% during the period from 43.0% during the comparable period in 2003 as we continued to realize improvements from our ongoing programs to improve the margins on our large quantity business and increased our number of small quantity customers electing our Steri- Safe^SM program from 55,000 to 84,000. In addition we were able to improve our transportation productivity by increasing our route density. This improvement in gross margin was partially offset by a 0.3% reduction in the gross margin as a result of the above mentioned fixed asset write-off and by an increase in energy costs in 2004.

Selling, general and administrative expenses. Selling, general and administrative expenses, including acquisition related costs, increased to $59.0 million for the nine months ended September 30, 2004 from $52.3 million for the comparable period in 2003. The increase was the result of higher spending related to acquisitions and strategic marketing programs such as BioSystems, Steri-Safe^SM and our other new initiatives, partially offset by lower bad debt expense. Amortization expense increased to $1.8 million during the period from $1.1 million in the same period in 2003. This increase was the result of intangibles identified relative to acquisitions completed throughout 2003. Selling, general and administrative expenses as a percent of revenues increased to 15.6% during the period from 15.4% during the comparable period in 2003.

Income from operations. Income from operations increased to $107.5 million for the nine months ended September 30, 2004 from $93.2 million for the comparable period in 2003. The increase was due to higher gross profit, partially offset by the above mentioned fixed asset write-off and higher selling, general and administrative expenses during the period. Income from operations as a percentage of revenue increased to 28.5% during the period from 27.5% during the same period in 2003 as a result of the factors described above.

Net interest expense. Net interest expense decreased to $8.1 million during the nine months ended September 30, 2004 from $9.6 million during the comparable period in 2003 primarily due to reduced debt and modestly lower interest rates.

Loan amendment fees/Debt extinguishments. We did not repurchase any of our 12 3/8% senior subordinated notes in the nine months ended September 30, 2004. During the same period in 2003 we incurred a $3.3 million expense related to the repurchase of $17.8 million of these notes. During the nine months ended September 30, 2004, and in connection with the acquisition of White Rose Environmental, we exercised options available to us under our senior secured credit facility and amended the revolving loan facility. We incurred $0.3 million in expense related to these items.

Income tax expense. Income tax expense increased to $38.7 million for the nine months ended September 30, 2004 from $31.1 million for the comparable period in 2003. The increase was due to higher taxable income.

LIQUIDITY AND CAPITAL RESOURCES

Our credit facility requires us to comply with various financial, reporting, and other covenants and restrictions, including a restriction on dividend payments. At September 30, 2004 we were in compliance with all of our financial debt covenants. As of September 30, 2004, we had $114.4 million of borrowings outstanding under our senior secured credit facility, consisting of $52.0 million under our revolving credit facility and $62.4 million under our Term A loan facility. During the quarter ended June 30, 2004 we exercised an option on our senior secured credit facility to increase the capacity of our revolving credit facility by $50.0 million and also amended the agreement to allow us to request another $50.0 million increase to the revolving credit facility capacity, which we then exercised for $32.0 million. This resulted in our revolving credit facility capacity increasing to $187.0 million with the ability to request another $18.0 in capacity if needed. In July 2004 we also amended our senior secured credit agreement to allow us to prepay the Term B loan facility independent of the Term A loan facility. We then prepaid the entire $27.3 million Term B loan facility in July 2004, while drawing on our revolving credit facility.

In October 2004 we exercised our option to redeem all of our outstanding 12-3/8% senior subordinated notes in the aggregate principal amount of $50.9 million. The redemption is anticipated to occur on or after November 15, 2004. By the terms of the governing trust indenture, the redemption price will be 106.1875% of the principal amount of the notes redeemed plus accrued interest. We will thus incur a cash redemption premium expense of approximately $3.2 million in connection with the redemption, in addition to the payment of the accrued interest of $3.2 million. We will also incur approximately $1.1 million of non-cash accelerated amortization of financing fees associated with our senior subordinated notes. We anticipate drawing on our revolving credit facility to fund the repurchase.

Working Capital. At September 30, 2004, our working capital was $35.6 million compared to working capital of $27.3 million at December 31, 2003. The increase in working capital was primarily due to higher accounts receivable and cash balances and partially offset by higher accounts payable and deferred revenue balances. The changes were primarily the result of acquisitions completed in June and July 2004. At September 30, 2004, we had available a $187.0 million revolving line of credit under our senior secured credit facility which was secured by our accounts receivable and all of our other assets. At September 30, 2004 we had borrowed $52.0 million and had committed $29.0 million as letters of credit under the line.

Net Cash Provided or Used. Net cash provided by operating activities was $82.9 million during the nine months ended September 30, 2004 compared to $88.3 million for the comparable period in 2003. This decrease primarily reflects decreased accounts payable and higher income tax payments in 2004 versus 2003 and higher accounts receivable balances partially offset by higher net income and deferred income tax and depreciation and amortization balances. Net cash provided by operating activities during the nine months ended September 30, 2004 included a $6.2 million tax benefit from disqualifying dispositions of stock acquired upon the exercise of incentive stock options, compared to a $5.6 million tax benefit during the comparable quarter in 2003.

Net cash used in investing activities for the nine months ended September 30, 2004 was $92.5 million compared to $48.4 million for the comparable period in 2003. This increase is primarily attributable to the White Rose Environmental Limited acquisition, which occurred in June 2004. Cash investments in acquisitions and international joint ventures for the nine months ended September 30, 2004 were $68.2 million versus $33.4 million in the comparable period in 2003. Capital expenditures were $23.3 million for the period compared to $14.6 million during the same period in 2003 primarily attributable to the investments being made to rollout the BioSystems program nationwide.

At September 30, 2004 we had approximately 10% of our treatment capacity in North America in incineration and approximately 90% in non-incineration technologies such as our proprietary patented ETD technology and autoclaving. We intend to reduce the incineration portion, as customers' preferences, regulations and business circumstances permit. The implementation of our commitment to move away from incineration may result in a write-down of the incineration equipment as and when we close incinerators that we are currently operating. Our commitment to move away from incineration is in the nature of a goal to be accomplished over an indeterminate number of years. Because of uncertainties relating, among other things, to customer education and acceptance and legal requirements to incinerate portions of the medical waste, we do not have a timetable for this transition. However, during the second quarter of 2004 we began the process of converting our Baltimore, MD incinerator to an autoclave and closed our Terrell, TX incinerator. We incurred a $1.2 million write-off of related equipment when it became idle during the quarter ended June 30, 2004.

Net cash provided by financing activities was $12.6 million during the nine months ended September 30, 2004 compared to net cash used in financing activities of $41.4 million for the comparable period in 2003. This is primarily the result of additional borrowings to fund the White Rose Environmental Limited acquisition in June 2004.

In addition during the nine-month period ended September 30, 2004 we issued a $5.0 million promissory note in connection with the American Waste Industries, Inc. acquisition, a $10.2 million promissory note in connection with the White Rose Environmental Limited acquisition and a $2.1 million promissory note in connection with the Texas Environmental Services Inc. acquisition.

ITEM 3-QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to market risks arising from changes in interest rates on our senior secured credit facility. Our interest rate exposure results from changes in LIBOR or the base rate, which are used to determine the applicable interest rates under our term loans and revolving credit facility. Our potential loss over one year that would result from a hypothetical, instantaneous and unfavorable change of 100 basis points in the interest rate on all of our variable rate obligations would be approximately $1.1 million. Fluctuations in interest rates will not affect the interest payable on our senior subordinated notes, which is fixed.

We have exposure to currency exchange rate fluctuations between the US dollar (USD) and UK pound sterling (GBP) related to a 15 million GBP intercompany loan with White Rose Environmental. We have attempted to hedge this exposure by purchasing forward contracts for the future sale of GBP that align with the repayment terms of the intercompany loan. The contracts are marked to market at the end of each reporting period and the gain or loss, along with the currency gain or loss on the underlying loan balance, is recorded in the other income/expense line of the income statement.

We have exposure to commodity pricing for gas and diesel fuel for our trucks. We do not hedge these items to manage the exposure.

ITEM 4-CONTROLS AND PROCEDURES

Our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter covered by this Report. On the basis of this evaluation, our President and Chief Executive Officer and our Chief Financial Officer each concluded that our disclosure controls and procedures were effective.

The term "disclosure controls and procedures' is defined in Rule 13a-14(e) of the Securities Exchange Act of 1934 as "controls and other procedures designed to ensure that information required to be disclosed by the issuer in the reports, files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the [Securities and Exchange] Commission's rules and forms." Our disclosure controls and procedures are designed to ensure that material information relating to us and our consolidated subsidiaries is accumulated and communicated to our management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding our required disclosures.

During the quarter ended September 30, 2004, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely materially to affect, our internal controls over financial reporting.

FROM TIME TO TIME WE ISSUE FORWARD-LOOKING STATEMENTS RELATING TO SUCH THINGS AS ANTICIPATED FINANCIAL PERFORMANCE, BUSINESS PROSPECTS, ACQUISITION ACTIVITIES AND SIMILAR MATTERS.

THESE FORWARD-LOOKING STATEMENTS MAY INVOLVE RISKS AND UNCERTAINTIES, SOME OF WHICH ARE BEYOND OUR CONTROL (FOR EXAMPLE, GENERAL ECONOMIC CONDITIONS). OUR ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM THE RESULTS DESCRIBED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE SUCH DIFFERENCES INCLUDE DIFFICULTIES IN COMPLETING THE INTEGRATION OF ACQUIRED BUSINESSES, CHANGES IN GOVERNMENTAL REGULATION OF MEDICAL WASTE COLLECTION AND TREATMENT, AND INCREASES IN TRANSPORTATION AND OTHER OPERATING COSTS, AS WELL AS VARIOUS OTHER FACTORS.

PART II
OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

See Note 11, Legal Proceedings, in the Notes to the Condensed Consolidated Financial Statements. (Item 1 of Part 1).

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about our purchases during the nine months ended September 30, 2004 of shares of our common stock.

Issuer Purchases of Equity Securities
Maximum Number (or Approximate Dollar Value) of Total Shares (or Number of Shares Units) that Average (or Units) May Yet Be Total Price Purchased as Part Purchased Number of Share Paid per of Publicly Under the (or Units) Share Announced Plans Plans or Period Purchased (or Unit) or Programs Programs =========================================================================================== January 1-January 31, 2004 100,000 42.93 100,000 2,557,170 February 1-February 29, 2004 -- -- -- 2,557,170 March 1-March 31, 2004 -- -- -- 2,557,170 April 1-April 30, 2004 -- -- -- 2,557,170 May 1-May 31, 2004 -- -- -- 2,557,170 June 1-June 30, 2004 30,000 45.48 30,000 2,527,170 July 1-July 31, 2004 -- -- -- 2,527,170 August 1-August 31, 2004 -- -- -- 2,527,170 September 1-September 30, 2004 100,000 45.28 100,000 2,427,170

The shares were repurchased as part of the plan announced on May 16, 2002, authorizing the repurchase of up to 3,000,000 shares of our common stock. The plan does not have an expiration date.

ITEM 6.EXHIBITS

3.1 Amendment of amended and restated bylaws, effective August 10, 2004

10.1 Amendment No. 6 to Amended and Restated Credit Agreement, dated as of August 23, 2004, among us as the borrower, certain subsidiaries of ours as guarantors, various financial institutions and other persons from time to time parties as the lenders, and Bank of America, N.A., as the administrative agent

10.2 Form of stock option agreement used for the grant of a nonstatutory stock option under our 1997 Stock Option Plan

10.3 Form of stock option agreement used for the grant of an incentive stock option under our 1997 Stock Option Plan

10.4 Form of stock option agreement used for the grant of a nonstatutory stock option under our 2000 Nonstatutory Stock Option Plan

10.5 Form of stock option agreement used for the grant of a nonstatutory stock option under our Directors Stock Option Plan

31.1 Rule 13a-14(a)/15d-14(a) Certification of Mark C. Miller, President and Chief Executive Officer

31.2 Rule 13a-14(a)/15d-14(a) Certification of Frank J.M. ten Brink, Executive Vice President and Chief Financial Officer

32 Section 1350 Certification of Mark C. Miller, President and Chief Executive Officer, and Frank J.M. ten Brink, Executive Vice President and Chief Financial Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 5, 2004.

	STERICYCLE, INC.
	(Registrant)
	By:	/s/ Frank J.M. ten Brink
	Frank J.M. ten Brink
	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EX-3 3 exh3-1.htm 10Q Q3 2004 Exhibit 3.1

Exhibit 3.1

Amendment of Bylaws

(Adopted and effective on August 10, 2004)

1. Amendment of Section 2.7

Section 2.7 of the Company's Bylaws is amended to read as follows:

2.7 Proxies

Each stockholder entitled to vote at a meeting of stockholders, or to consent to corporate action without a meeting, may authorize another person to act for him by a written proxy signed by him or his authorized agent and delivered to the secretary of the Corporation prior to or at the time of the meeting or other action. No proxy may be voted or acted on more than three years after its date, unless the appointment expressly provides for a longer period. A stockholder may revoke his appointment of a proxy by written notice to the secretary of the Corporation, by a subsequent appointment or by attendance at the meeting and voting in person.

2. New Section 2.11

Section 2.11 of the Company's Bylaws is renumbered as Section 2.12, and a new Section 2.11 is inserted to read as follows:

2.11 Business at Annual Meetings of Stockholders

(a) Only such business shall be conducted at an annual meeting of stockholders as may be properly brought before the meeting. To be properly brought before an annual meeting, the business must be either (i) specified in the Corporation's notice of the meeting pursuant to Section 2.4 of these Bylaws or (ii) proposed to be brought before the meeting by any stockholder of record (i) who is entitled to vote at the meeting, (ii) who gives timely notice of the proposed business in compliance with this Section 2.11, and (iii) who is a stockholder of record at the time of giving notice. In addition, for any business to be properly brought before an annual meeting by a stockholder, the business must be a proper matter for stockholder action.

(b) To be timely, a stockholder's notice of proposed business must be addressed to the secretary of the Corporation and received at the Corporation's principal executive offices no later than the close of business on the 90th day, and no earlier than the close of business on the 120th day, prior to the first anniversary of the preceding year's annual meeting of stockholders. If, however, the date of the annual meeting is more than 30 days before or after the first anniversary, the stockholder's notice must be received no later than the close of business on the 90th day, and no earlier than the 120th day, prior to the annual meeting.

(c) The stockholder's notice to the secretary shall include, for each item of business that the stockholder proposes to bring before the annual meeting, a brief description of the business and the reasons for conducting the business at the annual meeting. The stockholder's notice shall also include the stockholder's name and address as they appear on the Corporation's books, the name and address of the of the beneficial owner, if any, on whose behalf the stockholder is acting and the number of shares of the Corporation's stock beneficially owned by the beneficial owner, and a statement of any interest of the stockholder or beneficial owner in the business proposed to be brought before the meeting.

(d) The chairman of the annual meeting shall have the power to determine whether any business was not properly brought before the annual meeting in accordance with the procedures in this Section 2.11. If the chairman determines that any business was not properly brought before the meeting, the chairman shall inform the meeting that the business was not brought properly before the meeting and that the business may not be transacted.

EX-10 4 exh1001.htm 10Q Q3 2004 Exhibit 10.1 Exhibit 10.1

Amendment No. 6

To

Amended and Restated Credit Agreement

THIS AMENDMENT NO. 6 TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is being executed and delivered as of August 23, 2004 by and among Stericycle, Inc., a Delaware corporation (the "Borrower"), each of the Subsidiary Guarantors named as signatories hereto, the financial institutions from time to time party to the Credit Agreement referred to and defined below (collectively, the "Lenders") and Bank of America, N.A., as representative of the Lenders (in such capacity, the "Administrative Agent") and as issuer of letters of credit (in such capacity, the "Issuer"). Undefined capitalized terms used herein shall have the meanings ascribed to such terms in such Credit Agreement as defined below.

W I T N E S S E T H:

WHEREAS, the Borrower, the Lenders, the Issuer, the Administrative Agent, Credit Suisse First Boston, as the Co-Syndication Agent, UBS Warburg, LLC, as the Co-Syndication Agent, and Fleet National Bank, as the Documentation Agent, have entered into that certain Amended and Restated Credit Agreement dated as of October 5, 2001, as amended by Amendment No. 1 to Amended and Restated Credit Agreement dated as of June 28, 2002, Amendment No. 2 to Amended and Restated Credit Agreement dated as of January 27, 2003, Amendment No. 3 to Amended and Restated Credit Agreement dated as of March 15, 2004, Amendment No. 4 and Consent to Amended and Restated Credit Agreement dated as of June 10, 2004 and Amendment No. 5 to Amended and Restated Credit Agreement dated as of July 7, 2004 (as otherwise modified, the "Credit Agreement"), pursuant to which, among other things, the Lenders have agreed to provide, subject to the terms and conditions contained therein, certain loans to the Borrower; and

WHEREAS, the Borrower has requested that the Administrative Agent and the Required Lenders amend the Credit Agreement to increase the aggregate outstanding principal balance of all Indebtedness that Foreign Subsidiaries which are Restricted Subsidiaries are permitted to incur to pursuant to Section 7.2.2 of the Credit Agreement from $10,000,000 to $25,000,000 and, subject to the terms and conditions of this Agreement, the Administrative Agent and the Required Lenders hereby agree to such amendment.

NOW, THEREFORE, in consideration of the foregoing premises, the terms and conditions stated herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Borrower, the Subsidiary Guarantors, the Issuer, the Required Lenders and the Administrative Agent, such parties hereby agree as follows:

1. Amendment. Subject to the satisfaction of the condition precedent set forth in Paragraph 2 of this Agreement, clause (i) of the proviso at the end of Section 7.2.2 of the Credit Agreement is hereby amended to delete the reference to the dollar amount "$10,000,000" set forth in such clause and to replace such dollar amount with to the dollar amount "$25,000,000".

2. Effectiveness of this Agreement; Condition Precedent. Paragraph 1 of this Agreement shall be deemed to have become effective as of the date of this Agreement, but such effectiveness shall be expressly conditioned upon the Administrative Agent's receipt of an originally-executed counterpart of this Agreement executed and delivered by duly authorized officers of the Borrower, the Subsidiary Guarantors and the Required Lenders.

3. Representations, Warranties and Covenants.

(a) The Borrower hereby represents and warrants that this Agreement and the Credit Agreement as amended by this Agreement constitute the legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms.

(b) The Borrower hereby represents and warrants that its execution, delivery and performance of this Agreement and the Credit Agreement as amended by this Agreement have been duly authorized by all proper corporate action, do not violate any provision of its certificate of incorporation or bylaws, will not violate any law, regulation, court order or writ applicable to it, and will not require the approval or consent of any governmental agency, or of any other third party under the terms of any contract or agreement to which the Borrower or any of the Borrower's Affiliates is bound, including, without limitation, the Subordinated Debt Documents.

(c) The Borrower hereby represents and warrants that, after giving effect to the provisions of this Agreement, (i) no Default or Event of Default has occurred and is continuing or will have occurred and be continuing and (ii) all of the representations and warranties of the Borrower contained in the Credit Agreement and in each other Loan Document (other than representations and warranties which, in accordance with their express terms, are made only as of an earlier specified date) are, and will be, true and correct as of the date of the Borrower's execution and delivery hereof or thereof in all material respects as though made on and as of such date.

4. Reaffirmation, Ratification and Acknowledgment; Reservation. The Borrower and each Subsidiary Guarantor hereby (a) ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, and each grant of security interests and liens in favor of the Administrative Agent on behalf of the Lenders, under each Loan Document to which it is a party, (b) agrees and acknowledges that such ratification and reaffirmation is not a condition to the continued effectiveness of such Loan Documents, and (c) agrees that neither such ratification and reaffirmation, nor the Administrative Agent's, or any Lender's solicitation of such ratification and reaffirmation, constitutes a course of dealing giving rise to any obligation or condition requiring a similar or any other ratification or reaffirmation from the Borrower or such Subsidiary Guarantors with respect to any subsequent modifications to the Credit Agreement or the other Loan Documents. The Credit Agreement is in all respects ratified and confirmed. Each of the Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. Neither the execution, delivery nor effectiveness of this Agreement shall operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, or of any Default or Event of Default (whether or not known to the Administrative Agent or the Lenders), under any of the Loan Documents, all of which rights, powers and remedies, with respect to any such Default or Event of Default or otherwise, are hereby expressly reserved by the Administrative Agent and the Lenders. This Agreement shall constitute a Loan Document for purposes of the Credit Agreement.

5. Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

6. Administrative Agent's Expenses. The Borrower hereby agrees to promptly reimburse the Administrative Agent for all of the reasonable out-of- pocket expenses, including, without limitation, attorneys' and paralegals' fees, it has heretofore or hereafter incurred or incurs in connection with the preparation, negotiation and execution of this Agreement and the related Loan Documents.

7. Counterparts. This Agreement may be executed in counterparts, each of which shall be an original and all of which together shall constitute one and the same agreement among the parties.

[signature pages to follow]

IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first above written.

STERICYCLE, INC., as Borrower

By: /s/ Frank J.M. ten Brink

Name: Frank J.M. ten Brink

Title: Executive Vice President and

Chief Financial Officer

ENVIROMED, INC.,

BRIDGEVIEW, INC.,

MICRO-MED INDUSTRIES, INC.,

MICRO-MED OF GEORGIA, INC.,

MICRO-MED OF NORTH CAROLINA, INC.,

MICRO-MED OF TENNESSEE, INC.,

SCHERER LABORATORIES, INC.,

BIO-WASTE MANAGEMENT CORPORATION,

STERICYCLE OF WASHINGTON, INC.,

WASTE SYSTEMS, INC.,

MED-TECH ENVIRONMENTAL, INC.,

MED-TECH ENVIRONMENTAL (MA), INC.,

IONIZATION RESEARCH CO., INC.,

BFI MEDICAL WASTE, INC.,

AMERICAN MEDICAL DISPOSAL, INC.,

ENVIRONMENTAL HEALTH SYSTEMS, INC.,

STROUD PROPERTIES, INC.,

STERICYCLE INTERNATIONAL, LLC,

By: /s/ Frank J.M ten Brink

Title: Vice President

BANK OF AMERICA, N.A., as Administrative Agent

By: /s/ Paul Folino

Title:_ Assistant Vice President

BANK OF AMERICA, N.A., as a Lender and as Issuing Bank

By: /s/ Richard D. Hill, Jr.

Title: Managing Director

FLEET NATIONAL BANK

By: /s/ Richard D. Hill, Jr.

Title: Managing Director

LaSALLE BANK NATIONAL ASSOCIATION

By: /s/ Brian Peterson

Title: First Vice President

THE NORTHERN TRUST COMPANY

By: /s/ Eileen L. Socbunda

Title: Senior Vice President

HARRIS TRUST AND SAVINGS BANK

By: /s/ George M. Dluhy

Title: Vice President

CREDIT SUISSE FIRST BOSTON, acting through its New York Branch

By: /s/ Jay Chall

Title: Director

By: /s/ Karim Blasetti

Title: Associate

UBS AG, STAMFORD BRANCH

By: /s/ Wilfred v. Saint

Title: Director, Banking Product Services, US

By: /s/ Louis Pistecchia

Title: Director, Banking Product Services, US

BANK ONE, NA

By: /s/ [signature illegible]

Title: Vice President

EX-10 5 exh10-2.htm 10Q Q3 2004 Exhibit 10.2
Exhibit 10.2

Stock Option Agreement

(Nonstatutory Stock Option Under

Stericycle, Inc. 1997 Stock Option Plan)

Subject to the attached terms, Stericycle, Inc., a Delaware corporation (the "Company"), grants to the following employee of the Company or one of its subsidiaries (the "Employee"), as of the following grant date (the "Option Grant Date"), a nonstatutory stock option (the "Option") to purchase the following number of shares of the Company's Common Stock, par value $.01 per share (the "Option Shares"), at the following purchase price per share (the "Exercise Price"), exercisable in installments in accordance with the following vesting schedule, subject to the following terms:

Employee: [name]

Grant Date: [date]

Number of Option Shares: [number of shares]

Exercise Price Per Share: [price]

Vesting Schedule:

(1) [number] Option Shares vest on [date];

(2) [number] vest in 47 monthly installments of [number] Option Shares each beginning on [date] and continuing on the first day of each month through and including [date]; and

(2) [number] Option Shares vest on [date]

Expiration Date of Option: [date]

Terms of Option

1. Plan. This Option has been granted under the Stericycle, Inc. 1997 Stock Option Plan (the "Plan"), which is incorporated in this Agreement by reference. Capitalized terms used in this Agreement without being defined (for example, the term "Plan Administrator") have the same meanings that they have in the Plan.

2. Exercisability. The Option may be exercised in whole or in part at any time prior to its Expiration Date to the extent that it is vested at the time of exercise. The Option shall not continue to vest after the Employee's Termination Date. Any portion of the Option that remains unexercised shall expire on the Expiration Date. The Option shall be subject to earlier expiration as provided in Paragraph 5.

The Option shall become fully vested upon a Change in Control, as provided in Paragraph 8.2 of the Plan.

3. Manner of Exercise. The Option may be exercised in respect of a whole number of Option Shares (and only in respect of a whole number) by:

(a) written notice of exercise to the Plan Administrator (or its designee) at the Company's principal executive offices (which are currently located at 28161 North Keith Drive, Lake Forest, Illinois 60045), which is received prior to the Option's Expiration Date;

(b) full payment of the Exercise Price of the Option Shares in respect of which the Option is exercised; and

(c) full payment of an amount equal to the Company's federal, state and local withholding tax obligation, if any, in connection with the exercise.

In addition, the exercise of the Option shall be subject to any procedures and policies that the Plan Administrator has adopted to administer the Plan, which may be in effect at the time of exercise.

4. Manner of Payment. The Employee's payment of the Exercise Price of the Option Shares in respect of which the Option is exercised, and his or her payment of the Company's withholding tax obligation, if any, in connection with the exercise, shall be made by certified or bank cashier's check or by a wire transfer of immediately available funds.

Payment also may be made by means of a "cashless" net exercise through a broker approved by the Plan Administrator for the purpose, pursuant to which the full amount due to the Company is remitted directly by the broker from the net proceeds of the sale of a sufficient number of Option Shares. In addition, payment may be made in any other manner authorized by the Plan and specifically permitted by the Plan Administrator at the time of exercise.

5. Early Expiration of Option. If the Employee ceases to serve as an employee of the Company or a Subsidiary, the unvested portion of the Option shall terminate on the Employee's Termination Date. The vested portion of the Option shall expire shall expire 90 days after the Employee's Termination Date (or if the Employee's employment terminated by reason of his or her death or Disability, on the first anniversary of the Termination Date), unless the exercisability of the Option is extended by the Plan Administrator (in the Plan Administrator's sole discretion). The Plan Administrator may extend the exercisability of the Option to any date ending on or before the Option's Expiration Date.

6. Transferability. The Option may not be transferred, assigned or pledged (whether by operation of law or otherwise), except as provided by will or the applicable intestacy laws; and the Option shall not be subject to execution, attachment or similar process. The Option may be exercised only by the Employee or, in the case of his or her death, by the person or persons to whom the Option passes by the Employee's will or the applicable intestacy laws (or by the legal representative of the Employee's estate).

7. Interpretation. This Agreement is subject to the terms of the Plan, as the Plan may be amended (but except as required by applicable law, no amendment of the Plan after the Option Grant Date shall adversely affect the Employee's rights in respect of the Option without the Employee's consent). If there is a conflict or inconsistency between this Agreement and the Plan, the terms of the Plan shall control. The Plan Administrator's interpretation of this Agreement and the Plan shall be final and binding.

8. No Employment Right. Nothing in this Agreement shall be considered to confer on the Employee any right to continue in the employ of the Company or a Subsidiary or to limit the right of the Company or a Subsidiary to terminate the Employee's employment.

9. No Stockholder Rights. The Employee shall not have any rights as a stockholder of the Company in respect of any of the Option Shares unless and until Option Shares are issued to the Employee upon the exercise of one or more installments of the Option.

10. Governing Law. This Agreement shall be governed in accordance with the laws of the State of Illinois.

11. Binding Effect. This Agreement shall be binding on the Company and the Employee and on the Employee's heirs, legatees and legal representatives.

12. Effective Date. This Agreement shall not become effective until the Employee accepts this Agreement by returning a copy to the Company completed and signed on the first page by the Employee. When the Employee so accepts this Agreement, this Agreement shall become effective, retroactive to the Option Grant Date, without the necessity of further action by either the Company or the Employee.

Stericycle, Inc.

Mark C. Miller

President and Chief Executive Officer

Acceptance by Employee

I accept this Stock Option Agreement and agree to be bound by all of its terms. I acknowledge receipt of a copy of the Stericycle, Inc. 1997 Stock Option Plan. In consideration, in part, of the option granted to me under this Stock Option Agreement, I have signed a Confidentiality and Noncompetition Agreement with the Company, dated as of the Option Grant Date.

Employee's Signature:

Name (please print):

Address:

Social Security Number:

EX-10 6 exh10-3.htm 10Q Q3 2004 Exhibit 10.3 Exhibit 10.3

Stock Option Agreement

(Incentive Stock Option Under

Stericycle, Inc. 1997 Stock Option Plan)

Subject to the attached terms, Stericycle, Inc., a Delaware corporation (the "Company"), grants to the following employee of the Company or one of its subsidiaries (the "Employee"), as of the following grant date (the "Option Grant Date"), an incentive stock option (the "Option") to purchase the following number of shares of the Company's Common Stock, par value $.01 per share (the "Option Shares"), at the following purchase price per share (the "Exercise Price"), exercisable in installments in accordance with the following vesting schedule, subject to the following terms:

Employee: [name]

Grant Date: [date]

Number of Option Shares: [number of shares]

Exercise Price Per Share: [price]

Vesting Schedule:

(1) [number] Option Shares vest on [date];

(2) [number] vest in 47 monthly installments of [number] Option Shares each beginning on [date] and continuing on the first day of each month through and including [date]; and

(3) [number] Option Shares vest on [date]

Expiration Date of Option: [date]

Terms of Option

The Option shall become fully vested upon a Change in Control, as provided in Paragraph 8.2 of the Plan.

3. Manner of Exercise. The Option may be exercised in respect of a whole number of Option Shares (and only in respect of a whole number) by:

(b) full payment of the Exercise Price of the Option Shares in respect of which the Option is exercised; and

(c) full payment of an amount equal to the Company's federal, state and local withholding tax obligation, if any, in connection with the exercise.

In addition, the exercise of the Option shall be subject to any procedures and policies that the Plan Administrator has adopted to administer the Plan, which may be in effect at the time of exercise.

5. Early Expiration of Option. If the Employee ceases to serve as an employee of the Company or a Subsidiary, the unvested portion of the Option shall terminate on the Employee's Termination Date. The vested portion of the Option shall expire shall expire 90 days after the Employee's Termination Date (or if the Employee's employment terminated by reason of his or her death or Disability, on the first anniversary of the Termination Date). The Plan Administrator may extend the exercisability of the Option to any date ending on or before the Option's Expiration Date.

10. Governing Law. This Agreement shall be governed in accordance with the laws of the State of Illinois.

11. Binding Effect. This Agreement shall be binding on the Company and the Employee and on the Employee's heirs, legatees and legal representatives.

Stericycle, Inc.

Mark C. Miller

President and Chief Executive Officer

Acceptance by Employee

Employee's Signature:

Name (please print):

Address:

Social Security Number:

EX-10 7 exh10-4.htm 10Q Q3 2004 Exhibit 10.4
Exhibit 10.4

Stock Option Agreement

(Nonstatutory Stock Option Under

Stericycle, Inc. 2000 Nonstatutory Stock Option Plan)

Employee: [name]

Grant Date: [date]

Number of Option Shares: [number of shares]

Exercise Price Per Share: [price]

Vesting Schedule:

(1) 20% of the Option Shares vest on the first day of the first month following the month in which the first anniversary of the Option Grant Date occurs.

(2) 80% of the Option Shares vest in 48 equal monthly installments beginning on the first day of the second month following the month in which the first anniversary of the Option Grant Date occurs and continuing on the first day of each of the next 47 months. (Note: because of rounding, the number of Option Shares vesting with the 48th installment may differ from the number vesting with the prior 47 installments.)

Expiration Date of Option: [date]

Terms of Option

1. Plan. This Option has been granted under the Stericycle, Inc. 2000 Nonstatutory Stock Option Plan (the "Plan"), which is incorporated in this Agreement by reference. Capitalized terms used in this Agreement without being defined (for example, the term "Plan Administrator") have the same meanings that they have in the Plan.

The Option shall become fully vested upon a Change in Control, as provided in Paragraph 8.2 of the Plan.

3. Manner of Exercise. The Option may be exercised in respect of a whole number of Option Shares (and only in respect of a whole number) by:

(b) full payment of the Exercise Price of the Option Shares in respect of which the Option is exercised; and

(c) full payment of an amount equal to the Company's federal, state and local withholding tax obligation, if any, in connection with the exercise.

In addition, the exercise of the Option shall be subject to any procedures and policies that the Plan Administrator has adopted to administer the Plan, which may be in effect at the time of exercise.

10. Governing Law. This Agreement shall be governed in accordance with the laws of the State of Illinois.

11. Binding Effect. This Agreement shall be binding on the Company and the Employee and on the Employee's heirs, legatees and legal representatives.

undersigned, thereunto duly authorized.

Stericycle, Inc.

Mark C. Miller

President and Chief Executive Officer

Acceptance by Employee

I accept this Stock Option Agreement and agree to be bound by all of its terms. I acknowledge receipt of a copy of the Stericycle, Inc. 2000 Nonstatutory Stock Option Plan. In consideration, in part, of the option granted to me under this Stock Option Agreement, I have signed a Confidentiality and Noncompetition Agreement with the Company, dated as of the Option Grant Date.

Employee's Signature:

Name (please print):

Address:

Social Security Number:

EX-10 8 exh10-5.htm 10Q Q3 2004 Exhibit 10.5
Exhibit 10.5

Stock Option Agreement

(Nonstatutory Stock Option Under

Stericycle, Inc. Directors Stock Option Plan)

Subject to the terms of this Agreement, Stericycle, Inc., a Delaware corporation (the "Company"), grants to the following director of the Company (the "Director"), as of the following date (the "Grant Date"), a nonstatutory stock option (the "Option") to purchase the following number of shares of the Company's Common Stock, $.01 par value (the "Option Shares"), at the following purchase price per share (the "Exercise Price"), becoming exercisable in 12 consecutive monthly installments (the "Installments"), the first 11 Installments for [number] Option Shares each and the twelfth Installment for [number] Option Shares, on the first day of each month beginning [month] 1, 200_ and continuing through [month] 1, 200_:

Director: [name of director]

Grant Date: [date]

Option Shares: [number of shares]

Exercise Price: [price]

Expiration Date of each

Installment: [date]

1. Plan. The Option has been granted under the Stericycle, Inc. Directors Stock Option Plan (the "Plan"), which is incorporated in this Agreement by reference. The Plan is administered by the Company's Board of Directors or by the committee of the Board of Directors to which the Board has delegated its authority (in either case, the "Board").

2. Exercisability. Each Installment of the Option may be exercised only (i) on or after the date that the Installment becomes exercisable (its "Vesting Date") and (ii) before its Expiration Date. No Installment may be exercised before its Vesting Date or on or after its Expiration Date. An Installment which is not exercised before its Expiration Date shall expire on its Expiration Date. Each Installment of the Option shall be subject to earlier expiration as provided in Paragraph 5.

All Installments of the Option shall become fully exercisable upon a "Change in Control," as provided in Paragraph 6.2 of the Plan.

3. Manner of Exercise. Each exercisable Installment of the Option may be exercised in respect of a whole number of Option Shares (and only in respect of a whole number) by:

(a) written notice of exercise to the Board (or its designee) at the Company's principal executive offices (which are currently located at 28161 N. Keith Drive, Lake Forest, Illinois 60045), which is received on or before the Installment's Expiration Date;

(b) full payment of the Exercise Price of the Option Shares in respect of which the Installment is exercised; and

(c) full payment of an amount equal to the Company's federal, state and local withholding tax obligation, if any, in connection with the exercise.

In addition, the exercise of any Installment shall be subject to the procedures and policies that the Board has adopted to administer the Plan, which may be in effect at the time of exercise.

4. Manner of Payment. The Director's payment of (i) the Exercise Price of the Option Shares in respect of which an exercisable Installment of the Option is exercised and (ii) the Company's withholding tax obligation in connection with the exercise shall be made by certified or bank cashier's check or by a wire transfer of immediately available funds. Payment may also be made in any other manner authorized by the Plan and specifically permitted by the Board at the time of exercise.

5. Expiration of Installments. If the Director ceases to serve as an Outside Director for any reason (for example, as a result of his resignation, death, disability or removal from office or the expiration of his term of office without reelection), any unvested Installment of the Option shall expire on the date that he or she ceases to serve as an Outside Director. Each vested Installment of the Option shall expire or remain exercisable as follows:

(a) If the Director ceases to serve as an Outside Director by reason of his or her death or disability, the Installment shall expire on its Expiration Date.

(b) If the Director ceases to serve as an Outside Director for any reason other than his or her death or disability or his or her removal from office, the Installment shall expire on its Expiration Date unless the Board, taking into account the circumstances in which the Director ceases to serve as an Outside Director, considers an earlier expiration date appropriate (but in no event shall the expiration date be earlier than 30 days after the date that the Director ceases to serve as an Outside Director).

(c) If the Director ceases to serve as an Outside Director by reason of his or her removal from office, the Installment shall expire 30 days after the date that the Director ceases to serve as an Outside Director.

6. Transferability. Except for transfers to Permissible Transferees as permitted under Section 6.4 of the Plan, the Director may not transfer, assign or pledge any Installment of the Option (whether by operation of law or otherwise) except as provided by will or applicable intestacy laws; and no Installment of the Option shall be subject to execution, attachment or similar process. Each Installment of the Option may be exercised only by the Director (or by the Permissible Transferee to whom the Director transferred the Installment), except in the case of the death of the Director (or the death of the Permissible Transferee, as the case may be), when it may be exercised by the person or persons to whom it passes by will or applicable intestacy laws.

7. Interpretation. This Agreement is subject to the terms of the Plan, as the Plan has been and may be amended (but except as required by applicable law, no amendment of the Plan after the Grant Date shall adversely affect the Director's rights with respect to the Option without the Director's consent). If there is a conflict or inconsistency between this Agreement and the Plan, the terms of the Plan shall control. The Board's interpretation of this Agreement and the Plan shall be final and binding.

8. No Right To Nomination. Nothing in this Agreement shall be considered to confer on the Director any right to continue to be nominated as a director of the Company.

9. No Stockholder Rights. The Director shall not have any rights as a stockholder of the Company in respect of any of the Option Shares unless and until Option Shares are issued to the Director upon the exercise of one or more Installments of the Option.

10. Governing Law. This Agreement shall be governed in accordance with the laws of the State of Illinois.

11. Binding Effect. This Agreement shall be binding on the Company and the Director and on the Director's heirs, legatees and legal representatives.

12. Effective Date. This Agreement shall not become effective until the Director accepts this Agreement by returning a copy to the Company completed and signed below by the Director. When the Director so accepts this Agreement, this Agreement shall become effective, retroactive to the Grant Date, without the necessity of further action by either the Company or the Director.

Stericycle, Inc.

Mark C. Miller

President and Chief Executive Officer

Acceptance by Director

I accept this Stock Option Agreement and agree to be bound by all of its terms. I acknowledge receipt of a copy of the Stericycle, Inc. Directors Stock Option Plan.

[name of director]

Director's address:

Social security number:

EX-31 9 exh31-1.htm 10Q Q3 2004 Exhibit 31.1 Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

Mark C. Miller

President and Chief Executive Officer

I, Mark C. Miller, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Stericycle, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operation and cash flows of the registrant as of, and for, the periods presented in this quarterly report.

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant, and have:

a) designed such disclosure controls and procedure, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 5, 2004.

/s/ Mark C. Miller

Mark C. Miller

President and Chief Executive Officer

Stericycle, Inc.

EX-31 10 exh31-2.htm 10Q Q2 2004 Exhibit 31.2
Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

Frank J.M. ten Brink

Executive Vice President and Chief Financial Officer

I, Frank J.M. ten Brink, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Stericycle, Inc.;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 5, 2004.

/s/ Frank J.M. ten Brink

Frank J.M. ten Brink

Executive Vice President and

Chief Financial Officer

Stericycle, Inc.

EX-32 11 exh32.htm 10Q Q3 2004 Exhibit 32 Exhibit 32

SECTION 1350 CERTIFICATION

In reference to this quarterly report on Form 10-Q of Stericycle, Inc. we, Mark C. Miller, President and Chief Executive Officer of the registrant, and Frank J.M. ten Brink, an Executive Vice President and the Chief Financial Officer of the registrant, certify as follows, pursuant to 18 U.S.C. 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002):

(a) the report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(b) the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.

Date: November 5, 2004.

/s/ Mark C. Miller

Mark C. Miller

President and Chief Executive Officer

Stericycle, Inc.

/s/ Frank J.M. ten Brink

Frank J.M. ten Brink

Executive Vice President

and Chief Financial Officer

Stericycle, Inc.

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Delaware	36-3640402
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

PART I. Financial Information	Page No.

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2004 (Unaudited) and December 31, 2003	1

Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2004 and 2003 (Unaudited)	2

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and 2003 (Unaudited)	3

Notes to Condensed Consolidated Financial Statements (Unaudited)	4

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3. Qualitative and Quantitative Disclosures about Market Risk	22

Item 4. Controls and Procedures	22

PART II. Other Information

Item 1. Legal Proceedings	23

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	23

Item 6. Exhibits	24

Signatures	25
Certifications	26