Operator: Good afternoon. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the Stericycle First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you.
Ms. (Laura Murphy), Vice President of Finance, please go ahead
Laura Murphy - VP, Corporate Finance: Welcome to Stericycle's quarterly conference call. Joining me on today's call will be Frank ten Brink, CFO; Rich Kogler, COO; and Charlie Alutto, CEO. I will now read the Safe Harbor statement.
Statements made by Stericycle in this conference call that are not strictly historical are forward-looking. Forward-looking statements involve known and unknown risks, and should be viewed with caution. Factors described in the Company's Form 10-K, 10-Qs as well as its other filings with the SEC could affect the Company's actual results and could cause the Company's actual results to differ materially from expected results. The Company makes no commitment to disclose any revisions to forward-looking statements or any facts, events, or circumstances after this date that may bear upon forward-looking statements.
I will now turn it over to Frank.
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Thank you, Laura. The results for the first quarter are as follows. Revenues were $513.8 million, up 11.7% from $460.1 million in Q1 of '12 and internal growth excluding returns and recall revenues was up 8.1%. Domestic revenues were $363.6 million of which $341.1 million was domestic regulated waste and compliance services and $22.5 million with recalls and returns.
Domestic internal growth, excluding recalls and returns revenues, was up over 9% consisting of SQ up 10% and LQ up 8%. International revenues were $150.2 million and internal growth adjusted for unfavorable exchange impact of $4.2 million was up 5.4%. Acquisitions contributed $37.1 million to the growth in the quarter. Gross profit was $232.1 million or 45.2% of revenues.
SG&A expense including amortization was $97.7 million or 19% of revenues. Net interest expense was $13.4 million. Net income attributable to Stericycle was $74.6 million or $0.85 per share on an as reported basis and $0.88 adjusted for acquisition and other nonrecurring expenses.
Now to balance sheet; our covenant debt to EBITDA ratio was 2.1 at the end of the quarter. The unused portion of the revolver debt at the end of the quarter was approximately $675 million. In the quarter, we repurchased 79,602 shares of common stock in the open market in an amount of $7.6 million and we have authorization to purchase an additional 3.7 million shares. Our capital spend was $16.5 million and our DSO was 61 days. Q1 year-to-date cash provided from operations was $98.2 million.
I will now turn it over to Rich.
Richard T. Kogler - EVP and COO: Thanks Frank. Worldwide, we continue to use our strong free cash flow to drive our growth through acquisitions. In the quarter, we closed 12 transactions, 11 international and one domestic. The international acquisitions consisted of one in Spain, two in Japan, four in the U.K., one in Canada, one in Romania, one in Portugal and one in Chile. Our worldwide acquisition pool remains robust with well over $100 million in annualized revenues in multiple geographies and lines of business. At the end of the quarter, we had approximately 544,000 accounts of which approximately 527,000 were small, the remainder were large.
The strong internal growth rates we experienced in this quarter resulted from more customers adopting our multiple services, which include StrongPak, Steri-Safe, Pharma Waste and Sharps Management. Increased regulatory scrutiny and fines for noncompliance have driven customer demand for these regulated waste and compliance services. For example, U.S. EPA, state EPAs and Joint Commission are more focused on Pharma Waste in the healthcare sector. This scrutiny creates customer demand for our Pharma Waste program. We are excited about our future growth because when customers adopt multiple services this can more than double or triple customer revenues.
In closing, we want to thank each member of our worldwide team for their strong performance and continued commitment to our customers and shareholders.
Now, I'll turn it over to Charlie.
Charles A. Alutto - President and CEO: Thanks Rich. I would now like to provide insights on our current outlook for 2013. Please keep in mind that these are forward-looking statements. Revenues from the 12 acquisitions were approximately $2.4 million in Q1 and annualized are approximately $20 million. Keep in mind, our 2013 guidance does not include future acquisitions, divestitures, integration, acquisition-related and other non-reoccurring expenses.
We believe analyst EPS estimates will be in the range of $3.66 to $3.69. We believe analyst revenue estimates for 2013 will be in the range of $2.11 billion to $2.14 billion, depending on assumptions for growth and foreign exchange rates. We anticipate 2013 internal growth rates to be; SQ, 8% to 10%; LQ, 5% to 8%; international, 5% to 8%, and recall and returns revenues between $95 million to $110 million. We believe analysts will have estimates for free cash flow between $353 million to $357 million. CapEx is anticipated to be between $65 million to $70 million.
In closing, we are very pleased with our Q1 results and excited about the multiple growth opportunities for 2013 and beyond.
Thank you for your time. We'll now answer any questions. Jay, you can open up the Q&A line.
Operator: Ryan Daniels, William Blair.
Ryan Daniels - William Blair: Let me start on the M&A front. Obviously, a very strong quarter given the number of transactions, but the diversity also surprised me. Are you seeing more opportunities over in Europe and OUS markets given some of the financial struggles or is that just timing that a lot of these deals in different markets hit during the first quarter?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Again, we do deals opportunistically. And I would say that maybe the tax law changes in the U.S. maybe accelerated some deals into Q4 of 2012. The pipeline continues to be very robust and that's both in the U.S. and international.
Ryan Daniels - William Blair: Then any color on I guess overall the deal portion of that was regulated medical waste and then within that the SQ versus LQ mix?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Yeah, so they were all in the regulated waste side and it was about 60% SQ and 40% LQ.
Ryan Daniels - William Blair: Then a couple of other questions. On the patient communications business, I know you did a fairly sizable inpatient acquisition in the space last quarter and I'm curious, one, how the integration has gone and then number two, have you begun to see any cross-selling opportunities where you're able to go to systems that own larger physician practices and can offer a bundled service across the continuum of care?
Charles A. Alutto - President and CEO: Yeah, just to educate everybody, Ryan, that large acquisition was BerylHealthcare in the fourth quarter of 2012. It expanded our capabilities in the patient communication space, for instance, physician referrals, enhanced our scheduling ability, and post discharge calls. They were the market leader in the LQ space. We're still integrating that as we are integrating the Beryl piece with that platform acquisition that we had done about two years ago of NotifyMD. We do think we've got a unique position in the marketplace; not only in offering services to the physicians that are affiliated or owned by hospitals, but in the hospitals themselves, especially in the lines of the businesses we added with the Beryl deal.
Ryan Daniels - William Blair: And then one quick one and I'll hop off. Just I saw a recent news release about a relationship with Premier and the GPO. I'm curious if that's something that's been longstanding. I think you had some exclusive relationships with them in the past, at least with their ASCEND members. So, any color there would be helpful just to provide a little clarity.
Charles A. Alutto - President and CEO: Yeah, the Premier deal is nothing new. There was a renewal of the opportunity. They usually have multiple vendors on their contract. I think you probably saw that in the same press release. That really is a hunting license now that we've always had. So there's really no change to the business with that recent re-award with Premier.
Operator: Scott Schneeberger, Oppenheimer.
Scott Schneeberger - Oppenheimer: Could we speak a little bit to the geographies? I believe you said two in Japan and I think we've been quite there for a while. Can you just talk to what you're seeing? The last question hit on Europe, but Japan specifically?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: We did three deals in Japan in '11, we did one deal in Japan in '12, and so there is a continuation. Really in '12, they did a lot of work on integrating both the transportation and the treatment sites that we acquired there and that allowed them to now continue to do acquisitions on top of that.
Scott Schneeberger - Oppenheimer: The recall guidance, I think now for the year is adjusted a little bit lower than what you had been saying on the fourth quarter call. Could you just kind of frame that for us and confirm that's accurate, and then I have a follow-up?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Yeah. So, the guidance last time was $105 million to $120 million; now $95 million to $110 million, with the shortfall in Q1 being about $7 million to $8 million. Yes, that's exactly the difference roughly and to total that we took the guidance down $5 million.
Scott Schneeberger - Oppenheimer: I know that one is tough to predict. Is there anything that you see building, or I mean I guess the guidance implies that kind of status quo from here? So, moving on from that one, the last thing I wanted to touch upon is, the organic growth was quite solid. Could you touch on premium offerings. How are things going on the premium area?
Charles A. Alutto - President and CEO: Yeah, I think as Rich said, Scott, the premium offerings are StrongPak. We continue to be on track on that. The customer have taken that; continues to be strong. Rx Waste and Sharps Management continue to be drivers on the LQ side of the business, and then Steri-Safe on the SQ side of the business with a little bit of StrongPak as well moving that forward and we continue to see good growth rates there. So, it's a good start to the year.
Scott Schneeberger - Oppenheimer: I'm sorry, Charlie, if you guys might have said it, I might have missed it, I know you mentioned last time what the contribution was of StrongPak specifically to the quarter. Have you touched upon that and would you?
Charles A. Alutto - President and CEO: No, we did not break that out last time.
Operator: Al Kaschalk, Wedbush Securities.
Al Kaschalk - Wedbush Securities: Just actually a quick question or one-part question. Could you talk about, with this focus on regulation and pharma waste demand, how we should think about the adoption rates of that service or market opportunity and if there is a, so called, size of that market, just help us with that.
Richard T. Kogler - EVP and COO: Yeah, I think as we said before, we look at it as about a $200 million plus market opportunity in the LQ space. Adoption rates, as you can tell from our LQ growth rates overall have been pretty strong and they are being driven by enforcement and compliance both at the federal and the state level.
Al Kaschalk - Wedbush Securities: Is this something your sales force can reach into clients to help them take on this service or is this one where you have to be somewhat have them come forth to you?
Charles A. Alutto - President and CEO: No, they usually come to us. I mean, they are getting a lot of scrutiny right now not only from EPA, both on the state and the federal level, but joint commission now as they go and do their reviews for the accreditation and look at it. Obviously, our sales people are talking to our customers. We've got very good relationships on our LQ accounts. So, we're talking about this service offering and then it's their decision to make whether or not they want to try to do something in-house themselves on the characterization or have us do a full service Rx Waste program within the hospital. We are seeing good adoption at the IDN level as hospital now are larger entities where they are making the decision for all of the hospitals. We do see some uptick in some of the larger IDNs taking the program on.
Al Kaschalk - Wedbush Securities: Then just one. Within the relative range of product offerings how does this one fit margin profile-wise?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: I think the margins for this one are in the high 20s, low 30s, the gross margins.
Operator: Michael Hoffman, Wunderlich Securities.
Michael Hoffman - Wunderlich Securities: On the organic growth, can we talk in the U.S.? Can you help us understand the proportioning of that total growth between your auxiliary services versus pricing coming in on sort of the base legacy businesses?
Richard T. Kogler - EVP and COO: I think as we've said before, on the base legacy businesses, if I'm understanding your question right, price is usually around CPI plus or minus depending on the customer type and then the rest of it is organic growth.
Michael Hoffman - Wunderlich Securities: And that remaining organic growth is predominately the auxiliary services, that's why I was really trying to understand...?
Charles A. Alutto - President and CEO: Yeah, so Michael, on the SQ, its StrongPak and it is Steri-Safe. Volume does have a little bit on the SQ side. And then on the LQ side, it's mostly Sharps Management, Rx Waste and again a little bit of StrongPak in there. That's helpful?
Michael Hoffman - Wunderlich Securities: Yeah, that's helpful. And then, I get it it's on a pending lawsuit, but can you just talk a little bit about what this group is trying to accomplish? Do you have any sort of commentary about the lawsuit that was filed?
Richard T. Kogler - EVP and COO: You're referring to the class action lawsuit?
Michael Hoffman - Wunderlich Securities: Yes, from the veterinary group?
Richard T. Kogler - EVP and COO: Yeah, that was filed in Pennsylvania on March 12, 2013. We've disclosed that in our 8-K. It seems to me to be and to our attorneys to be a simply a follow-on from the settlement we reached with the New York Attorney General and also a 2008 whistleblower lawsuit that's been out there some time. Since that time, we've been served with three similar class action lawsuits that all have basically the same obligations. This is not unexpected. Our attorneys tell us that most of these cases end up being consolidated and tried as one. That's what we expect. As we said, we think the lawsuits are without merit. We will defend ourselves vigorously. Beyond that, it's really inappropriate to comment because this is pending litigation.
Michael Hoffman - Wunderlich Securities: Yeah, fair enough. I just wanted to understand if there's any other sort of aspects of it. And then on – can you comment on customer churns particularly in the domestic business; U.S. business, and even more finally on small generator side? Sort of given where we are sort of in this economic cycle, how would you frame the customer churn in the small generator market?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Really, we don't see a major difference in churn. I mean we have a very good revenue retention about 95%, and the reason 5% leaves us some customers don't pay their bills. Obviously, we stop service. There's doctors, dentists and alike like that close their shops and retire. Some consolidate; that's a couple of percent, and then your normal revenue maybe 1% to 2%. Obviously, it's a competitive market, and we lose some to competition.
Operator: Erin Wilson, Bank of America Merrill Lynch.
Erin Wilson - Bank of America Merrill Lynch: On patient communications, I guess we keep hearing about progress there. Would you say this is moving ahead of expectations at this point and what percent of your targeted customer base is already on board? I assume it's still small, but – and has maybe that addressable market changed at all in your view as far as – or, as who can actually benefit from this?
Charles A. Alutto - President and CEO: Yeah, Erin, I would say it is meeting our expectations, so it's on track. Obviously, we're new into this, so this is one with a great upside for us with respect to a target. The only thing that's changed on the market opportunity side is obviously with the acquisition of Beryl that increased our capability and hence increased the market size. Before Beryl we were looking at $1 billion plus opportunity and now it's greater than $2 billion.
Erin Wilson - Bank of America Merrill Lynch: And then, in Spain, I saw that you did another acquisition there and it seems like you're building up to some sort of critical mass. Are you beginning to roll out any sort of ancillary services there and is the customer base still primarily LQ, how much in the way of SQ is in that particular region?
Charles A. Alutto - President and CEO: We're still building the SQ business. Obviously, all the follow-on deals we did – besides the one large deal in 2011 we've done now 10 additional deals in Spain, mostly smaller deals, so we're starting to build the SQ customer base. We are, as we said last time, we were starting to pilot the clinical service offerings. For those – to remind those again, that's the Steri-Safe equivalent. In the international market we are now starting to roll out Steri-Safe in Spain since we now have a good base of SQ customers. We still have some ways to go there, but we like the opportunity in Spain and we're starting to launch the clinical services in that region.
Erin Wilson - Bank of America Merrill Lynch: So, what regions now do you have some sort of rollout ancillary service offering?
Charles A. Alutto - President and CEO: If you look at clinical services, we're in Canada, the U.K., Ireland, Spain and Portugal. And from a Sharps Management perspective, we are in Canada, Ireland and we, at the end of last year, just finished our first Sharps Management plant in the U.K.
Operator: Shlomo Rosenbaum, Stifel Nicolaus.
Shlomo Rosenbaum - Stifel Nicolaus: Last quarter, you guys highlighted StrongPak a little bit more. Is there any change in the trajectory of that business or is it just you guys have already alerted us to that and therefore, you haven't focused on it as much in your prepared comments?
Charles A. Alutto - President and CEO: That's exactly Shlomo. We spoke about it last time. It remains on track. I think the market opportunity we spoke about last time was $1 billion opportunity. I think the important to thing to stress these are multiyear agreements with many locations and the reoccurring revenue stream. Customer interest remains very high and we're on track with our plan. So, everything is moving along. Don't read anything into the comments about it. Everything is on track with respect to that offering.
Erin Wilson - Bank of America Merrill Lynch: And then where are you guys in the platform build for the communications business? You've done a bunch of different acquisitions and I know others have big investment in the platform. Where are you in terms of having kind of a unified platform that you want to be able to go out with?
Charles A. Alutto - President and CEO: Yeah, I think we're on the platform with respect to the service capabilities, we feel very comfortable where we are. Now there might be a few additional capabilities we will look at in the next year or so. From a systems platform, we're making progress. We like what we've seen so far. Some of the integration that we've done, we've got some work to do in that area. But we've also seen some nice gross margin lift in that business on some of the low-hanging fruit as we've started to integrate some of these businesses.
Erin Wilson - Bank of America Merrill Lynch: And then Frank, the AR DSO ticked up a tad in the first quarter. Does that have anything to do with more of the acquisitions in Spain?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: The DSO was up to 61, and there's really two factors there. It was a weekend cutoff. We also had Easter right before that, so there were some bank holidays in some of the European and Latin America countries. That was really the main driver of, we feel, of the increase.
Operator: Gary Bisbee, Barclays.
Gary Bisbee - Barclays Capital: I guess the first question, the guidance for organic growth for the SQ and LQ units, you continue to be trending at the high end of those. Is that remain a conservatism or is there anything we might look for that could lead to some slowing in those growth rates as we move through the year?
Charles A. Alutto - President and CEO: No, I think you know us. We're always conservative in guidance. Obviously, there's a lot of changes going on in healthcare right now. So, I think it's prudent to be conservative with our growth rates. Growth rates obviously vary quarter-to-quarter based on the days in the quarter, influx of large contracts and holidays, but I think we're consistent to where we've been in the past, which is conservative.
Gary Bisbee - Barclays Capital: And then, looking at the international business, I realize it's early in adding on of ancillary, but can you give us any sense just what – if you look at international; the total portfolio, what would the penetration of those be either as a percent of revenue or just directionally relative to what it is in the domestic market. I guess what I'm getting at is how early in the game are we? And maybe the follow-on to that is just, how material could that be over, say, five years or something like that in terms of providing some gross margin (there)?
Charles A. Alutto - President and CEO: Yeah, I think we're very early in the stages on the international front and then I have told individuals I have been in Stericycle for many years. The international business to me looks like Stericycle did in the late '90s. So, we've got ways to go on the opportunity. We do think we can double or triple the revenue over a long period of time. We think we can move gross margins. Every market will be different. Healthcare is different in every region and geography that we're in, but obviously, we feel really good about the international business over the long run.
Gary Bisbee - Barclays Capital: And then just one last one, in terms of following up on the patient communication question, when will you be at the point in terms of the offerings and everything that you'll start to really ramp the strategy for upselling this to (the same) customers, and sort of how do you go about doing that?
Charles A. Alutto - President and CEO: Yeah, as I have said before, I think from a patient communication standpoint, 2013 will be a year we're continuing to make investments and look at acquisitions. I think the internal growth and the go-to-market will be finalized this year and you'll see it in 2014 and beyond.
Operator: Isaac Ro, Goldman Sachs.
Isaac Ro - Goldman Sachs: First off on M&A, just wondering, you mentioned the 11 deals you did ex-U.S. Is it fair to say that all those are margin-dilutive to the core franchise in the near-term? Just trying to understand or see if we can quantify a little bit of how we should look at the margin impact from those deals over the next few quarters?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Yeah, normally, acquisitions have in the past been slightly margin-dilutive, depending obviously on the size of what they're coming in at in the quarter. So, this quarter, two of those deals that we did and a lot of them are international too, slightly margin-dilutive. You also have a factor maybe that you need to think about for the rest of the year. Obviously, foreign exchange rates are different right now than they were when we gave guidance the last time. And so, FX impact in the remainder of the year is probably $8 million to $9 unfavorable from a revenue point of view. So, that is one to take into account too.
Isaac Ro - Goldman Sachs: Then maybe a second one on M&A. If you just maybe looked at your funnel from here on potential pipeline deals, could you maybe give us a sense of how the U.S. versus ex-U.S. pipeline looks? Is it fair to say we are going to keep seeing vast majority of your deal flow ex-U.S.?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: No, again, we do deal opportunistically. We don't have a specific number for the U.S. or international and the pipeline is robust in both areas. So, I would never read into one quarter what a trend is. It's robust on both sides.
Isaac Ro - Goldman Sachs: Then just last one from me on PCS, a little bit more of a big picture question with regards to the healthcare system in the U.S. We've seen pretty steady consolidation of individual physician practices into larger group practices over the last few years and I'm just wondering if you had any examples, you could share a point or two where that market dynamic has driven maybe accelerated adoption of PCS just given that you already in some cases, relationships on waste management and I was just wondering if that's been a fruitful way in which you can sort of upsell as the physician market consolidates?
Charles A. Alutto - President and CEO: Yeah, overall, we think in the consolidation, it's going to be a positive for Stericycle. We think there will be an opportunity to consolidate vendors to Stericycle. We have seen one large system that actually went to Stericycle for all their physician-owned after-hour ancillary services. So that was a nice win for the team. I think the other thing you have to do though is as these systems get larger and they consolidate, it could slow up a little bit on the sales cycle. So it's plus and minus, but overall we think there will be consolidation to vendors. We think Beryl will be a great opportunity for leveraging the relationship that they have at hospitals already. But we've already seen one nice win from the team on an after-hour answering service that affiliated with a very large IDN.
Operator: Kevin Steinke, Barrington Research.
Kevin Steinke - Barrington Research: I just want to follow up on the Pharma Waste opportunity. Now that you see a regulatory scrutiny picking up in that area, do you see that your Pharma Waste offering being able to perhaps start to gain some traction on the SQ side as well or are you going to continue to focus on the LQ for the foreseeable future?
Richard T. Kogler - EVP and COO: We're focusing primarily on LQ because it's a $200 million plus opportunity. There's certainly the potential exist to move this into SQ and we're always experimenting with different offerings and tweaking our offerings. So maybe keep an eye on this space.
Kevin Steinke - Barrington Research: Where are you now in terms of the SQ, LQ mix in the U.K. specifically and then how does that compare to the rest of your international markets?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Yeah, U.K. has right now approached the mid-30s from a revenue point of view, that's SQ related. We don't disclose it for each of the countries, but each country continues to focus on that. Obviously as Charlie said, like Sharps Management now going overseas in these countries also will give a nice lift to the SQ side.
Kevin Steinke - Barrington Research: And Frank, just on the gross margin up 10 basis points sequentially. Can you give us any puts and takes there as well as energy as a percent of revenue in the quarter?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Yeah, the energy as a percent was 5.6%, same as last quarter. If you kind of break down to gross margin, acquisitions was like 5 basis points reducer, foreign exchange offset that a little bit with 4 bps up, and then the business itself; the remainder was 12 bps up.
Kevin Steinke - Barrington Research: And for the full year, should we continue to expect in that range of 40 basis points to 60 basis points of gross margin improvement that you mentioned last quarter?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Yeah, consistent with what we've done in the past; 40 basis points to 60 basis points year-end over year-end.
Operator: Richard Close, Avondale Partners.
Richard Close - Avondale Partners: With respect to the BerylHealth, if we can go into that a little bit more, seems like they have some – rather than just the patient communications aspects they have some analytics and different technology platforms. And I'm wondering if you could talk a little bit in and around the margin opportunity there in terms of what type of gross margins do they have compared to maybe some of the other add-on businesses such as Steri-Safe and the Sharps Management and some of those other add-ons?
Charles A. Alutto - President and CEO: Yeah, so Richard, it's not a technology player. I have seen that out there. Beryl is a – it's a call center type of business. Now, they do have data analytics where they take some of the information on some of their physician referrals and feed that back to the hospital and help them with their marketing strategy and they're putting their marketing dollars in the right place. So they do have some data analytics that go along with their service offering, but it's not a technology. When we look at the business itself from Beryl and compare it to other patient communications, the gross margins are very similar and the EBIT margins are very similar which is right now close to our corporate margins. But obviously the EBIT margins are a lot lower since we've got a higher SG&A spend to it.
Richard Close - Avondale Partners: Then with respect to the acquisitions that have been put in place or completed in the most recent quarter, I think you said $20 million in annualized revenue contribution. There seems maybe a little bit lower amount than some of the most recent quarters. Al though I know that number bounces around. Can you talk a little bit about that in terms of the size of the acquisitions? Are you seeing anything different? I know you reaffirmed you $100 in annualized pipeline, but if we talk a little bit about the size of the acquisitions?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Yeah, I wouldn't read anything into that. Again, as I said, the tax law changes in the U.S. have kind of accelerated some deals into Q4 pipeline as we said is robust both U.S. international that there is definitely north of $100 million in that pipeline. So, no, I would not read anything into this quarter. It's not uncommon for us that Q1 is a little bit slower for the last almost two to two years we've had this scared tax rates would go up and as a result people did deals in Q4.
Richard Close - Avondale Partners: A final question from me. Is there any opportunity near term? Do you see patient communications on the international front at all?
Charles A. Alutto - President and CEO: Right now, long-term, we think there are some opportunities. But right now the focus is on patient communications in the U.S. business. We do think from a call center standpoint, the recall and returns business could do some things internally. But right not on the patient communication, that business is going to be mostly U.S. and I think the reason we are focusing on that is, as you know, the changes in the healthcare law and the Affordable Care Act patient satisfaction is important to the long-term reimbursement rates for hospitals. So there is a lot of focus right now around the patient experience and part of that is how hospitals and healthcare providers communicate with their patients.
Operator: Stewart Scharf, S&P Capital IQ.
Stewart Scharf - S&P Capital IQ: Basically, most of my questions have been answered. Just, where would you focus on in Europe? Is there any area where you feel concern or are you just looking opportunistically as you said, or is there any specific area in Europe that is worse than other areas of your business?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: No, I think there is opportunities. Definitely in Spain, with the number of transactions we've done, there is opportunity for integration and improvement in the margins there. In the U.K., there is some obviously with them now being in newer products like Sharps Management and clinical services. There is room for growth there. In the same time, (there's bits) obviously all the time going that they've done a very good job at. And Portugal, not dissimilar to Spain, good opportunities for integration still. No, we see opportunities here. We don't see specific issues that head us right now. It looks like from a pricing point of view that we've had some contracts that were CPI kind of related; that seems to have bottomed out a little bit too.
Charles A. Alutto - President and CEO: And I think Stewart, if you were asking about new geographies in Europe or – we continue to look at new countries, not only in Europe, but Latin America and Asia for expansion as well. And when those opportunities become available to us, we will look at them and potentially do deals in those new geographies as well.
Stewart Scharf - S&P Capital IQ: And do you have the number of shares bought back again; I didn't catch that?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: The number of shares repurchased?
Stewart Scharf - S&P Capital IQ: Yeah.
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: That was – hang on one second, we had 79,602.
Operator: Sean Dodge, Jefferies.
Sean Dodge - Jefferies: Charlie, just kind of following up on your last comment, can you give us some sense of how you guys think about or prioritize entering new international markets versus backfilling existing ones? And maybe what I'm kind of trying to get at here is, is over the next couple of years is there going to be more focus on building out your existing footprint or the majority of your resource is going to be placed toward identifying and entering these new geographies?
Charles A. Alutto - President and CEO: No, I think we always have balanced both. We look at it what are the opportunities. We kind of know what countries we want to look at to expand into. Obviously, we look at countries where we're in first. That's where a lot of the M&A spend there, Sean, because we do get the synergistic value of those deals when we close them. When we're looking at a new country though, we look at Tier 1 countries. Obviously, there needs to be a base around regulated waste regulations for us to even to think about that market. We look at the stability of the country; the currency, and then also look at the management team of it. It's our first entering into a new market, we want to be able to grow with that management team and do other deals. So there's a lot of factors that go in there, but certainly we need base regulations there and a good healthcare market, and those are some of the things that go into the decision-making process.
Sean Dodge - Jefferies: And then on the sales force in general, are there any planned changes to the size or structure of the sales force or your marketing spend for that matter, now that you're trying to ramp into less traditional services lines like patient communications and StrongPak.
Richard T. Kogler - EVP and COO: Well, I think we've done a pretty good job. Those who have followed us and seeing how we kind of use the existing force so to cross-sell and sell multiple services, we're certainly SG&A-conscious. And I think at this point, what you have seen occasionally is our SG&A as a percent of revenue will move up a little bit if we've got a hard hand defeat. Then once we sort of gotten the sales force used that. We put those dollars somewhere else, remove them back into the pot. I don't think you're going to see anything dramatic with spend and right now, I think the growth rates reflect that the sales team is doing a great job.
Operator: David Manthey, Robert W. Baird.
David Manthey - Robert W. Baird: A question for you on the non-GAAP presentation and the guidance. Historically it's been Stericycle practice not to exclude integration expenses and I see that you're adding them back this quarter I'm just wondering if you could talk about that and then when you gave the guidance of $3.65 to $3.69 for this year, were you assuming a level of integration expenses in that or not?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Yeah, if you go back to the script of last quarter we said that in our prior guidance we would adjust for it. We think it's better comparability. It gives more clarity and transparency to shareholders. So, also it kind of matches how we run the business and how we review people. So, we as a result of that made that change and then said so in the last quarter and the guidance.
David Manthey - Robert W. Baird: So, non-GAAP presentation for starting first quarter of this year you're excluding not only acquisition-related expenses, but integration related expenses routinely going forward?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Yeah, and we do it for both obviously this year and last year. So, last year will adjust up from that point. The comparable is $3.34 from an EPS point of view.
David Manthey - Robert W. Baird: Then second, Frank, on the tax rate, still 36%?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Yeah, that's good for guidance. Then finally, with these newer areas you're going to get into the patient communications; the Rx Waste, StrongPak, primarily the last two kind of the waste type services offerings. Have you seen any change in the competitive landscape at all? It would seem like when you get these large, potentially rapidly growing regulatory change type markets that you'd have some rush of entrants into those markets. Can you talk about the competitive landscape and how you expect to deal with that going forward?
Charles A. Alutto - President and CEO: Yeah, I think on the regulated waste side, Dave, obviously, we see a lot of competition for both the Rx Waste and the StrongPak business, both in a local and a regional level. I think for both offerings though, we are in a unique position given our relationship, not only in the healthcare side, but on the retail side as well. And I think our core competencies fit well in both Rx Waste and StrongPak, and that's what makes us successful in selling in this space.
Operator: David Lewis, Morgan Stanley.
James Francescone - Morgan Stanley: This is actually James in for David. I think just one question on international. Even as domestic SQ and LQ growth have been consistently hitting the high end of the range, in those businesses as you know, international has been a little bit of a laggard and obviously there is some fundamental reasons for that, business mix and things like that. But could you help us understand how much going forward – how much of the priority in the international business is increasing the organic growth rate versus getting growth through M&A versus profitability, and how does that develop going forward?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: Yeah, in fact, we were pleased to see the international one start to come up a little bit again. The team is doing a good job. Obviously, the last year, year and a half, the European escalators have slowed that growth a little bit, and in one or two of those geographies, in fact, it was for some quarters negative. So now having bottomed out on that, it comes up a little bit, and I think we're pleased that it's starting to come off a little bit and the team is doing a good job.
Operator: Barbara Noverini, Morningstar.
Barbara Noverini - Morningstar: I think you might have touched upon this briefly before, but just for clarification's sake, how should we think about StrongPak's service offerings? Is this more an event-driven business like (RRM) or is this more of a recurring program they are offering customers where you're billing them on a regular basis?
Charles A. Alutto - President and CEO: Yeah, this is not like RMS, so this is not project-driven. This is reoccurring revenue stream. They are multiyear agreements with many locations with reoccurring revenues; so very similar identical to our core regulated waste offerings.
Barbara Noverini - Morningstar: Now, are there different tiers of services within these programs?
Charles A. Alutto - President and CEO: It's not like Steri-Safe. If that's the question, they are like a standard, select and preferred. Obviously, every client has different needs. So, the pick-up schedules and the level of service we might give to one customer might differ, but there aren't different levels of service like a Steri-Safe offering.
Operator: Gary Bisbee, Barclays.
Gary Bisbee - Barclays Capital: Just one quick numbers follow-up. Can you break down the $34.2 million? I think that was the year-to-year growth in organic revenue across international versus U.S.; SQ and LQ?
Frank J.M. ten Brink - EVP, CFO and Chief Administrative Officer: We do that into Q, so you'll have to wait for that one at that time.
Operator: There are no further questions.
Charles A. Alutto - President and CEO: Thanks Jay. In closing, I just want to remind everyone that today is Administrative Professionals Day. Make sure you acknowledge those administrative professionals that contribute to the success of your organization. On behalf of the Stericycle executive team, we want to thank (Kelly, Rhonda, and Sandy) for all of their hard work this past year. Have a great evening and we look forward to speaking to everyone again on our next call. Thank you.
Operator: This concludes today's conference call. You may now disconnect.