Stericycle Annual Report 2011

FY2011 Annual Report · Stericycle

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ANNUAL REPORT

2011

(800) 643-0240

www.stericycle.com

Dear Fellow Shareholders:
In 2011, Stericycle continued to set new Company financial records and expand
our range of service offerings in the U.S. and 11 international countries in pursuit
of our mission to help our customers protect their people and reduce risk.

Our revenues in 2011 grew to $1.7 billion, a 16.4% increase over 2010. Our
gross margin was 45.4% in 2011 compared with 46.4% in 2010. Operating
income before acquisition-related costs and various adjustments increased
13.8% to $444.4 million from $390.6 million in 2010. Our operating margin
before acquisition-related costs and various adjustments was 26.5% compared
with 27.1% in 2010.

Under U.S. generally accepted accounting principles (“GAAP”), net income
attributable to Stericycle for 2011 increased 12.9%, to $234.8 million from
$207.9 million, and diluted earnings per share increased 12.4%, to $2.69 from
$2.39 per diluted share. Our 2011 results included a net reduction in net
income of $14.3 million, or $0.16 per diluted share, due to acquisition expenses,
litigation settlement expenses, and restructuring and plant closure costs, which
were offset partially by an adjustment to fair value and a net release of prior
years’ tax reserves. Our 2010 results included a net reduction in net income of
$11.6 million, or $0.13 per diluted share, due to acquisition expenses, litigation
settlement expenses, and restructuring and plant closure costs, which were
offset partially by a gain in a sale of assets and a net release of prior years’
tax reserves. Excluding the impact of these items on our results in both 2010
and 2011, our non-GAAP net income in 2011 grew to $249.1 million, a 13.4%
increase over our non-GAAP net income of $219.6 million in 2010.

Accomplishments in 2011
In 2011, we continued to generate strong free cash flow from operations, which
we used to fund growth and improve our balance sheet. We invested $53.3 million
in capital expenditures to expand our capabilities, drive innovation, and better
serve the evolving needs of our customers. In addition, we used $479.7 million for
domestic and international acquisitions and $124.1 million for stock repurchases
on the open market.

In the U.S.: We continued to strengthen Stericycle’s leadership position in
regulated waste management, healthcare safety, and compliance services.
We continued to increase the penetration of Steri-SafeSM, our OSHA safety
and compliance solution, which allows healthcare providers throughout the
U.S. to create a safe, regulatory-compliant workplace. We continued to achieve
strong customer adoption of our Sharps Management Service, which not only
reduces the risk of needle sticks for hospital staff, but also prevents thousands
of tons of plastic and corrugated material from accumulating in landfills. 2011
was a milestone year for our Sharps Management Service as we reached the
100 million container milestone: as of December 31, 2011, over 107 million
disposable plastic containers have been diverted from landfills in the United
States through this unique service offering. We continued to expand our
Pharmaceutical Waste Compliance Services to both hospitals and small quantity
customers, helping them to dispose of pharmaceuticals that are unused or
identified as waste in a safe and compliant manner. In 2011, we completed 21
domestic acquisitions including the successful integration of HWS.

Sustainability: Stericycle remains committed to helping our customers meet
their sustainability goals. To date, the diversion of plastic containers from
landfills resulting from our Sharps Management Service equates to 7.5 million
gallons of gas not burned and 145 million pounds of CO2 not emitted. Our
Pharmaceutical Waste Disposal Program helps keep unused drugs out of the water
system. We continue to pilot alternative fuel sources for our transportation fleet
including our first truck leases that use Compressed Natural Gas (CNG). Our
ExpertSUSTAINABILITY services offer product re-use, recycling and alternative
use options, and have diverted 20 million pounds of waste from landfills.

Internationally: We continued to establish and strengthen our position in
multiple international markets. We acquired 24 businesses internationally,
including in Spain, where we had not previously operated. We strengthened
our capabilities in Argentina, Brazil, Canada, Chile, Ireland, Japan, Mexico,
Portugal, Romania, Spain and the United Kingdom. We continued to roll out
our Clinical Services offering in select international markets. Clinical Services is
a unique suite of solutions that addresses various aspects of managing a medical
or dental practice, principal among which is regulated waste services. Clinical
Services has a modular architecture which enables us to continue to market new
products and services to both new and existing customers on an on-going basis.

Priorities for 2012

By building on Stericycle’s industry leadership position in 2011, we are
confident that we have the operating platform that we need to drive future
growth and explore new opportunities that arise to serve our customers
better. Our priorities for 2012 are as follows:

Domestic Growth: Our focus will be on providing our multiple service
offerings to both our small quantity (SQ) and large quantity (LQ) customer
base and expanding our services to new customers. Our marketing efforts to
SQ customers will concentrate on our Steri-SafeSM OSHA safety and compli-
ance services and Regulated Waste Management Services. Our marketing
focus for LQ customers will continue to be on extending the momentum of
our Sharps Management Services, Pharmaceutical Waste Disposal Program,
and Regulated Waste Management Services, and expanding our Regulated
Returns and Recall Management Services. We will continue to build on the
Patient Communication Services platform we acquired in 2011 by expanding
this offering to our existing customer base (both SQ and LQ) while simulta-
neously focusing on new customer acquisition.

International Growth: We will remain focused on integrating the acquisitions
we have completed and pursuing attractive international market opportuni-
ties directed at providing value to our shareholders over the course of the
next several years. We will also focus on expanding and penetrating the
international SQ customer market by utilizing our Clinical Services program
to grow our revenues and margins.

Profit Growth: We remain committed to improving our operating performance.
We will seek to make further improvements to our collection route densi-
ties through the use of routing technology and acquisitions, to reduce our
long-haul transportation costs, and improve efficiency in our processing
plants. Our culture of continuous improvement is focused on streamlining
how we serve our customers and encourages the sharing of best practices
and productivity improvement ideas across our entire organization. We will
continue to invest in the latest Customer Experience tools to ensure that we
serve our customers in a timely and efficient manner.

Service Innovation and Environmental Sustainability Leadership:
During 2012, we will maintain our dual commitment to being both
responsive to our customers’ evolving needs and an environmental leader
by offering sustainable solutions designed to meet those needs in an
environmentally-responsible way. Our innovative Steri-SafeSM OSHA
safety and compliance services continue to help our customers enjoy a
safer, more regulatory-compliant workplace in a cost-effective manner.
The breadth of our Regulated Returns and Recall Management Services
helps our customers protect their brands and reduce liability. Our Sharps
Management Service featuring reusable containers offers significant
sustainability benefits by reducing waste volume and conserving valuable
natural resources. Stericycle’s Pharmaceutical Waste Disposal program
helps our customers prevent the potential release of pharmaceuticals with
their hazardous waste content from being released into the water supply.
Our Patient Communication Services help our customers more effectively
and proactively communicate with their patients.

(cid:135)(cid:3)(cid:135)(cid:3)(cid:135)

We are excited and confident about our future. Through our many service
offerings, we help our customers protect the safety of their workforce and
reduce risk. We are a leader in providing regulated waste management,
safety compliance, sharps management, pharmaceutical waste disposal, and
Regulated Returns and Recall Management Services to our customers. We
will continue to improve the efficiency of our operations, to enhance our
customers’ experience while maintaining our strong emphasis on safety and
regulatory compliance, and to focus on the many growth opportunities that
our leadership position affords us. We thank you for your support.

Mark C. Miller
Chairman and CEO

2011

C O R P O R A T E

I N F O R M A T I O N

E x e c u t i v e O f f i c e r s

Mark C. Miller

Chairman and Chief Executive Officer

Charles A. Alutto

President, Stericycle USA

Frank J.M. ten Brink

Michael Collins

Executive Vice President and Chief Financial Officer/CAO

President, Returns Management Services

Richard Kogler

Executive Vice President and Chief Operating Officer

I n d e p e n d e n t A u d i t o r s

F o r m 1 0 - K

B o a r d o f D i r e c t o r s

(cid:48)(cid:68)(cid:85)(cid:78)(cid:3)(cid:38)(cid:17)(cid:3)(cid:48)(cid:76)(cid:79)(cid:79)(cid:72)(cid:85)(cid:3)(cid:135)(cid:3)Chairman & CEO

(cid:45)(cid:68)(cid:70)(cid:78)(cid:3)(cid:58)(cid:17)(cid:3)(cid:54)(cid:70)(cid:75)(cid:88)(cid:79)(cid:72)(cid:85)(cid:3)(cid:135)(cid:3)Lead Director

Chairman – Nominating and

Governance Committee

Member – Audit Committee

John Patience

Member – Nominating and

Governance Committee

Member – Audit Committee

Ernst & Young LLP

155 N. Wacker Drive

Chicago, Illinois 60606

L e g a l C o u n s e l

Johnson and Colmar

2201 Waukegan Road, Suite 260

Bannockburn, Illinois 60015

T r a n s f e r A g e n t

Wells Fargo Bank N.A.

Shareowner Services

161 N. Concord Exchange

South St. Paul, MN 55075

Jonathan T. Lord, M.D.

Chairman – Compensation

Committee

Member – Nominating

and Governance Committee

Thomas D. Brown

Member – Audit Committee

William K. Hall

Member – Compensation

Committee

Rodney F. Dammeyer

Chairman – Audit Committee

Member – Nominating

and Governance Committee

Ronald G. Spaeth

Member – Compensation

Committee

James W.P. Reid-Anderson

Member – Compensation

Committee

Additional copies of this Annual Report or Form 10-K filed with

the Securities and Exchange Commission are available, without

charge, upon request from the company, Investor@stericycle.com

or (800) 643-0240 ext. 2012.

A n n u a l M e e t i n g

The annual meeting of stockholders will be held on

Tuesday, May 22, 2012 at the DoubleTree Hotel Chicago

O’Hare Airport - Rosemont

5460 North River Road, Rosemont, IL 60018.

N a s d a q ® S y m b o l

SRCL

United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-K
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011

or
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
For the transition period from

Commission File Number 0-21229

Stericycle, Inc.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

36-3640402
(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)

Securities registered pursuant to Section 12(b) of the Act:

Common stock, par value $.01 per share
(Title of each class)

NASDAQ Global Select Market
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant

Act. YES È NO ‘

is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act of

1934. YES ‘ NO È

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 È NO ‘

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). YES È NO ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K, or any amendment to this Form 10-K. È

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer È
Non-accelerated filer ‘

‘
Accelerated filer
Smaller reporting company ‘
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange

Act). YES ‘ NO È

State the aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the
price at which common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal
quarter (June 30, 2011): $7,668,576,282.

On February 14, 2012, there were 84,762,386 shares of the Registrant’s common stock outstanding.

Information required by Items 10, 11, 12 and 13 of Part III of this Report is incorporated by reference from the Registrant’s

definitive Proxy Statement for the 2012 Annual Meeting of Stockholders to be held on May 22, 2012.

DOCUMENTS INCORPORATED BY REFERENCE

Stericycle, Inc.
2011 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

Market Price for Registrant’s Common Equity, Related Stockholder Matters and

Issuer Purchases of Equity Securities

Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of

Operations

Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure

Controls and Procedures
Other Information

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters

Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services

Exhibits and Financial Statement Schedules

PART I.
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II.
Item 5.

Item 6.
Item 7.

Item 7A.
Item 8.
Item 9.

Item 9A.
Item 9B.
PART III.
Item 10.
Item 11.
Item 12.

Item 13.
Item 14.
PART IV.
Item 15.
Signatures

Page No.

1
11
14
14
14
14

15
18

20
31
32

64
64
64

65
65

65
65
66

67
71

Item 1. Business

PART I.

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

consolidated basis.

Overview

Services

We are in the business of managing regulated waste and providing an array of related and complementary
services. We operate in the United States, Argentina, Brazil, Canada, Chile, Ireland, Japan, Mexico, Portugal,
Romania, Spain, and the United Kingdom.

The regulated waste services we provide include medical waste disposal, our Steri-Safe® medical waste and
compliance program, our Clinical Services program, our Bio Systems® reusable sharps disposal management
services, pharmaceutical waste disposal, and hazardous waste disposal.

In addition to our regulated waste services, we offer regulated returns and recall management services,
patient communications services, and medical safety products. Our regulated returns and recall management
services help pharmacies and manufacturers handle the return of unused and expired pharmaceuticals. Through
ExpertRECALL™, we manage all aspects of a product recall or withdrawal for pharmaceutical, medical device,
and consumer product manufacturers in a manner compliant with applicable regulations. ExpertRETRIEVAL/
QA™ performs retail quality audits, consumer complaint retrieval and product retrieval services, and brand
integrity monitoring for retailers, manufacturers, and other businesses. We also provide communications services
to healthcare providers to improve office productivity and communications with patients.

We operate integrated national regulated waste management networks in the United States, Argentina,
Brazil, Canada, Chile, Ireland, Japan, Mexico, Portugal, Romania, Spain, and the United Kingdom. Our
worldwide networks include a total of 175 processing or combined processing and collection sites and 154
additional
transfer, collection or combined transfer and collection sites. Our regulated waste processing
technologies include autoclaving, our proprietary electro-thermal-deactivation system (“ETD”), chemical
treatment and incineration.

Customers

We serve approximately 522,000 customers worldwide, of which approximately 16,000 are large-quantity
generators, such as hospitals, blood banks and pharmaceutical manufacturers, and approximately 506,000 are
small-quantity generators, such as outpatient clinics, medical and dental offices, long-term and sub-acute care
facilities, veterinary offices, municipalities and retail pharmacies.

For large-quantity generators of regulated waste such as hospitals and for pharmaceutical companies and

distributors, we offer:

•

our regulated waste management services;

our Bio Systems® reusable sharps disposal management services to reduce the risk of needle sticks;

our pharmaceutical waste services;

our Integrated Waste Stream Solutions (IWSS) program;

a variety of products and services for infection control;

our regulated returns and recall management services for expired or recalled products; and

•

a variety of patient communications services.

For small-quantity generators of regulated waste such as doctors’ offices and for retail pharmacies, we offer:

•

our regulated waste management services;

our Steri-Safe® OSHA, HIPAA compliance, and clinical services programs;

a variety of products and services for infection control;

our regulated returns and recall management services for expired or recalled products; and

a variety of patient communications services.

We benefit from significant customer diversification. No one customer accounts for more than 1.5% of our

total revenues, and our top ten customers account for approximately 6% of total revenues.

Industry Overview

Governmental legislation and regulation increasingly requires the proper handling and disposal of regulated
waste which includes such items as medical waste, hazardous waste, and pharmaceutical waste. Regulated
medical waste is generally any medical waste that can cause an infectious disease and includes: single-use
disposable items, such as needles, syringes, gloves and other medical supplies; cultures and stocks of infectious
agents; and blood and blood products. Regulated pharmaceutical waste consists of expired or recalled
pharmaceuticals.

We believe that in 2011 the size of the global market for regulated waste and other services we provide was

approximately $15.0 billion. Industry growth is driven by a number of factors. These factors include:

• Aging of Population: The average age of the population in the countries we operate in is rising. As
people age, they typically require more medical attention and a wider variety of tests, procedures and
medications, leading to an increase in the quantity of regulated waste generated.

• Pressure to Reduce Healthcare Costs: The healthcare industry is under pressure to reduce costs. We
believe that our services can help healthcare providers to reduce their handling and compliance costs
and to reduce their potential liability for employee exposure to bloodborne pathogens and other
infectious agents. In addition, hospital institutions continue to outsource service which we can provide.

• Environmental and Safety Regulation: We believe that many businesses that are not currently using
third party regulated waste management services are unaware either of the need for proper training of
employees or of the requirements of OSHA and other regulations regarding the handling of regulated
waste. These businesses include manufacturing facilities, schools, restaurants, hotels and other
businesses where employees may come into contact with bloodborne pathogens or handle hazardous
materials. Similarly, the proper handling of expired or recalled products requires an expertise that many
businesses lack or find inefficient to provide.

•

Shift to Off-Site Treatment: We believe that patient care is continuing to shift from institutional
higher-cost acute-care settings to less expensive, smaller, off-site treatment alternatives, with a
resulting increase in the number of regulated waste generators that cannot treat their own regulated
waste.

• Control of Drug Diversion: The U.S. Drug Enforcement Administration (“DEA”) has recently
emphasized improved control of the handling and shipment of controlled substances to prevent
diversion and counterfeiting,
thus increasing the utility to pharmaceutical manufacturers and
distributors of a returns service for expired or recalled pharmaceuticals.

Competitive Strengths

We believe that we benefit from the following competitive strengths, among others:

• Broad Range of Services: We offer our customers a broad range of services. We work with businesses
across a number of industries such as healthcare, manufacturing, and retail to safely and efficiently
dispose of regulated materials, ensure regulatory compliance, improve employee and customer safety,
protect their brands, improve communications with patients, and manage corporate and personal risk.

• Established Network of Processing and Transportation Locations in Each Country: We believe that

our network of locations results in a very efficient operation.

• Diverse Customer Base and Revenue and Cost Stability: We have a diverse customer base and
contractual relationships in all the markets in which we operate. We are also generally protected from
the cost of regulatory changes or increases in fuel, insurance or other operating costs because our
regulated waste contracts typically allow us to adjust our prices to reflect these cost changes.

•

Strong Sales Network and Proprietary Database: We use both telemarketing and direct sales efforts to
obtain new customers for our regulated waste and other services. In addition, we have a large database
of potential new small-quantity customers, which we believe gives us a competitive advantage in
identifying and reaching this higher-margin sector.

• Experienced Senior Management Team: We have experienced leadership. Our five most senior
executives collectively have over 125 years of management experience in the health care, consumer
and waste management industries.

• Ability to Integrate Acquisitions: Since 1993 we have completed 258 acquisitions in the United States
and internationally and have demonstrated a consistent ability to integrate our acquisitions into our
operations successfully.

Our goals are to strengthen our position as a leading provider of regulated waste and compliance services

and to continue to improve our profitability. Components of our strategy to achieve these goals include:

• Expand Range of Services and Products: We believe that we continue to have opportunities to expand
our business by increasing the range of products and services that we offer our existing regulated waste
customers. For example, to small-quantity customers, we offer OSHA compliance services through our
Steri-Safe® program and patient communications services; to large-quantity customers, we offer our
Bio Systems® reusable sharps management program, our pharmaceutical waste disposal services and
patient communications services.

•

Improve Margins: We intend to continue working to improve our margins by increasing our base of
small-quantity customers and focusing on service strategies that more efficiently meet the needs of our
large-quantity customers. We have succeeded in raising the percentage of our domestic regulated waste
revenues from small-quantity customers from 33% for the fourth quarter of 1996 to 63% for 2011.

Seek Complementary Acquisitions: We intend to continue to seek opportunities to acquire businesses
that expand our networks and service capabilities in the United States and internationally that will
increase our customer base. We believe that selective acquisitions can enable us to improve our
operating efficiencies through increased utilization of our service infrastructure.

Acquisitions

We have substantial experience in evaluating potential acquisitions and determining whether a particular
business can be integrated into our operations with minimal disruption. Once a business is acquired, we
implement programs and procedures to improve customer service, sales, marketing, routing, equipment
utilization, employee productivity, operating efficiency and overall profitability.

We completed 258 acquisitions from 1993 through 2011, with 164 in the United States and 94

internationally.

During 2011, we completed 45 acquisitions, of which 21 were domestic businesses in regulated waste,
patient communications, or returns management services business and of which 24 were international regulated
waste businesses in Latin America, Europe, and Japan.

International

We conduct regulated waste operations in Argentina, Brazil, Canada, Chile, Ireland, Japan, Mexico,
Portugal, Romania, Spain, and the United Kingdom. We began our operations in Canada and Mexico in 1998,
Argentina in 1999, the United Kingdom in 2004, Ireland in 2006, Chile in 2008, Romania and Portugal in 2009,
Brazil and Japan in 2010, and Spain in 2011. Our international service offerings are primarily medical waste
disposal. We also have started an international presence with our Returns and Quality Audit program managed
through returns and recall management services. While our international customers are primarily large quantity
generators, we are expanding our small quantity customer base through programs similar to our Steri-Safe
program such as Stericycle Clinical Services (“SCS”) in Canada and select countries in Europe.

Regulated Waste Services and Operations

Collection and Transportation: In many respects, our regulated waste business is one of logistics.
Efficiency of collection and transportation of regulated waste is a critical element of our operations because it
represents the largest component of our operating costs.

For regulated waste, we supply specially designed reusable leak-resistant and puncture-resistant plastic
containers to most of our large-quantity customers and many of our larger small-quantity customers. To assure
regulatory compliance, we will not accept regulated waste from customers unless it complies with our acceptance
protocols and is properly packaged in containers that we have either supplied or approved.

We collect containers or corrugated boxes of regulated waste from our customers depending upon customer
requirements, contract terms and volume of waste generated. The waste is then transported directly to one of our
processing facilities or to one of our transfer stations where it is combined with other regulated waste and
transported to a processing facility.

Transfer stations allow us to temporarily hold small loads of waste until they can be consolidated into full
truckloads and transported to a processing facility. Our use of transfer stations in a “hub and spoke”
configuration improves the efficiency of our collection and transportation operations by expanding the
geographic area that a particular processing facility can serve thereby increasing utilization of the facility by
increasing the volume of waste that it processes.

We collect some expired or recalled products, but more typically, customers ship them directly to our

processing facilities.

Processing and Disposal: Upon arrival at a processing facility, containers or boxes of regulated waste are
typically scanned to verify that they do not contain any unacceptable substances like radioactive material. Any
container or box that is discovered to contain unacceptable waste is returned to the customer and the appropriate
regulatory authorities are informed.

The regulated waste is then processed using one of our various treatment or processing technologies. Upon
completion of the particular process, the resulting waste or incinerator ash is transported for resource recovery,
recycling or disposal in a landfill owned by an unaffiliated third party. After plastic containers such as our
Steri-Tub® or Bio Systems® containers have been emptied, they are washed, sanitized and returned to customers
for re-use.

Upon receipt at a processing facility, expired or recalled products are counted and logged, and controlled
substances are stored securely. In accordance with the manufacturer’s instructions, expired or recalled products
are then returned to the manufacturer or destroyed in compliance with applicable regulations.

Documentation: We provide complete documentation to our customers for all regulated waste that we

collect in accordance with applicable regulations and customer requirements.

Processing Technologies

We currently use both non-incineration technologies (autoclaving, our proprietary ETD technology, and

chemical treatment) and incineration technologies for treating regulated waste.

Stericycle was founded on the belief that there was a need for safe, secure and environmentally responsible
management of regulated medical waste. From our beginning, we have championed the use of non-incineration
treatment technologies such as our ETD process. While we recognize that some state regulations currently in
force mandate that some types of regulated waste must be incinerated, we also know from years of experience
working with our customers that there are ways to reduce the amount of regulated waste that is ultimately
incinerated. The most effective strategy that we have seen involves comprehensive education of our customers in
waste minimization and segregation.

Autoclaving: Autoclaving treats regulated waste with steam at high temperature and pressure to kill
pathogens. Autoclaving alone does not change the appearance of waste, and some landfill operators may not
accept recognizable regulated waste. In this case, autoclaving may be combined with a shredding or grinding
process to render the regulated waste unrecognizable.

ETD: Our ETD treatment process includes a system for grinding regulated waste. After grinding, ETD uses
an oscillating field of low-frequency radio waves to heat regulated waste to temperatures that destroy pathogens
such as viruses, bacteria, fungi and yeast without melting the plastic content of the waste. ETD does not produce
regulated air or water emissions.

Incineration: Incineration burns regulated waste at elevated temperatures and reduces it to ash. Incineration
reduces the volume of waste, and it is the recommended treatment and disposal option for some types of
regulated waste such as anatomical waste or residues from chemotherapy procedures. Air emissions from
incinerators can contain certain byproducts that are subject to federal, state and, in some cases, local regulation.
In some circumstances, the ash byproduct of incineration may be regulated.

Chem-Clave: Chemclaving treats regulated waste using high heat, chemicals, pressure, and a steam auger to
kill pathogens. The waste is treated in a sealed container while the auger shreds the waste, making it
unrecognizable while exposing more surface area of the waste to the steam. After shredding and treatment, the
waste residue is sterile and safe for landfill.

Marketing and Sales

Marketing Strategy: We use both telemarketing and direct sales efforts to obtain new customers. In
addition, our drivers may also participate in our regulated waste marketing efforts by actively soliciting small-
quantity customers they service.

Small-Quantity Customers: We target small-quantity customers as a growth area of our regulated waste
business. We believe that when small-quantity regulated waste customers view the potential risks of failing to
comply with applicable regulations they value the services that we provide. We consider this factor to be the
basis for the higher gross margins that we have achieved with our small-quantity customers relative to our large-
quantity customers. We believe that the same potential exists in processing returns of expired products for
smaller customers.

Steri-Safe® and Patient Communication Services: Our domestic Steri-Safe® OSHA compliance program
provides an integrated regulated waste management and compliance-assistance service for small-quantity
customers who typically lack the internal personnel and systems to comply with OSHA regulations. Customers
for our Steri-Safe® service pay a predetermined subscription fee in advance for regulated waste collection and
processing services and can also choose from available packages of training and education services and products
designed to help them to comply with OSHA regulations. We believe that the implementation of our Steri-Safe®
service provides us with an enhanced opportunity to leverage our existing customer base through the program’s
prepayment structure and diversified product and service offerings. In 2010 and 2011, we introduced a similar
program called Clinical Services in Canada, Ireland, Portugal, and the United Kingdom. We offer a variety of
services to healthcare providers designed to enhance office productivity and efficiency and to improve
communications with patients. We also serve hospitals and larger facilities. We believe that our patient
communications services afford us an opportunity to leverage our existing small-quantity customer base.

Mail-Back Program: We also operate a domestic “mail-back” program by which we can reach small-
quantity regulated waste customers located in outlying areas that would be inefficient to serve using our regular
route structure. Our mail-back program has allowed us to service customers as far away as Hawaii, Alaska,
Guam, and the Virgin Islands. Our mail-back program is also used in home care patient settings.

Large-Quantity Customers: Our marketing efforts to large-quantity customers are conducted by account
executives, service specialists and healthcare compliance specialists focused on serving as a trusted advisor to
our customers. In this role, our field resources provide advice, training and consultative services to assist our
large-quantity customers reach their objectives of staying in compliance with local, state, and federal regulations,
reducing their impact on the environment, and maintaining a safe work environment for their staff and patients.

We offer singular waste stream services, including regulated waste management services and Sharps
Management Service featuring our Bio Systems® reusable containers. Additionally, we have the ability to manage
the full spectrum of waste streams generated by a facility with our Integrated Waste Stream Solutions
service. Many of Stericycle’s large quantity services deliver fully integrated/ turnkey solutions which include
program design, clinical staff education, implementation support, onsite service personnel and the necessary
service equipment to support each program.

National Accounts: As a result of our extensive geographic coverage, we are capable of servicing national
account customers (i.e., customers requiring regulated waste management services at various geographically
dispersed locations).

Contracts: We have multi-year contracts with the majority of our customers. We negotiate individual
contracts with each customer. Although we have several standard forms of contract, terms may vary depending
in some
upon the customer’s service requirements and the volume of regulated waste generated and,
jurisdictions, statutory and regulatory requirements. Substantially all of our contracts with small-quantity
customers contain automatic renewal provisions.

Competition

The industries and markets in which we operate are highly competitive, and barriers to entry into the
regulated waste collection and disposal business,
returns business, and the patient
communications business are very low. Our competitors consist of many different types of service providers,
including a large number of regional and local companies. In the regulated waste industry, another major source
of competition is the on-site treatment of regulated waste by some large-quantity generators, particularly
hospitals. Similarly, customers could handle patient communications internally.

the pharmaceutical

In addition,

in the regulated waste industry we face potential competition from businesses that are
attempting to commercialize alternate treatment technologies or products designed to reduce or eliminate the
generation of regulated waste, such as reusable or degradable medical products.

Governmental Regulation

The regulated waste industry is subject to extensive regulations. In many countries there are multiple
regulatory agencies at the local and national level that affect our services. This statutory and regulatory
framework imposes a variety of compliance requirements, including requirements to obtain and maintain
government permits. We maintain numerous governmental permits, registrations, and licenses to conduct our
business in the jurisdictions in which we operate. Our permits vary by jurisdiction based upon our activities
within that jurisdiction and on the applicable laws and regulations of that jurisdiction. These permits grant us the
authority, among other things:

•

to construct and operate collection, transfer and processing facilities;

to transport regulated waste within and between relevant jurisdictions; and

to handle particular regulated substances.

Our permits must be periodically renewed and are subject to modification or revocation by the issuing

authority.

We are also subject to regulations that govern the definition, generation, segregation, handling, packaging,
transportation, treatment, storage and disposal of regulated waste. In addition, we are subject to extensive
regulations designed to minimize employee exposure to regulated waste.

U.S. Federal and Foreign Regulation: We are subject to substantial and dynamic regulations enacted and
enforced by the U.S. government and by the governments of the foreign jurisdictions in which we conduct
regulated waste operations. The specific statutory and regulatory requirements we must comply with vary from
jurisdiction to jurisdiction. The laws governing our domestic and international operations generally consist of
statutes and regulations concerning environmental protection, employee health and welfare, transportation, the
use of the mails, and controlled substances.

Environmental Protection: Our business is subject to extensive and evolving environmental regulations in
all of the geographies in which we operate. Generally, the environmental laws we are subject to regulate the
handling, transporting, and disposing of hazardous and non-hazardous waste, the release or threatened release of
hazardous substances into the environment, the discharge of pollutants into streams, rivers, groundwater and
other surface waters, and the emission of pollutants into the air. The principal environmental laws that govern our
operations in the U.S. are the Resource Conservation and Recovery Act of 1976 (“RCRA”), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), and the Clean Air Act of 1970.
Though medical waste is currently considered non-hazardous solid waste under RCRA, some substances we
collect from some of our customers, including photographic fixer developer solutions, lead foils and dental
amalgam, are considered hazardous waste. CERCLA and state laws similar to it may impose strict, joint and
several liability on the current and former owners and operators of facilities from which release of hazardous
substances has occurred and on the generators and transporters of the hazardous substances that come to be
located at these facilities. The six incinerators we currently operate in the U.S. must comply with the emissions
standards imposed by the applicable states pursuant to regulations implemented under the Clean Air Act.

Examples of environmental laws applicable to our international operations include the Waste Framework
Directive, the Environmental Liabilities Directive, the IPPC (Integrated Pollution Prevention and Control)
Directive, the Waste Incineration Directive in the European Union (“EU”), the Waste Management Act in
Ireland, Ley 154 (Residuos Patogenicos) in Argentina, Lei 12.305/2010 (Lei Ordinária) Institui A Política
Nacional De Resíduos Sólidos in Brazil, and the Canadian Environmental Protection Act and related regulations
in Canada.

Employee Health and Welfare: We are also subject to numerous regulations enacted to protect and promote
worker health and welfare through the implementation and enforcement of standards designed to prevent illness,
injury and death in the workplace. The primary law relating to employee health and welfare applicable to our

business in the U.S. is the Occupational Safety and Health Act of 1970, which establishes certain employer
responsibilities including maintenance of a workplace free of recognized hazards likely to cause illness, death or
serious injury, compliance with standards promulgated by OSHA, and assorted reporting and record keeping
obligations as well as disclosure and procedural requirements. Various OSHA standards apply to certain aspects
of our operations and govern such matters as exposure to bloodborne pathogens and other potentially infectious
materials.

Employee health and welfare laws governing our business in foreign jurisdictions include the Workplace
Health and Safety Directive and the Directive concerning ionizing radiation in the EU, and various provisions of
the Canada Labour Code and related regulations in Canada.

Transportation: Various laws regulating the transportation of waste and other potentially dangerous
materials also apply to the services we provide. In the U.S., the Department of Transportation (“DOT”) has
adopted regulations that require us to package and label regulated waste in compliance with designated standards,
and which incorporate bloodborne pathogens standards issued by OSHA. Under these standards, we must, among
other things, identify our packaging with a “biohazard” marking on the outer packaging, and our regulated waste
container must be sufficiently rigid and strong to prevent tearing or bursting. It must also be puncture-resistant,
leak-resistant, properly sealed and impervious to moisture. Expired or recalled pharmaceuticals are subject to
substantially the same DOT regulations as medical waste. We identify these products by their National Drug
Code number and classify them by their handling, transportation and disposal requirements.

Examples of transportation laws we must comply with internationally include the Directive on the Inland
Transportation of Dangerous Goods in the EU and the Transport of Dangerous Goods Act and related regulations
in Canada.

Use of the Mails: Certain regulations governing the use of the mails in the U.S. apply to a particular
component of our sharps management services, requiring us to obtain and maintain permits from the U.S. Postal
Service (“USPS”). We have obtained permits from the USPS to conduct our “mail-back” program, pursuant to
which customers mail approved containers of “sharps” (needles, knives, broken glass and the like) directly to our
treatment facilities.

to certain laws regulating controlled substances. Our

Controlled Substances: In the U.S., our regulated returns and recall management services business is
subject
returns service for expired and recalled
pharmaceuticals is required to comply with Drug Enforcement Administration (“DEA”) regulations relating to
the approval and permitting of processing facilities, management of employees engaged in the collection,
processing and disposal of controlled substances, and proper documentation and reporting to the DEA.

U.S. and Foreign Local Regulation: We conduct business in all 50 states and Puerto Rico. Each state has
its own regulations related to the handling, treatment and storage of regulated waste. Although there are many
differences among the various state laws and regulations, for regulated waste many states have followed the
model under the state RCRA equivalent. In each state where we operate a processing facility or a transfer station,
we are required to comply with numerous state and local laws and regulations as well as our operating plan for
applicable facilities. In addition, many local governments have ordinances and regulations, such as zoning and
health regulations that affect our operations. Similarly, our international operations are subject to regulations
enacted and enforced at the provincial, municipal, and local levels of government in addition to the national
regulations with which we must comply.

Patents and Proprietary Rights

We hold United States patents relating to the ETD treatment process and other aspects of processing
regulated waste. We have filed or have been assigned patent applications in several foreign countries and we
have received patents in Australia, Canada, Denmark, France, Ireland, Italy, Japan, Mexico, South Africa, South
Korea, Spain, Sweden, and the United Kingdom. The last of our current United States patents relating to our
ETD treatment process expires in January 2019.

We own federal registrations for trademarks/servicemarks including Stericycle®, Steri-Safe®, Steri-Fuel®,
Steri-Plastic®, Steri-Tub®, Direct Return®, Stericycle ExpertRECALL®, Sustainable Solutions®, and a service
mark consisting of a nine-circle design.

Potential Liability and Insurance

The regulated waste industry involves potentially significant risks of statutory, contractual, tort and common

law liability claims. Potential liability claims could involve, for example:

•

cleanup costs;

personal injury;

damage to the environment;

employee matters;

property damage; or

alleged negligence or professional errors or omissions in the planning or performance of work.

We could also be subject to fines or penalties in connection with violations of regulatory requirements.

We carry $35 million of liability insurance (including umbrella coverage), and under a separate policy, $10
million of aggregate pollution and legal liability insurance ($10 million per incident), which we consider
sufficient to meet regulatory and customer requirements and to protect our employees, assets and operations.

Employees

As of December 31, 2011, we had 10,249 full-time and 873 part-time employees, of which 6,877 were
employed in the United States and 4,245 internationally. A total of ten collective bargaining agreements with
local unions of the International Brotherhood of Teamsters and Private Sanitation Union cover 413 of our U.S.
drivers, transportation helpers and plant workers. These agreements expire at various dates through June 2015.
We also have approximately 1,040 employees in Latin America, 80 employees in Canada, and 20 employees in
Europe under collective bargaining agreements. We consider our employee relations to be satisfactory.

Executive Officers of the Registrant

The following table contains certain information regarding our five current executive officers:

Name
Mark C. Miller
Richard T. Kogler
Frank J.M. ten Brink
Charles A. Alutto
Michael J. Collins

Position
Chairman and Chief Executive Officer
Executive Vice President and Chief Operating Officer
Executive Vice President and Chief Financial Officer
President, Stericycle USA
President, Return Management Services

Age
56
52
55
46
55

Mark C. Miller has served as our Chief Executive Officer since joining us in May 1992 and as our Chairman
of the Board of Directors since August 2008. In February 2012, the Board of Directors selected Mr. Miller to
become Executive Chairman of the Board and Charlie Alutto to succeed him as our Chief Executive Officer
effective January 1, 2013. From May 1989 until he joined us, Mr. Miller served as vice president for the Pacific,
Asia and Africa in the International Division of Abbott Laboratories, which he joined in 1976 and where he held
a number of management and marketing positions. Mr. Miller received a B.S. degree in computer science from
Purdue University, where he graduated Phi Beta Kappa.

Richard T. Kogler joined us as Chief Operating Officer in January 1999. From May 1995 through October
1998, Mr. Kogler was vice president and chief operating officer of American Disposal Services, Inc., a solid
waste management company. From October 1984 through May 1995, Mr. Kogler served in a variety of
management positions with Waste Management, Inc. Mr. Kogler received a B.A. degree in chemistry from St.
Louis University.

Frank J.M. ten Brink has served as our Executive Vice President, Finance and Chief Financial Officer since
June 1997. From 1991 until 1996 he served as chief financial officer of Hexacomb Corporation, and from 1996
until joining us, he served as chief financial officer of Telular Corporation. Prior to 1991, he held various
financial management positions with Interlake Corporation and Continental Bank of Illinois. Mr. ten Brink
received a B.B.A. degree in international business and a M.B.A. degree in finance from the University of
Oregon.

Charlie Alutto joined us in May 1997 following our acquisition of the company where he was then
employed. He became an executive officer in February 2011 and serves as President, Stericycle USA since
January 2010. In February 2012, the Board of Directors selected Mr. Alutto to succeed Mr. Miller as our Chief
Executive Officer effective as of January 1, 2013. Mr. Alutto has over 23 years experience in healthcare waste
and compliance services and has served in many leadership positions at Stericycle, including VP and Managing
Director of Stericycle’s European business, Vice President of Stericycle’s hospital business and Area VP of
Operations. Mr. Alutto received a B.S. degree in finance from Providence College and a M.B.A. degree in
finance from St. John’s University.

Michael J. Collins has served as President of our Recall and Returns Management Services Division since
June 2006. Prior to joining us, he served at Abbott Laboratories, a diversified health care company, which he
joined in 1982 and where he held a number of management and marketing positions, most recently as vice
president, medical products group health systems. Mr. Collins received a B.A. degree in business and education
from the University of New Haven and a M.B.A. degree in business administration from National University.

Website Access

We maintain an Internet website, www.stericycle.com, providing a variety of information about us and the
services we provide. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K that we file with the Securities and Exchange Commission are available, as soon as practicable after
filing, at the investors’ page on our website, or by a direct link to our filings on the SEC’s free website,
www.sec.gov.

Item 1A. Risk Factors

We are subject to extensive governmental regulation, which is frequently difficult, expensive and time-
consuming to comply with.

industry is subject

The regulated waste management

to extensive federal, state and local

laws and
regulations relating to the collection, transportation, packaging, labeling, handling, documentation, reporting,
treatment and disposal of regulated waste. Our business requires us to obtain many permits, authorizations,
approvals, certificates, and other types of governmental permission from every jurisdiction where we operate.
We believe that we currently comply in all material respects with all applicable permitting requirements. State
and local regulations change often, however, and new regulations are frequently adopted. Changes in the
regulations could require us to obtain new permits or to change the way in which we operate under existing
permits. We might be unable to obtain the new permits that we require, and the cost of compliance with new or
changed regulations could be significant.

Many of the permits that we require, especially those to build and operate processing plants and transfer
facilities, are difficult and time-consuming to obtain. They may also contain conditions or restrictions that limit
our ability to operate efficiently, and they may not be issued as quickly as we need them (or at all). If we cannot
obtain the permits that we need when we need them, or if they contain unfavorable conditions, it could
substantially impair our operations and reduce our revenues.

The level of governmental enforcement of environmental regulations has an uncertain effect on our business
and could reduce the demand for our services.

We believe that the government’s strict enforcement of laws and regulations relating to regulated waste
collection and treatment has been good for our business. These laws and regulations increase the demand for our
services. A relaxation of standards or other changes in governmental regulation of regulated waste could increase
the number of competitors or reduce the need for our services.

If we are unable to acquire regulated waste and other businesses, our revenue and profit growth may be
slowed.

Historically, our growth strategy has been based in part on our ability to acquire regulated waste and other

businesses. We do not know whether in the future we will be able to:

•

identify suitable businesses to buy;

complete the purchase of those businesses on terms acceptable to us;

improve the operations of the businesses that we do buy and successfully integrate their operations into
our own; or

avoid or overcome any concerns expressed by regulators.

We compete with other potential buyers for the acquisition of regulated waste companies and other
businesses. This competition may result in fewer opportunities to purchase companies that are for sale. It may
also result in higher purchase prices for the businesses that we want to purchase.

We also do not know whether our growth strategy will continue to be effective. Our business is significantly
larger than before, and new acquisitions may not have the incremental benefits that we have obtained in the past.

The implementation of our acquisition strategy could be affected in certain instances by the concerns of
federal and state regulators, which could result in our not being able to realize the full synergies or
profitability of particular acquisitions.

We may become subject to inquiries and investigations by federal or state antitrust regulators from time to
time in the course of completing acquisitions of other regulated waste businesses. In order to obtain regulatory
clearance for a particular acquisition, we could be required to modify certain operating practices of the acquired

business or to divest ourselves of one or more assets of the acquired business. Changes in the terms of our
acquisitions required by regulators or agreed to by us in order to settle regulatory investigations could impede our
acquisition strategy or reduce the anticipated synergies or profitability of our acquisitions. The likelihood and
outcome of inquiries and investigations from federal or state regulators in the course of completing acquisitions
cannot be predicted.

Aggressive pricing by existing competitors and the entrance of new competitors could drive down our profits
and slow our growth.

The regulated waste industry is very competitive because of low barriers to entry, among other reasons. This
competition has required us in the past to reduce our prices, especially to large account customers, and may
require us to reduce our prices in the future. Substantial price reductions could significantly reduce our earnings.

We face direct competition from a large number of small, local competitors. Because it requires very little
money or technical know-how to compete with us in the collection and transportation of regulated waste, there
are many regional and local companies in the industry. We face competition from these businesses, and
competition from them is likely to exist in the new locations to which we may expand in the future. In addition,
large national companies with substantial resources may decide to enter the regulated waste industry. For
example, in the United States, Waste Management, Inc., a major solid waste company is offering regulated waste
management services to hospitals and other large and small quantity generators of regulated waste.

Our competitors could take actions that would hurt our growth strategy, including the support of regulations
that could delay or prevent us from obtaining or keeping permits. They might also give financial support to
citizens’ groups that oppose our plans to locate a processing or transfer facility at a particular location.

The loss of our senior executives could affect our ability to manage our business profitably.

We depend on a small number of senior executives. Our future success will depend upon, among other things,
our ability to keep these executives and to hire other highly qualified employees at all levels. We compete with
other potential employers for employees, and we may not be successful in hiring and keeping the executives and
other employees that we need. We do not have written employment agreements with any of our executive officers,
and officers and other key employees could leave us with little or no prior notice, either individually or as part of a
group. Our loss of or inability to hire key employees could impair our ability to manage our business and direct its
growth.

Restrictions in our senior unsecured credit facility may limit our ability to pay dividends, incur additional debt,
make acquisitions and make other investments.

Our senior unsecured credit facility contains covenants that restrict our ability to make distributions to

stockholders or other payments unless we satisfy certain financial tests and comply with various financial ratios.

It also contains covenants that limit our ability to incur additional indebtedness, acquire other businesses and
make capital expenditures, and imposes various other restrictions. These covenants could affect our ability to
operate our business and may limit our ability to take advantage of potential business opportunities as they arise.

Our expansion into foreign countries exposes us to unfamiliar regulations and may expose us to new obstacles
to growth.

We plan to grow both domestically and internationally. We have established operations in the United States,
Argentina, Brazil, Canada, Chile, Ireland, Japan, Mexico, Portugal, Romania, Spain, and the United Kingdom.
Foreign operations carry special risks. Although our business in foreign countries has not yet been affected, our
business in the countries in which we currently operate and those in which we may operate in the future could be
limited or disrupted by:

•

exchange rate fluctuations;

•

government controls;

import and export license requirements;

political or economic instability;

trade restrictions;

changes in tariffs and taxes;

our unfamiliarity with local laws, regulations, practices and customs;

restrictions on repatriating foreign profits back to the United States or movement of funds to other
countries; and

difficulties in staffing and managing international operations.

Foreign governments and agencies often establish permit and regulatory standards different from those in
the United States. If we cannot obtain foreign regulatory approvals, or if we cannot obtain them when we expect,
our growth and profitability from international operations could be limited. Fluctuations in currency exchange
could have similar effects.

Our earnings could decline if we write-off intangible assets, such as goodwill.

As a result of our various acquisitions, our balance sheet at December 31, 2011 contains goodwill of $1.9
billion and other intangible assets, net of accumulated amortization of $546.6 million (including indefinite lived
intangibles of $94.5 million). In accordance with Accounting Standards Codification (“ASC”) Topic 350
“Intangibles—Goodwill and Other,” we evaluate on an ongoing basis whether facts and circumstances indicate
any impairment of the value of indefinite-lived intangible assets such as goodwill. As circumstances after an
acquisition can change, we may not realize the value of these intangible assets. If we were to determine that a
significant impairment has occurred, we would be required to incur non-cash charges for the impaired portion of
goodwill and other unamortized intangible assets, which could have a material adverse effect on our results of
operations in the period in which the impairment charge occurs.

The handling and treatment of regulated waste carries with it the risk of personal injury to employees and
others.

Our business requires us to handle materials that may be infectious or hazardous to life and property in other
ways. While we try to handle such materials with care and in accordance with accepted and safe methods, the
possibility of accidents, leaks, spills, and acts of God always exists. Examples of possible exposure to such
materials include:

•

truck accidents;

damaged or leaking containers;

improper storage of regulated waste by customers;

improper placement by customers of materials into the waste stream that we are not authorized or able
to process, such as certain body parts and tissues; or

• malfunctioning treatment plant equipment.

Human beings, animals or property could be injured, sickened or damaged by exposure to regulated waste.
This in turn could result in lawsuits in which we are found liable for such injuries, and substantial damages could
be awarded against us.

While we carry liability insurance intended to cover these contingencies, particular instances may occur that
are not insured against or that are inadequately insured against. An uninsured or underinsured loss could be
substantial and could impair our profitability and reduce our liquidity.

The handling of regulated waste exposes us to the risk of environmental liabilities, which may not be covered
by insurance.

As a company engaged in regulated waste management, we face risks of liability for environmental
contamination. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980,
or CERCLA, and similar state laws impose strict liability on current or former owners and operators of facilities
that release hazardous substances into the environment as well as on the businesses that generate those
substances and the businesses that transport them to the facilities. Responsible parties may be liable for
substantial investigation and clean-up costs even if they operated their businesses properly and complied with
applicable federal and state laws and regulations. Liability under CERCLA may be joint and several, which
means that if we were found to be a business with responsibility for a particular CERCLA site, we could be
required to pay the entire cost of the investigation and clean-up even though we were not the party responsible
for the release of the hazardous substance and even though other companies might also be liable.

Our pollution liability insurance excludes liabilities under CERCLA. Thus, if we were to incur liability
under CERCLA and if we could not identify other parties responsible under the law whom we are able to compel
to contribute to our expenses, the cost to us could be substantial and could impair our profitability and reduce our
liquidity. Our customer service agreements make clear that the customer is responsible for making sure that only
appropriate materials are disposed of. If there were a claim against us that a customer might be legally liable for,
we might not be successful in recovering our damages from the customer.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We lease office space for our corporate offices in Lake Forest, Illinois. Domestically, we own or lease two
ETD processing facilities, 58 facilities that provide autoclave or incineration processing, 23 facilities that use
other processing technologies. All of our processing facilities also serve as collection sites. We own or lease 111
additional transfer and collection sites and 12 additional sales/administrative sites. Internationally, we own or
lease three ETD processing facilities, 70 facilities that provide autoclave or incineration processing, and 19
facilities that use other processing technologies. We also own or lease 43 transfer and collection sites, 24
additional sales/administrative sites, and lease two landfills. We believe that these processing and other facilities
are adequate for our present and anticipated future needs.

Item 3. Legal Proceedings

We operate in a highly regulated industry and must deal with regulatory inquiries or investigations from
time to time that may be instituted for a variety of reasons. We are also involved in a variety of civil litigation
from time to time.

Item 4. Mine Safety Disclosures

Not Applicable

PART II.

Item 5. Market Price for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer
Purchases of Equity Securities

As of February 14, 2012, we had 138 stockholders of record. The Company’s stock trades on the NASDAQ

Global Select Market under the ticker symbol SRCL.

The following table provides the high and low sales prices of our Common Stock for each calendar quarter

during our two most recent fiscal years:

Quarter
First quarter 2010
Second quarter 2010
Third quarter 2010
Fourth quarter 2010

First quarter 2011
Second quarter 2011
Third quarter 2011
Fourth quarter 2011

High
$56.38
66.57
70.36
$81.78

$88.82
94.29
93.00
$88.41

Low
$51.16
54.35
62.57
$69.75

$77.00
84.39
74.09
$76.22

We did not pay any cash dividends during 2011 and have never paid any dividends on our common stock.
We currently expect that we will retain future earnings for use in the operation and expansion of our business and
do not anticipate paying any cash dividends in the foreseeable future. See Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”.

Under resolutions that our Board of Directors adopted, we have been authorized to purchase a cumulative
total of 20,537,398 shares of our common stock on the open market. As of December 31, 2011, we had purchased
a cumulative total of 16,209,713 shares.

The following table provides information about our purchases of shares of our common stock during the

year ended December 31, 2011:

Issuer Purchases of Equity Securities

Period
January 1 – January 31, 2011
February 1 – February 28, 2011
March 1 – March 31, 2011
April 1 – April 30, 2011
May 1 – May 31, 2011
June 1 – June 30, 2011
July 1 – July 31, 2011
August 1 – August 31, 2011
September 1 – September 30, 2011
October 1 – October 31, 2011
November 1 – November 30, 2011
December 1 – December 31, 2011

Total

Number of
Shares (or
Units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs
0
0
0
0
0
50,675
164,000
701,344
96,837
93,197
356,538
100,000

Maximum Number
(or Approximate
Dollar Value) of
Shares (or Units)
that May Yet Be
Purchased Under
the Plans or
Programs
5,890,276
5,890,276
5,890,276
5,890,276
5,890,276
5,839,601
5,675,601
4,974,257
4,877,420
4,784,223
4,427,685
4,327,685

Total
Number of
Shares (or
Units)
Purchased
0
0
0
0
0
50,675
164,000
701,344
96,837
93,197
356,538
100,000

Average
Price
Paid per
Share
(or Unit)
0
$
0
0
0
0
84.90
83.67
79.11
79.41
78.16
78.34
76.41

1,562,591

$79.39

1,562,591

4,327,685

Equity Compensation Plans

The following table summarizes information as of December 31, 2011 relating to our equity compensation
plans pursuant to which stock option grants, restricted stock awards or other rights to acquire shares of our
common stock may be made or issued:

Equity Compensation Plan Information

Plan Category
Equity compensation plans approved by our security holders (1)
Equity compensation plans not approved by our security

Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options
(a)
5,815,871

Weighted-
Average
Exercise
Price of
Outstanding
Options
(b)
$52.78

Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in
Column (a))
(c)
4,525,356

holders (2)

595,942

$25.64

(1) These plans consist of our 2011 Incentive Compensation Plan, 2008 Incentive Stock Plan, 2005 Incentive
Stock Plan, 1997 Stock Option Plan, 1996 Directors Stock Option Plan, and the Employee Stock Purchase
Plan.

(2) The only plan in this category is our 2000 Nonstatutory Stock Option Plan.

In 2000, our Board of Directors approved the 2000 Nonstatutory Stock Option Plan (the “2000 Plan”),
which authorized the granting of nonstatutory stock options for 7,000,000 shares of our common stock to
employees (but not to officers or directors). See Note 6 – Stock Based Compensation to the Consolidated
Financial Statements for a description of this plan.

Performance Graph

The following graph compares the cumulative total return (i.e., stock price appreciation plus dividends) on our
common stock over the five-year period ending December 31, 2011 with the cumulative total return for the same
period on the NASDAQ National Market Composite Index, the S&P 500 Index, and the Dow Jones US Waste &
Disposal index. The graph assumes that $100 was invested on December 31, 2006 in our common stock and in the
stock represented by each of the four indices, and that all dividends were reinvested.

The stock price performance of our common stock reflected in the following graph is not necessarily indicative

of future performance.

Stericycle, Inc.
Russell 3000 Index
Dow Jones US Waste & Disposal

Nasdaq NM Composite
S&P 500 Index

$220.00

$200.00

$180.00

$160.00

$140.00

$120.00

$100.00

$80.00

$60.00

12/31/2006

12/31/2007

12/31/2008

12/31/2009

12/31/2010

12/31/2011

Item 6. Selected Financial Data

In thousands, except per share data

Statement of Income Data
Revenues
Income from operations
Net income attributable to Stericycle, Inc.
Earnings per share—Diluted
Depreciation and amortization
Statements of Cash Flow Data
Net cash flow provided by/(used for):

(1)

(2)

2011

Years Ended December 31,
2009

2008

2010

2007

$1,676,048
424,311
234,751
2.69
66,046

$1,439,388
370,683
207,879
2.39
53,885

$1,177,736
315,189
175,691
2.03
39,990

$1,083,679
274,239
148,708
1.68
34,148

$ 932,767
224,544
118,378
1.32
31,137

Operating activities
Investing activities
Financing activities

$ 306,104
(514,649)
148,324

$ 325,670
(245,482)
(13,565)

$ 277,246
(350,189)
81,772

$ 210,555
(132,930)
(77,882)

$ 174,042
(135,261)
(32,635)

Balance Sheet Data
Cash, cash equivalents and short-term

(1)

investments

Total assets
Long-term debt, net of current portion
Stericycle, Inc. equity

22,927
3,177,090
1,284,113
$1,198,166

95,524
2,639,023
1,014,222
$1,048,425

16,898
2,182,803
910,825
$ 845,695

10,503
1,759,298
753,846
$ 670,480

18,364
1,608,159
613,781
$ 714,075

(1) See Note 3—Acquisitions and Divestitures to the Consolidated Financial Statements for information

concerning our acquisitions during the three years ended December 31, 2011.

(2) See Note 8—Earnings per Common Share to the Consolidated Financial Statements for information

concerning the computation of earnings per diluted common share.

•

In 2011, net income includes the following after-tax effects: $15.6 million of expenses related to
acquisitions; $3.2 million of restructuring and plant closure costs; $0.7 million related to litigation
settlement expense; $0.8 million related to accelerated interest expense due to early term loan
repayment; $1.3 million benefit due to a net release of prior years’ tax reserves; and $4.7 million gain
related to the change in fair value of contingent consideration. The net effect of these adjustments
negatively impacted diluted earnings per share (“EPS”) by $0.16.

In 2010, net income includes the following after-tax effects: $8.9 million of expenses related to
acquisitions; $5.2 million of restructuring and plant closure costs; litigation settlement expense of $0.5
million; $1.8 million gain in sale of assets related to the MedServe divestiture; and $1.2 million benefit
due to a net release of prior years’ tax reserves. The net effect of these adjustments negatively impacted
diluted EPS by $0.13.

In 2009, net income includes the following after-tax effects: $6.8 million of acquisition expenses; $1.0
million of restructuring costs; and $1.8 million benefit due to a net release of the prior years’ tax
reserves. The net effect of these adjustments negatively impacted diluted EPS by $0.06.

In 2008, net income includes the following after-tax effects: $3.5 million expense related to a business
dispute settlement; and a fixed asset write-down of equipment of $0.3 million. The net effect of these
adjustments negatively impacted diluted EPS by $0.05.

In 2007, net income includes the following after-tax effects, netting to $9.3 million in expense, which
negatively impacted diluted EPS by $0.10:

$8.6 million of legal settlement expense related to an arbitration award in Australia;

ii.

$1.8 million write down of our investment in Medam, B.A., an Argentine joint venture. The write
down of our investment in Argentina was a result of the legal restructuring of the business
operations;

iii. $1.3 million write down of the White Rose Environmental tradename as a result of the name

change of our subsidiary in the United Kingdom;

iv. $0.1 million write down of a permit intangible for a treatment facility in the United Kingdom that

was no longer being used;

$0.8 million write down of equipment that had been permanently idled;

vi. $1.2 million gain on the divestiture of selected assets of Sterile Technologies, Ltd., one of our

subsidiaries in the United Kingdom;

vii. $2.0 million income from proceeds received from two of our insurance carriers for coverage
related to the 3CI Complete Compliance Corporation (“3CI”) class action litigation settlement;

viii. $0.1 million gain on the sale of our Scherer Labs assets.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction

with our Consolidated Financial Statements and related notes in Item 8 of this Report.

Introduction

We are in the business of managing regulated waste and providing an array of related services. We operate
in the United States, Argentina, Brazil, Canada, Chile, Ireland, Japan, Mexico, Portugal, Romania, Spain, and the
United Kingdom.

For large-quantity generators of regulated waste such as hospitals and for pharmaceutical companies and
distributors, we offer our institutional regulated waste management services; our Bio Systems® reusable sharps
management services to reduce the risk of needle sticks; a variety of products and services for infection control;
our patient communication services; and our regulated returns and waste management services for expired or
recalled products, pharmaceutical waste disposal services, and hazardous waste disposal. For small quantity
generators of regulated waste such as doctors’ offices and for retail pharmacies, we offer: our medical and
regulated waste management services; our Steri-Safe® OSHA and HIPAA compliance programs; a variety of
products and services for infection control; our patient communication services; and our regulated returns and
recall services for expired or recalled products.

We operate integrated national regulated waste management networks domestically and internationally. Our
national networks include a total of 175 processing or combined processing and collection sites and 154
transfer, collection or combined transfer and collection sites. Our regulated waste processing
additional
technologies include autoclaving, our proprietary ETD, chemical
treatment, and incineration. We serve
approximately 522,000 customers worldwide, of which approximately 16,000 are large-quantity generators and
approximately 506,000 are small-quantity generators.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements requires that we make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure
of contingent assets and liabilities. We believe that of our significant accounting policies (see Note 2 – Summary
of Significant Accounting Policies to the Consolidated Financial Statements), the following ones may involve a
higher degree of judgment on our part and greater complexity of reporting.

Revenue Recognition: Revenues for our regulated waste management services, other than our Steri-Safe
service, are recognized at the time of waste collection. Our Steri-Safe revenues are recognized evenly over the
contractual service period. Payments received in advance are deferred and recognized as services are provided.
Revenues from regulated returns and recall management services and patient communication services are
recorded at the time services are performed. Revenues from product sales are recognized at the time the goods
are shipped to the customer. We do not have any contracts in a loss position. Losses would be recorded when
known and estimable for any contracts that should go into a loss position.

Goodwill and Other Identifiable Intangible Assets: Goodwill associated with the excess purchase price
over the fair value of assets acquired is not amortized. We have determined that our permits have indefinite lives
and, accordingly, are not amortized (see Note 11—Goodwill and Other Intangible Assets to the Consolidated
Financial Statements for additional information).

Our balance sheet at December 31, 2011 contains goodwill of $1.9 billion. In accordance with accounting
standards, we evaluate on at least an annual basis, using the fair value of reporting units, whether goodwill is

impaired. If we were to determine that a significant impairment has occurred, we would be required to incur
non-cash charges of the impaired portion of goodwill that could have a material adverse effect on our results of
operations in the period in which the impairment charge occurs.

During the quarter ended June 30, 2011 we performed our annual goodwill impairment evaluation for our
three reporting units, Domestic Regulated Waste Management Services, Domestic Regulated Returns and Recall
Management Services, and International. We calculate the fair value of our reporting units using two methods,
one a market approach and the other an income approach. Both the market and income approaches indicated no
impairment to goodwill to any of our three reporting units.

Market Approach: Our market approach begins by calculating the market capitalization of the Company
using the average stock price for the prior 30 days and the outstanding share count at June 30, 2011. We then
look at the Company’s Earnings Before Interest, Tax, Depreciation, and Amortization (“EBITDA”), adjusted for
stock compensation expense and other items, such as a gain on sale of divested assets, for the prior twelve
months. The calculated market capitalization is divided by the modified EBITDA to arrive at a valuation
multiple. The fair value of each reporting unit is then calculated by taking the product of the valuation multiple
and the trailing twelve month modified EBITDA of that reporting unit. The fair value was then compared to the
reporting units’ book value and determined to be in excess of the book value. We believe that starting with the
fair value of the company as a whole is a reasonable measure as that fair value is then allocated to each reporting
unit based on that reporting unit’s individual earnings. A sustained drop in our stock price would have a negative
impact to our fair value calculations. A temporary drop in earnings of a reporting unit would have a negative
impact to our fair value calculations.

The results of our goodwill impairment test using the market approach indicated the fair value of our

reporting units exceeded book value by a substantial amount, in excess of 100% of book value.

Income Approach: The income approach uses expected future cash flows of each reporting unit and
discounts those cash flows to a present value. Expected future cash flows are calculated using management
assumptions of internal growth, capital expenditures, and cost efficiencies. Future acquisitions are not included in
the expected future cash flows. We use a discount rate based on our Company calculated Weighted Average Cost
of Capital which is adjusted for each of our reporting units based on risk size premium and foreign country
premium. Significant assumptions used in the income approach include realization of future cash flows and the
discount rate used to present value those cash flows.

The results of our goodwill impairment test using the income approach indicated the fair value of our

reporting units exceeded book value by a substantial amount; in excess of 100%.

Our permits are tested for impairment annually at December 31 or more frequently if circumstances indicate
that they may be impaired. We use either a discounted income or cost savings model as the current measurement
of the fair value of the permits. The fair value is based upon, among other things, certain assumptions about
expected future operating performance, internal and external processing costs, and an appropriate discount rate
determined by management. Our estimates of discounted income may differ from actual income due to, among
other things, inaccuracies in economic estimates.

In 2011, we wrote off $2.8 million for the permit intangibles of three facilities due to rationalizing our
operations. Under current acquisition accounting, a fair value must be assigned to all acquired assets based on a
theoretical “market participant” regardless of the acquirers’ intended use for those assets. This accounting
treatment can lead to the recognition of losses if a company disposes of acquired assets.

Other

identifiable intangible assets,

tradenames, and covenants
such as customer
not-to-compete, are currently amortized using the straight-line method over their estimated useful lives. We have
determined that our regulated waste customer relationships have between 14-year and 40-year lives based on the
specific type of
relationship. Although the contracted regulated waste management business is highly
competitive, we have been able to maintain high customer retention through excellent customer service.

relationships,

The valuation of our contractual customer relationships was derived using a discounted income approach
valuation model. These assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may be less than its undiscounted estimated future cash flows. There have
been no indicators of impairment of these intangibles (see Note 11—Goodwill and Other Intangible Assets to the
Consolidated Financial Statements).

Share Repurchases: Purchase price over par value for share repurchases are allocated to additional paid-in

capital until the additional paid-in capital reaches zero, with any remainder being allocated to retained earnings.

Income Taxes: We are subject to income taxes in both the U.S. and numerous foreign jurisdictions. We
compute our provision for income taxes using the asset and liability method, under which deferred tax assets and
liabilities are recognized for the expected future tax consequences of temporary differences between the financial
reporting and tax bases of assets and liabilities and for operating loss and tax credit carry-forwards. Deferred tax
assets and liabilities are measured using the currently enacted tax rates that are expected to apply to taxable
income for the years in which those tax assets and liabilities are expected to be realized or settled. Significant
judgments are required in order to determine the realizability of these deferred tax assets. In assessing the need
for a valuation allowance, we evaluate all significant available positive and negative evidence, including
historical operating results, estimates of future taxable income and the existence of prudent and feasible tax
planning strategies. Changes in the expectations regarding the realization of deferred tax assets could materially
impact income tax expense in future periods. To provide for uncertain tax positions, we maintain a reserve for tax
benefits assumed that do not meet a threshold of “more likely than not” to be sustained. Management believes the
amount provided for uncertain tax positions is adequate.

Accounts Receivable: Accounts receivable consists of amounts due to us from our normal business
activities and are carried at their estimated collectible amounts. Accounts receivable balances are determined to
be delinquent when the amount is past due based on the contractual terms with the customer. We maintain an
allowance for doubtful accounts to reflect the expected uncollectibility of accounts receivable based on past
collection history and specific risks identified among uncollected accounts. Accounts receivable are charged to
the allowance for doubtful accounts when we have determined that the receivable will not be collected. No single
customer accounts for more than 2% of our accounts receivable.

Insurance: Our insurance for workers’ compensation, vehicle liability and physical damage, and employee-
related health care benefits is obtained using high deductible insurance policies. A third-party administrator is
used to process all such claims. We require all workers’ compensation, vehicle liability and physical damage
claims to be reported within 24 hours. As a result, we accrue our workers’ compensation, vehicle and physical
damage liability based upon the claim reserves established by the third-party administrator at the end of each
reporting period. Our employee health insurance benefit liability is based on our historical claims experience
rate. Our earnings would be impacted to the extent that actual claims vary from historical experience. We review
our accruals associated with the exposure to these liabilities for adequacy at the end of each reporting period.

Litigation: We operate in a highly regulated industry and deal with regulatory inquiries or investigations
from time to time that may be instituted for a variety of reasons. We are also involved in a variety of civil
litigation from time to time. Settlements from litigation would be recorded when known, probable and estimable.

Stock Option Plans: We have issued stock options to employees and directors as an integral part of our
compensation programs. Stock-based compensation cost is measured at the grant date based on the value of the
award and is recognized as expense over the vesting period. Determining the fair value of stock-based awards at the
grant date requires considerable judgment, including estimating expected volatility of our stock, expected term of
the award, and the risk-free rate. Our stock’s expected volatility is based upon historical experience. The expected
term of the awards is based upon a measure of historical volatility of our stock price. The risk-free interest rate
assumption is based upon the U.S. Treasury yield rates of a comparable period. If factors change and we employ
different assumptions, stock-based compensation expense may differ significantly from what we have recorded in
the past.

New Accounting Pronouncements: For information about recently issued accounting pronouncements see

Note 2—Summary of Significant Accounting Policies to the Consolidated Financial Statements.

Fair Value Considerations: Financial assets and liabilities are classified in their entirety based on the
lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a
particular input to the fair value measurement requires judgment, and may affect the valuation of assets and
liabilities and their placement within the fair value hierarchy levels. The impact of our creditworthiness has been
considered in the fair value measurements noted below. In addition, the fair value measurement of a liability
must reflect the nonperformance risk of an entity.

At December 31, 2011, we had $22.5 million in cash and cash equivalents and $0.4 million of short-term
investments that we recorded at fair value using Level 1 inputs and $9.9 million of contingent consideration
related to acquisitions that we recorded at fair value using Level 3 inputs.

At December 31, 2011, we had no derivative instruments.

Restructuring Costs: In December 2010, we reorganized the structure of our international management
group in order to leverage strong local management, resulting in employee severance and other charges. During
the third quarter of 2011 we expanded this program to include consolidation of administrative facilities in the
United Kingdom and reorganization of our international legal structure. We recognized $2.3 million in expense
during 2011, of which $2.2 million was recognized on our Consolidated Statement of Income within “Selling,
general and administrative expense.” We had an accrual balance of $0.9 million at December 31, 2011, which we
expect to pay out primarily in the first quarter of 2012 with some immaterial additional expense.

In addition to the restructuring charges, we recognized $2.8 million and $0.9 million in non cash expenses

during 2011 and 2010, respectively, related to the rationalization of domestic plant operations.

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Highlights for the year ended December 31, 2011 included the following:

•

revenues grew to $1.68 billion, a 16.4% increase over $1.44 billion in 2010;

gross margins decreased to 45.4% in 2011 from 46.4% in 2010;

operating income was $424.3 million, a 14.5% increase from $370.7 million for 2010;

• we incurred a net $15.7 million in expenses related to restructuring and plant closure, acquisitions,

changes in fair value of contingent consideration, and litigation settlement;

• we incurred $4.3 million in integration expenses related to acquisitions;

•

cash flow from operations was $306.1 million.

In analyzing our company’s performance it is necessary to understand that our various regulated waste
services share a common infrastructure and customer base. We market our regulated waste services by offering
various pricing options to meet our customers’ preferences, and customers move between these different billing
paradigms. For example, our regulated waste customers may contract with us for “Medical Waste Disposal”
services that are billed based on the weight of waste collected, processed and disposed during a particular period
and,
the same customer could move to our standard service “Steri-Safe OSHA
Compliance Program,” which packages the same regulated waste services with some training and education
services for a contracted subscription fee. Another example is a customer that purchases our “Medical Waste
Disposal” and “Sharps Disposal Management” services which provides the customer with the same regulated
waste services under a different pricing and billing arrangement. We do not track the movement of customers
between the various types of regulated waste services we offer. Although we can identify directional trends in

in a subsequent period,

our services, because the regulated waste services are similar in nature and the inherent inaccuracies in
disaggregation, we believe that aggregating these revenues communicates the appropriate metric. We analyze our
revenue growth by identifying changes related to internal growth, acquired growth, and changes due to currency
exchange fluctuations.

The following summarizes the Company’s operations:

In thousands, except per share data

Revenues

Cost of revenues
Depreciation
Restructuring costs

Total cost of revenues
Gross profit

Selling, general and administrative expenses
Depreciation
Amortization

Total selling, general and administrative expenses

(excluding items below)

Acquisition expenses
Change in fair value of contingent consideration
Integration expenses
Restructuring and plant closure costs
Litigation settlement
Gain on sale of business

Income from operations
Net interest expense
Income tax expense
Net income
Less: net income attributable to noncontrolling interests

Net income attributable to Stericycle, Inc.
Earnings per share—Diluted

Years Ended December 31,

2011

$
$1,676,048
874,115
41,135
54

2010

100.0 $1,439,388
52.1
733,416
2.5
37,025
0.0
1,520

%
100.0
50.9
2.6
0.1

915,304
760,744
291,468
8,642
16,269

316,379
16,704
(7,221)
4,346
5,021
1,185
19

424,311
48,632
134,981
237,343
2,592

$ 234,751
2.69
$

54.6
45.4
17.4
0.5
1.0

18.9
1.0
-0.4
0.3
0.3
0.1
0.0

25.3
2.9
8.1
14.2
0.2

14.0

771,961
667,427
261,460
6,941
9,919

278,320
9,519
0
4,112
6,851
897
(2,955)

370,683
36,815
121,396
210,457
2,578

$ 207,879
2.39
$

53.6
46.4
18.2
0.5
0.7

19.3
0.7
0.0
0.3
0.5
0.1
-0.2

25.8
2.6
8.4
14.6
0.2

14.4

Revenues: Our revenues increased $236.7 million, or 16.4%, to $1.68 billion in 2011 from $1.44 billion in
2010. Domestic revenues increased $128.5 million, or 11.9%, to $1.21 billion from $1.08 billion in 2010 as
internal growth for domestic small account customers increased by approximately $48.8 million, approximately
8%, driven by an increase of Steri-Safe revenues. Revenues from domestic large account customers increased
approximately $19.4 million, or over 5%, as we increased the total number of accounts and expanded our Sharps
Management and Pharmaceutical Waste Disposal programs. Internal revenues for returns and recall management
services decreased by $19.9 million compared to 2010 because 2010 had more large recalls which resulted in
higher revenues. Internal revenues exclude acquisitions less than one year old. Total domestic regulated waste
and returns and recall management acquisitions less than one year old contributed approximately $80.2 million to
the increase in domestic revenues in 2011.

International revenues in 2011 were $463.9 million, compared to $355.8 million in 2010, an increase of
$108.1 million, or 30.4%. Internal growth, currency rate fluctuations and acquisitions impact the comparison of
2011 to 2010. Internal growth was $18.9 million. The effect of exchange rates positively impacted international
2011 revenues by $11.2 million as foreign currencies appreciated against the U.S. dollar. Acquisitions and
divestitures less than one year old contributed an additional $78.0 million in international revenues.

Cost of Revenues: Our 2011 cost of revenues increased $143.3 million, or $18.6%, to $915.3 million
compared to $771.9 million in 2010. Our domestic cost of revenues increased $68.0 million, or 12.5%, to $612.7
million in 2011 compared to $544.7 million for 2010 as a result of costs related to a proportional increase in
revenues from acquisitions and internal growth.

Our international cost of revenues increased $75.4 million, or 33.2%, to $302.6 million in 2011 compared to
$227.2 million in 2010 as a result of costs related to a proportional increase in revenues, partially driven by the
impact of exchange rates.

Our gross margin percentage decreased to 45.4% during 2011 from 46.4% during 2010 due to inclusion of
lower margin acquired revenues. Domestic gross margin percentage slightly decreased to 49.5% during 2011
from 49.7% in 2010. Our domestic gross profit was unfavorably impacted by $1.5 million in 2010 from
restructuring costs for our regulated returns and recall management services business.

International gross margin decreased to 34.8% compared to 36.1% in 2010, primarily due to acquisitions
with lower margins being consolidated. In general, international gross margins are lower than domestic gross
margins because the international operations have less penetration into the small quantity generator market,
which has a higher gross margin. Historically, the international operations have had most of their revenues from
large hospitals. As the international revenues increase, consolidated gross margins receive downward pressure
due to this “business mix” shift, which may be offset by additional
international small quantity market
penetration, integration savings and domestic business expansion.

Selling, General and Administrative Expenses: In 2011, our selling, general and administrative (“SG&A”)
expenses, excluding acquisition costs and other items, increased $38.1 million, or 13.7%, to $316.4 million from
$278.3 million in 2010. As a percentage of revenue, these costs decreased by 0.4% in 2011 compared to 2010.
Depreciation expense as a percentage of revenue was 0.5% in both 2011 and 2010. Amortization expense as a
percentage of revenue increased to 1.0% in 2011 from 0.7% in 2010 due to larger quantity of acquisitions and
related amortization.

Domestically, SG&A increased $19.5 million, or 9.1%, to $233.7 million in 2011 from $214.2 million in
2010. The increase was primarily due to SG&A expenses related to the acquired revenues and higher
amortization expense. As a percentage of revenue, these costs decreased 0.5% in 2011 compared to 2010.

Internationally, our SG&A increased $18.6 million, or 29.0%, in 2011 to $82.7 million from $64.1 million
in 2010. Increased SG&A was due to increased number of international acquisitions and investment in our
Clinical Services program, partially offset by restructuring of the international management structure and the
continued integration of acquisitions. Higher amortization expense related to recognized intangible assets from
acquisitions. As percentage of revenue, these costs decreased 0.2% in 2011 compared to 2010.

Income from Operations: Income from operations increased by $53.6 million, or 14.5%, to $424.3 million
in 2011 from $370.7 million in 2010. Comparisons of income from operations between 2011 and 2010 are
affected by various charges not considered part of our day-to-day operations. During the year ended
December 31, 2011, we recognized $16.7 million in acquisition expenses, $4.3 million related to the integration
of new acquisitions, $5.1 million of restructuring and plant closure costs, and $1.2 million in litigation
settlement, partially offset by $7.2 million change in fair value of contingent consideration. These various
adjustments resulted in $20.1 million net expense on a pre-tax basis.

During the year ended December 31, 2010, we recognized $9.5 million in acquisition expenses, $4.1 million
expenses related to integration of new acquisitions, $7.6 million of restructuring cost, $0.8 million plant closure
expenses, and litigation settlement of $0.9 million, partially offset by a $3.0 million gain on sale of assets related
to the MedServe divestiture. These various adjustments resulted in $19.9 million net expense on a pre-tax basis.

Domestically, our income from operations increased $41.3 million, or 13.3%, to $351.7 million in 2011
from $310.4 million in 2010. Internationally, our income from operations increased $12.3 million, or 20.4%, to
$72.6 million in 2011 from $60.3 million in 2010.

Interest Expense and Interest Income: Interest expense increased to $49.4 million during 2011 from $37.1
million during 2010 due to higher borrowings in 2011 and higher interest rates. Interest income was $0.8 million
during 2011 and $0.3 million during 2010.

Income Tax Expense: Income tax expense increased to $135.0 million during 2011 from $121.4 million
during 2010. In 2011 and 2010, we recognized a net $1.3 million and $1.2 million, respectively; of tax benefits
related to prior years unrecognized tax positions which positively impacted our diluted earnings per share by
$0.01 in both 2011 and 2010. The effective tax rates for the years 2011 and 2010 were approximately 36.3% and
36.6%, respectively.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

Highlights for the year ended December 31, 2010 included the following:

•

revenues grew to $1.44 billion, a 22.2% increase over $1.18 billion in 2009;

gross margins decreased to 46.4% in 2010 from 46.9% in 2009;

operating income was $370.7 million, a 17.6% increase from $315.2 million for 2009;

• we incurred a net $15.8 million in expenses related to restructuring and plant closure, acquisitions,

litigation settlement, and gain on sale of assets;

• we incurred $4.1 million in integration expenses related to acquisitions;

•

cash flow from operations was $325.7 million.

The following summarizes the Company’s operations:

In thousands, except per share data

Revenues

Cost of revenues
Depreciation
Restructuring costs

Total cost of revenues
Gross profit

Selling, general and administrative expenses
Depreciation
Amortization

Total selling, general and administrative expenses

(excluding items below)

Acquisition expenses
Integration expenses
Restructuring and plant closure costs
Litigation settlement
Gain on sale of business

Income from operations
Net interest expense
Income tax expense
Net income
Less: net income attributable to noncontrolling interests

Net income attributable to Stericycle, Inc.
Earnings per share—Diluted

Years Ended December 31,

2010

$
$1,439,388
733,416
37,025
1,520

%
100.0
50.9
2.6
0.1

2009

$
$1,177,736
595,608
29,028
704

%
100.0
50.6
2.5
0.1

771,961
667,427
261,460
6,941
9,919

278,320
9,519
4,112
6,851
897
(2,955)

370,683
36,815
121,396
210,457
2,578

$ 207,879
2.39
$

53.6
46.4
18.2
0.5
0.7

19.3
0.7
0.3
0.5
0.1
-0.2

25.8
2.6
8.4
14.6
0.2

14.4

625,340
552,396
216,911
5,572
5,390

227,873
7,333
1,096
905
0
0

315,189
34,132
101,299
176,389
698

$ 175,691
2.03
$

53.1
46.9
18.4
0.5
0.5

19.3
0.6
0.1
0.1
0
0

26.8
2.9
8.6
15.0
0.1

14.9

Revenues: Our revenues increased $261.7 million, or 22.2%, to $1.44 billion in 2010 from $1.18 billion in
2009. Domestic revenues increased $171.0 million, or 18.7%, to $1.08 billion from $912.6 million in 2009 as
internal growth for domestic small account customers increased by approximately $46.7 million, approximately 9%,
driven by an increase of Steri-Safe and Clinical Services revenues. Revenues from domestic large account
customers increased approximately $17.5 million, or over 5%, as we increased the total number of accounts and
expanded our Sharps Management and Pharmaceutical Waste Disposal programs. Returns and recall management
services revenues increased by $55.7 million compared to 2009 resulting from larger recalls in 2010. Domestic
acquisitions less than one year old added an additional $51.1 million to the growth in revenues compared to 2009.

International revenues in 2010 were $355.8 million, compared to $265.1 million in 2009, an increase of
$90.7 million, or 34.2%. Internal growth, currency rate fluctuations and acquisitions impact the comparison of
2010 to 2009. Internal growth was $19.1 million. The effect of exchange rates positively impacted international
2010 revenues by $2.5 million as foreign currencies appreciated against the U.S. dollar. Acquisitions less than
one year old favorably impacted revenue growth by $69.1 million.

Cost of Revenues: Our 2010 cost of revenues increased $146.6 million, or $23.4%, to $771.9 million
compared to $625.3 million in 2009. Domestic cost of revenues increased $86.4 million, or 18.9%, to $544.7
million in 2010 compared to $458.3 million for 2009. International cost of revenues increased $60.2 million, or
36.0%, to $227.2 million in 2010 compared to $167.0 million in 2009.

Our gross margin percentage decreased to 46.4% during 2010 from 46.9% during 2009. Domestic gross
margin percentage slightly decreased to 49.7% during 2010 from 49.8% in 2009. Our domestic gross profit was
unfavorably impacted by $1.5 million in 2010 and $0.7 million in 2009 from restructuring costs for our regulated
returns and recall management services business.

International gross margin decreased to 36.1% compared to 37.0% in 2009, primarily due to acquisitions
with lower margins being consolidated. In general, international gross margins are lower than domestic gross
margins because the international operations have less penetration into the small quantity generator market,
which has a better gross margin. Historically, the international operations have had most of their revenues from
large hospitals. As the international revenues increase, consolidated gross margins receive downward pressure
due to this “business mix” shift, which can be offset by additional
international small quantity market
penetration, integration savings and domestic business expansion.

Selling, General and Administrative Expenses: In 2010, our SG&A expenses, excluding acquisition costs
and other items, increased $50.4 million, or 22.1%, to $278.3 million from $227.9 million in 2009. As percentage
of revenue, SG&A expenses remained at 19.3% in 2010 and 2009. Depreciation expense as a percentage of
revenue was 0.5% in both 2010 and 2009. Amortization expense as a percentage of revenue increased to 0.7% in
2010 from 0.5% in 2009 due to larger quantity of acquisitions and related amortization.

Domestically, SG&A increased $31.6 million, or 17.3%, to $214.2 million in 2010 from $182.6 million in
2009. The increase was primarily due to pre-synergized cost structure of the acquired revenues, higher amortization
expense, market penetration for our Pharmaceutical Waste programs, and investments in the Steri-Safe services.

Internationally, our SG&A increased $18.8 million, or 41.5%, in 2010 to $64.1 million from $45.3 million
in 2009. As percentage of revenue, SG&A was 18.0% in 2010 and 17.1% in 2009. The increase in SG&A was
partially due to our acquisitions in UK, Brazil, and Japan, which have higher SG&A expenses. Higher
amortization expense related to recognized intangible assets from acquisitions and investment in our Clinical
Services program also contributed to the increase in SG&A.

Income from Operations: Income from operations increased by $55.5 million, or 17.6%, to $370.7 million
in 2010 from $315.2 million in 2009. Comparisons of income from operations between 2010 and 2009 are
affected by various charges not considered part of our day-to-day operations. During the year ended
December 31, 2010, we recognized $9.5 million in acquisition expenses, $4.1 million expenses related to
integration of new acquisitions, $7.6 million of restructuring cost, $0.8 million plant closure expenses, and
litigation settlement of $0.9 million, partially offset by a $3.0 million gain on sale of assets related to the
MedServe divestiture. These various adjustments resulted in $19.9 million net expense on a pre-tax basis.

During the year ended December 31, 2009, we recognized $7.3 million in acquisition expenses, $1.1 million
expenses related to integration of new acquisitions, and $1.6 million of restructuring costs for our regulated returns
and recall management services business. These adjustments resulted in $10.0 million net expenses on a pre-tax
basis.

Domestically, our income from operations increased $45.5 million, or 17.2%, to $310.4 million in 2010
from $264.9 million in 2009. Internationally, our income from operations increased $10.0 million, or 19.9%, to
$60.3 million in 2010 from $50.3 million in 2009.

Interest Expense and Interest Income: Interest expense increased to $37.1 million during 2010 from $34.4
million during 2009 due to higher borrowings in 2010 and higher interest rates. Interest income was $0.3 million
during both 2010 and 2009.

Income Tax Expense: Income tax expense for the years 2010 and 2009 reflects an effective tax rate of
approximately 36.6% and 36.5%, respectively, for federal and state income taxes. In 2010, we recognized a net
$1.2 million benefit related to prior years unrecognized tax benefits. In 2009, we recognized a net $1.8 million
benefit related to prior years unrecognized tax benefits.

Liquidity and Capital Resources:

Our $1.0 billion senior credit facility maturing in September 2016, our $100.0 million private placement
notes maturing April 2015, our $175.0 million private placement note maturing in October 2017, and our $225.0
million private placement notes maturing in October 2020, all require us to comply with various financial,
reporting and other covenants and restrictions, including a restriction on dividend payments. The financial debt
covenants are the same for the senior credit facility and the private placement notes. At December 31, 2011, we
were in compliance with all of our financial debt covenants.

As of December 31, 2011, we had $527.9 million of borrowings outstanding under our $1.0 billion senior
unsecured credit facility, which includes foreign currency borrowings of $72.4 million. We also had $159.1
million committed to outstanding letters of credit under our senior credit facility. The unused portion of the
revolving credit facility as of December 31, 2011 was $313.0 million. At December 31, 2011, our interest rates
on borrowings under our revolving credit facility were as follows:

•

For short-term borrowing (less than one month): Federal funds rate plus 0.5%, the prime rate or the
Euro Currency rate plus 1%, whichever is higher and a spread of 0.125% plus a 0.25% facility fee.

For borrowing greater than one month: LIBOR plus 1.125% plus a 0.25% facility fee.

The weighted average rate of interest on the unsecured revolving credit facility was 1.73% per annum,

which includes the 0.25% facility fee.

As of December 31, 2011, we had $100.0 million outstanding 5.64% private placement notes which we
entered into on April 15, 2008. The notes bear interest at the fixed rate of 5.64% per annum. Interest is payable in
arrears semi-annually on April 15 and October 15 beginning on October 15, 2009, and principal is payable at the
maturity of the notes on April 15, 2015.

As of December 31, 2011, we had outstanding $175.0 million of seven-year unsecured senior notes (the

“Series A notes”) and $225.0 million of 10-year unsecured senior notes (the “Series B notes”).

The Series A notes bear interest at the fixed rate of 3.89% per annum, and the Series B notes bear interest at
the fixed rate of 4.47% per annum. Interest is payable in arrears semi-annually on April 15 and October 15
beginning on April 15, 2011. The principal amount of $175.0 million of the Series A notes will be payable at the
maturity of the notes on October 15, 2017, and the principal amount of $225.0 million of the Series B notes will
be payable at the maturity of the notes on October 15, 2020.

At December 31, 2011, we had $240.1 million in promissory notes issued in connection with acquisitions
during 2004 through 2011, $111.9 million in foreign subsidiary bank debt outstanding, and $4.7 million in capital
lease obligations.

Working Capital: At December 31, 2011, our working capital increased by $3.5 million to $63.7 million

compared to $60.2 million at December 31, 2010.

Our current assets increased by $21.9 million in 2011 primarily due to acquired assets of $61.9 million of
which $54.4 million was accounts receivable. Cash and cash equivalents at December 31, 2010 included $23.0
million, offset by an equivalent amount in accrued liabilities that was used for recalled product reimbursement
during 2011.

Our current liabilities increased by $18.4 million in 2011. We acquired $39.1 million in current liabilities of
which $27.1 million was accounts payable. Offsetting these acquired liabilities was the decrease in the recalled
product reimbursement of $23.0 million. We repaid the outstanding principal on our term loan debt of which
$20.2 million was current (see Note 13—Debt), and also $9.9 million of the short-term portion of our acquisition
notes. Offsetting short-term debt decreases was an increase in our short-term amounts on our senior credit facility
of $30.2 million due to borrowings for acquisitions. The remaining increase to our current liabilities is primarily
an increase to accrued taxes and an increase to accrued interest related to higher debt.

Net Cash Provided or Used: Net cash provided by operating activities decreased $19.6 million, or 6.0%, to
$306.1 million during 2011. Cash provided by operations as a ratio to net income is 129% and 155% for 2011
and 2010, respectively, with Days Sales Outstanding at 53 days when excluding acquired receivables related to
our acquisition in Spain, and 59 days when including acquired receivables in 2011 compared to 51 days in 2010.

Cash provided by operating activities in 2010 includes a cash inflow for recalled product reimbursements,

which resulted in an increase to accrued liabilities in the amount of $23.0 million.

Net cash used in investing activities during 2011 was $514.6 million compared to $245.5 million used in
2010. The increase is due to acquisitions, of which the largest was our acquisition of HWS which resulted in
$234.4 million cash used. We redeemed $15.8 million of certificates of deposit the quarter ended September 30,
2011. Capital expenditures in 2011 decreased, as a percentage of revenue, to 3.2% from 3.4% in 2010.

Net cash provided by financing activities was $148.3 million during 2011 compared to $13.6 million net
cash used by financing activities in 2010, a change of $216.5 million related to increased borrowings to finance
certain acquisitions, and partially offset by share repurchases of $124.1 million compared to $94.3 million in
2010, an increase of $29.7 million.

Contractual Obligations

The following table summarizes our significant contractual obligations and cash commitments as of

December 31, 2011:

Payments due by period (dollars in thousands)

Long-term debt
Capital lease obligations
Operating leases
Purchase obligations
Other long-term liabilities

Total
$1,633,140
5,435
204,858
10,584
4,658

2012
$144,962
2,572
50,432
4,388
1,162

2013-2014
$258,888
1,740
70,747
4,795
1,229

2015-2016
$752,824
647
44,020
1,401
1,352

(1)
(1)

(1)(2)

2017
and After
$476,466
476
39,659
0
915

Total contractual cash obligations

$1,858,675

$203,516

$337,399

$800,244

$517,516

(1) The long-term debt, capital leases, and other long-term liabilities items include both the future principal
payment amount as well as an amount calculated for expected future interest payments. Long-term debt that
has floating interest rate requires the use of management judgment to estimate the future rate of interest.
(2) Other long-term liabilities include amounts related to covenants not-to-compete agreements and exclude
payments for unrecognized tax benefits. Based on the contingent and uncertain nature of our liability for
unrecognized tax benefits, we are unable to make an estimate of the period of potential settlement, if any,
with the applicable taxing authorities.

At December 31, 2011, we had $159.1 million in stand-by letters of credit issued.

We anticipate that our operating cash flow, together with borrowings under our senior unsecured credit
facility, will be sufficient to meet our anticipated future operating expenses, capital expenditures and debt service
obligations as they become due during the next 12 months and the foreseeable future.

Guarantees: We have guaranteed a loan to JPMorganChase Bank N.A. on behalf of Shiraishi-Sogyo Co.
Ltd (“Shiraishi”). Shiraishi is a customer in Japan that is expanding its medical waste management business and
has a one year loan with a current balance of $6.4 million with JPMorganChase Bank N.A. that expires in May
2012. We also have extended loans to Shiraishi for approximately $15.2 million in support of its medical waste
business. These amounts are collateralized with the assets of Shiraishi and related companies.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are subject to market risks arising from changes in interest rates. Our potential additional interest
expense 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 $6.1 million on a pre-tax
basis.

We have exposure to foreign currency fluctuations. We have subsidiaries in eleven foreign countries whose
functional currency is the local currency. Changes in foreign currency exchange rates could unfavorably impact
our consolidated results of operations. We have exposure to commodity pricing for gas and diesel fuel for our
trucks and for the purchase of containers and boxes. We do not hedge these items to manage the exposure.

Item 8. Financial Statements and Supplementary Data

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control
over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) under the
Securities Exchange Act of 1934 as a process designed by, or under the supervision of, a company’s principal
executive and principal financial officers and effected by the company’s board of directors, management and
other personnel,
to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting
principles. The Company’s internal control over financial reporting includes those policies and procedures that:

(i)

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with U.S. generally accepted accounting principles, and that receipts
and expenditures of the Company are being made only in accordance with authorizations of
management and directors of the Company; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2011. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated
Framework.

Based on this assessment and those criteria, management concludes that the Company maintained effective

internal control over financial reporting as of December 31, 2011.

The Company’s independent auditors have issued an attestation report on the Company’s internal control

over financial reporting. That report appears on page 33.

Stericycle, Inc.

Lake Forest, IL
February 28, 2012

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Stericycle, Inc. and Subsidiaries

We have audited Stericycle, Inc. and Subsidiaries’ internal control over financial reporting as of
December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Stericycle, Inc. and
Subsdiaries’ management is responsible for maintaining effective internal control over financial reporting, and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our opinion, Stericycle, Inc. and Subsidiaries maintained, in all material respects, effective internal

control over financial reporting as of December 31, 2011, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Stericycle, Inc. and Subsidiaries as of December 31, 2011 and
2010, and the related consolidated statements of income, changes in equity, and cash flows for each of the three
years in the period ended December 31, 2011 and our report dated February 28, 2012 expressed an unqualified
opinion thereon.

Chicago, Illinois
February 28, 2012

Ernst & Young LLP

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Stericycle, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Stericycle, Inc. and Subsidiaries as of
December 31, 2011 and 2010, and the related consolidated statements of income, changes in equity, and cash
flows for each of the three years in the period ended December 31, 2011. Our audits also included the financial
statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Stericycle, Inc. and Subsidiaries at December 31, 2011 and 2010, and the
consolidated results of their operations and their cash flows for each of the three years in the period ended
December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Stericycle Inc.’s internal control over financial reporting as of December 31, 2011, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 28, 2012 expressed an unqualified
opinion thereon.

Ernst & Young LLP

Chicago, Illinois
February 28, 2012

STERICYCLE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

In thousands, except share and per share data

ASSETS
Current Assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, less allowance for doubtful accounts of $18,905 in 2011 and

$10,845 in 2010
Deferred income taxes
Prepaid expenses
Other current assets

Total Current Assets
Property, plant and equipment, net
Goodwill
Intangible assets, less accumulated amortization of

$42,050 in 2011 and $28,394 in 2010

Other assets

Total Assets

LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt
Accounts payable
Accrued liabilities
Deferred revenues
Other current liabilities

Total Current Liabilities
Long-term debt, net of current portion
Deferred income taxes
Other liabilities
Equity:
Common stock (par value $.01 per share, 120,000,000 shares authorized, 84,696,227

issued and outstanding in 2011, 85,242,387 issued and outstanding in 2010)

Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings

Stericycle, Inc. Equity

Noncontrolling interest

Total Equity

Total Liabilities and Equity

December 31,

2011

2010

22,511
416

79,276
16,248

290,854
19,314
22,466
35,035

214,899
16,824
16,038
25,403

390,596
293,912
1,913,703

368,688
267,971
1,595,764

546,618
32,261

375,174
31,426

$3,177,090

$2,639,023

$ 100,526
66,635
140,521
12,855
6,377

326,914
1,284,113
313,733
25,079

91,406
54,777
134,355
14,455
13,496

308,489
1,014,222
222,647
13,315

847
0
(45,984)
1,243,303

1,198,166
29,085

852
46,945
(16,869)
1,017,497

1,048,425
31,925

1,227,251

1,080,350

$3,177,090 $2,639,023

The accompanying notes are an integral part of these financial statements.

STERICYCLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

In thousands, except share and per share data

Revenues
Costs and Expenses:
Cost of revenues (exclusive of depreciation shown below)
Depreciation—cost of revenues
Selling, general and administrative expenses (exclusive of

depreciation and amortization shown below)

Depreciation—SG&A
Amortization

Total Costs and Expenses

Income from Operations
Other Income (Expense):
Interest income
Interest expense
Other expense, net

Total Other Expense

Income Before Income Taxes
Income Tax Expense

Net Income
Less: Net Income Attributable to Noncontrolling Interests

Net Income Attributable to Stericycle, Inc.

Earnings Per Common Share:

Basic

Diluted

Years Ended December 31,
2010

2011

2009
$ 1,177,736

$ 1,676,048 $ 1,439,388

874,169
41,135

311,522
8,642
16,269

734,936
37,025

279,884
6,941
9,919

1,251,737

1,068,705

424,311

370,683

799
(49,431)
(3,355)

(51,987)

372,324
134,981

237,343
2,592

266
(37,081)
(2,015)

(38,830)

331,853
121,396

210,457
2,578

234,751 $

207,879

2.75

2.69

2.44

2.39

596,312
29,028

226,245
5,572
5,390

862,547

315,189

201
(34,333)
(3,369)

(37,501)

277,688
101,299

176,389
698

175,691

2.07

2.03

Weighted Average Number of Common Shares Outstanding:

Basic
Diluted

85,467,421
87,367,712

85,057,775
86,962,651

84,769,912
86,744,003

The accompanying notes are an integral part of these financial statements.

STERICYCLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands

OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Loss/ (gain) on sale of business
Restructuring and plant closure costs
Write down of other assets
Change in fair value of contingent consideration
Accelerated amortization of term loan financing fees
Stock compensation expense
Excess tax benefit of stock options exercised
Depreciation
Amortization
Deferred income taxes
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable
Accounts payable
Accrued liabilities
Deferred revenues
Other assets and liabilities

Net cash provided by operating activities

INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired
Proceeds from/(purchases of) short-term investments
Proceeds from sale of business and other assets
Capital expenditures

Net cash used in investing activities

FINANCING ACTIVITIES:
Repayment of long-term debt and other obligations
Borrowings on senior credit facility
Repayments on senior credit facility
Proceeds from private placement of long-term note
Proceeds from term loan
Payments of deferred financing costs
Payments on capital lease obligations
Purchase and cancellation of treasury stock
Payments to noncontrolling interests
Proceeds from other issuance of common stock
Excess tax benefit of stock options exercised

Net cash provided by/(used in) financing activities

Effect of exchange rate changes on cash

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

NON-CASH ACTIVITIES:
Net issuance of obligations for acquisitions

Years Ended December 31,

2011

2010

2009

237,343

210,457

176,389

19
2,756
1,256
(7,221)
1,241
15,367
(17,410)
49,777
16,269
31,837

(31,821)
(12,539)
21,656
(1,997)
(429)
306,104

(2,955)
5,571
0
0
0
15,298
(24,687)
43,966
9,919
26,312

(20,270)
(165)
56,578
(878)
6,524
325,670

0
1,609
0
0
0
14,638
(10,905)
34,600
5,390
22,253

12,567
2,420
21,464
89
(3,268)
277,246

(479,661)
15,942
2,371
(53,301)

(514,649)

(190,430)
(14,732)
8,000
(48,320)

(311,891)
385
1,227
(39,910)

(245,482)

(350,189)

(39,536)
1,643,458
(1,372,631)
0
0
(3,740)
(3,333)
(124,056)
(534)
31,286
17,410

(42,377)
1,007,801
(1,350,597)
400,000
0
(5,757)
(2,894)
(94,335)
0
49,907
24,687

(19,023)
963,061
(1,022,666)
0
215,000
(3,635)
(1,106)
(75,686)
0
14,922
10,905

148,324
3,456

(56,765)
79,276

22,511

58,338

(13,565)
(3,114)

63,509
15,767

79,276

96,295

81,772
(2,157)

6,672
9,095

15,767

38,090

The accompanying notes are an integral part of these financial statements.

STERICYCLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years Ended December 31, 2011, 2010 and 2009

In thousands

Balance at December 31, 2008
Net income
Currency translation adjustment
Change in fair value of cash flow hedge, net of

tax of $1,446

Comprehensive income
Issuance of common stock for exercise of options

and employee stock purchases

Purchase/ cancellation of treasury stock
Stock compensation expense
Excess tax benefit of disqualifying dispositions of
stock options and exercise of non-qualified
stock options

Change in noncontrolling interest

Stericycle, Inc. Equity

Issued
and
Outstanding
Shares
85,253

Common
Stock
$852

Additional Paid-
In Capital
$ 67,776

Retained
Earnings
$ 633,927
175,691

Accumulated Other
Comprehensive
Income (Loss)
$(32,075)

17,595

2,188

1,132
(1,670)

12
(17)

15,889
(73,164)
14,638

22,383

Noncontrolling
Interest
158
$
698
835

Total
Equity
$ 670,638
176,389
18,430

2,188

197,007

15,901
(73,181)
14,638

9,787

22,383
9,787

Balance at December 31, 2009

84,715

$847

$ 47,522

$ 809,618

$(12,292)

$11,478

$ 857,173

Net income
Currency translation adjustment
Change in fair value of cash flow hedge, net of

tax of $1,353

Comprehensive income
Issuance of common stock for exercise of options

and employee stock purchases

Purchase/ cancellation of treasury stock
Stock compensation expense
Excess tax benefit of disqualifying dispositions of
stock options and exercise of non-qualified
stock options

Change in noncontrolling interest

1,988
(1,461)

20
(15)

50,491
(94,320)
18,565

24,687

207,879

2,578
2,938

(2,544)

(2,033)

14,931

210,457
394

(2,033)

208,818

50,511
(94,335)
18,565

24,687
14,931

Balance at December 31, 2010

85,242

$852

$ 46,945

$1,017,497

$(16,869)

$31,925

$1,080,350

Net income
Currency translation adjustment
Change in fair value of cash flow hedge, net of

tax of $216

Comprehensive income
Issuance of common stock for exercise of options

and employee stock purchases

Purchase/ cancellation of treasury stock
Stock compensation expense
Excess tax benefit of disqualifying dispositions of
stock options and exercise of non-qualified
stock options

Change in noncontrolling interest

1,016
(1,562)

11
(16)

36,394
(115,095)
15,367

17,410
(1,021)

2,592
(3,437)

(29,456)

341

234,751

(8,945)

237,343
(32,893)

341

204,791

36,405
(124,056)
15,367

(1,995)

17,410
(3,016)

Balance at December 31, 2011

84,696

$847

$1,243,303

$(45,984)

$29,085

$1,227,251

The accompanying notes are an integral part of these financial statements.

STERICYCLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011

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

consolidated basis.

NOTE 1—DESCRIPTION OF BUSINESS

We were incorporated in 1989 and presently serve a diverse customer base of over 522,000 customers
throughout the United States, Argentina, Brazil, Canada, Chile, Ireland, Japan, Mexico, Portugal, Romania, Spain,
and the United Kingdom. Domestically, we own or lease two ETD processing facilities, 58 facilities that provide
autoclave or incineration processing, and 23 facilities that use other processing technologies. All of our processing
facilities also serve as collection sites. We own or lease 111 additional transfer and collection sites and 12 additional
sales/administrative sites. We use our fully integrated, national network to provide a broad range of services to our
customers including regulated waste management services and regulated return and recall management services.
Regulated waste management services include regulated waste removal services, sharps management services,
products and services for infection control, and safety and compliance programs. Regulated return and recall
management services are physical services provided to companies and individual businesses that assist with the
handling of products that are being removed from the supply chain due to recalls or expiration. These services also
include advanced notification technology that is used to communicate specific instructions to the users of the
product. Our waste treatment technologies include autoclaving, incineration, chemical treatment and our proprietary
electro-thermal-deactivation system. Internationally, we own or lease three ETD processing facilities, 70 facilities
that provide autoclave or incineration processing, and 19 facilities that use other processing technologies. We also
own or lease 43 transfer and collection sites, 24 additional sales/administrative sites, and lease two landfills.

We have 6,877 employees in the United States, of which 413 are covered by collective bargaining
agreements. Internationally, we have 4,245 employees, of which approximately 1,140 are covered by collective
bargaining agreements, primarily in Latin America.

The accompanying consolidated financial statements have been prepared pursuant

to the rules and
regulations of the Securities and Exchange Commission (“SEC”) in conformity with accounting principles
generally accepted in the United States. The preparation of financial statements in conformity with these
accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period.

In our opinion, the consolidated financial statements included herein contain all adjustments necessary to
present fairly our financial position as of December 31, 2011 and 2010 and the results of our operations, our cash
flows, and our statement of changes in equity for the three years ended December 31, 2011, 2010 and 2009. Such
adjustments are of a normal recurring nature. We have evaluated subsequent events through the date of filing this
Annual Report on Form 10-K.

The preparation of the consolidated financial statements in conformity with accounting principles generally
accepted in the United States requires management to make certain estimates and assumptions that affect the
amount of reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and revenues and expenses during the periods reported. Actual results may
differ from those estimates.

Certain amounts in previously issued financial statements have been reclassified to conform to the current

period presentation. The following adjustments were made to our 2010 balance sheet:

•

$2.2 million was reclassified from “Short-term investments” to “Cash and cash equivalents”. It was
determined that these investments were misclassified in 2010 because they had a maturity date of less

•

than 90-days and therefore, according to our accounting policy should be classified as “Cash and cash
equivalents”;

$0.5 million was reclassified from “Accounts receivable” to “Other current assets” to conform to the
2011 presentation. These amounts are related to product reimbursements due us and are not trade
receivables, therefore we believe that it is more appropriate to classify these amounts as “Other current
assets”;

$16.0 million was reclassified from accrued liabilities to either “Other current liabilities” or “Current
portion of long-term debt” to conform to the 2011 presentation. These amounts are related to
acquisition payments, primarily contingent consideration, that we believe are more appropriately
classified as either a component of debt, when the amount is not subject to adjustment, or other
liabilities when they may be subject to adjustment.

These adjustments had no impact on our 2010 “Net cash provided by operating activities”.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation:

The consolidated financial statements include the accounts of Stericycle, Inc. and its wholly owned

subsidiaries.

Revenue Recognition:

Revenues for our regulated waste management services, other than our Steri-Safe service, are recognized at
the time of waste collection. Our Steri-Safe revenues are recognized evenly over the contractual service period.
Payments received in advance are deferred and recognized as services are provided. Revenues from regulated
returns and recall management services and patient communications are recorded at the time services are
performed. Revenues from product sales are recognized at the time the goods are shipped to the ordering
customer. We do not have any contracts in a loss position. Losses would be recorded when probable and
estimable for any contracts that would be expected to go into a loss position.

Cash Equivalents and Short-Term Investments:

We consider all highly liquid investments with a maturity of less than three months when purchased to be

cash equivalents. Short-term investments consist of certificates of deposit which mature in less than one year.

Property, Plant and Equipment:

Property, plant and equipment are stated at cost. Depreciation and amortization, which include the
depreciation of assets recorded under capital leases, are computed using the straight-line method over the
estimated useful lives of the assets as follows:

Building and improvements
Machinery and equipment
Containers
Transportation equipment
Office equipment and furniture
Software

4 to 40 years
3 to 30 years
2 to 20 years
3 to 7 years
2 to 15 years
1 to 7 years

Our containers have a weighted average remaining useful life of 12.5 years.

Goodwill and Identifiable Intangibles:

Goodwill and identifiable indefinite lived intangible assets are not amortized, but are subject to an annual
impairment test. Other intangible assets are amortized over their useful lives. We have determined that our

customer relationships have useful lives from 14 to 40 years based upon the type of customer, with a weighted
average remaining useful life of 29.5 years. We have covenants not-to-compete intangibles with useful lives from
two to ten years, with a weighted average remaining useful life of 5.4 years. We have tradename intangibles with
useful lives from 15 to 40 years, with a weighted average remaining useful life of 20.6 years. We have
determined that our permits have indefinite lives due to our ability to renew these permits with minimal
additional cost, and therefore they are not amortized.

Valuation of our intangible customer relationships and permits is derived using a discounted income and
cost savings approach. Financial information such as revenues, costs, assets and liabilities and other assumptions
related to the intangible asset are input into a standard valuation model to determine a stream of income
attributable to that intangible. The income stream is then discounted to the present to arrive at a valuation. We
perform annual impairment tests on our indefinite lived intangible assets.

Valuation of Intangibles:

Our permits are currently tested for impairment annually at December 31 or more frequently if
circumstances indicate that they may be impaired. We use a discounted income or cost savings model as the
current measurement of the fair value of the permits. The fair value is based upon, among other things, certain
assumptions about expected future operating performance,
internal and external processing costs, and an
appropriate discount rate determined by management. Our estimates of discounted income may differ from actual
income due to, among other things, inaccuracies in economic estimates.

Amortizable identifiable intangible assets, such as customer relationships,

tradenames and covenants
not-to-compete, are currently amortized using the straight-line method over their estimated useful lives. We have
determined that our customer relationships have between 14 and 40 year lives based on the specific type of
relationship. The valuation of our contractual customer relationships was derived using a discounted income
approach valuation model. These assets are reviewed for
impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may be less than its undiscounted estimated future
cash flows (see Note 11—Goodwill and Other Intangible Assets to the Consolidated Financial Statements).

Share Repurchases:

Purchase price over par value for share repurchases are allocated to additional paid-in capital until the

additional paid-in capital reaches zero, with any remainder being allocated to retained earnings.

Income Taxes:

Deferred income tax liabilities and assets are determined based on the differences between the financial
statement and income tax basis of assets and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.

Accounts Receivable:

Accounts receivable consist of amounts due to us from our normal business activities and are carried at their
estimated collectible amounts. We do not require collateral as part of our standard trade credit policy. Accounts
receivable balances are determined to be past due when the amount is overdue based on the contractual terms
with the customer. We maintain an allowance for doubtful accounts to reflect the expected uncollectibility of
accounts receivable based on past collection history and specific risks identified among uncollected accounts.
Accounts receivable are written off against the allowance for doubtful accounts when we have determined that
the receivable will not be collected and/or when the account has been referred to a third party collection agency.
No single customer accounts for more than 2% of our accounts receivable. Bad debt expense was $7.1 million,
$7.5 million and $6.9 million for the years ended December 31, 2011, 2010 and 2009, respectively.

Financial Instruments:

Our financial instruments consist of cash and cash equivalents, short-term investments, accounts receivable
and payable and long-term debt. At December 31, 2011, the fair value of the Company’s debt obligations was
estimated at $1.41 billion, compared to a carrying amount of $1.38 billion. This fair value was estimated using
market interest rates for comparable instruments. The Company has no current plans to retire a significant
amount of its debt prior to maturity. Financial instruments, which potentially subject us to concentrations of
credit risk, consist principally of accounts receivable. Credit risk on trade receivables is minimized as a result of
the large size of our customer base. No single customer represents greater than 2% of total accounts receivable.
We perform ongoing credit evaluation of our customers and maintain allowances for potential credit losses. For
any contracts in loss positions, losses are recorded when probable and estimable. These losses, when incurred,
have been within the range of our expectations.

Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires
the amounts reported in the financial statements and
us to make estimates and assumptions that affect
accompanying notes. Some areas where we make estimates include allowance for doubtful accounts, credit
memo reserve, accrued employee health and welfare benefits, income tax liabilities, accrued auto and workers’
compensation insurance claims, and intangible asset valuations. Such estimates are based on historical trends and
on various other assumptions that are believed to be reasonable under the circumstances. Actual results could
differ from our estimates.

Future estimated expenses may fluctuate depending on changes in foreign currency rates. The estimates for
payments due on long-term debt, lease payments under capital leases, amortization expense and rental payments
are based upon foreign exchange rates as of December 31, 2011 (see Notes 11, 13 and 14 to the Consolidated
Financial Statements).

Stock-Based Compensation:

We recognize compensation expense for all stock-based awards made to our employees and directors.
Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized
over the vesting period. Determining the fair value of stock-based awards at the grant date requires considerable
judgment, including estimating expected volatility of our stock, expected term of the award, and the risk-free
rate. Our stock’s expected volatility is based upon historical experience. The expected term of options granted is
based on historical experience. The risk-free interest rate assumption is based upon the U.S. Treasury yield rates
for a comparable period. If factors change and we employ different assumptions, stock-based compensation
expense for new grants may differ significantly from what we have recorded in the past.

Foreign Currency Translation:

Assets and liabilities of foreign affiliates that use the local currency as their functional currency are
translated at the exchange rate on the last day of the accounting period, and income statement accounts are
translated at the average rates during the period. Related translation adjustments are reported as a component of
comprehensive income in shareholders’ equity.

Environmental Matters:

We record a liability for environmental remediation or damages when a cleanup program becomes probable
and the costs or damages can be reasonably estimated. We did not have any environmental liabilities recorded at
December 31, 2011 nor are we aware of any issues at our facilities that could initiate the need for environmental
remediation.

New Accounting Standards:

Accounting Standards Recently Adopted

Revenue Recognition

On January 1, 2011, Stericycle adopted changes issued by the Financial Accounting Standards Board
(“FASB”) to guidance on revenue recognition for arrangements with multiple deliverables. This update allows
companies to allocate consideration received for qualified separate deliverables using estimated selling price for
both delivered and undelivered items when vendor-specific objective evidence or third-party evidence is
unavailable. Additional disclosures discussing the nature of multiple element arrangements,
the types of
deliverables under the arrangements, the general timing of their delivery, and significant factors and estimates
used to determine estimated selling prices are required. This new guidance did not have a material impact to our
financial statements.

Accounting Standards Issued But Not Yet Adopted

Comprehensive Income

In June 2011, the FASB issued changes to the presentation of comprehensive income. These changes give
an entity the option to present the total of comprehensive income, the components of net income, and the
components of other comprehensive income either in a single continuous statement of comprehensive income or
in two separate but consecutive statements; the option to present components of other comprehensive income as
part of the statement of changes in stockholders’ equity was eliminated. The items that must be reported in other
comprehensive income or when an item of other comprehensive income must be reclassified to net income were
not changed. Additionally, no changes were made to the calculation and presentation of earnings per share. These
changes become effective for Stericycle on January 1, 2012. Other than the change in presentation, these changes
will not have an impact on our financial statements.

Goodwill Impairment Testing

In September 2011, the FASB issued changes to the testing for impairment of goodwill. Previous guidance
under Topic 350 required an entity to test goodwill for impairment, on at least an annual basis, by comparing the
fair value of a reporting unit with its carrying amount, including goodwill (step one). If the fair value of a
reporting unit is less than its carrying amount, then the second step of the test must be performed to measure the
amount of the impairment loss, if any. Under the amendments, an entity is not required to calculate the fair value
of a reporting unit unless the entity determines, using qualitative assessment, that it is more likely than not
(greater than 50%) that its fair value is less than its carrying amount. These changes become effective for
Stericycle on January 1, 2012, although early adoption is permitted. As these changes should not affect the
outcome of the impairment analysis of a reporting unit, management has determined these changes will not have
an impact on our financial statements.

NOTE 3—ACQUISITIONS AND DIVESTITURES

The following table summarizes the locations of our acquisitions for the years ended December 31, 2011,

2010 and 2009:

Acquisition Locations
United States
Argentina
Brazil
Canada
Chile
Ireland
Japan
Mexico
Portugal
Romania
Spain
United Kingdom

Total

2011
21
1
4
2
1
1
3
0
1
6
2
3

2010
13
1
3
0
1
0
2
3
1
1
0
8

2009
16
0
0
1
2
0
0
0
1
2
0
1

The following table summarizes the aggregate purchase price of our acquisitions during the years ended

December 31, 2011, 2010 and 2009:

In thousands

Cash
Promissory notes
Deferred consideration
Contingent consideration

Total purchase price

2011
$479,661
38,461
11,695
8,182

2010
$190,430
77,760
2,474
16,061

2009
$311,891
38,090
0
0

$537,999

$286,725

$349,981

During 2011, we completed 45 acquisitions, of which 20 were domestic regulated waste and compliance
businesses, one was a domestic returns management services business and 24 were international regulated waste
businesses. In Mexico, we sold our 55% majority ownership of a regulated waste business for approximately $3.3
million resulting in an immaterial gain. We also increased our majority share in a previous acquisition in Brazil
from 70% to 82.5%.

In 2011, we recognized $342.5 million in goodwill related to current year acquisitions and prior year
allocation adjustments, of which $233.4 million was assigned to our United States reporting segment and $109.1
million was assigned to our International reporting segment (see Note 11—Goodwill and Other Intangible Assets
to the Consolidated Financial Statements). Tax deductible goodwill, pending final acquisition accounting, was
approximately $50.6 million, $49.6 million and $73.3 million for the years 2011, 2010 and 2009, respectively.

In 2011, we recognized $206.8 million in intangible assets of which $190.4 million represents the estimated
fair value of acquired customer relationships with amortizable lives of 14-40 years, $14.5 million in permits with
indefinite lives, $1.3 million in a tradename with an amortizable life of 15 years, and $0.6 million in covenants
not-to-compete with amortizable lives of 5 years. The allocation of acquisition price is preliminary pending
completion of certain intangible asset valuations and completion accounts.

The following table summarizes purchase price allocation for our acquisitions for the years ended

December 31, 2011, 2010 and 2009:

In thousands

Fixed assets
Intangibles
Goodwill
Net other assets
Debt
Net deferred tax liabilities
Noncontrolling interests

2011
$ 29,897
206,775
342,486
21,016
(1,240)
(60,437)
(498)

2010
$ 19,020
113,632
203,003
11,491
(22,774)
(22,716)
(14,931)

2009
$ 32,927
99,183
243,814
15,910
(16,047)
(16,019)
(9,787)

$537,999

$286,725

$349,981

For financial reporting purposes, our 2011 and 2010 acquisitions were accounted for using the acquisition
method of accounting. These acquisitions resulted in recognition of goodwill in our financial statements
reflecting the premium paid to acquire businesses that we believe are complementary to our existing operations
and fit our strategy. The Company incurred $16.7 million and $9.5 million of acquisition related expenses during
the years ended December 31, 2011 and 2010, respectively. These expenses are identified on our Consolidated
Statements of Income as part of “Selling, general and administrative expenses”.

The results of operations of these acquired businesses have been included in the consolidated statements of
income from the date of the acquisition. Because we integrate acquisitions into our current structure in order to
achieve cost synergies, the effect of acquisitions on net income is not practical to estimate. The 2011 estimated
impact to revenues of these acquisitions was $89.3 million. The estimated annualized revenues from these
acquisitions were approximately $184.5 million. The following consolidated pro forma information is based on
the assumption that these acquisitions all occurred on January 1, 2011 and 2010.

In thousands

Revenue

2011
$1,771,248

2010
$1,623,888

NOTE 4—FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes
between (1) market participant assumptions developed based on market data obtained from independent sources
(observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based
on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of
three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair
value hierarchy are described below:

• Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the

entity has the ability to access.

• Level 2—Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets
that are not active, or other inputs that are observable or can be corroborated by observable data for
substantially the full term of the assets or liabilities.

• Level 3—Valuations based on inputs that are supported by little or no market activity and that are

significant to the fair value of the assets or liabilities.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is
significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value
measurement requires judgment, and may affect the valuation of assets and liabilities and their placement within
the fair value hierarchy levels. The impact of our creditworthiness has been considered in the fair value
measurements noted below.
the
nonperformance risk of an entity.

the fair value measurement of a liability must

In addition,

reflect

In thousands

Assets:

Cash and cash equivalents
Short-term investments

Total assets
Liabilities:

Contingent consideration

Total liabilities

In thousands

Assets:

Cash and cash equivalents
Short-term investments

Total assets
Liabilities:

Contingent consideration

Total liabilities

Total as of
December 31,
2011

Fair Value Measurements
Using

Level 1
Inputs

Level 2
Inputs

Level 3
Inputs

$22,511
416

$22,927

$ 9,921

$0
0

0
0

$9,921

Total as of
December 31,
2010

Fair Value Measurements
Using

Level 1
Inputs

Level 2
Inputs

Level 3
Inputs

$79,276
16,248

$95,524

$16,450

$0
0

0
0

$16,450

Level 1: At December 31, 2011, we have $22.5 million in cash and cash equivalents, and $0.4 million in
money market accounts, which we recorded at fair value using Level 1 inputs. At December 31, 2010, we had
$79.3 million in cash and cash equivalents, $15.8 million in certificates of deposit, and $0.4 million in money
market accounts. In 2010, we financed a portion of our Japan acquisitions through local borrowings of ¥1.2
billion which required us to deposit the equivalent USD amount of $15.8 million in one year certificates of
deposit with an affiliated bank located in the United States which was redeemed in September 2011.

Level 2: We had no assets or liabilities measured at fair value using Level 2 inputs at December 31, 2011 or

December 31, 2010.

Level 3: We had contingent consideration liabilities recorded in the amounts of $9.9 million at December 31,
2011, and $16.5 million at December 31, 2010. Contingent consideration represents amounts to be paid as part of
acquisition consideration only if certain future events occur. These events are usually acquisition targets for
revenues or earnings. We arrive at the fair value of contingent consideration by applying a weighted probability of
potential outcomes to the maximum possible payout. The calculation of these potential outcomes is dependent on
both past financial performance and management assumptions about future performance. Contingent consideration

liabilities are reassessed each quarter and are reflected in the balance sheet as part of “Other current liabilities” or
“Other liabilities”. Changes to contingent consideration are reflected in the table below:

In thousands
Contingent consideration at December 31, 2010

Increases due to acquisitions
Decreases due to payments
Changes due to currency fluctuations
Changes in fair value reflected in income statement (SG&A)

Contingent consideration at December 31, 2011

$ 16,450
13,264
(11,535)
(1,037)
(7,221)

$ 9,921

Fair Value of Debt: At December 31, 2011, the fair value of the Company’s debt obligations was estimated
at $1.41 billion compared to a carrying amount of $1.38 billion. At December 31, 2010, the fair value of the
Company’s debt obligations was estimated at $1.108 billion, compared to a carrying amount of $1.106 billion.
The fair values were estimated using market interest rates for comparable instruments. The Company has no
current plans to retire a significant amount of its debt prior to maturity.

There have been no movements of items between fair value hierarchies.

NOTE 5—INCOME TAXES

The U.S. and International components of income before income taxes consisted of the following for the

years ended December 31, 2011, 2010 and 2009:

In thousands

United States
International

Total income before income taxes

2011
$307,909
64,415

2010
$273,891
57,962

2009
$229,343
48,345

$372,324

$331,853

$277,688

Significant components of our income tax expense for the years ended December 31, 2011, 2010 and 2009

are as follows:

In thousands

Current

United States—federal
United States—state and local
International

Deferred

United States—federal
United States—state and local
International

Total provision

2011

2010

2009

$ 99,481
10,205
11,906

$ 72,733
9,356
15,864

$ 60,493
8,938
9,895

121,592

97,953

79,326

7,690
2,589
3,110

13,389

19,834
3,254
355

23,443

16,046
2,636
3,291

21,973

$134,981

$121,396

$101,299

A reconciliation of the income tax provision computed at the federal statutory rate to the effective tax rate

for the years ended December 31, 2011, 2010 and 2009 are as follows:

Federal statutory income tax rate
Effect of:

State and local taxes, net of federal tax effect

Other

Effective tax rate

2011
2010
35.0% 35.0% 35.0%

2009

2.2% 2.5% 2.7%
(0.9)% (0.9)% (1.2)%

36.3% 36.6% 36.5%

Cash payments for income taxes were $74.4 million, $76.6 million and $66.5 million for the years ended

December 31, 2011, 2010 and 2009, respectively.

Our deferred tax liabilities and assets as of December 31, 2011 and 2010 were as follows:

In thousands

Deferred tax liabilities:

Property, plant and equipment
Goodwill and intangibles

Total deferred tax liabilities
Deferred tax assets:

Accrued liabilities
Other
Net operating tax loss carry forwards

Less: operating tax loss valuation allowance

Total deferred tax assets

Net deferred tax liabilities

2011

2010

$ (34,699) $ (22,799)
(318,624)
(234,846)

(353,323)

(257,645)

22,124
22,296
18,259
(3,775)

58,904

17,734
16,987
29,074
(11,973)

51,822

$(294,419) $(205,823)

At December 31, 2011, net operating loss carry forwards for U.S. federal and state income tax purposes
have been fully utilized, excluding net operating loss carry forwards related to our acquisitions. The remaining
net operating loss carry forwards from foreign and domestic acquisitions are approximately $38.9 million that
begin to expire in 2015. Of these, $3.4 million have a valuation allowance offsetting the benefit. The valuation
allowance primarily represents loss carry-forwards for which limitations are in place and utilization is uncertain
before their expiration. Changes in our valuation allowance during 2011 were primarily related to adjustments to
acquisition accounting.

Undistributed earnings of foreign subsidiaries are considered permanently reinvested, and therefore no
deferred taxes are recorded thereon. The cumulative amounts of such earnings are $707.0 million at
December 31, 2011, and it was not practicable to estimate the amount of tax that may be payable upon
distribution assuming repatriation.

We and our subsidiaries file U.S. federal income tax returns and income tax returns in various states and
foreign jurisdictions. With a few exceptions, we are no longer subject to U.S. federal, state, local, or non-U.S.
income tax examinations by tax authorities for years before 2006.

The Company has recorded accruals to cover certain uncertain tax positions. Such uncertain tax positions
relate to additional taxes that the Company may be required to pay in various tax jurisdictions. During the course
of examinations by various taxing authorities, proposed adjustments may be asserted. The Company evaluates
such items on a case-by-case basis and adjusts the accrual for uncertain tax positions as deemed necessary. The
estimated amount of liability associated with the Company’s uncertain tax positions that may change within the
next twelve months cannot be reasonably estimated.

The total amount of unrecognized tax positions as of December 31, 2011 is $10.7 million. The amount of
unrecognized tax positions that, if recognized, would affect the effective tax rate is approximately $10.7 million.
We recognized interest and penalties accrued related to income tax reserves in the amount of $0.7 million and
$0.1 million, for the years ended December 31, 2011 and 2010, respectively, as a component of income tax
expense.

The following table summarizes the changes in unrecognized tax positions during the years ended

December 31, 2011 and 2010:

In thousands
Unrecognized tax positions, December 31, 2009

Gross increases—tax positions in prior period
Gross decreases—tax positions in prior period
Gross increases—current period tax positions
Settlement
Lapse of statute of limitations

Unrecognized tax positions, December 31, 2010

Gross increases—tax positions in prior period
Gross decreases—tax positions in prior period
Gross increases—current period tax positions
Settlement
Lapse of statute of limitations

Unrecognized tax positions, December 31, 2011

$ 7,622
828
(21)
1,863
0
(1,160)

$ 9,132

242
0
2,609
(108)
(1,210)

$10,665

NOTE 6—STOCK BASED COMPENSATION

Stock Plans:

We have adopted six stock option plans:

(i)

the 2011 Incentive Compensation Plan, which expires May 2021;

(ii)

the 2008 Incentive Stock Plan, which our stockholders approved in May 2008;

(iii) the 2005 Incentive Stock Plan, which our stockholders approved in April 2005;

(iv) the 2000 Nonstatutory Stock Option Plan, which expired in February 2010;

(v)

the 1997 Stock Option Plan, which expired in January 2007;

(vi) the 1996 Directors Stock Option Plan, which expired in May 2006.

The 2011 Incentive Compensation Plan authorizes awards of stock options, stock appreciation rights,
restricted stock, and restricted stock units for a total of 3,000,000 shares; the 2008 Plan authorizes awards of
stock options, stock appreciation rights, restricted stock, and restricted stock units for a total of 3,500,000 shares;
the 2005 Plan authorizes awards of stock options and stock appreciation rights for a total of 4,800,000 shares; the
2000 Plan authorizes stock option grants for a total of 7,000,000 shares; the 1997 Plan authorized stock option
grants for a total of 6,000,000 shares; and the Directors Plan authorized stock option grants for a total of
2,340,000 shares.

In terms of the stock options authorized, the 2011 Plan, 2008 Plan, and the 2005 Plan provide for the grant
of non-statutory stock options (“NSOs”) and incentive stock options intended to qualify under section 422 of the
Internal Revenue Code (“ISOs”); the 2000 Plan provides for the grant of NSOs; the 1997 Plan provided for the
grant of NSOs and ISOs; and the Directors Plan provided for the grant of NSOs.

The 2011, 2008 and 2005 Plans authorize awards to our officers, employees and consultants and, following
the expiration of the Directors Plan in May 2006, to our directors; the 2000 Plan authorized awards to our
employees and consultants but not to our officers and directors; the 1997 Plan authorized awards to our officers,
directors, employees and consultants; and the Directors Plan authorized awards to our outside directors.

As of December 31, 2011, we reserved the following shares for issuance, consisting of both shares available
for awards under the 2011 Plan, 2008 Plan, 2005 Plan, 2000 Plan, and 1997 Plan and shares issuable under
outstanding stock option grants and restricted stock unit awards:

1996 Directors Plan options

1997 Plan options
2000 Plan options

2005 Plan options
2008 Plan options

2011 Plan options

Total shares reserved

133,224

306,594
595,942

3,326,274
3,446,125

3,000,000

10,808,159

Employee Stock Purchase Plan:

In October 2000, our Board of Directors adopted the Employee Stock Purchase Plan (“ESPP”) effective as
of July 1, 2001. Our stockholders approved the ESPP in May 2001. The ESPP authorizes 600,000 shares of our
common stock to be purchased by employees at a 15% discount from the market price of the stock through
payroll deductions during two six-month offerings each year. An employee who elects to participate in an
offering is granted an option on the first day of the offering for a number of shares equal to the employee’s
payroll deductions under the ESPP during the offering period (which may not exceed $5,000) divided by the
option price per share. The option price per share is the lower of 85% of the closing price of a share of our
common stock on the first trading day of the offering period or 85% of the closing price on the last trading day of
the offering period. We recognize compensation expense for the ESPP, which is reflected in the statement of
income. Every U.S. employee who has completed six months employment as of the first day of an offering and
who is a full-time employee, or a part-time employee who customarily works at least 20 hours per week, is
eligible to participate in the offering. During 2011, 2010, and 2009, 53,213 shares, 61,573 shares, and 56,145
shares respectively, were issued through the ESPP.

Stock Based Compensation Expense:

During 2011, there were no changes to our stock compensation plans or modifications to outstanding stock-
based awards which would change the value of any awards outstanding. Compensation expense for all stock-
based compensation awards granted subsequent to January 1, 2006 is based on the grant-date fair value
determined in accordance with the provisions of FASB accounting standards for share-based payments. During
the years ended December 31, 2011, 2010 and 2009, we recognized compensation expense of $14.4 million,
$14.4 million and $14.0 million, respectively, for stock options, and $1.0 million, $0.9 million and $0.7 million,
respectively, for the ESPP, which is reflected in the statement of income. There were no significant capitalized
stock-based compensation costs at December 31, 2011, 2010 and 2009.

The following table presents the total stock-based compensation expense resulting from stock option awards

and the ESPP included in the consolidated statements of income:

In thousands

Years Ended December 31,
2010

2009

2011

Cost of revenues—stock option plan
Selling, general and administrative—stock option plan
Selling, general and administrative—restricted stock unit
Selling, general and administrative—ESPP

Total

121
13,428
811
1,007

224
13,914
304
856

366
13,599
0
673

$15,367

$15,298

$14,638

As of December 31, 2011, there were $24.5 million of total unrecognized compensation expenses related to

non-vested option awards, which is expected to be recognized over a weighted-average period of 1.49 years.

The following table sets forth the tax benefits related to stock compensation:

In thousands

Tax benefit recognized in income statement
Excess tax benefit realized

Stock Options:

Years Ended December 31,

2011
$ 6,091
17,410

2010
$ 7,359
24,687

2009
$ 5,329
10,905

Options granted to directors vest in one year and options granted to officers and employees generally vest
over five years. Expense related to the graded vesting options is recognized using the straight-line method over
the vesting period.

The exercise price per share of an option granted under any of our stock option plans may not be less than
the closing price of a share of our common stock on the date of grant. The maximum term of an option granted
under any plan may not exceed 10 years. An option may be exercised only when it is vested and, in the case of an
option granted to an employee (including an officer), only while he or she remains an employee and for a limited
period following the termination of his or her employment. New shares are issued upon exercise of stock options.
Option activity for the years ended December 31, 2011, 2010 and 2009 is summarized as follows:

Outstanding at beginning of year
Granted
Exercised
Forfeited
Cancelled or expired

2011

2010

2009

Weighted
Average
Exercise
Price per
Share
$41.86
85.28
32.41
53.49
28.93

Number of
Options
6,508,833
1,050,226
(963,218)
(244,378)
(9,126)

Weighted
Average
Exercise
Price per
Share
$35.43
54.13
26.95
47.07
55.50

Weighted
Average
Exercise
Price per
Share
$30.97
47.39
19.61
42.84
53.37

Number of
Options
7,297,399
1,368,476
(1,107,063)
(162,470)
(8,589)

Number of
Options
7,387,753
1,388,846
(2,106,156)
(156,269)
(5,341)

Outstanding at end of year

6,342,337

$50.06

6,508,833

$41.86

7,387,753

$35.43

Exercisable at end of year
Available for future grant

3,406,594
4,396,346

$40.31

3,099,479
2,240,937

$34.49

3,884,494
3,939,210

$28.58

The total exercise intrinsic value represents the total pre-tax intrinsic value (the difference between the sales
price on that trading day in the year ended December 31, 2011 and the exercise price associated with the
respective option).

In thousands

Total exercise intrinsic value of options exercised

Years Ended December 31,

2011
$52,939

2010
$78,500

2009
$37,600

The total aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between our closing
stock price on the last day of trading for the year ended December 31, 2011 and the exercise price, multiplied by the
number of in-the-money options) that would have been received by the option holders assuming all option holders had
exercised their options on December 31, 2011; this amount changes based on the fair market value of our stock.

The following tables set forth the information related to outstanding options for the years ended

December 31, 2011, 2010 and 2009:

In years

Weighted average remaining contractual life of outstanding options

In thousands

Total aggregate intrinsic value of outstanding options

2011

2010

2009

6.5

6.7

6.5

2011
$184,300

2010
$254,200

2009
$146,400

The following tables set forth the information related to exercisable options:

In years

Weighted average remaining contractual life of exercisable options

In thousands

Total aggregate intrinsic value of exercisable options

2011

2010

2009

5.3

2011
$128,900

2010
$143,900

2009
$103,600

Options outstanding and exercisable as of December 31, 2011 by price range are presented below:

Options Outstanding

Options Exercisable

Range of Exercise Price
$13.685-$23.535
$23.585-$32.875
$33.500-$37.825
$38.100-$38.565
$38.905-$43.330
$43.340-$46.830
$46.870-$49.760
$49.900-$51.550
$51.750-$53.150
$53.480-$94.240

Outstanding
Average
Remaining
Life in Years
2.48
4.02
4.83
5.10
5.35
7.08
7.29
8.07
6.16
8.67

Weighted
Average
Exercise
Price
$21.86
29.38
35.38
38.56
42.75
46.79
48.72
51.52
53.13
77.17

Weighted
Average
Exercise
Price
$21.86
29.36
35.31
38.56
42.82
46.76
48.93
51.51
53.13
65.15

Shares
635,002
699,255
61,573
490,249
71,016
331,964
93,911
247,739
385,687
390,198

6.47

$50.06

3,406,594

$40.31

Shares
635,002
715,255
63,513
658,722
80,086
860,266
139,811
1,003,191
663,837
1,522,654

6,342,337

The Black-Scholes option-pricing model was used in determining the fair value of each option grant. The
expected term of options granted is based on historical experience. Expected volatility is based upon historical
volatility. The expected dividend yield is zero. The risk-free interest rate is based upon the U.S. Treasury yield
rates for a comparable period. The assumptions that we used in the Black-Scholes model are as follows:

Stock options granted
Weighted average grant date fair value
Expected term (in years)
Expected volatility
Expected dividend yield
Risk free interest rate

Restricted Stock Units:

Years Ended December 31,

2011
1,050,226
21.07
5.75
27.42%
0.00%
2.21%

2010
1,388,846
13.74
5.75
28.31%
0.00%
2.33%

2009
1,368,476
11.90
5.50
28.28%
0.00%
2.08%

Restricted stock units (“RSUs”) activity for the years ended December 31, 2011 and 2010 is summarized as
follows below. RSUs vest at the end of three years. Our 2008 Plan includes a share reserve related to RSUs
granted at a 2-1 ratio. We did not grant any RSUs in 2009.

2011

Weighted
Average
Remaining
Contractual
Life

(in years)

Aggregate
Intrinsic
Value

2010

Weighted
Average
Remaining
Contractual
Life

(in years)

Aggregate
Intrinsic
Value

Number
of Units

0
20,000
0

1.63

0.00
1.60

$2,706,784

20,000

0
$2,220,173

0
20,000

2.12

0.00
2.12

$1,618,400

0
$1,618,400

Number
of Units

20,000
18,488
(3,750)

34,738

0
28,493

Outstanding at beginning of year
Granted
Forfeited

Outstanding at end of year

Exercisable at end of year
Vested and expected to vest in the future

The per share fair value of RSUs for the years ended December 31, 2011 and 2010 was $85.00 and $51.65,

respectively.

Preferred Stock:

NOTE 7—PREFERRED STOCK

At December 31, 2011 and 2010, we had 1,000,000 authorized shares of preferred stock and no shares

issued or outstanding.

NOTE 8—EARNINGS PER COMMON SHARE

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

In thousands, except share and per share data

Years Ended December 31,

2011

2010

2009

Numerator:
Numerator for basic earnings per share net income attributable to

Stericycle, Inc.

234,751

207,879

175,691

Denominator:
Denominator for basic earnings per share-weighted average shares
Effect of diluted securities:
Employee stock options

Denominator for diluted earnings per share-adjusted weighted

average shares and after assumed exercises

Earnings per share—Basic

Earnings per share—Diluted

85,467,421

85,057,775

84,769,912

1,900,291

1,904,876

1,974,091

87,367,712

86,962,651

86,744,003

2.75

2.69

2.44

2.39

2.07

2.03

For additional

information regarding outstanding employee stock options, see Note 6—Stock Based

Compensation to the Consolidated Financial Statements.

In 2011, 2010 and 2009, options to purchase 879,266 shares, 133,535 shares and 2,218,914 shares,
respectively, at exercise prices of $77.00-$94.24, $51.55-$80.92 and $46.56-$60.53, respectively, were not included
in the computation of diluted earnings per share (“EPS”) because the effect would have been anti-dilutive.

NOTE 9—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of total comprehensive income are net income, the change in cumulative currency
translation adjustments and gains and losses on derivative instruments qualifying as cash flow hedges. The
following table sets forth the components of total comprehensive income for 2011, 2010 and 2009:

In thousands

Beginning balance January 1, 2009

Fiscal 2009 change
Ending balance December 31, 2009

Fiscal 2010 change
Ending balance December 31, 2010
Fiscal 2011 change

Ending balance December 31, 2011

Currency
Translation
Adjustments
$(29,179)

17,595
$(11,584)

(2,544)
$(14,128)
(29,456)

Unrealized
Gains
(Losses) on
Cash Flow
Hedges
$(2,896)

2,188
$ (708)

(2,033)
$(2,741)
341

Accumulated
Other
Comprehensive
Income/(Loss)
$(32,075)

19,783
$(12,292)

(4,577)
$(16,869)
(29,115)

$(43,584)

$(2,400)

$(45,984)

The tax impact of the unrealized loss on cash flow hedges in accumulated other comprehensive income at
December 31, 2011, 2010 and 2009 was $0.2 million, $1.4 million, and $1.4 million, respectively. Translation
adjustments are not tax-effected as the Company’s net investment in foreign subsidiaries and all related foreign
earnings are deemed permanently invested.

The following table summarizes amounts related to cash flow hedges reclassified to interest expense on our

Consolidated Statements of Income.

In thousands

Interest rate swap
Treasury lock

Total

NOTE 10—PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31 consisted of the following items:

In thousands

Land
Building and improvements
Machinery and equipment
Office equipment and furniture
Internally developed software
Construction in progress

Total property, plant & equipment

Less: accumulated depreciation

Property, plant and equipment, net

Years Ended December 31,

2011

2010

2009

0
341

341

$(2,118) $2,188
0

$(2,033) $2,188

2011
$ 21,325
100,765
322,434
48,136
14,912
18,645

2010
$ 16,337
93,743
277,067
42,561
11,084
18,075

526,217
(232,305)

458,867
(190,896)

$ 293,912

$ 267,971

NOTE 11—GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other indefinite lived intangibles are not amortized, but are subject to an annual impairment

test, or to more frequent testing if circumstances indicate that they may be impaired.

We have two geographical reporting segments, “United States” and “International”, both of which have
goodwill. The changes in the carrying amount of goodwill for the years ended December 31, 2011 and 2010 were
as follows:

In thousands

Balance as of December 31, 2009
Goodwill acquired during year
Goodwill allocation adjustments
Sale of assets
Changes due to currency fluctuation

Balance as of December 31, 2010

Goodwill acquired during year
Goodwill allocation adjustments
Sale of assets
Changes due to currency fluctuation

Balance as of December 31, 2011

United
States
$1,153,149
125,272
3,682
(2,345)
0

International
$240,942
87,810
(13,761)
0
1,015

Total
$1,394,091
213,082
(10,079)
(2,345)
1,015

1,279,758

316,006

1,595,764

232,850
(6,192)
0
0

120,750
(4,922)
(2,887)
(21,660)

353,600
(11,114)
(2,887)
(21,660)

$1,506,416

$407,287

$1,913,703

During the quarter ended June 30, 2011, we performed our annual goodwill impairment evaluation for our
three reporting units, Domestic Regulated Waste, Domestic Regulated Returns and Recall Management Services,
and International. We calculate fair value for our reporting units using two methods, one a market approach and
the other an income approach. Both the market and income approaches indicated no impairment to goodwill to
any of our three reporting units.

The results of our goodwill impairment test using the market approach indicated the fair value of our

reporting units exceeded book value by a substantial amount, in excess of 100% of book value.

Income Approach: The income approach uses expected future cash flows of each reporting unit and
discounts those cash flows to a present values. Expected future cash flows are calculated using management
assumptions of internal growth, capital expenditures, and cost efficiencies. Future acquisitions are not included in
the expected future cash flows. We use a discount rate based on our Company calculated Weighted Average Cost
of Capital which is adjusted for each of our reporting units based on risk size premium and foreign country
premium. Significant assumptions used in the income approach include realization of future cash flows and the
discount rate used to present value those cash flows.

The results of our goodwill impairment test using the income approach indicated the fair value of our

reporting units exceeded book value by a substantial amount; in excess of 100%.

In 2011 and 2010, we wrote off $2.8 million and $0.6 million, respectively, for the permit intangibles of
facilities due to rationalizing our domestic operations. These expenses are reflected as part of “Selling, general
and administrative expenses”. Under current acquisition accounting, a fair value must be assigned to all acquired
assets based on a theoretical “market participant” regardless of the acquirers’ intended use for those assets. This
accounting treatment can lead to the recognition of losses if a company disposes of acquired assets.

We complete our annual impairment analysis of our indefinite lived intangibles (facility permits) during the
quarter ended December 31 of each year. In 2011 and 2010, we performed our annual permit impairment
evaluation and determined that, other than as noted above, there was no impairment.

Our intangible assets, other than indefinite lived goodwill and permits, are amortized over their useful lives.
In 2011, we assigned $190.4 million to customer relationships with amortization periods of 14 to 40 years and
$14.5 million to facility environmental permits with indefinite lives.

In 2010, we assigned $97.1 million to customer relationships with amortization periods of 15 to 40 years

and $16.5 million to facility environmental permits with indefinite lives.

As of December 31, the values of the intangible assets were as follows:

In thousands

Amortizable intangibles:

Covenants not-to-compete
Customer relationships
Tradenames
License agreements
Other

Indefinite lived intangibles:
Operating permits

Gross
Carrying
Amount

$ 10,903
480,033
2,556
720
0

2011

2010

Accumulated
Amortization

Net
Value

Gross
Carrying
Amount

Accumulated
Amortization

Net
Value

$ 4,350
36,994
391
315
0

6,553
443,039
2,165
405
0

$ 10,402
304,175
1,200
766
1,801

$ 2,952
23,177
253
211
1,801

7,450
280,998
947
555
0

94,456

85,224

Total

$588,668

$42,050

$546,618

$403,568

$28,394

$375,174

During the years ended December 31, 2011, 2010 and 2009, the aggregate amortization expense was $16.3

million, $9.9 million and $5.4 million, respectively.

The estimated amortization expense for each of the next five years, assuming no additional amortizable

intangible assets, is as follows for the years ended December 31:

In thousands
2012
2013
2014
2015
2016

NOTE 12—ACCRUED LIABILITIES

Accrued liabilities at December 31 consisted of the following items:

In thousands

Accrued compensation
Accrued insurance
Accrued income taxes
Accrued other taxes
Accrued interest
Accrued professional services liabilities
Accrued product reimbursement
Accrued liabilities—other

Total accrued liabilities

$19,082
19,009
18,765
18,595
18,313

2011
$ 33,312
30,376
6,178
22,132
9,037
2,011
9,361
28,114

2010
$ 31,325
26,449
2,703
15,016
8,934
4,377
23,907
21,644

$140,521

$134,355

New Debt

NOTE 13—DEBT

On September 21, 2011, we and certain of our subsidiaries entered into an amended and restated credit
agreement (the “new credit agreement”) with Bank of America, N.A., as administrative agent, swingline lender, a

lender and a letter of credit issuer, other lenders party to the new credit agreement, JPMorgan Chase Bank, N.A.,
as syndication agent, and HSBC Bank USA, National Association, Lloyds Securities, Inc. and Union Bank, N.A.,
as co-documentation agents. The new credit agreement amended and restated our prior credit agreement dated as
of August 24, 2007, as amended. The new credit agreement increases our unsecured revolving credit facility from
$850.0 million to $1.0 billion and extends the maturity date of our borrowings from August 24, 2012 to
September 21, 2016. We paid $3.7 million in financing fees which will be amortized to interest expense over the
life of the loan agreement.

Long-term debt consisted of the following at December 31:

In thousands

Obligations under capital leases
$1 billion revolver weighted average rate 1.73%, due in 2016
$215 million term loan
$100 million Private Placement notes 5.64%, due in 2015
$175 million Private Placement notes 3.89%, due in 2017
$225 million Private Placement notes 4.47%, due in 2020
Acquisition notes weighted average rate of 2.95% and weighted average maturity of

4.3 years

Foreign bank debt weighted average rate 6.73% and Weighted average maturity of 2.2

years

Less: current portion
Total

2011

4,679
527,884
0
100,000
175,000
225,000

2010

6,330
175,407
80,969
100,000
175,000
225,000

240,138

251,489

111,938

91,433

1,384,639

1,105,628

100,526
$1,284,113

91,406
$1,014,222

Payments due on long-term debt, excluding capital

lease obligations, during each of the five years

subsequent to December 31, 2011 are as follows:

In thousands
2012
2013
2014
2015
2016
Thereafter

98,324
80,730
91,731
134,940
546,517
427,718
$1,379,960

We paid interest of $43.5 million, $28.6 million and $24.8 million for the years ended December 31, 2011,

2010 and 2009, respectively.

Property under capital leases included with property, plant and equipment in the accompanying consolidated

balance sheets is as follows at December 31:

In thousands

Buildings
Machinery and equipment
Vehicles
Office equipment and furniture
Less: accumulated depreciation

Amortization related to these capital leases is included with depreciation expense.

Minimum future lease payments under capital leases are as follows:

In thousands
2012
2013
2014
2015
2016
Thereafter

Total minimum lease payments
Less: amounts representing interest

Present value of net minimum lease payments
Less: current portion

Long-term obligations under capital leases

2011

2010

768 $

3,381
5,114
45
(2,845)

518
2,998
5,103
0
(2,720)

$ 6,463 $ 5,899

$ 2,572
1,184
556
394
253
476

5,435
(756)

4,679
(2,202)

$ 2,477

Our $1.0 billion senior credit facility maturing in September 2016, our $100.0 million private placement
notes maturing April 2015, our $175.0 million private placement notes maturing in October 2017, and our $225.0
million private placement notes maturing in October 2020, all require us to comply with various financial,
reporting and other covenants and restrictions, including a restriction on dividend payments. The financial debt
covenants are the same for the senior credit facility, and the private placement notes. At December 31, 2011, we
were in compliance with all of our financial debt covenants.

As of December 31, 2011 and 2010, we had $159.1 million and $184.0 million, respectively, committed to
outstanding letters of credit under our senior credit facility. The unused portion of the revolving credit facility as
of December 31, 2011 and 2010 was $313.0 million and $490.6 million, respectively.

Guarantees

We have guaranteed a loan to JPMorganChase Bank N.A. on behalf of Shiraishi-Sogyo Co. Ltd
(“Shiraishi”). Shiraishi is a customer in Japan that is expanding its medical waste management business and has a
one year loan with a current balance of $6.4 million with JPMorganChase Bank N.A. that expires in May 2012.
We also have extended loans to Shiraishi for approximately $15.2 million in support of its medical waste
business. These amounts are collateralized with the assets of Shiraishi and related companies.

NOTE 14—LEASE COMMITMENTS

We lease various plant equipment, office furniture and equipment, motor vehicles, office and warehouse
space, and landfills under operating lease agreements, which expire at various dates over the next 19 years. The
leases for most of the properties contain renewal provisions.

Rent expense for 2011, 2010 and 2009 was $75.3 million, $57.9 million and $45.8 million, respectively.

Minimum future rental payments under non-cancelable operating leases that have initial or remaining terms
in excess of one year as of December 31, 2011 for each of the next five years and in the aggregate are as follows:

In thousands
2012
2013
2014
2015
2016
Thereafter

$ 50,432
39,158
31,589
25,436
18,584
39,659

$204,858

NOTE 15—PRODUCTS AND SERVICES AND GEOGRAPHIC INFORMATION

FASB ASC Topic 280 requires segment information to be reported based on information utilized by
executive management to internally assess performance and make operating decisions. We have determined that
we have three operating segments based on the organizational structure of our company and information
reviewed. These operating segments are International Waste Management Services (“International”), Domestic
Regulated Waste Management Services (“United States”) and Domestic Returns and Recall Management
Services. We have aggregated Domestic Regulated Waste Management Services and Domestic Returns and
Recall Management Services into one reportable segment, United States, based on our consideration of the
following aggregation criteria:

•

they have similar economic characteristics;

the same services are provided;

the same types of customers are serviced;

the same types of waste collection, transportation and treatment methods are utilized;

their regulatory environments are similar, but vary based upon country specific regulations; and

they employ the same sales and marketing techniques and activities.

Our two reportable segments are United States (which includes Puerto Rico) and International. Summary

information for our reportable segments is as follows:

In thousands

Revenues:

United States
Europe
Other international countries

Total International

Total

Income before income taxes:

United States
International

Total

Total assets:

United States
International

Total

Property, Plant and Equipment, net:

United States
Europe
Other international countries

Total International

Total

2011

2010

2009

$1,212,111
252,620
211,317

$1,083,565
199,304
156,519

$ 912,594
158,577
106,565

463,937

355,823

265,142

$1,676,048

$1,439,388

$1,177,736

$ 316,156
56,168

$ 277,486
54,367

$ 232,077
45,611

$ 372,324

$ 331,853

$ 277,688

$2,208,152
968,938

$1,919,424
719,599

$1,453,546
729,257

$3,177,090

$2,639,023

$2,182,803

$ 197,118
52,604
44,190

$ 188,936
38,833
40,202

$ 184,089
32,592
29,473

96,794

79,035

62,065

$ 293,912

$ 267,971

$ 246,154

Revenues are attributed to countries based on the location of customers. Intercompany revenues recorded by
the United States for work performed in Canada are eliminated prior to reporting United States revenues. The
same accounting principles and critical accounting policies are used in the preparation of the financial statements
for both reporting segments.

Detailed information for our United States reporting segment is as follows:

In thousands

Regulated waste management services
Regulated returns and recall management services

Total revenues

Net interest expense
Income before income taxes
Income taxes

Net income attributable to Stericycle, Inc.

Depreciation and amortization
Capital expenditures

2011
$1,094,928
117,183

2010
$ 957,398
126,167

2009
$842,479
70,115

1,212,111

1,083,565

912,594

40,048
316,156
119,982

31,079
277,486
105,065

28,852
232,077
88,113

$ 196,174

$ 172,421

$143,964

40,689
36,270

35,769
33,737

$ 29,424
29,479

Detailed information for our International reporting segment is as follows:

In thousands

Regulated waste management services revenue
Net interest expense
Income before income taxes
Income taxes

Net income
Less: net income attributable to noncontrolling interests

Net income attributable to Stericycle, Inc.

Depreciation and amortization
Capital expenditures

2011
$463,937
8,584
56,168
14,999

41,169
2,592

2010
$355,823
5,736
54,367
16,331

2009
$265,142
5,280
45,611
13,186

38,036
2,578

32,425
698

$ 38,577

$ 35,458

$ 31,727

$ 25,357
17,031

$ 18,116
14,583

$ 10,566
10,431

NOTE 16—EMPLOYEE BENEFIT PLAN

We have a 401(k) defined contribution retirement savings plan covering substantially all domestic
employees. Each participant may elect to defer a portion of his or her compensation subject to certain limitations.
We may contribute up to 50% of the first 5% of compensation contributed to the plan by each employee up to a
maximum of $1,750 per annum. Our contributions for the years ended December 31 2011, 2010 and 2009 were
approximately $2.6 million, $2.3 million and $2.1 million, respectively.

The Company has several foreign defined contribution plans, which require the Company to contribute a
regulations. For the years ended
total contributions made by the Company for these plans were

percentage of
December 31, 2011, 2010 and 2009,
approximately $0.8 million, $0.7 million and $0.7 million, respectively.

the participating employee’s salary according to local

NOTE 17—LEGAL PROCEEDINGS

NOTE 18—RESTRUCTURING AND PLANT CLOSURE COSTS

In December 2010, we reorganized the structure of our international management group in order to leverage
strong local management, resulting in employee severance and other charges. During the third quarter of 2011 we
expanded this program to include consolidation of administrative facilities in the United Kingdom and
reorganization of our international legal structure. We had an accrual balance of $0.9 million at December 2011,
which we expect to pay out primarily in the first quarter of 2012 with some immaterial additional expense.

The following tables below highlight the pre-tax charges and changes in the reserves for 2011 and 2010.
These charges, except for fifty-four thousand reflected in “Costs of revenues”, are reflected on our Consolidated
Statement of Income within “Selling, general and administrative expenses”.

In thousands

Employee severance
Other costs

Total

Beginning
Reserve at
01/01/11
$1,835
217

Charges for
the Year
Ended
12/31/11
$1,078
1,241

Ending
Reserve at
12/31/11
$330
563

Cash Paid
$(2,583)
(895)

$2,052

$2,319

$(3,478)

$893

In thousands

Employee severance
Other costs
Non-cash items

Employee severance
Other costs

Total

Beginning
Reserve at
01/01/10
$666
6

Charges for
the Year
Ended
12/31/10
$3,100
1,080

Ending
Reserve at
12/31/10
$1,835
217

Cash Paid
$(1,931)
(869)

0
0

3,266
925

0
0

$672

$8,371

$(2,800)

$2,052

In addition to the restructuring charges, we recognized $2.8 million and $0.9 million in non cash expenses

during 2011 and 2010, respectively, related to the rationalization of domestic plant operations.

NOTE 19—SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table summarizes our unaudited consolidated quarterly results of operations as reported for

2011 and 2010:

In thousands, except per share data

Revenues
Gross profit
Restructuring costs and plant closure expense
Litigation settlement
(Loss)/ gain on sale of business
Acquisition expenses
Change in fair value of contingent consideration
Integration expenses
Net income attributable to Stericycle, Inc.
* Basic earnings per common share
* Diluted earnings per common share

In thousands, except per share data

Revenues
Gross profit
Restructuring costs and plant closure expense
Litigation settlement
Gain on sale of assets
Acquisition expenses
Integration expenses
Net income attributable to Stericycle, Inc.
* Basic earnings per common share
* Diluted earnings per common share

First
Quarter
2011
$398,126
182,430
(258)
0
0
(5,938)
2,140
(766)
55,674
0.65
0.64

$
$

Second
Quarter
2011
$410,441
186,741
(195)
0
0
(5,261)
0
(1,287)
55,542
0.65
0.63

$
$

Third
Quarter
2011
$420,924
190,055
(633)
(460)
(323)
(3,195)
0
(1,813)
59,247
0.69
0.68

$
$

Fourth
Quarter
2011
$446,557
201,518
(3,989)
(725)
304
(2,310)
5,081
(480)
64,288
0.76
0.74

$
$

Year
2011
$1,676,048
760,744
(5,075)
(1,185)
(19)
(16,704)
7,221
(4,346)
234,751
2.75
2.69

$
$

First
Quarter
2010
$335,177
155,317
(667)
0
0
(800)
(1,149)
48,119
0.57
0.56

$
$

Second
Quarter
2010
$347,734
161,537
(1,563)
(937)
2,955
(556)
(1,314)
53,094
0.63
0.61

$
$

Third
Quarter
2010
$362,988
168,098
(216)
0
0
(1,891)
(790)
56,686
0.66
0.65

$
$

Fourth
Quarter
2010
$393,489
182,475
(5,925)
40
0
(6,272)
(859)
49,980
0.59
0.57

$
$

Year
2010
$1,439,388
667,427
(8,371)
(897)
2,955
(9,519)
(4,112)
207,879
2.44
2.39

$
$

* EPS calculated on a quarterly basis, and, as such, the amounts may not total the calculated full-year EPS.

NOTE 20—SUBSEQUENT EVENTS

We have evaluated subsequent events through the date of filing our annual report on Form 10-K. No events

have occurred that would require adjustment to or disclosure in the consolidated financial statements.

STERICYCLE, INC. AND SUBSIDIARIES
SCHEDULE II—VALUATION AND ALLOWANCE ACCOUNTS

In thousands

Allowance for doubtful accounts

Balance
12/31/08
$ 6,616

Charges to
Expenses
$6,866

Other Charges/
(Reversals) (1)
$ 765

Balance
Write-offs/
Payments
12/31/09
$(5,538) $ 8,709

Balance
12/31/09
$ 8,709

Charges to
Expenses
$7,524

Other Charges/
(Reversals) (1)
$ (190)

Write-offs/
Balance
12/31/10
Payments
$(5,198) $10,845

Balance
12/31/10
$10,845

Charges to
Expenses
$7,079

Other Charges/
(Reversals) (1)
$6,807

Balance
Write-offs/
12/31/11
Payments
$(5,826) $18,905

(1) Amounts consist primarily of valuation allowances assumed from acquired companies and currency

translation adjustments.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

Our management, with the participation of our Chairman 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 year covered by this Report. On the basis of this evaluation, our Chairman 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-15(e) of the Securities Exchange Act
of 1934 as “controls and other procedures of an issuer that are designed to ensure that information required to be
disclosed by the issuer in the reports that it 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 Chairman and
Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding our
required disclosures.

(b) Internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting and our Independent Registered Public

Accounting Firm’s Attestation Report are included in Item 8.

There were no changes in our internal controls or in other factors that could materially affect those controls

during the quarter ended December 31, 2011.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item regarding our directors is incorporated by reference to the information
contained under the caption “Election of Directors” in our definitive proxy statement for our 2012 Annual
Meeting of Stockholders to be held on May 22, 2012, to be filed pursuant to Regulation 14A.

The information required by this Item regarding our executive officers is contained under the caption

“Executive Officers of the Registrant” in Item 1 of Part I of this Report.

The information required by this Item regarding compliance with Section 16(a) of the Securities Exchange
Act of 1934 is incorporated by reference to the information contained under the caption “Section 16(a) Beneficial
Ownership Reporting Compliance” in our definitive proxy statement for our 2011 Annual Meeting of
Stockholders to be held on May 22, 2012, to be filed pursuant to Regulation 14A.

We have adopted a code of business conduct that applies to all of our employees. The code of conduct is
available on our website, www.stericycle.com, under “About Us/Codes of Conduct”. We intend to satisfy the
disclosure requirement under Item 5.05 of Form 8-K regarding any amendments to, or waiver from, a provision
of our code of conduct by posting such information on our website.

The information required by this Item regarding certain corporate governance matters is incorporated by
reference to the information contained under the caption “Election of Directors” in our definitive proxy statement
for our 2012 Annual Meeting of Stockholders to be held on May 22, 2012, to be filed pursuant to Regulation
14A.

Item 11. Executive Compensation

The information required by this Item is incorporated by reference to the information contained under the
caption “Compensation Discussion and Analysis” and following sections (up to Item 2) in our definitive proxy
statement for our 2012 Annual Meeting of Stockholders to be held on May 22, 2012, to be filed pursuant to
Regulation 14A.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters

The information required by this Item is incorporated by reference to the information contained under the
captions “Stock Ownership” and “Compensation Discussion and Analysis” and following sections (up to Item 2)
in our definitive proxy statement for our 2012 Annual Meeting of Stockholders to be held on May 22, 2012 to be
filed pursuant to Regulation 14A.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item regarding our policies and procedures for the review, approval or
ratification transactions with related persons is incorporated by reference to the information contained under the
caption “Policy on Related Party Transactions” in Item 1 of our definitive proxy statement for our 2012 Annual
Meeting of Stockholders to be held on May 22, 2012, to be filed pursuant to Regulation 14A.

The information required by this Item regarding director independence is incorporated by reference to the
information contained in Item 1 of our definitive proxy statement for our 2012 Annual Meeting of Stockholders
to be held on May 22, 2012, to be filed pursuant to Regulation 14A.

Item 14. Principal Accounting Fees and Services

Fees for professional services provided by our independent public accountants, Ernst & Young LLP, in each

of the last two fiscal years, in each of the following categories are:

In thousands

Audit fees
Audit-related fees
Tax fees
All other fees

2011
$1,426
0
321
0

2010
$1,485
0
0
0

$1,747

$1,485

Fees for audit services include fees rendered in connection with the audit of our annual financial statements
and the audit of our internal controls over financial reporting, and review of our interim financial statements
included in our quarterly reports on Form 10-Q.

In accordance with policies adopted by the Audit Committee of our Board of Directors, all audit and
non-audit related services to be performed for us by our independent public accountants must be approved in
advance by the Audit Committee.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) List of Financial Statements, Financial Statement Schedule and Exhibits

We have filed the following financial statements and financial statement schedule as part of this report:

Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements of Stericycle, Inc. and Subsidiaries
Consolidated Balance Sheets as of December 31, 2011 and 2010
Consolidated Statements of Income for Each of the Years in the Three-Year Period Ended

December 31, 2011

Consolidated Statements of Cash Flows for Each of the Years in the Three-Year Period Ended

December 31, 2011

Consolidated Statements of Changes in Equity for Each of the Years in the Three-Year Period Ended

December 31, 2011

Notes to Consolidated Financial Statements
Schedule II—Valuation and Allowance Accounts

Page
33
34

38
39
64

All other financial statement schedules have been omitted because they are not applicable to us or the

required information is shown in the consolidated financial statements or notes thereto.

We have filed the following exhibits with this report:

Filed with
Electronic
Submission

Exhibit
Index

3.1*

3.2*

3.3*

3.4*

3.5*

3.6*

3.7*

3.8*

Description

Amended and restated certificate of incorporation (incorporated by reference to Exhibit
3.1 to our registration statement on Form S-1 declared effective on August 22, 1996
(Registration No. 333-05665))

First certificate of amendment to amended and restated certificate of incorporation
(incorporated by reference to Exhibit 3.1 to our current report on Form 8-K filed
November 29, 1999)

Second certificate of amendment to amended and restated certificate of incorporation
(incorporated by reference to Exhibit 3.4 to our annual report on Form 10-K for 2002)

Third certificate of amendment to amended and restated certificate of incorporation
(incorporated by reference to Exhibit 3.4 to our registration statement on Form S-4
declared effective on October 10, 2007 (Registration No. 333-144613))

Amended and restated bylaws (incorporated by reference to Exhibit 3(ii).1 to our current
report on Form 8-K filed February 22, 2008)

Amendment to bylaws (incorporated by reference to Exhibit 3(ii).1 to our current report
on Form 8-K filed August 20, 2008)

Amendment to bylaws (incorporated by reference to Exhibit 3(ii).1 to our current report
on Form 8-K filed March 11, 2011)

Amendment to bylaws (incorporated by reference to Exhibit 3(ii).1 to our current report
on Form 8-K filed February 16, 2012)

Filed with
Electronic
Submission

Exhibit
Index

4.1*

10.1*

10.2*

10.3*

Description

Specimen certificate for shares of our common stock, par value $.01 per share
(incorporated by reference to Exhibit 4.1 to our registration statement on Form S-1
declared effective on August 22, 1996 (Registration No. 333-05665))

Amended and Restated Credit Agreement dated as of September 21, 2011 entered into by
us and certain of our subsidiaries as borrowers, Bank of America, N.A., as administrative
agent, swingline lender, a lender and a letter of credit issuer, other lenders party to the
amended and restated credit agreement, JPMorgan Chase Bank, N.A., as syndication
agent, and HSBC Bank USA, National Association, Lloyds Securities, Inc., and Union
Bank, N.A., as co-documentation agents (incorporated by reference to Exhibit 10.1 to our
current report on Form 8-K filed September 23, 2011)

Note Purchase Agreement dated as of April 15, 2008 entered into by us, as issuer and
seller, and The Northwestern Mutual Life Insurance Company, American United Life
Insurance Company, The State Life Insurance Company, Pioneer Mutual Life Insurance
Company, Knights of Columbus, Principal Life Insurance Company, CUNA Mutual
Insurance Society, CUMIS Insurance Society, Inc. and Modern Woodmen of America, as
purchasers (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K
filed April 18, 2008)

Note Purchase Agreement dated as of August 18, 2010 entered into by us, as issuer and
seller, and Metropolitan Life Insurance Company, MetLife Insurance Company of
Connecticut, Union Fidelity Life Insurance Company, Allstate Life Insurance Company,
Allstate Life Insurance Company of New York, American Heritage Life Insurance
Company, New York Life Insurance Company, New York Life Insurance and Annuity
Corporation, New York Life Insurance and Annuity Corporation Institutionally Owned
Life Insurance Separate Account (BOLI 30C), Forethought Life Insurance Company,
Hartford Life Insurance Company, Hartford Life and Accident Insurance Company,
Hartford Fire Insurance Company, Physicians Life Insurance Company, Nationwide Life
Insurance Company, Nationwide Life and Annuity Insurance Company, Massachusetts
Mutual Life Insurance Company, C.M. Life Insurance Company, RiverSource Life
Insurance Company, Thrivent Financial for Lutherans, The Lincoln National Life
Insurance Company, The Northwestern Mutual Life Insurance Company, Jackson
National Life Insurance Company, Allianz Life Insurance Company of North America,
MONY Life Insurance Company, AXA Equitable Life Insurance Company, CUNA
Mutual Insurance Society, Southern Farm Bureau Life Insurance Company, Phoenix Life
Insurance Company, PHL Variable Insurance Company, Modern Woodmen of America,
United of Omaha Life Insurance Company, Companion Life Insurance Company, Mutual
of Omaha Insurance Company, Woodmen of the World Life Insurance Society, Knights
of Columbus, Physicians Insurance A Mutual Company, Seabright Insurance Company
and Country Life Insurance Company, as purchasers (incorporated by reference to our
current report on Form 10-K filed August 27, 2010)

10.4*† Directors Stock Option Plan (Amended and Restated) (“Directors Plan”) (incorporated by

reference to Exhibit 4.1 to our registration statement on Form S-8 filed August 2, 2001
(Registration No. 333-66542))

10.5*†

10.6*†

First amendment to Directors Plan (incorporated by reference to Exhibit 10.9 to our
annual report on Form 10-K for 2001)

Form of stock option agreement for option grant under Directors Plan (incorporated by
reference to Exhibit 10.1 to our quarterly report on Form 10-Q for the quarter ended
September 30, 2004)

Filed with
Electronic
Submission

Exhibit
Index

10.7*†

10.8*†

10.9*†

10.10*†

10.11*†

10.12*†

10.13*†

10.14*†

Description

1997 Stock Option Plan (“1997 Plan”) (incorporated by reference to Exhibit 10.3 to our
annual report on Form 10-K for 1997)

First amendment to 1997 Plan (incorporated by reference to Exhibit 10.9 to our
registration statement on Form S-3 declared effective on February 4, 1999 (Registration
No. 333-60591))

Second amendment to 1997 Plan (incorporated by reference to Exhibit 10.12 to our
annual report on Form 10-K for 2001)

Third amendment to 1997 Plan (incorporated by reference to Exhibit 10.16 to our annual
report on Form 10-K for 2003)

2000 Nonstatutory Stock Option Plan (“2000 Plan”) (incorporated by reference to
Exhibit 10.13 to our annual report on Form 10-K for 2001)

First amendment to 2000 Plan (incorporated by reference to Exhibit 10.14 to our annual
report on Form 10-K for 2001)

Second amendment to 2000 Plan (incorporated by reference to Exhibit 10.15 to our
annual report on Form 10-K for 2001)

Third amendment to 2000 Plan (incorporated by reference to Exhibit 4.2 to our
registration statement on Form S-8 filed December 20, 2002 (Registration No. 333-
102097))

10.15*†

2005 Incentive Stock Plan (“2005 Plan”) (incorporated by reference to Exhibit 4.1 to our
registration statement on Form S-8 filed August 9, 2005 (Registration No. 333-127353))

10.16*†

First amendment to 2005 Plan

10.17*†

2008 Incentive Stock Plan (“2008 Plan”) (incorporated by reference to Exhibit 4.1 to our
registration statement on Form S-8 filed August 8, 2008 (Registration No. 333-152877))

10.18*†

First amendment to 2008 Plan

10.19*†

2011 Incentive Stock Plan (“2011 Plan”) (incorporated by reference to Exhibit 4.1 to our
registration statement on Form S-8 filed August 9, 2011 (Registration No. 333-176165))

10.20†

10.21†

10.22†

10.23†

Form of agreement for stock option grant under 2005, 2008 and 2011 Plans

Form of agreement for restricted stock unit award under 2008 and 2011 Plans

Bonus conversion program (2012 plan year)

Form of agreement for stock option grant under bonus conversion program for 2012 plan
year

10.24*†

Employee Stock Purchase Plan (“ESPP”), as amended and restated May 16, 2007 and
amended May 28, 2008

10.25*†

Second amendment to ESPP

10.26*†

10.27*†

14*

Plan of Compensation for Outside Directors (incorporated by reference to Exhibit 10.1 to
our current report on Form 8-K filed August 11, 2006)

First amendment to Plan of Compensation for Outside Directors (incorporated by
reference to Exhibit 10.19 to our annual report on Form 10-K for 2006)

Code of ethics (incorporated by reference to Exhibit 10.14 to our annual report on Form
10-K for 2003)

Exhibit Index

Description

31.1

31.2

Subsidiaries

Consent of Independent Registered Public Accounting Firm

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

Section 1350 Certification of Chief Executive Officer and Chief Financial
Officer

101.INS XBRL

Instance Document

101.SCH XBRL

Taxonomy Extension Schema Document

101.CAL XBRL

Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL

Taxonomy Definition Linkbase Document

101.LAB XBRL

Taxonomy Extension Label Linkbase Document

101.PRE XBRL

Taxonomy Extension Presentation Linkbase Document

Filed with
Electronic
Submission

* Previously filed
† Management contract or compensatory plan required to be filed pursuant to Item 601 of Regulation S-K

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: February 28, 2012

Name

Title

Date

/s/ MARK C. MILLER

Mark C. Miller

Chairman and Chief Executive
Officer (Principal Executive
Officer)

February 28, 2012

/s/

JACK W. SCHULER
Jack W. Schuler

Lead Director of the Board of

February 28, 2012

Directors

/s/ FRANK J.M. TEN BRINK

Executive Vice President and Chief

February 28, 2012

Frank J.M. ten Brink

/s/ ROD F. DAMMEYER

Rod F. Dammeyer

/s/ WILLIAM K. HALL

William K. Hall

/s/

JONATHAN T. LORD, M.D.
Jonathan T. Lord, M.D.

/s/

JOHN PATIENCE
John Patience

/s/

JAMES W.P. REID-ANDERSON
James W.P. Reid-Anderson

Financial Officer (Principal
Financial and Accounting
Officer)

Director

February 28, 2012

/s/ THOMAS D. BROWN

Director

February 28, 2012

Thomas D. Brown

/s/ RONALD G. SPAETH

Director

February 28, 2012

Ronald G. Spaeth

[THIS PAGE INTENTIONALLY LEFT BLANK]

Dear Fellow Shareholders:

Priorities for 2012

In 2011, Stericycle continued to set new Company financial records and expand

our range of service offerings in the U.S. and 11 international countries in pursuit

of our mission to help our customers protect their people and reduce risk.

By building on Stericycle’s industry leadership position in 2011, we are

confident that we have the operating platform that we need to drive future

growth and explore new opportunities that arise to serve our customers

Our revenues in 2011 grew to $1.7 billion, a 16.4% increase over 2010. Our

gross margin was 45.4% in 2011 compared with 46.4% in 2010. Operating

income before acquisition-related costs and various adjustments increased

13.8% to $444.4 million from $390.6 million in 2010. Our operating margin

before acquisition-related costs and various adjustments was 26.5% compared

with 27.1% in 2010.

Under U.S. generally accepted accounting principles (“GAAP”), net income

attributable to Stericycle for 2011 increased 12.9%, to $234.8 million from

$207.9 million, and diluted earnings per share increased 12.4%, to $2.69 from

$2.39 per diluted share. Our 2011 results included a net reduction in net

income of $14.3 million, or $0.16 per diluted share, due to acquisition expenses,

litigation settlement expenses, and restructuring and plant closure costs, which

were offset partially by an adjustment to fair value and a net release of prior

years’ tax reserves. Our 2010 results included a net reduction in net income of

$11.6 million, or $0.13 per diluted share, due to acquisition expenses, litigation

settlement expenses, and restructuring and plant closure costs, which were

offset partially by a gain in a sale of assets and a net release of prior years’

tax reserves. Excluding the impact of these items on our results in both 2010

and 2011, our non-GAAP net income in 2011 grew to $249.1 million, a 13.4%

increase over our non-GAAP net income of $219.6 million in 2010.

Accomplishments in 2011

In 2011, we continued to generate strong free cash flow from operations, which

we used to fund growth and improve our balance sheet. We invested $53.3 million

in capital expenditures to expand our capabilities, drive innovation, and better

serve the evolving needs of our customers. In addition, we used $479.7 million for

domestic and international acquisitions and $124.1 million for stock repurchases

on the open market.

In the U.S.: We continued to strengthen Stericycle’s leadership position in

regulated waste management, healthcare safety, and compliance services.

We continued to increase the penetration of Steri-SafeSM, our OSHA safety

and compliance solution, which allows healthcare providers throughout the

U.S. to create a safe, regulatory-compliant workplace. We continued to achieve

strong customer adoption of our Sharps Management Service, which not only

reduces the risk of needle sticks for hospital staff, but also prevents thousands

of tons of plastic and corrugated material from accumulating in landfills. 2011

was a milestone year for our Sharps Management Service as we reached the

100 million container milestone: as of December 31, 2011, over 107 million

disposable plastic containers have been diverted from landfills in the United

States through this unique service offering. We continued to expand our

Pharmaceutical Waste Compliance Services to both hospitals and small quantity

customers, helping them to dispose of pharmaceuticals that are unused or

identified as waste in a safe and compliant manner. In 2011, we completed 21

domestic acquisitions including the successful integration of HWS.

Sustainability: Stericycle remains committed to helping our customers meet

their sustainability goals. To date, the diversion of plastic containers from

landfills resulting from our Sharps Management Service equates to 7.5 million

gallons of gas not burned and 145 million pounds of CO2 not emitted. Our

Pharmaceutical Waste Disposal Program helps keep unused drugs out of the water

system. We continue to pilot alternative fuel sources for our transportation fleet

including our first truck leases that use Compressed Natural Gas (CNG). Our

ExpertSUSTAINABILITY services offer product re-use, recycling and alternative

use options, and have diverted 20 million pounds of waste from landfills.

Internationally: We continued to establish and strengthen our position in

multiple international markets. We acquired 24 businesses internationally,

including in Spain, where we had not previously operated. We strengthened

our capabilities in Argentina, Brazil, Canada, Chile, Ireland, Japan, Mexico,

Portugal, Romania, Spain and the United Kingdom. We continued to roll out

our Clinical Services offering in select international markets. Clinical Services is

a unique suite of solutions that addresses various aspects of managing a medical

or dental practice, principal among which is regulated waste services. Clinical

Services has a modular architecture which enables us to continue to market new

products and services to both new and existing customers on an on-going basis.

better. Our priorities for 2012 are as follows:

Domestic Growth: Our focus will be on providing our multiple service

offerings to both our small quantity (SQ) and large quantity (LQ) customer

base and expanding our services to new customers. Our marketing efforts to

SQ customers will concentrate on our Steri-SafeSM OSHA safety and compli-

ance services and Regulated Waste Management Services. Our marketing

focus for LQ customers will continue to be on extending the momentum of

our Sharps Management Services, Pharmaceutical Waste Disposal Program,

and Regulated Waste Management Services, and expanding our Regulated

Returns and Recall Management Services. We will continue to build on the

Patient Communication Services platform we acquired in 2011 by expanding

this offering to our existing customer base (both SQ and LQ) while simulta-

neously focusing on new customer acquisition.

International Growth: We will remain focused on integrating the acquisitions

we have completed and pursuing attractive international market opportuni-

ties directed at providing value to our shareholders over the course of the

next several years. We will also focus on expanding and penetrating the

international SQ customer market by utilizing our Clinical Services program

to grow our revenues and margins.

We will seek to make further improvements to our collection route densi-

ties through the use of routing technology and acquisitions, to reduce our

long-haul transportation costs, and improve efficiency in our processing

plants. Our culture of continuous improvement is focused on streamlining

how we serve our customers and encourages the sharing of best practices

and productivity improvement ideas across our entire organization. We will

continue to invest in the latest Customer Experience tools to ensure that we

serve our customers in a timely and efficient manner.

Service Innovation and Environmental Sustainability Leadership:

During 2012, we will maintain our dual commitment to being both

responsive to our customers’ evolving needs and an environmental leader

by offering sustainable solutions designed to meet those needs in an

environmentally-responsible way. Our innovative Steri-SafeSM OSHA

safety and compliance services continue to help our customers enjoy a

safer, more regulatory-compliant workplace in a cost-effective manner.

The breadth of our Regulated Returns and Recall Management Services

helps our customers protect their brands and reduce liability. Our Sharps

Management Service featuring reusable containers offers significant

sustainability benefits by reducing waste volume and conserving valuable

natural resources. Stericycle’s Pharmaceutical Waste Disposal program

helps our customers prevent the potential release of pharmaceuticals with

their hazardous waste content from being released into the water supply.

Our Patient Communication Services help our customers more effectively

and proactively communicate with their patients.

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We are excited and confident about our future. Through our many service

offerings, we help our customers protect the safety of their workforce and

reduce risk. We are a leader in providing regulated waste management,

safety compliance, sharps management, pharmaceutical waste disposal, and

Regulated Returns and Recall Management Services to our customers. We

will continue to improve the efficiency of our operations, to enhance our

customers’ experience while maintaining our strong emphasis on safety and

regulatory compliance, and to focus on the many growth opportunities that

our leadership position affords us. We thank you for your support.

Mark C. Miller

Chairman and CEO

2011

C O R P O R A T E

I N F O R M A T I O N

E x e c u t i v e O f f i c e r s

Mark C. Miller

Chairman and Chief Executive Officer

Charles A. Alutto

President, Stericycle USA

Frank J.M. ten Brink

Michael Collins

Executive Vice President and Chief Financial Officer/CAO

President, Returns Management Services

Richard Kogler

Executive Vice President and Chief Operating Officer

Profit Growth: We remain committed to improving our operating performance.

(cid:48)(cid:68)(cid:85)(cid:78)(cid:3)(cid:38)(cid:17)(cid:3)(cid:48)(cid:76)(cid:79)(cid:79)(cid:72)(cid:85)(cid:3)(cid:135)(cid:3)Chairman & CEO

B o a r d o f D i r e c t o r s

(cid:45)(cid:68)(cid:70)(cid:78)(cid:3)(cid:58)(cid:17)(cid:3)(cid:54)(cid:70)(cid:75)(cid:88)(cid:79)(cid:72)(cid:85)(cid:3)(cid:135)(cid:3)Lead Director
Chairman – Nominating and
Governance Committee
Member – Audit Committee

John Patience
Member – Nominating and
Governance Committee
Member – Audit Committee

Jonathan T. Lord, M.D.
Chairman – Compensation
Committee
Member – Nominating
and Governance Committee

Thomas D. Brown
Member – Audit Committee

William K. Hall
Member – Compensation
Committee

Rodney F. Dammeyer
Chairman – Audit Committee
Member – Nominating
and Governance Committee

Ronald G. Spaeth
Member – Compensation
Committee

James W.P. Reid-Anderson
Member – Compensation
Committee

I n d e p e n d e n t A u d i t o r s

F o r m 1 0 - K

Ernst & Young LLP
155 N. Wacker Drive
Chicago, Illinois 60606

L e g a l C o u n s e l

Johnson and Colmar
2201 Waukegan Road, Suite 260
Bannockburn, Illinois 60015

T r a n s f e r A g e n t

Wells Fargo Bank N.A.
Shareowner Services
161 N. Concord Exchange
South St. Paul, MN 55075

Additional copies of this Annual Report or Form 10-K filed with
the Securities and Exchange Commission are available, without
charge, upon request from the company, Investor@stericycle.com
or (800) 643-0240 ext. 2012.

A n n u a l M e e t i n g

The annual meeting of stockholders will be held on
Tuesday, May 22, 2012 at the DoubleTree Hotel Chicago
O’Hare Airport - Rosemont
5460 North River Road, Rosemont, IL 60018.

N a s d a q ® S y m b o l

SRCL

ANNUAL REPORT

2011

(800) 643-0240