Stericycle Annual Report 2017

FY2017 Annual Report · Stericycle

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2017
Annual Report

We protect what matters.

2017 ANNUAL REPORT

A Message from Charlie Alutto

Dear Fellow Shareholders:

The past year was an extraordinary period in Stericycle’s history. After years of rapid growth, Stericycle’s revenue grew
only modestly in 2017 and earnings per share did not meet expectations due to unexpected challenges in addition
to anticipated headwinds. While specific conditions have impacted our recent results, we do not believe they alter
the Company’s long-term opportunities for success. Stericycle has market-leading positions in our industries and we
have best-in-class solutions to help our customers meet increasing regulatory compliance needs. The markets we serve
are expected to continue to grow, and our team members are committed to improving our results.

Stericycle is a purpose-driven company with strength, resilience and a commitment to continuous improvement,
and our recent results have further fueled the need to adapt and evolve. We are facing our challenges head on
by adopting new strategies, refining our operations, and improving our processes to strengthen our business
both near term and long into the future.

During the fourth quarter of 2017, we announced a comprehensive Business Transformation which is expected to help
Stericycle evolve into a world-class organization utilizing an enterprise performance management model and deliver:

• An enhanced experience for customers

• Predictable profit growth

• Stable, repeatable revenue growth

• Increased returns for shareholders

Evolving and Transforming for the Future

As part of the Business Transformation, we are shifting from a focus on alignment and synergies within a service
line to capturing value across our entire portfolio. We are organizing our service lines, geographic markets and
functions under global standardized processes and systems as well as implementing standardized key performance
indicators. These changes will improve our insight into our business, improve data management and speed decision
making. A global enterprise resource planning (ERP) system is the central component of our Business Transformation
and will become the backbone of our new performance management model. Under this model, we will integrate
all of our services lines and geographies onto one operating system. These efforts are expected to streamline
operations, remove inefficiencies, and improve consistency of service delivery across our lines of business.

In addition to the foundational investment in an ERP, we are focused on five key initiatives to drive efficiency
and improve financial performance:

• Portfolio Rationalization: Conducting a thorough
review of all our services and geographies to
determine their long-term fit with our organization
and rationalize our portfolio

• Operational Optimization: Expanding implementation
of route planning logistics, optimizing transportation
and facilities as an integrated network, and leveraging
technology to modernize our field operations

• Organizational Excellence and Efficiency: Redesigning

our organization to optimize resources, further integrate
our logistics businesses, and streamline global business
shared services activities

• Commercial Excellence: Aligning our sales and

service teams around the customer, standardizing
customer relationship management, consolidating
call center activities, and increasing customer
self-service options

• Strategic Sourcing: Reducing costs through improved
procurement-to-pay processes and leveraging
organizational scale

To ensure the success of this Business Transformation, we have established dedicated project teams, upgraded
talent across the organization, and retained leading advisors to drive positive outcomes and success. We have
developed and validated detailed work plans with contingencies to guide our actions. Finally, we have instituted
processes and monitoring systems to track progress.

2017 ANNUAL REPORT

We anticipate positive contributions to the business beginning in 2018 with continued performance improvements
over the next several years. The multi-year Business Transformation is expected to deliver an internal rate of return in
excess of 85%. The program is projected to support Adjusted EBITDA growth of 5% to 9% and Adjusted EPS growth
of 6% to 10%, both compounded, over 2018 to 2022.

Beyond our focus on successfully executing the Business Transformation, we remain committed to driving
organic growth and maintaining our disciplined capital allocation strategy.

Stericycle has multiple opportunities to drive organic growth through selling additional services and outbound
customer acquisition campaigns. The conversion of the unvended market for secure information destruction services
remains an opportunity, as does continued expansion of our retail hazardous waste service and new pharmaceutical
disposal solutions that address key business and community concerns for unused pharmaceuticals. Internationally,
we continue to evaluate opportunities to expand our existing service lines into markets where we have a company
presence, such as the expansion of secure information destruction into Spain.

We intend to maintain our balanced approach to capital allocation, and the recently-enacted U.S. federal tax reform
legislation will only further benefit our strategy. Our current priority is debt reduction in order to return Stericycle to
its historical debt to covenant EBITDA ratio below 3.0. In 2017, we continued our disciplined approach to capital
allocation paying $256 million toward debt reduction and investing $53 million for strategic, tuck-in acquisitions.
Additionally, we returned $36 million to shareholders through preferred stock dividends and repurchased $34
million of preferred stock. We will continue to opportunistically repurchase shares of stock (including our mandatory
convertible preferred stock which will convert automatically to common stock in September 2018) when favorable
market conditions exist.

Progress across Our Diversified Business

Looking back on 2017, we made significant progress in a number of other key areas of our business, notably:

• Continued expansion of additional services (sharps

• Maintained our leadership position within the recall

management and pharmaceutical waste disposal) within
the hospital market, which was higher than expected;

• Achieved higher than anticipated growth from

Shred-it due to diligent focus on the conversion of
the unvended market;

• Completed the integration activities required to

achieve the $52 million in synergies projected with
the Shred-it acquisition;

industry, managing multiple high-profile recall events;

• Drove margin expansion across our hazardous waste
service lines despite revenue declines within the M&I
area; and

• Exited the margin-neutral patient transportation
business through a combination of contract
expirations and divestitures.

Focused on Driving Shareholder Value in 2018 and Beyond

The next several years represent a critical period for Stericycle as we focus on managing continued service-line
specific headwinds and executing the Business Transformation while continuing to exceed our customers’ service
expectations. We recognize that we must act decisively and follow through on our commitments in 2018 in order
to pave the way for a stronger future. And we will.

Our team at Stericycle is committed to providing solutions to our customers that protect people and brands,
promote health and safeguard the environment. And we are committed to positioning Stericycle for a long and
successful future. We remain confident about the many opportunities that exist for Stericycle and believe we are
on the right path to realize our company’s great potential.

Charles A. Alutto
President and CEO

2017 ANNUAL REPORT

Directors and Executive Management

B O A R D O F D I R E C T O R S

Robert S. Murley
Chairman

Charles A. Alutto
President and
Chief Executive Officer

Brian P. Anderson
Chair – Audit Committee

Lynn Dorsey Bleil
Chair – Nominating and
Governance Committee
Member – Compensation Committee

Thomas D. Brown
Chair – Compensation Committee
Member – Nominating and
Governance Committee

John Patience
Member – Audit
Committee

Thomas F. Chen
Member – Audit Committee
Member – Nominating and
Governance Committee

Mark C. Miller
Former Chairman
and Chief Execuitive Officer

Jack W. Schuler
Former Lead Director

Mike S. Zafirovski
Member – Compensation Committee
Member – Nominating and
Governance Committee

E X E C U T I V E O F F I C E R S

Charles A. Alutto
President and
Chief Executive Officer

Daniel V. Ginnetti
Executive Vice President,
Chief Financial Officer

Brenda R. Frank
Executive Vice President,
Chief People Officer

Robert J. Guice
Executive Vice President,
International

Joseph “Brent” Arnold
Executive Vice President,
Chief Operating Officer

Kurt M. Rogers
Execuitive Vice President,
General Counsel and
Corporate Secretary

Ruth-Ellen Abdulmassih
Executive Vice President,
Communication and
Related Services

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10!K

!! ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
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 1!37556
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
Depositary Shares, each representing a 1/10th ownership
interest in a share of 5.25% Mandatory Convertible
Preferred Stock, Series A, par value $0.01 per share
(Title of each class)

NASDAQ Global Select Market

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 is a well!known seasoned issuer, as defined in Rule 405 of the Securities Act. YES
! NO "
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES
" NO !
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 ! 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 ! 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. !
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.

Large accelerated filer !
Smaller reporting company "

Accelerated filer "
Emerging Growth Company "

Non!accelerated filer "

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. "
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 !
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, 2017): $6,512,899,920.
On February 19, 2018, there were 85,544,357 shares of the Registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
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 2018 Annual Meeting of Stockholders to be held on May 23, 2018.

Table of Contents

PART I.

Item 1. Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

PART II.

Item 5. Market Price for Registrant's Common Equity, Related Stockholder Matters

Item 6. Selected Financial Data

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

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

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

Item 9A. Controls and Procedures

Item 9B. Other Information

PART III.

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

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

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

Item 14. Principal Accounting Fees and Services

PART IV.

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary

SIGNATURES

TABLE OF CONTENTS

Page No.

106

111

112

113

114

120

121

PART I

Item 1. Business

PART I

Unless the context requires otherwise, the “Company”, “Stericycle”, we," "us" or "our" refers to Stericycle,
Inc., a Delaware corporation, and its subsidiaries on a consolidated basis. Stericycle was incorporated in
1989.

Overview

Services

Stericycle is a business-to-business services provider with a focus on regulated and compliance solutions.
Our core purpose is to help our customers fulfill their promise by providing solutions that protect people
and brands, promote health and safeguard the environment. Over our 28 year history, Stericycle has
developed the scale, expertise and experience to handle many complicated and often behind-the-scenes
services that allow our more than one million customers to focus on running their business. We operate
in the United States (“U.S.”) and 20 other countries. Our worldwide networks include a total of 256
processing facilities, 2 landfills, 22 communication centers, 325 transfer sites, 75 customer service or
administrative offices, and 110 warehouse or parking facilities.

256

Processing
Facilities

Landfill
Locations

Communication
Centers

325

Transfer
Sites

Office
Locations

We are one of the leading providers in our core service lines, which include:

Medical waste management services (including reusable sharps disposal management services)

Pharmaceutical waste services

Hazardous waste management services

Secure information destruction (including document and hard drive destruction services)

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Stericycle, Inc. • 3

PART I

Compliance programs under the Steri-Safe®, Clinical Services, First Practice Management,
SeguriMed and EnviroAssure brand names

Regulated recall and returns management communication, logistics, and data management
services for expired, withdrawn or recalled products

Live voice and automated communication services including afterhours answering, appointment
scheduling, appointment reminders, secure messaging, and event registration

We operate our business in 21 markets around the globe. Our full portfolio of services is available in the
United States, Canada, Ireland, the Netherlands, Spain, and the United Kingdom (“U.K.”). Only regulated
waste services are provided in Argentina, Brazil, Chile, Japan, Mexico, Portugal, Republic of Korea, and
Romania. Only secure information destruction services are provided in Australia, Austria, Belgium, France,
Germany, Luxembourg and Singapore. Secure information destruction services under the Shred-it brand
are also provided in the United Arab Emirates through a joint venture with the Company’s portion of
income reported as an equity investment.

Customers

Our broad offering of services appeals to a wide range of small and large business customers. The
majority of our customers are healthcare businesses (hospitals, physician and dental practices, outpatient
clinics,
long-term care facilities, etc.). We also provide services to retailers, manufacturers, financial
services providers, professional services providers, governmental entities, and other businesses.

In total, we serve more than one million customers worldwide. No single customer accounts for more
than 1.2% of our total revenues, and our top ten customers collectively account for approximately 7.1% of
total revenues. We provide service to the majority of these customers under multi-year contracts.

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Stericycle, Inc. • 4

PART I

Although we have several standard contracts, terms vary depending upon the customer’s service
requirements, types of services and geographies.

Segments

Our three operating segments are:

! Domestic and Canada Regulated Waste and Compliance Services (“Domestic and Canada RCS”)
! International Regulated Waste and Compliance Services (“International RCS”)
! Domestic Communication and Related Services (“Domestic CRS”)

Our Regulated Waste and Compliance Services segments for both Domestic and Canada, as well as
International,
include medical waste disposal, pharmaceutical waste disposal, and hazardous waste
management; secure information destruction of documents and e-media, and compliance services.

Our Domestic Communication and Related Services
inbound/outbound
communication, automated patient reminders, online scheduling, notifications, product retrievals, product
returns, and quality audits.

consists of

segment

Domestic CRS does not consistently meet the quantitative criteria to be a separate reportable segment
and therefore is included in the “All Other” reporting segment.
Costs related to our corporate
headquarter and shared services functions are also included in “All Other.”

Financial and other information related to our reporting segments is included in Part II,
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations and Part II, Item 8.
Financial Statements and Supplementary Data; Note 16 - Segment Reporting.

Business Strategy

Focus on Regulated Business-to-Business Operations

We focus on providing business-to-business services in areas of operations that are highly regulated. By
helping our customers maintain compliance with complex regulations, we protect people and brands,
promote health, and safeguard the environment. Governmental legislation and regulation increasingly
items such as medical waste, hazardous waste,
requires the proper handling and disposal of
pharmaceutical waste, and personal and confidential information. Regulated waste can be defined as any
material with government-imposed guidelines for handling the material for transportation or disposal.
Medical waste, such as needles, syringes, gloves, cultures and potentially infectious agents, blood and
blood products, can potentially cause an infectious disease. Hazardous waste is designated and governed
by federal and local environmental protection agencies but generally includes waste that is considered
dangerous or potentially harmful to our health or the environment. Hazardous wastes can be liquids,
solids, gases, or sludge. Pharmaceutical waste may be hazardous or nonhazardous and consists of
expired, recalled, or otherwise unused pharmaceuticals. Personal and confidential information includes
documents and e-media containing protected healthcare information, financial
information, or other
confidential information. Additionally, the regulatory environment related to promoting overall health
and protecting consumers from unsafe products continues to increase.

Focus on the Small Customer with Recurring Service Needs

We also focus on serving smaller businesses which often have an even greater need for support with
compliance matters since they tend to lack the specialized staff that is found at larger businesses. With a
small business, regulatory and compliance matters are often managed by a business owner, office
manager, or facility supervisor who manage multiple functions for the organization and often lack the
time and resources to properly investigate and comply with a wide range of regulations that may impact

2017 10-K Annual Report

Stericycle, Inc. • 5

PART I

In response to this need of small businesses, we developed comprehensive and
their operations.
customizable services to accommodate varying customer requirements. This business strategy has guided
us as we have expanded into additional service offerings including hazardous or pharmaceutical waste
management, communication services, and secure information destruction.

Organic Growth

As a leading provider in regulated and compliance solutions, we continue to focus on enhancing our
service offerings and platforms to exceed customer expectations. We have developed a strong and loyal
customer base, with, we believe, a revenue retention rate of approximately 90% (based on our internal
customer attrition analysis), and have been able to leverage these customer relationships to provide
additional services. Our growth strategy focuses on selling additional services to existing customers as
well as securing new customer relationships.

Growth through Acquisition

The various regulated waste and compliance services that we provide tend to be in highly fragmented
industries. We have proven that acquisitions are a steady and efficient way to scale operations, build
critical customer density for transportation and treatment operations, and enter new markets or
geographies, as well as provide opportunity to introduce our additional services to the acquired
customers.
In our early history, acquisitions were a key strategy to rapidly building our customer base and
route density in the United States. We have been able to expand internationally through acquisition and
now operate in 20 different markets outside the U.S. Over our history, Stericycle has completed 496
acquisitions, with 271 in the United States and 225 internationally. During 2017, we completed 30
acquisitions. We expect to continue our acquisition strategy, remaining focused on small, highly accretive,
tuck-in acquisitions that broaden our various service capabilities while creating value for our shareholders.

Business Transformation

Key initiatives of the Business Transformation include:

! Portfolio Rationalization: Executing on a comprehensive review of the Company’s global service

lines to identify and pursue the divestiture of non-strategic assets.

! Operational Optimization: Standardizing route planning logistics, modernizing field operations, and

driving network efficiency across facilities.

! Organizational Excellence and Efficiency: Redesigning the Company’s organizational structure to

optimize resources and align around a global shared business services model.

! Commercial Excellence: Aligning our sales and service organizations around the customer,

standardizing our customer relationship management process, and expanding customer self-service
options.

! Strategic Sourcing: Reducing spend through global procure-to-pay processes and leveraging

organizational scale.

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Stericycle, Inc. • 6

PART I

Implementation of the Business Transformation began in 2017 with the identification and validation of
key transformational opportunities as well as an organizational restructuring which occurred during the
fourth quarter. Execution of the Business Transformation is expected to continue through 2022 with the
implementation of a best-in-class system in the U.S. as a significant milestone for 2020 with the
international roll-out the following year.

Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
and Item 8. Financial Statements and Supplementary Data; Note 3 – Restructuring, Divestitures, and Assets
Held For Sale.

Market Size and Growth Potential

We provide a wide range of services across multiple market segments and industries. We believe the size
of the global market for the services we provide, in the geographies we currently operate in, is expected
to be approximately $38 billion in 2018.

Industry growth is driven by a number of factors, including:

• Aging Population: The average age of the population in the countries where we operate 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 medical waste, hazardous waste, and
pharmaceutical waste, as well as an increase in confidential healthcare records requiring secure
destruction.

• Pressure to Reduce Healthcare Costs While Improving Outcomes: The healthcare industry is under
pressure to reduce costs and at the same time improve healthcare outcomes for patients served. By
outsourcing services not directly tied to the delivery of healthcare services, these organizations can
potentially reduce costs and improve staff efficiencies. By leveraging third party experts, healthcare
organizations may also limit their potential liability for regulatory compliance.

• Enforcement of Regulations: Enforcement of regulations relating to the management of regulated
waste and protected information is increasing. Penalties for violations can be costly and high profile,
thereby impacting a business’ overall reputation. Greater enforcement combined with higher
penalties results in more compliance and a corresponding increase in potential customers.

• Safety and Security Regulation: We believe that many businesses that are not currently using third
party regulated waste management, secure information destruction, or recall and communication
services are unaware either of the need for proper training of employees or of the regulatory
requirements. Similarly, many businesses find that the proper handling of expired or recalled products
requires an expertise and efficient processes that they lack.

• Increased Business Focus on Sustainability: Businesses large and small are continuing to realize
that the focus on sustainability is now essential to operating efficiently and meeting the increasing
demands of customers for environmental responsibility. Such pressures are driving proper disposal of
pharmaceuticals, recycling efforts, creative disposal efforts for unused inventory, shred-all policies for
paper, and other initiatives supported by our services.

• Regulation of Privacy and Information Security and Concerns over Data Breaches: The continued
development and growth of the secure information destruction industry has been driven, in part, by
the need for compliance with increasing government regulation with respect
to privacy and
information security. These regulations take different forms, with some requiring organizations to
establish reasonable measures to protect against loss, theft and unauthorized access, use and
disclosure, and others imposing data retention requirements that require businesses to destroy or
render anonymous personal information when it’s no longer required for a legal or legitimate business

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Stericycle, Inc. • 7

PART I

purpose.
organizations use to meet their legal safeguarding and retention requirements.

Secure information destruction services are increasingly a standard measure that

• Market Expansion due to Increased Outsourcing:

In regard to secure information destruction
services and communication services, significant market growth is expected to come from increased
reliance on outsourced service providers. Many small businesses currently do not use services or
manage these needs with internal resources and solutions. Opportunity exists to convert these
businesses as the trend to outsource support services continues.

• Fragmented Markets: The industries in which we operate are highly fragmented with numerous small
competitors operating within a limited geographic area and with a narrow focus on a specific service.
Opportunities exist to drive efficiencies by consolidating operations.

• International Market Development: The medical waste, hazardous waste, and secure information
destruction regulations in certain international markets are at an early stage of development relative
to North America and Europe. As emerging markets continue to advance their healthcare practices,
environmental controls, and data privacy regulations, we expect to see further demand for our services
on a global scale.

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, including healthcare, manufacturing, and retail, to safely and
improve employee and
efficiently dispose of regulated materials, ensure regulatory compliance,
customer safety, protect their brands,
improve communications with their patients or clients, and
manage corporate and personal risk.

• Strong Service Relationships with Customers: We offer our customers necessary services which
require access to their facilities, operating information, or customer data. This relationship, supported
by a history of strong service, allows us access to decision makers to offer additional opportunities.

• Long-term Contracts: The majority of services we provide involve long-term contracts that are often

renewed.

• Established Network of Processing and Transportation Locations in Each Country: We believe
that our infrastructure network results in an efficient operation with alternate treatment or destruction
options for our customers. The scale of our network also provides us the ability to be the single-
source provider for customers with multiple locations across the country and gives us the flexibility to
quickly redirect services or operations to another location if the need arises due to severe weather,
power outages, or other situations.

• Routing Logistics: We maintain a vast transportation network that is focused on route efficiency.
This advantage has been built from a deliberate focus on route density and technological investments
to optimize routing at both the individual truck and geographic market level.

• Industry Leadership and Expertise: Based on our infrastructure and revenues, we maintain a global
leadership position across our various services lines, including regulated medical waste, retail and
healthcare hazardous waste, secure information destruction, and product recalls and returns. We
attract and retain highly experienced team members who have a deep understanding of the industries
they serve, the regulatory climate, and the evolving needs of the customers we serve.

• Volume-based Leverage for Disposal, Treatment or Recycling: As a leading service provider for
regulated medical waste, hazardous waste, and secure information destruction, we can leverage large

2017 10-K Annual Report

Stericycle, Inc. • 8

PART I

volumes of waste, recyclables, and paper to obtain better pricing on final treatment, disposal and/or
recycling.

• Secure Management of Information for Destruction: With the acquisition of Shred-it, Stericycle is
the global leader in secure information destruction. Our processes for managing information for
destruction meet or exceed the requirements of the National Association for Information Destruction
(“NAID”) AAA Certification and support our customers’ requirements to comply with the Gramm-
Leach-Bliley Act (“GLBA”), the Fair and Accurate Credit Transaction Act (“FACTA”), and Health Insurance
Portability and Accountability Act (“HIPAA”) Privacy Rules in the U.S., the General Data Protection
Regulation (“GDPR”) covering Europe, and other data security regulations abroad.

• Ability to Integrate Acquisitions: Since 1993 we have completed 496 acquisitions in the United
States and internationally. The acquisitions have allowed us to rapidly achieve economies of scale,
especially related to route density for transportation efficiency, and the expansion of service offerings
to new and existing customers. Our Business Transformation will improve our ability to integrate
acquisitions and achieve synergies.

• Experienced Senior Management Team: We have experienced leadership. Our executive
management team has over 125 years of management experience in the health care or specialty waste
management industries.

Regulated Waste and Compliance Service Operations

Collection and Transportation

The collection process for regulated waste streams begins at the customer location with segregation. To
assure regulatory compliance, we will not accept material from customers unless it complies with our
waste acceptance protocols and is properly stored or packaged in containers that we have either supplied
or approved.

Our fleet of vehicles then collects containers at the customer location. The majority of collected waste is
then transported directly to one of our processing facilities or to one of our transfer stations until it’s
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 the utilization of the facility and the
volume of waste that it processes.

Processing

Site

Transfer Site

Customer

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Stericycle, Inc. • 9

PART I

Processing and Disposal of Regulated Medical Waste

Upon arrival at a processing facility, containers or boxes of regulated waste undergo a quality control
process to verify that they do not contain any unacceptable substances. Any container or box that is
discovered to contain unacceptable waste goes through a corrective action process which could include
redirecting the waste, returning the waste to the customer, and/or notifying the appropriate regulatory
authorities. From there, regulated medical waste is processed using one of several treatments or
processing technologies, predominantly at one of our wholly-owned facilities:

• Autoclaving: Autoclaving is the primary method of medical waste treatment. This process relies on

steam at high temperature and pressure to kill pathogens and render materials non-infectious.

• Alternative technologies: We use a number of different non-incineration alternatives to autoclaves,
predominantly outside of the U.S. The processes used by these technologies are effectively the same
with the regulated waste heated to a specified temperature for a required time to kill the pathogens.
This is not always under pressure. Depending on local requirements, the waste may be shredded
before or after treatment to render it unrecognizable.

• 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, residues from chemotherapy procedures
and non-hazardous pharmaceutical waste. Air emissions from incinerators can contain certain
byproducts that are subject to federal, state, and in some cases,
In some
circumstances, the ash byproduct of incineration may be regulated.

local regulation.

Upon completion of the particular process, the resulting waste or incinerator ash is transported for
disposal
In some countries, where permitted by
regulation, the treated waste is recovered, including recovery as fuel, in waste-to-energy processes.

in a landfill owned by unaffiliated third parties.

Processing and Disposal of Hazardous Wastes

Our technicians receive hazardous wastes either as expired goods requiring deconstruction or as defined
hazardous wastes. Expired goods are deconstructed to recover metals and plastics for recycling thereby
minimizing the total volume of waste disposed of as hazardous waste. Materials that are predefined as
hazardous upon collection are bulked together or consolidated at treatment storage and disposal facilities
for more efficient transport to the final disposal or processing destination. Whenever possible, we seek
sustainable solutions for managing materials including alternative uses, recovery processes, recycling
options, fuel blending, or energy recovery. When sustainable options do not exist, these wastes are sent
to third parties for incineration, landfill or water treatment.

Destruction and Recycling of Secure Information

If not shredded on site in a Shred-it truck with proprietary information destruction technology, documents
are sent to a shredding facility for secure destruction. Documents are cross-cut shredded and then baled
to be sold as sorted office paper (“SOP”) for recycling.

Communication Solutions and Expert Solutions Business Overview

Our Communication Solutions service line provides a broad range of live voice or automated services to
help our customers keep in touch with their patients and clients. Our team serves as a client
representative providing answering services, appointment scheduling or reminders, event registration, and
other activities. Providing these solutions requires sophisticated information management systems to
redirect calls, store and quickly retrieve live voice protocols or client data, send automated
communications, or provide easily accessible reporting and activity details to our customers. Beyond the

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information management system infrastructure, call center staffing and education levels are critical to
success. We leverage sophisticated workflow analysis and staffing tools to ensure appropriate resources
are in place in order to handle call volumes quickly and consistently across our multiple call centers during
peak volumes.

Our Expert Solutions service line acts as a business partner to protect our client’s customers and to
protect our client’s brands. We specialize in partnering with automotive, food/beverage, medical device,
pharmaceutical, consumer goods manufacturers and retailers to guide them through critical recalls,
retrievals, or audit processes to ensure brand protection. Services could include notification services to
impacted customers, call center services to support a recall or retrieval, removing impacted product from
distribution, processing recalled product and supporting remedy requirements, and compliance reporting.
These solutions are highly customized based on the product being recalled or retrieved and the specific
needs of the client.

Competition

The industries and markets in which we operate are highly competitive, and barriers to entry are low. Our
competitors consist of many different types of service providers, including national, regional and local
In the regulated waste and secure information destruction industries, another major source of
companies.
regulated medical waste, some large-quantity generators,
competition is on-site treatment.
particularly hospitals, may choose an onsite autoclave or other treatment process. For secure information
destruction, many businesses may choose to use small, on-site shredders for their documents. Similarly,
customers could handle recalls or communication needs internally.

For

In addition, we face potential competition from businesses that are attempting to commercialize a wide
range of technologies that directly or indirectly reduce the need for regulated medical waste, hazardous
waste or secure information destruction services.

Governmental Regulation

The regulated medical waste, hazardous waste, secure information destruction, and recall industries are
subject to numerous regulations.
In many countries there are multiple regulatory agencies at the local
and national level that affect our customers or our services. This 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. Periodic renewals are subject to public participation and can lead to additional regulatory
oversight. 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 to ensure public and employee health and safety at the federal, state
and local levels.

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U.S. Federal and Foreign Regulation

We are subject to substantial regulations enacted and enforced by the U.S. government and by the
governments of the foreign jurisdictions in which we conduct regulated waste and secure information
destruction operations. The regulatory requirements with which we must comply vary from jurisdiction to
jurisdiction. The laws governing our domestic and international operations generally consist of statutes,
legislation and regulations concerning environmental protection, employee health and welfare,
transportation, the use of the mail, ethical business conduct, and proper handling and management of
regulated waste streams, controlled substances and personal and confidential information.

Environmental Protection

Certain service lines within our business are 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 state environmental regulatory
agencies as they provide the specific legislative and or regulatory frameworks which require the
management and treatment of regulated medical waste. Additionally, 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 are the federal regulations that affect management
of certain aspects of regulated medical waste and all RCRA hazardous wastes. CERCLA and state laws
similar to it may impose strict, joint and several liabilities 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 ten incinerators
at seven facilities we currently operate in the U.S. must comply with the emissions standards imposed by
the applicable states permitting authorities pursuant to regulations promulgated under the Clean Air Act
as well as state and/or municipal waste permit requirements.

Examples of environmental laws applicable to our international operations include the Waste Framework
Directive, Environmental Liabilities Directive, Industrial Emissions Directive and the Shipments of Waste
Regulations in the European Union ("EU"), 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. Additional environmental laws at the federal and/or
local levels apply to regulated waste management in other markets in which we conduct business.

Employee Health and Welfare

We are subject to numerous regulations promulgated 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 federal laws relating to employee health and welfare applicable to our
business in the U.S. are in the Occupational Safety and Health Act of 1970 ("OSHA"), which establishes
specific employer responsibilities including engineering controls, administrative controls, training, policies
and programs complying with the regulations and ultimately recordkeeping and reporting, all in an effort
to ensure a safe workplace. Various OSHA standards apply to almost all aspects of our operations and
govern such matters as exposure to blood borne pathogens, hazard communication, personal protective
equipment, etc.

Employee health and welfare laws governing our business in global jurisdictions include examples such as
the European Framework Directive on Safety and Health at Work (Directive 89/391 EEC), and various

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provisions of the Canada Labour Code and related occupational safety and health regulations in the
provinces and territories of Canada.

Transportation

Various laws regulating the transportation of waste and other potentially hazardous materials also apply
to the services we provide.
In the U.S., the Department of Transportation ("DOT") has promulgated
regulations which deal with two different aspects of transportation: hazardous materials transport and
safety in transportation. These regulations are defined within the Pipeline Hazardous Materials Safety
Administration ("PHMSA") and the Federal Motor Carrier Safety Administration ("FMCSA"). These federal
requirements plus additional state requirements are closely monitored internally. Due to our fleet size we
are regularly subject to road side inspections.
These inspections have a cumulative effect on our
compliance history and require us to remain in good standing so as not to jeopardize our permits.

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, and globally the International Maritime Dangerous Goods Code and the IATA
Dangerous Goods Regulations.

Document Management

Numerous laws and regulations require proper protection of confidential customer information by
business parties that have access to such information.
In the U.S., the most commonly cited regulations
include the Fair and Accurate Credit Transaction Act (“FACTA”) Final Disposal Rule, the FACTA Red Flag
Rule, the Health Insurance Portability and Accountability Act (“HIPAA”) Privacy Rule, and the Gramm-
Leach Bliley Act (“GLBA”). Furthermore the General Data Protection Regulation (“GDPR”) provides the
framework for data privacy and data protection for companies that do business in Europe.

For the transportation of secure information for destruction, we are regulated by the U.S. Department of
Transportation as a commercial motor carrier. The processes for the destruction of secure information
destruction processes are not regulated by any government agency. However, the National Association of
Information Destruction (“NAID”) maintains a certification to ensure that destruction processes support
the needs of organizations to meet laws and regulations relating to the protection of confidential
information. We currently hold the NAID AAA Certification. Further, the Payment Card Industry ("PCI")
Security Standards Council has developed Data Security Standards which are imposed upon merchants
utilizing credit cards and require destruction of documents and media in accordance with their standards.

Ethical Business Conduct

Various international regulations governing ethical business practices apply to our business, including but
not limited to, the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act (“Bribery Act”), and the
Brazilian Clean Companies Act. These laws may apply to our business on both a global and local basis,
and ban unethical behavior such as the payment of bribes to government officials for the purpose of
gaining an improper business advantage, improper maintenance of the company’s books and records, as
well as other financial transparency requirements.

Use of the Mail

United States Postal Service ("USPS") has its own set of specific regulations defined in Publication 52
which governs the use of the postal system for mailing of hazardous, restricted and perishable materials.
More specifically, mailback management offerings for sharps, medical waste, and pharmaceutical wastes,
require us to obtain and maintain authorization permits from the USPS. We have obtained permits from
the USPS to conduct our "mail-back" programs which provide a convenient service for customers who

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need such a service with approved containers for "sharps" (needles, knives, broken glass and the like) or
other regulated wastes to be sent directly to a treatment facility.

Controlled Substances

Our service offerings for the recall, return and destruction of controlled substance pharmaceuticals are
subject to numerous laws and regulations under various international federal agencies, such as the Drug
Enforcement Administration ("DEA")
These regulations apply to both the closed loop
management of controlled substances as well as the return of unused controlled substances from
consumers. These regulations typically require facilities to obtain a registration of license and meet
certain criteria in order to collect, process, and dispose of controlled substances. The regulations have
very strict requirements for the management of employees, the type of security within facilities,
recordkeeping, and the reporting of all controlled substances managed at the facility. Much like
permitting, the registration must be updated regularly and subjects us to inspection and enforcement.

in the US.

U.S. and Foreign Local Regulation

We conduct business in all 50 states and Puerto Rico. Because the federal EPA does not promulgate
regulations for regulated medical waste at a national level, each state has its own regulations related to
the handling, treatment and storage of regulated medical waste. Many states have followed requirements
similar to the Medical Waste Tracking Act of 1988 or have placed medical waste regulations under solid
In addition, certain states
waste regulations. Hazardous waste in the U.S. is regulated under the RCRA.
may have their own regulations for handling, treatment and storage of hazardous wastes. Regulated
garbage (sometimes referred to as “APHIS waste” taken from the Animal Plant and Health Inspection
Service) is another area of regulatory requirements we are subject to pursuant to regulations promulgated
by the United States Department of Agriculture ("USDA") and Customers and Border Patrol. The USDA
typically inspects our facilities receiving such APHIS waste on a quarterly basis.

In each state where we operate a processing facility or a transfer station, we are required to comply with
varying state and local laws and regulations which may also require a specific operating plan.
In addition,
many local governments have ordinances and regulations, such as zoning or wastewater regulations that
affect our operations. Similarly, our international operations are subject to regulations enacted and
levels of government in addition to the national
enforced at the provincial, municipal, and local
regulations with which we must comply.

Patents, Trademarks and Proprietary Rights

With the acquisition of Shred-it, we hold patents in the U.S. for a three-staged shredder with patent
applications pending in Canada and Europe. We also hold patents in the U.S., Canada, and Europe for
Securshield, proprietary locks for shredding containers.

We own federal registrations for a number of trademarks/servicemarks including Stericycle®, Steri-Safe®,
Stericycle ExpertRECALL®, Sustainable Solutions®, LiveAnswer®, Shred-it®, Securit®, Community Shred-
it®, Making Sure it’s Secure®, and our company logo service mark consisting of a nine-circle design. We
also hold international registrations for Stericycle, the nine-circle design used in our logo, and the Shred-it
name and design.

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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.

insurance coverages including property, workers Compensation, general

We carry several
liability,
employer’s liability, pollution Liability, privacy and security liability, event management, cyber-liability, and
miscellaneous professional services errors and omissions coverages. We also carry umbrella policies that
cover general Liability, auto and employers Liability. We regularly evaluate other lines of coverage to
respond to specific business needs but consider our current insurance coverage sufficient to meet
regulatory as well as customer requirements and to protect our employees, assets, and operations.

Executive Officers of the Registrant

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

Name

Position

Charles A. Alutto

President and Chief Executive Officer

Joseph “Brent” Arnold

Executive Vice President and Chief Operating Officer

Daniel V. Ginnetti

Kurt M. Rogers

Ruth-Ellen Abdulmassih

Brenda R. Frank

Robert J. Guice

Executive Vice President and Chief Financial Officer

Executive Vice President, General Counsel and Corporate Secretary

Executive Vice President and President,

Communication and Related Services

Executive Vice President and Chief People Officer

Executive Vice President, International

Age

Charlie Alutto has served as President and Chief Executive Officer since January 2013 and as a Director
since November 2012. He 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 served as President, Stericycle USA.
He previously held various management positions with us, including vice president and managing director
of SRCL Europe and corporate vice president of our large quantity generator business unit. 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.

Brent Arnold was named as Chief Operating Officer during 2015. He joined Stericycle in April 2005 and
has worked in various leadership positions including Senior Vice President of Operations, Senior Vice
President of Sales and Marketing for the U.S., Corporate Vice President of our large and small quantity
business units, and Executive Vice President and President, Stericycle USA. He has more than 27 years of
experience primarily focused in the healthcare industry. Prior to joining Stericycle, he held various
leadership roles at Baxter International Inc. and Cardinal Health, Inc. Mr. Arnold received a B.S. degree in
marketing from Indiana University.

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Dan Ginnetti was named as Chief Financial Officer during 2014. He joined Stericycle as Area Vice
In 2004 he was promoted to Area Vice President for Stericycle’s Western,
President of Finance in 2003.
and later, Midwestern business units.
Following that, he was promoted to Senior Vice President of
Operations for the United States and Canada. He returned to financial management in 2013 becoming
Vice President of Corporate Finance and then CFO in August 2014. Prior to joining Stericycle, Mr. Ginnetti
held various finance and accounting positions with The Ralph M. Parsons Company, a worldwide
engineering firm, and Ryan Herco Products Corp., a national industrial plastics distributor. Mr. Ginnetti
has a B.S. degree in Business Economics from the University of California, Santa Barbara.

Kurt Rogers was named Executive Vice President, General Counsel and Corporate Secretary during July of
2017. Mr. Rogers previously served as Chief Legal Officer and Secretary of Vonage Holdings Corp., a
publicly-listed software technology and communications company, for more than seven years. Earlier, Mr.
Rogers was a partner with international law firms Bingham McCutchen LLP (now Morgan, Lewis & Bockius
LLP) and Latham & Watkins LLP and as an associate with Rogers & Wells LLP (now Clifford Chance LLP),
where he represented clients in litigation, intellectual property and other matters. Mr. Rogers received a
B.S. degree in Industrial and Labor Relations from Cornell University and his J.D. from Cornell Law School.

Ruth Abdulmassih was named Executive Vice President, Communication and Related Services during
February of 2017. She joined Stericycle in November 2006 and has worked in various leadership positions
in the Expert Solutions, Environmental Solutions and Communication Solutions businesses. Prior to her
appointment, Ms. Abdulmassih was General Manager of the Communication and Related Services
Business.
She has 30 years of experience including working in various leadership roles in multiple
businesses of Abbott Laboratories. Ms. Abdulmassih received a B.S. degree in Business/Marketing from
Northwood Institute.

Brenda Frank has served as Executive Vice President and Chief People Officer since January 2016. She
joined Stericycle with our acquisition of Shred-it in October 2015 where she spent six years as General
Counsel and Executive Vice President of Human Resources and Franchise Relations. Ms. Frank has spent
the last 20 years focusing on people, labor and employment, holding senior human resources and legal
roles at global services companies such as ITOCHU INTERNATIONAL and Pitney Bowes. She started her
career as a labor and employment attorney and litigator at Wilson Sonsini Goodrich & Rosati and
Proskauer Rose. Ms. Frank received her B.S. in Accounting from S.U.N.Y Albany and her J.D. from New
York University Law School.

Robert Guice was appointed Executive Vice President, International, effective September 2017. Mr. Guice
joined Stericycle as Senior Vice President of Europe/Middle East/Africa/Asia with the Shred-it acquisition
in October 2015. He had led international operations at Shred-it for more than 13 years. Prior to joining
Shred-it, he spent two years with Iron Mountain Inc. and had several sales-related roles at Marconi
Software Solutions (now Telent Plc) and International Computers Limited (now Fujitsu Ltd).

Available Information

We maintain an Internet website, www.stericycle.com, which provides a variety of information about the
Company and where the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and all amendments to those reports are available free of charge, as soon as
reasonably practicable, following the time they are filed with or furnished to the Securities and Exchange
Commission (“SEC”). Reports, proxy and information statements that are filed electronically with the SEC
are available on the SEC’s website, www.sec.gov.

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Item 1A. Risk Factors

Our consolidated results of operations, financial position, cash flows and reputation can be adversely
affected by various risks. These risks include the principal factors listed below and the other matters set
forth in this Form 10-K. There may be additional risks of which we are not presently aware or that we
currently believe are immaterial that could have an adverse impact on our business.

We are subject to extensive governmental regulation, which is frequently difficult, expensive and
time-consuming with which to comply; noncompliance could adversely affect our operations and
efforts to grow our business results.

The regulated waste management and secure information destruction industries are subject 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 and the proper handling
and protection of personal and confidential
information. Our business requires us to obtain many
permits, authorizations, approvals, certificates, and other types of governmental permissions and to
comply with various regulations in every jurisdiction in which we operate.
Federal, state and local
regulations change often, 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 our business. 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, or if they contain unfavorable conditions, it could substantially impair our
operations and reduce our revenues and/or profitability.

If we encounter regulatory compliance issues in the course of operating our businesses, we may
experience adverse publicity, which may intensify if such non-compliance results in civil or criminal
liability. This adverse publicity may harm our reputation, and result in difficulties in attracting new
customers, or retaining existing customers.

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 strict enforcement of laws and regulations relating to regulated waste collection and
treatment and the proper handling and protection of personal and confidential
information by
governmental authorities can have a positive effect on our business. These laws and regulations increase
the demand for our services. Relaxation of enforcement or other changes in governmental regulation of
regulated waste and personal and confidential information could increase the number of competitors we
face or reduce the need for our services.

Unfavorable market conditions, including those driven by economic or social trends, may impact
information we collect from
the volume of regulated wastes or personal and confidential
customers.

The compliance-based services we provide rely on the generation of regulated wastes or personal and
confidential information by our customers. The amount of material generated by our customers may be
impacted by macro-economic trends associated with manufacturing and industrial markets, healthcare
market dynamics, and trends associated with electronic and digital record keeping. Many of our services
are provided on a subscription basis with a monthly fee to minimize short-term or cyclical variability

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associated with these factors. However, some of our services are provided on a transactional basis, and
long-term trends resulting from these factors could reduce the demand for our services, whether we
provide them on a subscription or transactional basis.

We may experience difficulties executing on our multiyear Business Transformation.

We began a comprehensive, multiyear Business Transformation during the third quarter of 2017 with the
intent of implementing a global EPM operating model.
is expected to
standardize global end-to-end processes, align the company around key performance indicators, improve
data management and decision making, and improve the Company’s profitability. A global ERP system is
the central component of our Business Transformation and will become the backbone of our performance
management model. With an ERP, we will integrate all of our services lines and geographies onto one
operating system. In addition to the implementation of a best-in-class system, there are five key initiatives
of
the Business Transformation which include: portfolio rationalization, operational optimization,
organizational excellence and efficiency, commercial excellence, and strategic sourcing.

This new operating model

There is no assurance that the Business Transformation will achieve the anticipated benefits that we
expect. Further, the ERP platform will require significant investment of human and financial resources and
we may experience significant delays,
If the execution of our
Business Transformation fails to achieve its intended benefits, our business, financial condition, and results
of operation could be adversely affected.

increased costs and other difficulties.

Restrictions in our private placement notes and our Credit Agreement could adversely affect our
business, financial condition, results of operations, ability to make distributions and value of our
securities.

Our private placement notes and Credit Agreement contain customary affirmative covenants, including,
among others, covenants pertaining to the delivery of financial statements; certain financial covenants;
notices of default and certain other material events; payment of obligations; preservation of corporate
existence, rights, privileges, permits,
franchises and intellectual property; maintenance of
property and insurance and compliance with laws, as well as customary negative covenants, including,
among others, limitations on the incurrence of liens, investments and indebtedness; mergers and certain
other fundamental changes; dispositions of assets; restricted payments; changes in our line of business;
transactions with affiliates and burdensome agreements. 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.

licenses,

Our ability to comply with the covenants and restrictions contained in the private placement notes and
our Credit Agreement may be affected by events beyond our control, including prevailing economic,
financial, and industry conditions.
If market or other economic conditions deteriorate, our ability to
comply with these covenants may be impaired. A failure to comply with these provisions could result in a
default or an event of default. Upon an event of default, unless waived, the lenders could elect to
terminate its commitments, cease making further loans, require cash collateralization of letters of credit,
cause its loans to become due and payable in full and force us and our subsidiaries into bankruptcy or
liquidation.
If the payment of our debt is accelerated, our assets may be insufficient to repay such debt in
full, and the holders of our stock could experience a partial or total loss of their investment. See Part II,
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity
and Capital Resources.

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Servicing debt and funding other obligations requires a significant amount of cash, and our ability
to generate sufficient cash depends on many factors, some of which are beyond our control.

Our ability to make payments on and refinance our indebtedness and to fund our operations and capital
expenditures depends on our ability to generate cash flow and secure financing in the future. Our ability
to generate future cash flow depends, among other things, upon:

! future operating performance;
! general economic conditions;
! competition; and
! legislative and regulatory factors affecting our operations and business.

Some of these factors are beyond our control. There is no assurance that our business will generate cash
flow from operations or that future debt or equity financings will be available to us to enable us to pay
our indebtedness or to fund other needs. As a result, we may need to refinance all or a portion of our
indebtedness on or before maturity. There is no assurance that we will be able to refinance any of our
indebtedness on favorable terms, or at all. Any inability to generate sufficient cash flow or refinance our
indebtedness on favorable terms could have an adverse effect on our financial condition.

The amount of our indebtedness could adversely affect our business.

As of December 31, 2017, we had a total of $2.75 billion of outstanding indebtedness, including long-
term debt and short-term debt and not reduced by unamortized debt issuance costs. We also have the
ability to incur additional indebtedness subject to our financial covenants.

Our leverage could have adverse consequences on our business, including the following:

! we may be required to dedicate a substantial portion of our available cash to payments of principal

and interest on our indebtedness;

! our ability to access credit markets on terms we deem acceptable may be impaired; and
! we may be limited in our flexibility to adjust to changing market conditions.

Risks from our international operations could adversely affect our business, financial condition and
results of operations.

We have established operations in the United States and 20 other countries. Foreign operations carry
special risks including:

! exchange rate and interest rate fluctuations;
! substantial inflation in certain markets;
! dependence in certain markets on government entities as customers;
! delays in the collection of accounts receivable related to certain government funding practices;
! government controls;
! import and export license requirements;
! political or economic instability;
! changes in or compliance with U.S., local or other applicable laws and regulations, including laws and
regulations concerning anti-corruption, anti-bribery (i.e. U.S. Foreign Corrupt Practices Act), global
trade, trade sanctions, competition, privacy and data protection;

! trade restrictions;
! changes in tariffs and taxes;
! industry or macro-economic trends;
! permitting and regulatory standards;
! differences in local laws, regulations, practices, and business customs;

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! restrictions on repatriating foreign profits back to the United States or movement of funds to other

countries;

! difficulties in staffing and managing international operations;
! increases and volatility in labor costs; and
! property ownership restrictions in certain countries.

Any of the foregoing or other factors associated with doing business abroad could adversely affect our
business, financial condition and results of operations.

We face continuing risks relating to compliance with the U.S. Foreign Corrupt Practices Act
(“FCPA”) and other anti-corruption and anti-bribery laws.

On June 12, 2017, the SEC issued a subpoena to the Company, requesting documents and information
relating to the Company’s compliance with the FCPA or other foreign or domestic anti-corruption laws
with respect to certain of the Company’s operations in Latin America.
In addition, the Department of
Justice has notified the Company that it is investigating this matter in parallel with the SEC. The Company
is cooperating with these agencies. The Company is also conducting an internal investigation of these
and other matters, including outside of Latin America, under the oversight of the Audit Committee of the
Board of Directors and with the assistance of outside counsel, and this investigation has found evidence
of improper conduct. These matters (and other matters which may arise or of which we become aware in
the future) may be deemed to violate the FCPA and other anti-corruption and anti-bribery laws. Such
determinations could subject us to, among other things, enforcement actions by the SEC or the DOJ or
other regulatory bodies, fines, penalties, or litigation, which could adversely affect our business, financial
In addition, any significant settlement amount may require us to
condition and results of operations.
incur additional indebtedness, adversely affect our liquidity and ability to service our indebtedness, or
require us to restructure or amend the terms of our indebtedness. See Part II, Item 8. Financial Statements
and Supplementary Data; Note 18 – Legal Proceedings in the Consolidated Financial Statements for more
information regarding currently pending legal proceedings.

We are subject to a number of pending lawsuits.

We are a defendant in a number of pending lawsuits and may be named as a defendant in future lawsuits.
These current and future matters may result in significant liabilities and diversion of our management’s
time, attention and resources. Given the uncertain nature of litigation generally, we are not able in all
cases to estimate the amount or range of loss that could result from an unfavorable outcome in these
matters.
In view of these uncertainties, the outcome of these matters may result in charges in excess of
any established reserves and, to the extent available, liability insurance. Protracted litigation, including
any adverse outcomes, may have an adverse impact on our reputation, business, financial condition or
results of operations.
In addition, any significant judgment or settlement amount may require us to incur
additional indebtedness, adversely affect our liquidity and ability to service our indebtedness, or require
us to restructure or amend the terms of our indebtedness. See Part II, Item 8. Financial Statements and
Supplementary Data; Note 18 - Legal Proceedings in the Consolidated Financial Statements for more
information regarding currently pending legal proceedings.

Changing market conditions in the healthcare industry, including healthcare consolidation and
healthcare reform, could drive down our profits and slow our growth.

Within the United States, the healthcare industry is evolving to meet competing demands for increased
healthcare coverage of a growing and aging population and economic pressures to reduce healthcare
costs. As a result of these dynamics, hospital networks are consolidating physician practices into their
networks,
independent practices are consolidating together, and healthcare providers are focused on
cutting costs within their businesses. These changes exert downward pricing pressure on services that we

2017 10-K Annual Report

Stericycle, Inc. • 20

PART I

provide to healthcare customers which could adversely affect our profitability and growth. Commitments
made in connection with the settlement of the MDL Action, as discussed in Part II, Item 8. Financial
Statements and Supplementary Data; Note 18 - Legal Proceedings may affect our ability to increase prices
in the future and a deterioration in our customer relationships as a result of the MDL Action may affect
our ability to sell additional services to our customers, both of which could adversely affect our
profitability and growth.

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

The industries in which we participate are very competitive because of low barriers to entry, among other
reasons. This competition has required us in the past to reduce our prices to our customers, may require
us to reduce our prices in the future or may affect our ability to increase prices in the future. Substantial
price reductions or our inability to increase prices could significantly reduce our earnings.

We face direct competition from a large number of small, local competitors. Because it requires very little
financial investment to compete in the collection and transportation of regulated wastes or the secure
destruction of personal and confidential information, there are many regional and local companies in
these industries. We face competition from these businesses, and competition from them is likely to exist
In addition, large national companies with
in new locations to which we may expand in the future.
in the United States, Waste
For example,
substantial resources operate in the markets we serve.
Management, Inc., Clean Harbors, and Iron Mountain all offer competing services.

If we fail to maintain an effective system of internal controls over financial reporting, including
remediating known material weaknesses in our internal controls as of December 31, 2017, we may
not be able to report our financial results timely and accurately or prevent fraud, which could
adversely affect investor confidence in our company, our results of operations and our stock price.

As disclosed in more detail in Part II, Item 9A. Controls and Procedures of this Report, we have identified
certain material weaknesses as of December 31, 2017, in our internal controls over financial reporting.
Due to these material weaknesses, we have also concluded our disclosure controls and procedures were
not effective as of December 31, 2017.

Notwithstanding the material weaknesses that existed as of December 31, 2017, management has
concluded that the consolidated financial statements included in this Annual Report fairly present, in all
material respects, our financial position, results of operations and cash flows as of the dates, and for the
periods, presented, in conformity with U.S. GAAP. Our management has taken action to remediate these
material weaknesses, as discussed in more detail under Part II, Item 9A. Controls and Procedures of this
Report, and is committed to continue investing significant time and resources and taking actions to
remediate the material weaknesses in our internal control over financial reporting as we work to further
integrate acquisitions, streamline disparate information technology systems, and enhance our control
environment. Any failure to maintain or implement required new or improved controls, or any difficulties
we encounter in their implementation, could result in additional significant deficiencies or material
weaknesses, and result in material misstatements in our financial statements that could result in a
restatement of financial statements.

Attacks on our information technology systems could damage our reputation, negatively impact
our businesses and expose us to litigation risk.

We use computers in substantially all aspects of our business operations. We also use mobile devices,
social networking and other online activities to connect with our employees and our customers. We rely
heavily on various proprietary and third party information systems. Our reputation for the secure

2017 10-K Annual Report

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PART I

handling of customer and other sensitive information is critical to the success of our business. Although
we have implemented safeguards and taken steps to prevent potential cyber incidents and security
breaches, our preventative measures may not be entirely effective as the information technology and
network infrastructure may still be vulnerable to attacks by hackers or breaches due to employee error,
malfeasance, computer viruses, power outages, natural disasters, acts of terrorism or other disruptions. A
cybersecurity incident and breach of our
information systems could lead to theft, destruction,
misappropriation or release of sensitive and/or confidential information or intellectual property which
could result in business disruption, negative publicity, violation of privacy laws, loss of customers, brand
damage, adverse financial and operational results, and potential litigation.

Our management depends on relevant and reliable information for decision making purposes, including
key performance indicators and financial reporting. A lack of relevant and reliable information could
preclude us from optimizing our overall performance. Any significant loss of data, failure to maintain
reliable data, disruptions affecting our information systems, or delays or difficulties in transitioning to new
systems could adversely affect our business, financial condition and results of operations.
In addition, our
ability to continue to operate our businesses without significant interruption in the event of a disaster or
other disruption depends in part on the ability of our information systems to operate in accordance with
our disaster recovery and business continuity plans.
If our information systems fail and our redundant
systems or disaster recovery plans are not adequate to address such failures, or if our business
interruption insurance does not sufficiently compensate us for any losses that we may incur, our revenues
and profits could be reduced and the reputation of our brands and our business could be adversely
affected.
In addition, remediation of such problems could result in significant, unplanned capital
investments.

Fluctuations in the commodity market related to the demand and price for recycled paper may
affect our business, financial condition and results of operations.

We sell nearly all of the shredded paper from our secure information destruction business to paper
companies and recycled paper brokers. Sorted office paper is marketed as a commodity and is subject to
significant demand and price fluctuations beyond our control. Historically, economic and market shifts,
fluctuations in capacity and changes in foreign currency exchange rates have created cyclical changes in
prices, sales volume and margins for pulp and paper products. The length and magnitude of industry
cycles have varied over time and by product, but generally reflect changes in macroeconomic conditions
and levels of industry capacity. The overall
levels of demand for the pulp and paper products, and
consequently its sales and profitability, reflect fluctuations in levels of end-user demand, which depend in
part on general macroeconomic conditions in North America and worldwide, as well as increasing use of
digitalization. As a result, the market demand for recycled paper can be volatile due to factors beyond
our control.
Lack of demand for our shredded paper material could adversely affect our business,
financial condition and results of operations.

We may incur significant charges as a result of our portfolio optimization strategy; our portfolio
optimization strategy may not achieve the desired results.

As part of our long-term strategy for improving our profitability and return on invested capital, we
continue to evaluate the performance of our entire portfolio of assets and businesses. Based on this
evaluation, we may sell certain assets or businesses or exit particular markets. Any divestitures resulting
from this strategy may cause us to record significant write-offs, including those related to goodwill and
In addition, divestitures we complete may not yield the targeted improvements in
other intangible assets.
our business. Any charges that we are required to record or the failure to achieve the intended financial
results associated with our portfolio optimization strategy could have a material adverse effect on our
business, financial condition or results of operations.

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PART I

A change or deterioration in our relations with our employees or an increase in labor and
employment costs could have a materially adverse effect on our business, financial condition and
results of operations.

Labor and employment is one of our highest costs and increases in employment costs could materially
affect our cost structure and our profitability. We compete with other businesses in our markets for
qualified employees and the labor supply is sometimes tight in our markets. A shortage of qualified
employees or further unionization would require us to incur additional costs related to wages and
benefits; inefficiencies in operations; unanticipated costs in sourcing temporary or third party labor; legal
fees and interference with customer relationships.

The Company is a party to 15 collective bargaining agreements in the U.S. and Canada, covering
approximately 645 employees, or approximately 4.0%, of our total U.S. and Canadian workforce. These
agreements expire on a scheduled basis depending upon the negotiated length of the contract’s term.
Collective bargaining agreement negotiations occur every year depending upon which agreements expire
and whether one or both parties seek the modification of terms.

While we believe the Company will maintain good working relations with its employees on acceptable
terms, there can be no assurance that we will be able to negotiate the terms of future agreements with
unions in a manner acceptable to the Company. There is also no guarantee that current non-union
employees will not seek union representation resulting in additional collective bargaining agreements
with associated increased costs to the Company. Potential work disruptions from labor disputes may
disrupt our businesses and adversely affect our brand, customer relations, financial condition and results
of operations.

If we are unable to acquire regulated waste, secure information destruction 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 and integrate 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; and
! avoid or overcome any concerns expressed by regulators.

We compete with other potential buyers for the acquisition of regulated waste and secure information
destruction companies and other businesses. This competition may result in fewer opportunities to
It may also result in higher purchase prices for the businesses that
purchase companies that are for sale.
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, state and foreign 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, state or foreign antitrust or other
regulators from time to time in the course of completing acquisitions of other regulated waste and secure
In order to obtain regulatory clearance for a particular acquisition, we
information destruction businesses.
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

2017 10-K Annual Report

Stericycle, Inc. • 23

PART I

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, state or foreign regulators in the course of
completing acquisitions cannot be predicted.

We may not realize the synergies and growth opportunities that are anticipated from acquisitions.

The benefits we expect to achieve as a result of acquisitions that we complete will depend, in part, on our
ability to realize targeted synergies and anticipated growth opportunities. Our success in realizing these
synergies and growth opportunities, and the timing of this realization, depends on the successful
integration of other business and operations with our pre-existing business and operations. Even if we
are able to integrate these businesses and operations successfully, this integration may not result in the
realization of the full benefits of the synergies and growth opportunities we currently expect within the
anticipated time frame or at all.

We will incur integration costs in connection with our acquisition strategy.

Our business strategy includes growth through acquisition. Each acquisition includes a detailed execution
plan to integrate the acquired operations into Stericycle’s existing infrastructure to achieve synergies. We
expect to incur costs to implement such cost savings measures. We anticipate that we will incur certain
non-recurring charges in connection with this integration, including costs and charges associated with
integrating operations, processes and systems. We cannot identify the timing, nature and amount of all
such charges. The significant acquisition-related integration costs could adversely affect our results of
operations in the period in which such charges are recorded or our cash flow in the period in which any
related costs are actually paid. We believe that synergies will come from the elimination of duplicative
costs such as selling, general and administrative expenses, as well as the realization of other efficiencies
related to the integration of the businesses such as the optimization of logistics, truck and plant
utilization, improvements in route density and facility optimization, and contact center efficiencies. We
also believe such synergies will offset incremental acquisition-related costs over time, but this net benefit
may not be achieved in the near term, or at all.

Market conditions could adversely change and our earnings could decline resulting in charges to
impair intangible assets, such as goodwill.

As a result of our various acquisitions, the Consolidated Balance Sheet at December 31, 2017 contains
goodwill of $3.60 billion and other intangible assets, net of accumulated amortization of $1.79 billion.
In
accordance with Accounting Standards Codification Topic 350,
Intangibles - Goodwill and Other, we
evaluate on an ongoing basis whether facts and circumstances indicate any impairment to 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. During 2017, we wrote off $21.0 million of permits,
tradenames and customer relationships due to Operational Optimization. We also recognized a $65.0
million non-cash goodwill impairment charge related to our Latin America reporting unit. We recognized
this impairment due to a reduction of forecasted future cash flows in Latin America as discussed in the
Impairment section of Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations. The recognition of these impairments, or potential future impairments, could have
a material adverse impact on our results of operations.

The handling of regulated waste exposes us to the risk of environmental liabilities.

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 ("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

2017 10-K Annual Report

Stericycle, Inc. • 24

PART I

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.

Tax interpretations and changes in tax regulations and legislation could adversely affect us.

Tax interpretations, regulations and legislation in the various jurisdictions in which we operate are subject
income tax expense or
to measurement uncertainty and the interpretations can impact net income,
recovery, and deferred income tax assets or liabilities. Tax rules and regulations, including those relating
to foreign jurisdictions, are subject to interpretation and require judgment by us that may be challenged
by the taxation authorities upon audit. Although we believe our assumptions, judgements and estimates
are reasonable, changes in tax laws or our interpretation of tax laws and the resolution of any tax audits
could significantly impact
income taxes in our consolidated financial
statements.

the amounts provided for

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to
as the Tax Cuts and Jobs Act (the “Tax Act”). The changes included in the Tax Act are broad and
complex. The final impact of the Tax Act may differ from the estimates provided elsewhere in this report,
possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative
action to address questions that arise because of the Tax Act, any changes in accounting standards for
income taxes or related interpretations in response to the Tax Act, or any updates or changes to the
provisional estimates the Company has utilized to calculate the transition tax, including impacts from
changes to current year earnings and foreign exchange rates of foreign subsidiaries.

We face risks associated with project work and services that are provided on a non-recurring basis.

While the majority of our business is based on long-term contracts for regularly scheduled service, we do
have a portion of revenue which is derived from short-term projects or services that we provide on a non-
recurring basis.
Product recall and retrieval events, one-time purge events for secure information
destruction, and certain hazardous waste services that we provide on a project or non-recurring basis are
not predictable in terms of frequency, size or duration. Our customers’ need for these services could be
influenced by regulatory changes, fluctuations in commodity market performance, natural disasters and
acts of God, or other factors beyond our control. Variability in the demand for these services could
adversely affect our business, financial condition and results of operations.

2017 10-K Annual Report

Stericycle, Inc. • 25

PART I

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

Our business requires our employees 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 incidents that may present possible exposure to hazardous 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 (i.e. power outages, ineffective backup systems).

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 secure information for destruction exposes us to potential data security risks that
could result in monetary damages against us and could otherwise damage our reputation, and
adversely affect our business, financial condition and results of operations.

The protection of customer, employee, and company data is critical to our business. The regulatory
environment in the United States and Canada surrounding information security and privacy is increasingly
demanding, with the frequent imposition of new and constantly changing requirements.
Certain
legislation,
including the FACTA, the HIPAA, the Economic Espionage Act in the United States, the
Personal Information Protection and Electronic Documents Act in Canada and the General Data Protection
Regulation in the EU, require documents to be securely destroyed to avoid identity theft and inadvertent
leakage of confidential and sensitive information. A significant breach of customer, employee, or
company data could attract a substantial amount of media attention, damage our customer relationships
and reputation, and result in lost sales, fines, or lawsuits.
In addition, an increasing number of countries
have introduced and/or increased enforcement of comprehensive privacy laws or are expected to do so.
The continued emphasis on information security as well as increasing concerns about government
surveillance may lead customers to request us to take additional measures to enhance security and/or
assume higher liability under our contracts. As a result of legislative initiatives and customer demands, we
may have to modify our operations to further improve data security. Any such modifications may result in
increased expenses and operational complexity, and adversely affect our reputation, business, financial
condition and results of operations.

Our participation in multi-employer pension plans may subject us to liabilities that could
materially adversely affect our liquidity, cash flows and results of operations.

We participate in multi-employer pension plans administered by employer and union trustees. To the
extent that those plans are underfunded, the Employee Retirement Income Security Act of 1974, as
amended by the Multi-Employer Pension Plan Amendments Act of 1980 ("ERISA"), may subject us to
substantial liabilities in the event we, whether partially or totally, cease to have obligations to contribute
to the plans. Under current law regarding multi-employer defined benefit plans, circumstances such as a

2017 10-K Annual Report

Stericycle, Inc. • 26

PART I

plan's termination, an employer's partial or complete withdrawal from, or the mass withdrawal of all
contributing employers from, an underfunded multi-employer defined benefit plan can trigger our
obligation to make payments to the plan for our proportionate share of the multi-employer plan's
unfunded vested liabilities. Furthermore, the Pension Protection Act of 2006 added new funding rules
generally applicable to plan years beginning after 2007 for multi-employer plans that are classified as
"endangered," "seriously endangered," or "critical" status.
If plans in which we participate are in critical
status or underfunded, we could be required to make additional contributions.

Based upon the information available to us from plan administrators as of March 31, 2017, certain of the
multi-employer pension plans in which we participate are underfunded. The Pension Protection Act
requires that underfunded pension plans improve their funding ratios within prescribed intervals based on
the level of their underfunding. We have been notified that certain plans are in "critical" status and these
plans may require additional contributions. The amount of additional funds we may be obligated to
contribute in the future cannot be estimated, as such amounts will be based on future levels of employee
work that require the specific use of the union employees covered by these plans, investment returns and
the level of underfunding of such plans. Additional funding could adversely affect our liquidity, cash flows
and results of operations.
Item 8. Financial Statements and
Supplementary Data; Note 11 – Retirement and Other Employee Benefit Programs in the Consolidated
Financial Statements.

For more information, see Part

II,

Increases in transportation costs may adversely affect our business and reduce our earnings.

We maintain a vast transportation network and an extensive fleet of transportation vehicles. A significant
increase in market prices for trucks or fuel could adversely affect our business through higher
transportation costs and reduce our operating margins and reported earnings.

Some of our customers have suffered financial difficulties affecting their credit risk, which could
negatively impact our operating results.

We provide service to a number of customers, including governmental entities and municipalities, some of
which have suffered significant financial difficulties in recent years. Some of these entities could be
unable to pay amounts owed to us or renew contracts with us at previous or increased rates. The inability
of our customers to pay us in a timely manner or to pay increased prices, particularly large national
accounts, could negatively affect our operating results.

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.

2017 10-K Annual Report

Stericycle, Inc. • 27

PART I

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We lease office space for our corporate office in Lake Forest, Illinois. Domestically, we own or lease 123
processing facilities, which are primarily autoclaves and incinerator facilities for medical waste and
shredders for secure information destruction. All of our processing facilities also serve as collection sites.
We own or lease 214 additional transfer sites, 13 communication centers, 18 customer service or
administrative offices, and 72 warehouse or parking facilities.
Internationally, we own or lease 133
processing facilities, the majority of which are autoclave and incinerator facilities for medical waste. We
also own or lease 111 additional transfer sites, 9 communication centers, 57 customer service or
administrative offices, 38 warehouse or parking facilities, and 2 landfills. We believe that these processing
and other facilities are adequate for our present and anticipated future needs.

Item 3. Legal Proceedings

See Part II, Item 8. Financial Statements and Supplementary Data; Note 18 - Legal Proceedings in the
Consolidated Financial Statements.

Item 4. Mine Safety Disclosures

Not Applicable.

2017 10-K Annual Report

Stericycle, Inc. • 28

Part II

PART II

Item 5. Market Price for the Registrant’s Common Equity and Related Stockholder
Matters

The Company’s common stock is listed on the Nasdaq Global Select Market under the ticker symbol
"SRCL." There were 88 shareholders of record as of February 19, 2018.

We did not declare or pay any cash dividends during 2017 or 2016 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 Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 2017
Second quarter 2017
Third quarter 2017
Fourth quarter 2017

First quarter 2016
Second quarter 2016
Third quarter 2016
Fourth quarter 2016

High

Low

85.76
87.00
82.76
72.69

126.19
128.20
107.25
80.09

73.71
76.32
69.00
62.50

105.99
93.27
77.01
71.61

Under resolutions that our Board of Directors adopted, we have been authorized to purchase a cumulative
total of 24,621,640 shares of our common stock on the open market. As of December 31, 2017, we had
purchased a cumulative total of 21,960,871 shares. No common stock purchases were made during 2017.
See Part II,
Item 8. Financial Statements and Supplementary Data; Note 13 – Preferred Stock in the
Consolidated Financial Statements for a description of our repurchases of depository shares of mandatory
convertible preferred stock during 2017. We apply the common stock equivalent of repurchases of the
preferred stock against the number of shares of our common stock authorized for repurchase by the
Board of Directors.

2017 10-K Annual Report

Stericycle, Inc. • 29

Part II

Performance Graph

The following graph compares the cumulative total return (i.e., share price appreciation plus dividends) on
our common stock over the five-year period ended December 31, 2017 with the cumulative total return
for the same period on the Nasdaq National Market Composite Index, the S&P 500 Index, the Russell
3000 Index, and the Dow Jones U.S. Waste & Disposal index. The graph assumes that $100 was invested
on December 31, 2012 in our common stock and in the shares 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

$250.00

$225.00

$200.00

$175.00

$150.00

$125.00

$100.00

$75.00

$50.00

12/31/2012

12/31/2013

12/31/2014

12/31/2015

12/31/2016

12/31/2017

2017 10-K Annual Report

Stericycle, Inc. • 30

Item 6. Selected Financial Data

In millions, except per share data

Statements of Income Data
Revenues
Depreciation and amortization
(Loss) income from operations
Mandatory convertible preferred stock dividend
Gain on repurchase of preferred stock
Net income attributable to Stericycle, Inc. common
shareholders (1)
Earnings per common share attributable to Stericycle, Inc.
common shareholders - diluted (1)
Statements of Cash Flow Data
Net cash flow provided by (used for):

Operating activities (2)
Investing activities
Financing activities (2)

Balance Sheets Data
Cash and cash equivalents
Total assets
Long-term debt, net
Stericycle, Inc. equity

Part II

2013

2,142.8
88.4
535.6
-
-
311.4

2017

Years Ended December 31,
2015

2016

2014

$ 3,580.7
249.5
(7.6 )
36.3
(17.3)
23.4

3,562.3
252.5
433.8
39.4
(11.3)
178.2

2,985.9
127.4
487.6
10.1
-
256.9

2,555.6
104.6
556.3
-
-
326.5

0.27

2.08

2.98

3.79

3.56

508.6
(193.0)
(321.2)

42.2
6,988.3
2,615.3
$ 2,896.6

560.8
(195.6 )
(376.8 )

44.2
6,980.1
2,877.3
2,805.8

386.1
(2,533.9)
2,185.4

55.6
7,065.2
3,040.4
2,729.9

448.5
(462.8)
(30.0)

22.2
4,373.3
1,527.2
1,895.0

405.3
(235.0)
(136.0)

67.2
3,888.0
1,280.7
1,750.5

(1) See Part II, Item 8. Financial Statements and Supplementary Data; Note 14 - Earnings per Common
information concerning the

in the Consolidated Financial Statements for

Share ("EPS")
computation of diluted EPS.

(2)

To conform to the current period cash flows presentation, we reclassified $13.6 million net
repayments of bank overdrafts from Operating Activities to Financing Activities for the year ended
December 31, 2016 and $4.3 million net proceeds from bank overdrafts from Operating Activities
to Financing Activities for the year ended December 31, 2015. No changes in presentation were
made for the years ended December 31, 2014 and 2013.

For more details on the items below, see Part II, Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.

• In 2017, net income attributable to Stericycle, Inc. common shareholders included the following after-
tax effects: $20.0 million of Business Transformation costs; $77.4 million of intangible amortization;
$26.2 million of acquisition and integration expenses; $46.8 million of Operational Optimization
expenses; $7.1 million of net loss on divestitures; $203.5 million of litigation, settlement and regulatory
compliance expenses; $36.3 million of dividends paid on our Series A mandatory convertible preferred
stock; $67.2 million non-cash goodwill impairment charge in Latin America; $15.3 million of consulting
and professional services related to the implementation of the new revenue recognition and lease
accounting standards and internal control remediation activities; and $129.8 million tax benefit from
the provisional recording of the impact of U.S. tax reform. The net effect of these items negatively
impacted diluted EPS by $4.07.
For the purpose of calculating the ultimate EPS impact of our
mandatory convertible preferred stock, we calculate the impact by excluding the mandatory
convertible preferred stock dividend and using the “if-converted” method of share dilution.

2017 10-K Annual Report

Stericycle, Inc. • 31

Part II

• In 2016, net income attributable to Stericycle, Inc. common shareholders included the following after-
tax effects: $83.5 million of intangible amortization; $38.1 million of acquisition and integration
expenses; $40.4 million of Operational Optimization expenses; $23.2 million of loss on divestitures;
$4.4 million of litigation, settlement and regulatory compliance expenses; $39.4 million of dividends
paid on our Series A mandatory convertible preferred stock; $3.1 million of non-cash operating permit
and other impairment charge; $5.5 million of consulting and professional services related to internal
control remediation activities and implementation of the new revenue recognition standard; and $3.1
million gain from an insurance settlement. The net effect of these items negatively impacted diluted
EPS by $2.45. For the purpose of calculating the ultimate EPS impact of our mandatory convertible
preferred stock, we calculate the impact by excluding the mandatory convertible preferred stock
dividend and using the “if-converted” method of share dilution.

• In 2015, net income attributable to Stericycle, Inc. common shareholders included the following after-
tax effects: $29.8 million of intangible amortization; $55.4 million of acquisition and integration
expenses; $24.0 million of Operational Optimization expenses; $39.8 million of litigation, settlement
and regulatory compliance expenses; and $10.1 million of dividends paid on our Series A mandatory
convertible preferred stock. The net effect of these items negatively impacted diluted EPS by $1.76.
For the purpose of calculating the ultimate EPS impact of our mandatory convertible preferred stock,
we calculate the impact by excluding the mandatory convertible preferred stock dividend and using
the “if-converted” method of share dilution.

• In 2014, net income attributable to Stericycle, Inc. common shareholders included the following after-
tax effects: $27.8 million of acquisition and integration expenses; $10.1 million of Operational
Optimization expenses; and $4.0 million of litigation, settlement and regulatory compliance expenses.
The net effect of these items negatively impacted diluted EPS by $0.48.

• In 2013, net income attributable to Stericycle, Inc. common shareholders included the following after-
tax effects: $12.3 million of acquisition and integration expenses; $3.1 million of Operational
Optimization expenses; and $1.4 million of litigation, settlement and regulatory compliance expenses.
The net effect of these items negatively impacted diluted EPS by $0.19.

2017 10-K Annual Report

Stericycle, Inc. • 32

Part II

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

The following discussion of Stericycle’s financial condition and results of operations should be read in
conjunction with our Consolidated Financial Statements and related notes in Part II, Item 8. Financial
Statements and Supplementary Data of this Report.

Overview

Stericycle is a multinational business-to-business services company with a core purpose to protect people
and brands, promote health, and safeguard the environment. Stericycle works with its customers to
impact, manage business and personal risk,
ensure regulatory compliance, minimize environmental
improve safety, and facilitate communication. Services include medical waste disposal, sharps disposal
management, product recalls and retrievals, OSHA and HIPAA compliance programs, pharmaceutical
returns and disposal, sustainability services, retail hazardous waste management, hospital waste stream
secure information destruction, and inbound/outbound communication solutions.
management,
Stericycle provides its services in the United States and 20 other markets around the world.

For further information on the Company’s business, segments, and services, see Part I, Item 1. Business.

The following table identifies key strategies and other significant matters impacting our business for the
years ended December 31, 2017, 2016, and 2015:

In millions

Business Transformation
Intangible Amortization
Acquisitions and Integration
Operational Optimization
Divestitures
Litigation, Settlements and Regulatory Compliance
Impairment
Other
Total pre-tax

Capital Allocation (Preferred Dividends)
U.S. Tax Reform
Total after-tax

2017

Years Ended December 31,
2016

2015

31.3
118.4
40.7
71.1
9.5
327.7
65.0
24.8
688.5

36.3
(129.8)

(93.5) $

-
129.3
60.9
59.1
27.1
7.2
1.4
8.2
293.2

39.4
-
39.4

-
45.5
79.9
34.8
-
59.7
-
-
219.9

10.1
-
10.1

Business Transformation

Stericycle is focused on driving long-term growth, profitability and delivering enhanced shareholder value.
As part of our business strategy, in the third quarter of 2017, we initiated a comprehensive multiyear
Business Transformation with the objective to improve long-term operational and financial performance.
The Business Transformation is based on a strategic vision to build a best-in-class enterprise performance
management (“EPM”) operating model to enable the Company to operate more efficiently, provide an
enhanced experience to customers, better capitalize on future growth opportunities and establish greater
controls and oversight to drive more consistent results. Additionally, a key component to the Business
Transformation is the implementation of an enterprise resource planning (“ERP”) system which will

2017 10-K Annual Report

Stericycle, Inc. • 33

Part II

leverage standard processes throughout the organization to accelerate decision making, expedite
acquisition integration, remediate compliance and control issues, and enable real-time analytics.

Key initiatives of the Business Transformation include:

! Portfolio Rationalization: Executing on a comprehensive review of the Company’s global service

lines to identify and pursue the divestiture of non-strategic assets.

! Operational Optimization: Standardizing route planning logistics, modernizing field operations, and

driving network efficiency across facilities.

! Organizational Excellence and Efficiency: Redesigning the Company’s organizational structure to

optimize resources and align around a global shared business services model.

! Commercial Excellence:

Aligning our sales and service organizations around the customer,
standardizing our customer relationship management process, and expanding customer self-service
options.

! Strategic Sourcing:
organizational scale.

Reducing spend through global procure-to-pay processes and leveraging

As part of the Business Transformation, the Company expects to record approximately $275 million to
$300 million in expenses and capital expenditures over five years.

Business Transformation costs include the following types of activities:

! Employee termination,

! Asset impairment,

! Consulting and professional services including system integration, project management, ERP advisory,

and information technology related costs,

! Internal resources, including project related incentive compensation, and

! Other related expenses.

For the year ended December 31, 2017, we recorded $31.3 million in costs related to the Business
Transformation, which included $16.4 million for consulting and professional services primarily related to
business case development, execution and governance, $10.8 million for employee termination, $2.4
million non-cash impairment of long-lived assets, $1.0 million of other related expenses which are
reflected as part of Selling, General and Administrative (“SG&A”) on the Consolidated Statements of
Income, and $0.7 million for employee termination which is reflected as part of Cost of revenues (“COR”)
on the Consolidated Statements of Income.
In the fourth quarter of 2017, we capitalized $10.9 million of
licenses for the ERP system, which is classified within Property, plant and equipment (Construction in
progress) on the Consolidated Balance Sheets.

Intangible Amortization

For the years ended December 31, 2017, 2016, and 2015, the Company recorded $118.4 million, $129.3
million, and $45.5 million, respectively, of intangible amortization expense from acquisitions.

Acquisition and Integration

We have proven that acquisitions are a steady and efficient way to scale operations, build critical
customer density for transportation and treatment operations, and enter new markets or geographies, as

2017 10-K Annual Report

Stericycle, Inc. • 34

Part II

In our early
well as provide opportunity to introduce our additional services to the acquired customers.
history, acquisitions were a key strategy to rapidly building our customer base and route density in the
United States. We have been able to expand internationally through acquisition and now operate in 20
different markets outside the U.S. Over our history, Stericycle has completed 496 acquisitions, with 271 in
the United States and 225 internationally. We expect to continue our acquisition strategy, remaining
focused on small, highly accretive, tuck in acquisitions that broaden our various service capabilities while
creating value for our shareholders.

The following table summarizes the locations and services of our acquisitions for the years ended
December 31, 2017, 2016, and 2015:

Acquisition Locations
United States
Canada
France
Netherlands
Portugal
Republic of Korea
Spain
Total 2017 Acquisitions

United States
Australia
Republic of Korea
Romania
Spain
United Kingdom
Total 2016 Acquisitions

United States
Brazil
Canada
Ireland
Mexico
Netherlands
Republic of Korea
Romania
Spain
Total 2015 Acquisitions

Total Number of
Acquisitions

21
1
1
2
1
2
2
30

21
3
1
2
3
1
31

19
2
2
1
3
2
6
4
4
43

Regulated Waste
2
-
-
1
1
2
1
7

5
-
1
2
2
1
11

13
2
-
1
3
2
6
4
4
35

Service
Secure
Information
Destruction

Communication
Services

18
1
1
1
-
-
1
22

15
3
-
-
1
-
19

4
-
1
-
-
-
-
-
-
5

1
-
-
-
-
-
-
1

1
-
-
-
-
-
1

2
-
1
-
-
-
-
-
-
3

Our acquisition and integration costs include the following types of activities:

! Consulting and professional services incurred in connection with the identification, valuation, due
diligence, and execution of an acquisition or potential acquisition, and acquisition internal resources,

! Consulting and professional services incurred in connection with integrating newly acquired
businesses, which may include the integration of the sales or collection processes and systems,
rebranding to the Company’s name, closure activities, employee termination related to personnel
redundancies, contract and lease exit costs, and other integration related activities,

! Accelerated depreciation, and

2017 10-K Annual Report

Stericycle, Inc. • 35

Part II

! Change in fair value of contingent consideration.

For the years ended December 31, 2017, 2016, and 2015, the Company recorded $40.7 million, $60.9
million, and $79.9 million, respectively, of acquisition and integration expenses which are reflected as part
of SG&A on the Consolidated Statements of Income.

Acquisition and integration expenses for the year ended December 31, 2017 included $10.6 million
acquisition expenses, $30.5 million integration expenses, and a $0.4 million favorable change in the fair
value of contingent consideration.

Acquisition and integration expenses for the year ended December 31, 2016 included $9.6 million
acquisition expenses, $53.3 million integration expense (primarily related to the fourth quarter 2015
Shred-it acquisition), and a $2.0 million favorable change in fair value of contingent consideration.

Acquisition and integration expenses for the year ended December 31, 2015 included $39.1 million
acquisition expenses (primarily related to the fourth quarter 2015 Shred-it acquisition), $41.4 million
integration expense, and a $0.6 million favorable change in fair value of contingent consideration.

The results of operations of our acquired businesses have been included in the Consolidated Statements
of Income from the date of the acquisitions. Pro forma results of operations for these acquisitions are not
presented because the pro forma effects,
individually or in the aggregate, were not material to the
Company’s results of operations.

Operational Optimization

For the years ended December 31, 2017, 2016, and 2015, the Company recorded $71.1 million, $59.1
million, and $34.8 million, respectively, of Operational Optimization expenses which are reflected as part
of SG&A on the Consolidated Statements of Income.

Plant throughput and route density are competitive strengths of Stericycle. We maintain such strengths
by making adjustments to our network of transportation and treatment facilities to optimize overall
logistics and processing capabilities within a service line while reducing operational costs. As part of
these efforts, we seek to reduce network redundancies by consolidating facilities, closing the redundant
facility, and restructuring the local organization and operation for efficiency.

Our Operational Optimization costs include the following types of activities:

! Consulting and professional services,

! Employee termination,

! Closure activities,

! Contract and lease exit costs,

! Environmental and retirement obligations,

! Impairments and accelerated depreciation, and

! Other related expenses.

From 2015 to 2017, we closed/consolidated a number of Communications and Related Services business
sites (mostly call centers), reducing them from 80 to 31. By better leveraging technology and cross-
training agents, we were able to reduce redundant facilities and resources and improve overall customer
service levels.

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Stericycle, Inc. • 36

Part II

In 2016, as a result of the Company’s evaluation and optimization of their portfolio of services, Stericycle
ceased operating the patient transport business in the U.K. and exited from related contracts during 2016
and 2017.

During the first quarter of 2017, management began executing a realignment of our operations to reduce
labor redundancies and facility costs in our Latin American countries. Various operating locations,
primarily in Brazil, have been consolidated to increase efficiency while reducing headcount.

As part of our optimization efforts in 2017, we incurred operating permit and long-lived asset non-cash
impairment charges at our plant in Japan related to facility rationalization.

For the year ended December 31, 2017, we recorded $71.1 million of Operational Optimization expenses:

! $41.6 million in the U.S. of which $1.6 million employee termination, and $3.2 million lease exit costs
related to the closure/consolidation of call centers in our Domestic Communications and Related
Services business, $8.9 million non-cash impairment charges related to operating permits and
rationalization of tradenames, $9.2 million consulting and professional services to reduce operational
redundancies, and $18.7 million to improve efficiency such as optimizing overall
logistics, and
centralizing our customer service and sales functions for our secure information destructions locations.

! $15.7 million operational optimization costs in Latin America, of which $3.2 million employee
termination, $4.2 million closure and exit costs were due to rationalizing our operations,
environmental matters, and $8.3 million non-cash impairment charges for long-lived assets, operating
permits and customer relationships;

! $8.8 million of charges related to facility rationalization in Japan, including $8.7 million of non-cash

impairment charges for long-lived assets and operating permits; and

! $0.5 million of employee severance charges and $4.5 million closure and exit charges for facility

rationalization and contract exit charges in the U.K.

For the year ended December 31, 2017, all the charges described above were included in SG&A, except
for $0.4 million which was included in COR.

For the year ended December 31, 2016, we recorded $59.1 million of Operational Optimization expenses:

! $4.5 million related to employee termination;

! $26.5 million of charges to exit certain of our patient transport services contracts and plant conversion

expense in the U.K.;

! $16.1 million, mostly in the U.S., to improve efficiency such as optimizing overall

logistics and
processing capabilities for our security information destruction locations, and centralizing customer
service and sales functions for our medical waste business, including $6.8 million lease exit costs
related to the closure/consolidation of call centers in our Communications and Related Services
business; and

! $12.0 million of consulting and professional services to identify opportunities to reduce operational

redundancies.

For the year ended December 31, 2016, all the charges described above were included in SG&A, except
for $9.0 million which was in COR.

2017 10-K Annual Report

Stericycle, Inc. • 37

Part II

For the year ended December 31, 2015, we recorded $34.8 million of Operational Optimization expenses:

! $8.6 million related to employee termination;

! $8.1 million non-cash impairment charges for long-lived assets and intangible assets;

! $10.2 million in the U.S. to improve efficiency, including $of 3.6 million lease exit costs related to the

closure/consolidation of call centers in our Communications and Related Services business; and

! $7.9 million of costs incurred due to plant conversion and facility rationalization in the U.K.

For the year ended December 31, 2015, all the charges described above were included in SG&A, except
for $1.5 million which was included in COR.

Divestitures

For the years ended December 31, 2017 and 2016, the Company recorded $9.5 million and $27.1 million,
respectively, of divestiture expenses which are reflected as part of SG&A on the Consolidated Statements
of Income. The Company did not record any divestiture related expense for the year ended December 31,
2015.

The Company evaluates their portfolio of services on an ongoing basis with a country-by-country and
service line-by-service line approach to assess the long-term potential and identify potential business
candidates for divestiture. Our decision criterion for divestiture is based on:

! outlook for long-term market conditions,

! potential impact to complimentary services or customer relationships,

! ability to leverage infrastructure and customer base for growth,

! potential for margin improvement,

! divestiture value today versus future divestiture value,

! return on invested capital, and

! implications for ERP.

Divestiture costs include:

! Consulting and professional services,

! Impairments,

! Loss (gain) on disposal, and

! Other related expenses.

As a result of this portfolio optimization effort, Stericycle divested a niche Manufacturing and Industrial
hazardous waste business in the U.K. during 2016 and 2017. Furthermore, in late 2017 Stericycle divested
its secure information destruction business in South Africa.

For the year ended December 31, 2017, the Company recorded $9.5 million of divestiture related
expenses which included $6.8 million of non-cash asset impairment charges related to changes in the fair
value of assets held for sale in the U.K., and a $5.7 million loss from the sale of certain assets and liabilities

2017 10-K Annual Report

Stericycle, Inc. • 38

Part II

in the U.K., partially offset by a gain of $3.0 million related to the sale of our secure information
destruction business in South Africa.

For the year ended December 31, 2016, the Company recorded $27.1 million of divestiture related
expense which included a $25.5 million charge on certain of our U.K. operations that were classified as
assets held for sale, primarily non-cash impairment charges for customer relationships, operating permits,
goodwill and long-lived assets, and a $1.6 million loss from the sale of certain assets in the U.K.

With the anticipated implementation of a global enterprise resource planning system, Stericycle will
continue its strategic portfolio review with the intent of identifying additional non-strategic service lines
or markets for divestiture prior to the implementation of the ERP technology platform.

Litigation, Settlements and Regulatory Compliance

We operate in highly regulated industries and must address regulatory inquiries or respond to
investigations from time to time. We are also involved in a variety of civil litigation from time to time.
Our financial results may also include considerations of non-recurring matters including settlements,
environmental remediation, and legal related consulting and professional fees which are reflected as part
of SG&A on the Consolidated Statements of Income.

in 2017,

the Company executed a definitive written settlement agreement

Most notable,
(the
“Settlement”) for the small quantity medical waste customer class action lawsuit that was initiated in 2013.
Under the terms of the Settlement, we will establish a common fund of $295.0 million from which will be
paid all compensation to members of the settlement class, attorneys’ fees to class counsel, incentive
awards to the named class representatives, and all costs of notice and administration. Our existing
contracts with customers will remain in force, while we will also establish as part of the Settlement
guidelines for future price increases and provide customers additional transparency regarding such
including the availability of alternative
increases.
dispute resolution for members of the settlement class.
In the Settlement, we admitted no fault or
wrongdoing whatsoever, and entered into the Settlement in order to avoid the cost and uncertainty of
litigation.

The Settlement also addresses additional matters,

In June 2017, the Securities Exchange Commission (“SEC”) issued a subpoena to the Company, requesting
documents and information relating to the Company’s compliance with the Foreign Corrupt Practices Act
(“FCPA”) or other foreign or domestic anti-corruption laws with respect to certain of the Company’s
In addition, the Department of Justice (“DOJ”) has notified the Company that
operations in Latin America.
it is investigating this matter in parallel with the SEC. The Company is cooperating with these agencies.
The Company is also conducting an internal investigation of these and other matters, including outside of
Latin America, under the oversight of the Audit Committee of the Board of Directors and with the
assistance of outside counsel, and this investigation has found evidence of improper conduct. We have
not accrued for any potential associated contingent liabilities as we cannot reasonably estimate the
possible loss or range of possible losses that we may incur. As the factual and legal issues presented in
this matter are sufficiently unique, in our judgment, we are unable to make such an estimate.

For the year ended December 31, 2017, the Company recorded $327.7 million of legal, settlement and
regulatory compliance expenses, of which $295.0 million was for the Settlement and $32.7 million was for
regulatory compliance, consulting and professional services, primarily related to certain non-recurring
litigation matters.

2017 10-K Annual Report

Stericycle, Inc. • 39

Part II

For the year ended December 31, 2016, the Company recorded $7.2 million in regulatory compliance,
consulting and professional services, primarily related to certain non-recurring litigation matters.

For the year ended December 31, 2015, the Company recorded $59.7 million of legal, settlement and
regulatory compliance expenses, of which $28.5 million related to the Qui Tam Action Settlement, $28.2
million related to the Junk Fax Lawsuit Settlement, and $3.0 million of certain non-recurring litigation
matters.

Impairment

In our Form 10-Q for the quarter ended September 30, 2017, we disclosed that we were in the process of
completing the valuation of our reporting units with the assistance of our external valuation specialist. At
that time, we were evaluating the impact of the prolonged declining market trends in Latin America and
continued softness in the Company’s Manufacturing and Industrial regional hazardous waste business.
We have experienced cost pressures in Latin America due to the strength of local competition resulting in
In addition, the cost savings initiatives
an increasing inability to pass through inflationary price increases.
that were anticipated in 2017 have taken longer than expected to implement and are extending into 2018.
In the fourth quarter 2017, we finalized our long rang plan (“LRP”) to reflect these challenging conditions
in Latin America partially offset by incorporating the impact Business Transformation will have on our
prospective results.

As a result, the Company recorded a $65.0 million non-cash goodwill impairment charge related to the
Company’s Latin America reporting unit which is reflected as part of SG&A on the Consolidated
Statements of Income. The impairment charge recognized was the amount by which the carrying value of
the Latin America reporting unit exceeded its fair value. The result of the factors described above on our
LRP was an overall decline in the forecasted financial
information included in our income approach
valuation model.
In addition, we concluded it was appropriate to risk-adjust the discount rate used as
compared to the prior year.

There were no other impairments recorded in 2017 other than those already referenced above.

For the year ended December 31, 2016, the Company recorded a $1.4 million non-cash permit impairment
charge in Japan which is reflected as part of SG&A on the Consolidated Statements of Income. There were
no other impairments recorded in 2016 other than those already referenced above.

There were no other impairments recorded in the year ended December 31, 2015 other than those
already referenced above.

Other

During the year ended December 31, 2017, we recorded $24.8 million of consulting and professional
services related to the implementation of the new revenue recognition and lease accounting standards as
well as internal control remediation activities which are reflected as part of SG&A on the Consolidated
Statements of Income.

For the year ended December 31, 2016, we recorded $8.8 million of consulting and professional services
related to internal control remediation activities and implementation of the new revenue recognition
standard which are reflected as part of SG&A on the Consolidated Statements of Income. We also recorded
$2.5 million non-cash impairment charge, offset by a $3.1 million gain from an insurance settlement which is
reflected as part of Other (expense) income, net on the Consolidated Statements of Income.

2017 10-K Annual Report

Stericycle, Inc. • 40

There were no other special project costs for the year ended December 31, 2015.

Stericycle has maintained a structured capital allocation strategy that balances investment in the business,
debt reduction, and returns to shareholders.

Capital Allocation

Part II

Our Capital Allocation items include the following types of activities:

Stock issuance costs,

! Dividends on Preferred Stock,

! Debt modification costs in connection with related non-recurring matters,

Early extinguishment of debt gains and losses, and

! Other related expenses.

Dividends on shares of the Series A Preferred Stock are payable on a cumulative basis when, as and if declared by
our Board of Directors, or an authorized committee thereof, at an annual rate of 5.25% on the liquidation
preference of $1,000 per share (and, correspondingly, $100.00 per share with respect to the depositary shares).
The dividends may be payable in cash, or subject to certain limitations, in shares of our common stock, or any
combination of cash and shares of our common stock, on March 15, June 15, September 15 and December 15 of
each year, commencing on December 15, 2015, and to, and including, September 15, 2018.

We declared and paid dividends of $36.3 million, $39.4 million, and $10.1 million to the preferred stock
shareholders during the years ended December 31, 2017, 2016, and 2015, respectively.

Tax Reform

As a result of the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”) which was signed into law on
December 22, 2017, the Company has calculated its best estimate of the impact of the Tax Act on its year
end 2017 income tax benefit/provision and as a result has recorded $129.8 million as an income tax
benefit in the fourth quarter of 2017. For further discussion, see Part II, Item 8. Financial Statements and
Supplementary Data; Note 8 – Income Taxes in the Consolidated Financial Statements.

2017 10-K Annual Report

Stericycle, Inc. • 41

Part II

Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

Consolidated:

The following summarizes the Company’s consolidated operations:

In millions, except per share data

Years Ended December 31,

2017

2016

Change

Revenues
Cost of revenues
Gross profit
Selling, general and administrative expenses
(Loss) income from operations
Interest expense, net
Other expense, net
(Loss) income before income taxes
Income tax (benefit) expense
Net income
Net income attributable to noncontrolling interests
Net income attributable to Stericycle, Inc.
Mandatory convertible preferred stock dividend
Gain on repurchase of preferred stock
Net income attributable to common
shareholders

Earnings per share - diluted

$
$ 3,580.7
2,118.2
1,462.5
1,470.1
(7.6)
(93.7)
(6.6)
(107.9)
(150.9)
43.0
0.6
42.4
36.3
(17.3)

23.4

0.27

%
Revenue

100.0% $
59.2%
40.8%
41.1%
(0.2 %)
(2.6 %)
(0.2 %)
(3.0 %)
(4.2 %)
1.2 %
0.0 %
1.2 %
1.0 %
(0.5 %)

$
3,562.3
2,075.4
1,486.9
1,053.1
433.8
(97.8)
(7.9)
328.1
120.2
207.9
1.6
206.3
39.4
(11.3)

100.0% $
58.3%
41.7%
29.6%
12.2%
(2.7%)
(0.2%)
9.2%
3.4%
5.8%
0.0%
5.8%
1.1%
(0.3%)

18.4
42.8
(24.4)
417.0
(441.4)
4.1
1.3
(436.0)
(271.1)
(164.9)
(1.0)
(163.9)
(3.1)
(6.0)

0.7 % $

178.2

5.0% $

(154.8)

2.08

(1.81)

0.5%
2.1%
(1.6%)
39.6%
(101.8%)
(4.2%)
(16.5%)
(132.9%)
(225.5%)
(79.3%)
(62.5%)
(79.4%)
(7.9%)
53.1%

(86.9%)

(87.0%)

In analyzing our Company’s performance,

it is necessary to understand that our various
Revenues:
regulated services share a common infrastructure and customer base. We market our regulated and
compliance services by offering various pricing options to meet our customers’ preferences, and
customers move between these different billing paradigms. For example, our 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 in a subsequent period, the same customer could
move to our standard service ("Steri-Safe OSHA Compliance Program"), which packages the same
regulated medical waste services with 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 services under a different
pricing and billing arrangement. We do not track the movement of customers between the various types
of regulated services we offer. Although we can identify directional trends in our services, because the
regulated services are similar in nature and there are inherent inaccuracies in disaggregation, we believe
that aggregating these revenues communicates the appropriate metric. We analyze our revenue growth
by identifying changes related to organic growth, acquired growth, divestitures and changes due to
currency exchange fluctuations.

Consolidated revenues increased $18.4 million, or 0.5%, in 2017 to $3.58 billion from $3.56 billion in 2016.
Overall organic revenues growth contributed $20.1 million, or 0.6%. Organic growth excludes the effect of
foreign exchange and acquisitions and divestitures with less than a full year of revenues in the
comparative period. Acquisitions contributed $32.2 million to revenues. Divestitures reduced revenues by
$21.6 million. The net effect of acquisitions and divestitures resulted in a 0.3% increase in revenues in

2017 10-K Annual Report

Stericycle, Inc. • 42

Part II

2017. The effect of foreign exchange rates unfavorably impacted total revenues in 2017 by $12.3 million,
or 0.3%, as foreign currencies declined against the U.S. dollar.

(“M&I”) customers, which have a higher

Gross profit: Consolidated gross profit decreased $24.4 million, or 1.6%, in 2017 to $1.46 billion from
$1.49 billion in 2016. As a percentage of revenues, consolidated gross profit decreased to 40.8% in 2017
compared to 41.7% in 2016. The decline in gross profit was primarily due to lower revenues from our
Manufacturing and Industrial
fixed cost structure, and
approximately $18.0 million of non-cash fixed assets depreciation increases and write-offs. Domestically,
pricing pressure on our small quantity regulated waste and compliance customers negatively impacted
our gross profit as a percentage of revenues.
In addition, international gross profit is lower than domestic
gross profit because our international operations have fewer small account customers, which tend to
generate higher gross profit. Historically, our international operations generate most of their revenues
from large account customers, such as hospitals. As our international revenues increase, consolidated
gross profit percentages experience downward pressure due to this "business mix" shift, which may be
offset by additional international small account market penetration, integration savings, and domestic
business expansion.

SG&A: Consolidated SG&A expenses increased $417.0 million, or 39.6%, in 2017 to $1.47 billion from
$1.05 billion in 2016. The increase was primarily attributable to: $295.0 million charge for the Settlement
for the small quantity customer class action lawsuit, a $65.0 million non-cash goodwill impairment charge
in Latin America, $32.7 million in regulatory compliance, consulting and professional expenses, primarily
related to certain non-recurring litigation matters, $30.6 million of Business Transformation related
expenses, and $24.8 million of consulting and professional services related to the implementation of the
new revenue recognition and lease accounting standards and internal control remediation work. As a
percentage of revenues, excluding the $295.0 million Settlement charge and the $65.0 million non-cash
goodwill impairment charge, SG&A increased to 31.0% in 2017 compared to 29.6% in 2016.

(Loss) income from operations: Consolidated (loss) income from operations decreased $441.4 million,
or 101.8%, in 2017 to ($7.6) million loss from $433.8 million income in 2016. Comparison of income from
operations between 2017 and 2016 was primarily driven by the items described in Gross profit and SG&A
above.

Interest expense: Net interest expense decreased in 2017 to $93.7 million from $97.8 million in 2016 due
to a reduction of our average outstanding debt balance, partially offset by an increase in interest rates in
the U.S.

Income tax (benefit) expense:
Income tax (benefit) was ($150.9) million in 2017 compared to income tax
expense of $120.2 million in 2016. The effective tax rates for the years 2017 and 2016 were (139.9%) and
36.6%, respectively. The change in 2017 rate, when compared to the prior year, was primarily due to the
impact of the Tax Act signed into law on December 22, 2017. The Company recognized an income tax
(benefit) of $(129.8) million as a result of revaluing our U.S. net deferred tax liabilities from 35% to the
newly enacted U.S. corporate income tax rate of 21%, partially offset by a one-time transition tax on our
unremitted foreign earnings and profits which we will elect to pay over an eight-year period, and
expected foreign withholding taxes.

2017 10-K Annual Report

Stericycle, Inc. • 43

Part II

Information by Segment

Domestic and Canada RCS:

In millions

Revenues
Gross profit
SG&A
Income from operations

Years Ended December 31,

2017

2016

Change

$
2,551.9
1,091.7
789.8
301.9

% Revenue

100.0% $
42.8%
30.9%
11.8%

$
2,508.8
1,121.3
515.8
605.5

% Revenue

100.0%$
44.7 %
20.6 %
24.1 %

43.1
(29.6)
274.0
(303.6)

1.7 %
(2.6%)
53.1 %
(50.1%)

Revenues: Domestic and Canada RCS revenues increased $43.1 million, or 1.7%, in 2017 to $2.55 billion
from $2.51 billion in 2016. Organic revenue growth contributed $19.0 million, or 0.8%, and acquisitions
contributed $20.9 million, or 0.8%, to revenues. Our Secure Information Destruction revenues were strong
due to higher sales activity for both recurring and one-time purge services combined with higher
recycling revenue. The strengthening of the Canadian dollar had a favorable impact on 2017 revenues by
$3.2 million, or 0.1%. Services related to Manufacturing and Industrial (“M&I”) experienced a decline of
$19.7 million from last year, which reduced overall organic growth by 0.9%. This decline was due to fewer
In addition, we have experienced pricing
on-call services related to softness in the U.S. industrial market.
pressure on our small quantity regulated waste and compliance customers resulting from hospital
consolidation of physician practices and increased competitive activities in the market.

Gross profit: Domestic and Canada RCS gross profit decreased $29.6 million, or 2.6%, in 2017 to $1.09
billion from $1.12 billion in 2016. As a percentage of revenues, gross profit decreased to 42.8% in 2017
compared to 44.7% in 2016, primarily due to lower revenues from our M&I customers, which have a
higher fixed cost structure, and approximately $18.0 million of non-cash fixed assets depreciation
Pricing pressure on our small quantity regulated waste and compliance
increases and write-offs.
customers negatively impacted our gross profit as a percentage of revenues. We also experienced higher
costs related to wages and fuel.

SG&A: Domestic and Canada RCS SG&A expenses increased $274.0 million, or 53.1%, in 2017 to $789.8
million from $515.8 million in 2016, primarily due to the $295.0 million charge for the Settlement for the
small quantity customer class action lawsuit. As a percentage of revenues, excluding the $295.0 million
Settlement, SG&A decreased to 19.4% in 2017 compared to 20.6% in 2016.

Income from operations: Domestic and Canada RCS income from operations decreased $303.6 million,
or 50.1%, in 2017 to $301.9 million from $605.5 million in 2016. Comparison of income from operations
between 2017 and 2016 was primarily driven by the items described in Gross profit and SG&A above.

International RCS:

In millions

Revenues
Gross profit
SG&A
Loss from operations

Years Ended December 31,

2017

2016

Change

% Revenue

707.6
218.9
296.0
(77.1)

100.0% $
30.9%
41.8%
(10.9%)

751.7
228.5
256.8
(28.3)

100.0% $
30.4%
34.2%
(3.8%)

(44.1)
(9.6)
39.2
(48.8)

(5.9%)
(4.2%)
15.3 %
172.4%

2017 10-K Annual Report

Stericycle, Inc. • 44

Part II

International RCS revenue decreased $44.1 million, or 5.9%, in 2017 to $707.6 million from
Revenues:
$751.7 million in 2016. 2017 organic revenue decline in the International RCS segment was $13.4 million,
or 1.8%, primarily due to exiting certain patient transport service contracts in the U.K. and a decline in
M&I waste services in our Latin American countries. Acquisitions in the International RCS segment
contributed $6.4 million to revenues. Divestitures related to the sale of certain assets in the U.K. reduced
revenues by $21.6 million. The net effect of acquisitions and divestitures resulted in a 2.0% decrease in
revenues in 2017. The effect of foreign exchange rates unfavorably impacted international revenues in
2017 by $15.5 million, or 2.1%, as foreign currencies declined against the U.S. dollar.

Gross profit:
International RCS gross profit decreased $9.6 million, or 4.2%, in 2017 to $218.9 million
from $228.5 million in 2016. As a percentage of revenues, gross profit increased to 30.9% in 2017
compared to 30.4% in 2016 as a result of divesting a lower margin patient transport business in the U.K.

SG&A:
International RCS SG&A expenses increased $39.2 million, or 15.3%, in 2017 to $296.0 million
from $256.8 million in 2016, primarily due to a $65.0 million non-cash goodwill impairment charge in Latin
America, partially offset by the divestiture of the patient transport business in the U.K. in 2017. As a
percentage of revenues, excluding a $65.0 million non-cash goodwill impairment charge in Latin America,
SG&A decreased to 32.6% in 2017 compared to 34.2% in 2016.

International RCS loss from operations increased $48.8 million in 2017 to $77.1
Loss from operations:
million from $28.3 million in 2016. Comparison of loss from operations between 2017 and 2016 was
primarily driven by the items described in SG&A above.

All Other:

In millions

Revenues
Gross profit
SG&A
Loss from operations

Years Ended December 31,

2017

2016

Change

% Revenue

321.2
151.9
384.3
(232.4)

100.0% $
47.3%
119.6%
(72.4%)

301.8
137.1
280.5
(143.4)

100.0% $
45.4 %
92.9 %
(47.5%)

19.4
14.8
103.8
(89.0)

6.4 %
10.8 %
37.0 %
62.1 %

Our All Other segment includes Domestic Communication and Related Services operations which
consists of services including inbound/outbound communication, automated patient reminders, online
scheduling, notifications, product retrievals, product returns, and quality audits, as well as expenses
related to Corporate support, shared services functions, stock-based compensation, certain non-recurring
litigation matters,
implementation of the new revenue recognition and lease accounting standards,
internal control remediation activities and Business Transformation.

Revenues: Other revenues, related to Domestic Communication and Related Services, increased $19.4
million, or 6.4%, in 2017 to $321.2 million from $301.8 million in 2016, primarily due to serving new
brands across many industries and several larger non-recurring recall events in 2017.

Gross profit: Other gross profit increased $14.8 million, or 10.8%, in 2017 to $151.9 million from $137.1
million in 2016. As a percentage of revenues, gross profit increased to 47.3% in 2017 compared to 45.4%
in 2016.

SG&A: Other SG&A expenses increased $103.8 million, or 37.0%, in 2017 to $384.3 million from $280.5
million in 2016, primarily due to $20.5 million of Business Transformation related expenses, $24.8 million

2017 10-K Annual Report

Stericycle, Inc. • 45

Part II

of consulting and professional services related to the implementation of the new revenue recognition and
lease accounting standards and internal control remediation activities, and $32.7 million in regulatory
compliance, consulting and professional expenses, primarily related to certain non-recurring litigation
matters.

Loss from operations: Other loss from operations increased $89.0 million in 2017 to $232.4 million from
$143.4 million in 2016. Comparison of loss from operations between 2017 and 2016 was primarily driven
by the items described in SG&A above.

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

Consolidated:

The following summarizes the Company’s operations:

In millions, except per share data

Revenues
Cost of revenues
Gross profit
Selling, general and administrative expenses
Income from operations
Interest expense, net
Other (expense) income, net
Income before income taxes
Income tax expense
Net income
Net income attributable to noncontrolling interests
Net income attributable to Stericycle, Inc.
Mandatory convertible preferred stock dividend
Gain on repurchase of preferred stock
Net income attributable to common
shareholders

Earnings per share - diluted

Years Ended December 31,

2016

2015

Change

$
3,562.3
2,075.4
1,486.9
1,053.1
433.8
(97.8 )
(7.9)
328.1
120.2
207.9
1.6
206.3
39.4
(11.3)

%
Revenue

100.0% $
58.3%
41.7%
29.6%
12.2%
(2.7%)
(0.2%)
9.2%
3.4%
5.8%
0.0%
5.8%
1.1%
(0.3%)

$
2,985.9
1,731.1
1,254.8
767.2
487.6
(77.3)
0.6
410.9
142.9
268.0
1.0
267.0
10.1
-

%
Revenue

100.0% $
58.0 %
42.0 %
25.7 %
16.3%
(2.6%)
0.0 %
13.8 %
4.8%
9.0%
0.0 %
8.9 %
0.3 %
–

178.2

2.08

5.0% $

256.9

8.6% $

2.98

$
576.4
344.3
232.1
285.9
(53.8)
(20.5)
(8.5)
(82.8)
(22.7)
(60.1)
0.6
(60.7)
29.3
(11.3)

(78.7)

(0.90)

19.3%
19.9%
18.5%
37.3%
(11.0%)
26.5%
NM
(20.2%)
(15.9%)
(22.4%)
60.0%
(22.7%)
290.1%
NM

(30.6%)

(30.2%)

Revenues: Consolidated revenues increased $576.4 million, or 19.3%, in 2016 to $3.56 billion from $2.99
billion in 2015. Overall organic revenue growth contributed $94.6 million, or 3.2%. Organic growth
excludes the effect of foreign exchange and acquisitions and divestitures with less than a full year of
revenues in the comparative period. Acquisitions contributed $570.1 million to revenues driven by the full
year impact of the 2015 Shred-it acquisition. Divestitures reduced revenues by $0.2 million. The net
effect of acquisitions and divestitures resulted in a 19.1% increase in revenues in 2016. The effect of
foreign exchange rates unfavorably impacted total revenues in 2016 by $88.0 million, or 2.9%, as foreign
currencies declined against the U.S. dollar.

Gross profit: Consolidated gross profit increased $232.1 million, or 18.5%, in 2016 to $1.49 billion from
$1.25 billion in 2015. The increase in 2016 gross profit primarily reflects the full year impact of the 2015
Shred-it acquisition. As a percentage of revenues however, consolidated gross profit decreased to 41.7%
in 2016 compared to 42.0% in 2015, primarily driven by costs incurred to exit certain of our patient

2017 10-K Annual Report

Stericycle, Inc. • 46

transport services contracts in the U.K. ($8.3 million) and lower international gross profit due to customer
mix (fewer small customers which tend to provide higher gross profits).

Part II

SG&A: Consolidated SG&A expenses increased $285.9 million, or 37.3%, in 2016 to $1.05 billion from
$767.2 million in 2015 to support our increase in revenues and the full year impact of the 2015 Shred-it
acquisition. Depreciation and amortization increased $94.7 million in 2016 primarily related to the Shred-
it acquisition. During the fourth quarter of 2016, we increased our allowance for doubtful accounts due to
market and economic conditions as we continued to experience challenges internationally and in our M&I
waste services. Primarily in our Brazil and Mexico markets in Latin America, the aging profiles of our older
receivables were
desired
collection
improvement. Accordingly, we concluded that there was a higher degree of risk in our ability to collect
those aged accounts and therefore determined that it would be appropriate to adjust the allowance for
doubtful accounts by increasing the reserve percentages applied to those aged accounts. We also noted
a significant increase in our M&I accounts receivable and increased the allowance related to those
receivables. As a percentage of revenues, SG&A increased to 29.6% in 2016 compared to 25.7% in 2015.

efforts were

increasing

yielding

and

our

not

Income from operations: Consolidated income from operations decreased by $53.8 million, or 11.0%, in
2016 to $433.8 million from $487.6 million in 2015. Comparison of income from operations between 2016
and 2015 was primarily driven by the items described in Gross profit and SG&A above.

Net Interest Expense: Net interest expense increased to $97.8 million in 2016 from $77.3 million in 2015,
due to the full year impact of increased borrowings to fund the acquisition of Shred-it late in 2015.

Income tax expense decreased to $120.2 million in 2016 from $142.9 million in
Income Tax Expense:
2015. The effective tax rates for the years 2016 and 2015 were 36.6% and 34.8%, respectively. The
increase in the 2016 tax rate, when compared to 2015, was primarily related to the recognition of tax
benefits in 2015 as well as a higher proportion of pre-tax income in the U.S. which has a higher statutory
tax rate, compared to international operations.

Information by Segment

Domestic and Canada RCS:

In millions

Revenues
Gross profit
SG&A
Income from operations

Years Ended December 31,

2016

2015

Change

$
2,508.8
1,121.3
515.8
605.5

% Revenue

100.0% $
44.7%
20.6%
24.1%

$
1,999.2
908.8
404.1
504.7

% Revenue

100.0%$
45.5%
20.2%
25.2%

509.6
212.5
111.7
100.8

25.5 %
23.4 %
27.6 %
20.0 %

Revenues: Domestic and Canada RCS revenues increased $509.6 million, or 25.5%, in 2016 to $2.51
billion from $2.00 billion in 2015 reflecting the full year impact of the 2015 Shred-it acquisition.
Acquisitions contributed $476.1 million, and organic growth contributed $35.8 million, or 1.8% in
revenues. The Canadian dollar weakened and negatively affected 2016 revenue by $2.3 million. Services
related to M&I waste decreased by $15.0 million due to fewer on call services (project work) and softness
In addition, we experienced
in the U.S. M&I market, negatively impacting overall organic growth by 1.7%.
pricing pressure on our small quantity regulated waste and compliance customers resulting from hospital
consolidation of physician practices and increased competitive activities in the market.

2017 10-K Annual Report

Stericycle, Inc. • 47

Part II

Gross profit: Domestic and Canada RCS gross profit increased $212.5 million, or 23.4%, in 2016 to $1.12
billion from $908.8 million in 2015 reflecting the full year impact of the 2015 Shred-it acquisition. As a
percentage of revenues, gross profit decreased to 44.7% in 2016 compared to 45.5% in 2015, primarily
due to less than anticipated revenues from our M&I customers, which have a higher fixed cost structure.
Additionally, higher disposal costs for some of our industrial waste project work in 2016 unfavorably
impacted domestic gross profit.

SG&A: Domestic and Canada RCS SG&A expenses increased $111.7 million, or 27.6%, in 2016 to $515.8
million from $404.1 million in 2015, primarily related to the full year impact of the 2015 Shred-it
acquisition,
increased compensation and marketing expenses, and an increase in our allowance for
doubtful accounts driven by challenging market and economic conditions, which encountered both
macro-economic slowdowns in the general economy as well as the slow-down in the Manufacturing and
Industrial
(M&I) customer base. As a percentage of revenues, SG&A increased to 20.6% in 2016
compared to 20.2% in 2015.

Income from operations: Domestic and Canada RCS income from operations increased $100.8 million,
or 20.0%, in 2016 to $605.5 million from $504.7 million in 2015 reflecting the full year impact of the 2015
Shred-it acquisition. Comparison of income from operations between 2016 and 2015 was primarily driven
by the items described in Gross profit and SG&A above.

International RCS:

In millions

Years Ended December 31,

2016

2015

Change

% Revenue

Revenues
Gross profit
SG&A
(Loss) income from operations

751.7
228.5
256.8
(28.3)

100.0% $
30.4%
34.2%
(3.8%)

716.8
230.3
181.1
49.2

100.0%$
32.1%
25.3%
6.9%

34.9
(1.8)
75.7
(77.5)

4.9 %
(0.8%)
41.8 %
(157.5 %)

International RCS revenues increased $34.9 million, or 4.9%, in 2016 to $751.7 million from
Revenues:
$716.8 million in 2015. Organic growth, currency rate fluctuations and acquisitions impacted the
comparison of 2016 and 2015. Organic growth in the International RCS segment contributed $33.1
million in revenues, or 4.6%. The exit from certain of our patient transport services contracts in the U.K.
negatively impacted our organic growth in 2016. The effect of foreign exchange rates unfavorably
impacted international revenues in 2016 by $85.7 million, or 12.0%, as foreign currencies declined against
the U.S. dollar. Revenues from international acquisitions contributed $87.8 million to the increase in
revenues in 2016 reflecting full year impact of the 2015 Shred-it acquisition.

Gross profit:
International RCS gross profit decreased by $1.8 million, or 0.8%, in 2016 to $228.5 million
from $230.3 million in 2015. As a percentage of revenues gross profit decreased to 30.4% in 2016
compared to 32.1% in 2015 due to the negative impact of higher costs related to servicing certain
government contracts and charges incurred to exit some of the contracts in our U.K. patient transport
services business, partially offset by the full-year inclusion of the 2015 Shred-it acquisition, which has a
higher average gross profit.
In addition, our international gross profit was negatively impacted by the
inability to pass full cost increases on to customers in areas of high inflation.

SG&A:
International RCS SG&A expenses increased $75.7 million, or 41.8%, in 2016 to $256.8 million
from $181.1 million in 2015. As a percentage of revenues, SG&A increased to 34.2% in 2016 compared to

2017 10-K Annual Report

Stericycle, Inc. • 48

Part II

25.3% in 2015. The following factors negatively impacted our international SG&A during 2016: the full
year inclusion of the 2015 Shred-it acquisition,
increased compensation expense in support of new
business growth opportunities, and an increase in our allowance for doubtful accounts due to market and
economic conditions as we continued to experience challenges internationally and in our M&I waste
services. Primarily in our Brazil and Mexico markets in Latin America, the aging profiles of our older
receivables were
desired
collection
improvement. Accordingly, we concluded that there was a higher degree of risk in our ability to collect
those aged accounts and therefore determined that it would be appropriate to adjust the allowance for
doubtful accounts by increasing the reserve percentages applied to those aged accounts. Brazil and
Mexico saw the largest increases to their allowance for doubtful accounts.

efforts were

increasing

yielding

and

our

not

International RCS income from operations decreased $77.5 million to a
(Loss) income from operations:
($28.3) million loss in 2016 from $49.2 million income in 2015. Comparison of (loss) income from
operations between 2016 and 2015 was primarily driven by the items described in Gross Profit and SG&A
above.

All Other:

In millions

Revenues
Gross profit
SG&A
Loss from operations

Years Ended December 31,

2016

2015

Change

% Revenue

301.8
137.1
280.5
(143.4)

100.0% $
45.4%
92.9%
(47.5%)

269.9
115.7
182.0
(66.3)

100.0% $
42.9%
67.4%
(24.6%)

31.9
21.4
98.5
(77.1)

11.8 %
18.5 %
54.1 %
116.3%

Our All Other segment includes Domestic Communication and Related Services operations which
consists of services including inbound/outbound communication, automated patient reminders, online
scheduling, notifications, product retrievals, product returns, and quality audits, as well as expenses
related to Corporate support, shared services functions, stock-based compensation, certain non-recurring
litigation matters, implementation of the new revenue recognition and lease accounting standards, and
internal control remediation activities.

Revenues: All Other revenues for the year ended December 31, 2016 increased $31.9 million, or 11.8%, to
$301.8 million from $269.9 million for the year ended December 31, 2015, primarily due to a significant
recall event in the fourth quarter of 2016 in Domestic Communication and Related Services.

Gross profit: Other gross profit increased $21.4 million, or 18.5%, in 2016 to $137.1 million from $115.7
million in 2015. As a percentage of revenues, gross profit increased to 45.4% in 2016 compared to 42.9%
in 2015.

SG&A: Other SG&A expenses increased $98.5 million, or 54.1%, in 2016 to $280.5 million from $182.0
million in 2015, primarily due to an increase in corporate shared services during 2016.

Loss from operations: Other loss from operations increased $77.1 million in 2016 to $143.4 million from
$66.3 million in 2015, primarily driven by the items described in SG&A above.

2017 10-K Annual Report

Stericycle, Inc. • 49

Part II

Liquidity and Capital Resources

The Company believes it has sufficient liquidity to support its ongoing operations and to invest in future
growth to create value for its stockholders. Operating cash flows and the Company’s $1.2 billion senior
credit facility are the Company’s primary sources of liquidity and are expected to be used for, among
other
interest and principal on the Company’s long-term debt obligations,
acquisitions, capital expenditures necessary to support growth and productivity improvements, including
associated with our multiyear Business Transformation, and any Board of Director approved stockholder
distribution.

things, payment of

The Company’s credit facilities contain a number of covenants, including financial covenants, to which the
Company was in compliance at December 31, 2017. Based upon the Company’s expected 2018 Business
Transformation investment plans, it is reasonably possible that the Company could exceed a Debt/EBITDA
leverage threshold (leverage covenant) at some point in 2018. This risk can be mitigated through
appropriate spending controls and/or seeking temporary relief from the leverage covenant from our
lenders.

Working Capital: At December 31, 2017, our working capital decreased $386.7 million to ($156.0) million
compared to $230.7 million at December 31, 2016.

Current assets increased $39.8 million in 2017 to $813.4 million from $773.6 million in 2016, primarily
driven by a $33.8 million increase in prepaid expenses from the timing of our income tax payments, and
$11.7 million increase in classification of assets held for sale, partially offset by a $10.8 million reduction in
net accounts receivable. Days sales outstanding ("DSO") was 63 days and 64 days at December 31, 2017
and 2016, respectively.

Current liabilities increased $426.5 million in 2017 to $969.4 million from $542.9 million in 2016, primarily
due to an accrual of $295.0 million related to the Settlement, $47.5 million reclassification of term loan
debt from long-term to current, $24.2 million increase in accrued professional services, $22.9 million
increase in accrued taxes, $22.9 million increase in accounts payable, and $11.7 million increase in accrued
compensation and self-insurance.

Net Cash Provided or Used: Net cash provided by operating activities decreased $52.2 million, or 9.3%,
in 2017 to $508.6 million from $560.8 million in 2016.

Net cash used in investing activities decreased $2.6 million, or 1.3%, in 2017 to $193.0 million from $195.6
million in 2016. We used $11.4 million less cash for acquisitions in 2017 than in 2016. Our capital
expenditures increased by $6.8 million in 2017 and, as a percentage of revenues, were at 4.0% and 3.8% in
2017 and 2016, respectively, as we invested $10.9 million in our Business Transformation late in 2017 for
software licenses related to the ERP system.

Net cash used in financing activities decreased $55.6 million, or 14.8%, in 2017 to $321.2 million from
$376.8 million in 2016. We repaid a net of $175.6 million and $178.4 million of our senior credit facility,
private placement, and term loan facility during 2017 and 2016, respectively. We had preferred share
repurchases of $34.2 million in 2017 compared to $40.8 million of common and $30.9 million of preferred
share repurchases in 2016. Dividends of $36.3 million and $39.4 million were paid during 2017 and 2016,
respectively, to holders of our Series A Preferred Stock.

2017 10-K Annual Report

Stericycle, Inc. • 50

Part II

The following table summarizes our significant contractual obligations and cash commitments at
December 31, 2017:

Contractual Obligations

Payments due by period (in millions)

Total

2018

2019-2020

2021-2022

2023 and
After

Recorded Obligations:

Covenants not-to-compete agreements
Mandatory deemed repatriation tax (1)
Expected environmental liabilities (2)

Total debt (3)
Unrecorded Obligations:

Interest on debt and capital leases (4)
Non-cancelable operating lease obligations (5)
Unconditional purchase obligations (6)

Total contractual cash obligations

0.8 $
24.3 $
30.8
2,747.2

327.2
561.1
71.1
3,762.5 $

0.2 $
1.8 $
5.7
119.5

82.9
145.9
37.1
393.1 $

0.4 $
3.7 $
5.2
593.4

134.1
213.2
32.1
982.1 $

$
$

0.2
3.7
2.9
1,776.7

104.8
115.1
1.9
2,005.3 $

-
15.1
17.0
257.6

5.4
86.9
-
382.0

(1) U.S. federal income tax on mandatory deemed repatriation is payable over 8 years pursuant to the

Tax Act.

(2)

(3)

(4)

Environmental liabilities are presented above on an undiscounted basis and are associated with
identified sites where an assessment has indicated that cleanup costs are probable and can be
reasonably estimated but the timing of such payments is not fixed and determinable.

These amounts represent the scheduled principal payments related to our long-term debt and
capital leases, excluding interest.

Interest on our fixed-rate debt was calculated based on contractual rates.
Interest on debt with
floating interest rates requires the use of management judgment to estimate the future rates of
interest.

(5) Operating lease obligations include various plant equipment, office furniture and equipment,
motor vehicles, office and warehouse space, and landfill leasing arrangements. Operating lease
obligations expire at various dates with the latest maturity in 2043.

(6) Purchase obligations primarily represent no cancelable contractual obligations related to
information technology products and services that we generally incur in the ordinary course of
our business.

Payments for unrecognized tax benefits are excluded from contractual obligations.
Based on the
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.

As of December 31, 2017, we had $130.8 million of outstanding stand-by letters of credit, $19.0 million of
surety bonds, and $15.7 million of bank guarantees. The bank guarantees are issued mostly by our
international subsidiaries for various purposes, including leases, seller notes, contracts and permits. The
surety bonds are used for performance guarantees. Neither the bank guarantees nor the surety bonds
affect our ability to use our various lines of credit.

We anticipate that our operating cash flows, together with borrowings under our senior unsecured credit
facility, will be sufficient to meet our anticipated future operating expenses, strategic initiatives such as

2017 10-K Annual Report

Stericycle, Inc. • 51

Part II

Business Transformation, capital expenditures and debt service obligations as they become due during
the next 12 months and the foreseeable future.

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 U.S. GAAP.
The
preparation of these financial statements requires management to make estimates, assumptions and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related
disclosure of contingent assets and liabilities. Although management believes that its estimates and
assumptions are reasonable, they are based upon information available when they are made, and
therefore, actual results may differ from these estimates under different assumptions or conditions. The
Company’s most critical accounting policies are those that may be material due to the levels of
subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such
matters to change, and that have a material impact on the financial condition or operating performance
of a company. The Company has identified the following as its most critical accounting policies and
estimates.

Revenue Recognition: We recognize revenue when the following criteria are met: persuasive evidence of
an arrangement exists, services have been rendered, the sales price is fixed or determinable and
collectability is reasonably assured. Revenues for our regulated medical waste management services,
other than our compliances services, and secure information destruction services are recognized at the
time of waste collection. Our compliance service revenues are recognized evenly over the contractual
service period. Payments received in advance are deferred and recognized as services are provided.
Revenues from hazardous waste services are recorded at the time waste is received at our processing
facility or delivered to a third party. Revenues from regulated recall and returns management services and
communication solutions are recorded at the time services are performed. Revenues from product sales
are recognized upon the transfer of title and risk of ownership, which is generally at the time the goods
are shipped to the customer. Charges related to sales taxes and international value added tax ("VAT") and
other similar pass through taxes are not included as revenue.

Effective January 1, 2018, the Company adopted ASU No. 2014-09 “Revenue from Contracts with
Customers (Topic 606) using the modified retrospective method.
The Company is applying certain
practical expedients, including the right to invoice, where the criteria have been met. The Company has
concluded that there will not be a material change to its revenue recognition under the new standard.
Certain costs associated with obtaining contracts with customers will be capitalized and amortized over
the expected economic life of the contract. We are in the process of finalizing the measurement of the
cumulative effect of adopting the new guidance, which will primarily be related to capitalizing commission
costs, for recognition in our first quarter 2018 10-Q filing.

Allowance for Doubtful Accounts: The Company reports accounts receivable at their net realizable
value, which is management’s best estimate of the cash that will ultimately be received. We maintain an
allowance for doubtful accounts to reflect the expected uncollectability of accounts receivable based on
historical collection data and specific risks identified among uncollected accounts. The adequacy of
allowances for uncollectible accounts is reviewed at least quarterly, and adjusted as necessary based on
such reviews. A considerable amount of management’s judgment is required to assess the collectability
of an account, based on detailed analysis of the aging of the receivables, the creditworthiness of our
customers, historical collection trends and current economic trends. Accounts receivable written off in
subsequent periods can differ from the allowance for doubtful accounts provided, but historically our

2017 10-K Annual Report

Stericycle, Inc. • 52

Part II

provision has been adequate. Allowance for doubtful accounts was $65.2 million and $49.6 million for the
years ended December 31, 2017 and 2016, respectively.

Intangible Asset Valuations: The methods commonly used to value intangible assets we acquire are the
income, market and cost approaches. The nature and characteristics of the asset indicate which approach
is most appropriate. Based on the analysis performed by the Company, the fair values of intangible assets
are generally estimated using acceptable income approaches.

A multi-period excess earnings method (“MPEEM”) is generally used to determine the fair value of
customer relationships. The fair value is derived by calculating the present value of the estimated after-
tax earnings attributable to the respective intangible assets. Key inputs and assumptions to the valuation
model are forecasted after-tax cash-flows, the identification of contributory assets and the quantification
of appropriate returns on these assets, the discount rate applied to present value the cash-flows and
attrition rates. Determining an accurate consumption of benefits from acquired customer relationships
cannot be reliably determined because the services we provide to acquired customers change from the
base-line revenues over an extended period of time due to factors such as volume increase, price increase,
and complementary service offerings. Therefore, we amortize our finite-lived intangible assets using the
straight-line method consistent with our valuation model.

A relief from royalty method is generally used to determine the fair value of tradenames. Key inputs and
assumptions to the valuation model are a reasonable approximation of the license rate for the trade
name, forecasted revenues and the discount rate applied to present value the after-tax stream of
estimated royalties avoided by acquiring the trade name.

Tangible Asset Valuation: Trucks, containers and equipment are some of the major asset classes subject
to revaluation as a result of our acquisitions. The indirect and direct methods of the cost approach and
the market approach are used by the Company to value tangible personal property assets. Following is a
description of the methodologies for estimating the fair value of the major tangible fixed asset classes:

! The market approach is used for the valuation of trucks. The market approach is based on market
In the market approach, the assets being valued are compared to recent
conditions and transactions.
In using similar units of comparison,
sales and/or asking prices of comparable properties or assets.
adjustments are made to the comparable assets to account for factors such as condition, capacity, and
age.

! The direct method of the cost approach is used in the valuation of containers.

In the direct method of
the cost approach, replacement cost new (“RCN”) is determined through current cost information
obtained from original equipment manufacturers, equipment dealers and vendors, and independent
research.

! The cost of reproduction new (“CRN”) for equipment is calculated using the indirect method of the
cost approach. Historical equipment costs and dates are used to calculate the current CRN.
In the
indirect method of the cost approach, trend factors are applied to the historical costs to estimate the
CRN of the assets. Time-adjusted trend factors are applied to historical costs using asset category
specific cost
The CRN is then adjusted for physical
indices published by industry sources.
deterioration and functional and economic obsolescence.

Goodwill and Other Identifiable Intangible Assets: We evaluate goodwill and other indefinite-lived
intangibles for impairment annually as of October 1 or when an indicator of impairment exists.

2017 10-K Annual Report

Stericycle, Inc. • 53

Part II

If no such determination is made, then the impairment test is complete.

We used a quantitative approach to assess goodwill for impairment. The fair value of each reporting unit
is calculated using the income approach (including discounted cash flows) and validated using a market
approach with the involvement of a third party valuation specialist. The income approach uses expected
future cash flows of each reporting unit and discounts those cash flows to present value. Expected future
cash flows are calculated using management assumptions of growth rates, including long-term growth
rates, capital expenditures, and cost efficiencies. Future acquisitions are not included in the expected
future cash flows. We use a discount rate based on a calculated weighted average cost of capital which is
adjusted for each of our reporting units based on size, country and company specific risk premiums. The
market approach compares the valuation multiples of similar companies to that of the associated
reporting unit. We then reconcile the calculated fair values to our market capitalization. The fair value is
then compared to its carrying value including goodwill.
If the fair value is in excess of its carrying value,
the related goodwill is not impaired.
If the fair value is less than its carrying value. We recognize an
impairment loss in the amount that carrying value exceeds the fair value.

We performed our annual goodwill impairment test as of October 1, 2017 and recognized $65.0 million in
non-cash goodwill impairment charges in our Latin America reporting unit. The fair value of our remaining
reporting units significantly exceeded the carrying value. We believe that the estimated fair value used in
measuring the impairment was based on reasonable assumptions. We performed a sensitivity analysis on
our estimated fair value noting that a 50 basis point increase in the discount rate or a 50 basis point
reduction in the long-term growth rate would result
impairment charge of
approximately $5 million or $9 million, respectively.

in an incremental

We have determined that our permits and certain tradenames have indefinite lives due to our ability to
renew them with minimal additional cost, and therefore they are not amortized.
In the fourth quarter of
impairment test on indefinite lived intangibles, other than
2017, the Company performed its annual
goodwill, using the qualitative approach for certain assets and the quantitative approach for the
remaining assets. The calculated fair value of our indefinite-lived intangibles 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.

Future changes in our assumptions or the interrelationship of the assumptions described above may
negatively impact
fair value, adverse changes in
assumptions could result in impairments of goodwill or other intangible assets that would require non-
cash charges and may have a material effect on our financial condition and operating results.

In future measurements of

future valuations.

Our finite-lived intangible assets are amortized over their useful lives using the straight-line method. Our
customer relationships have useful lives from 5 to 30 years based upon the type of customer. We have
non-compete covenant intangibles with useful
lives from 5 to 14 years. We also have tradename
intangibles with useful lives from 4 to 40 years.

We evaluate the useful
life of our intangible assets annually to determine whether events and
circumstances warrant a revision to the remaining useful life and changes are reflected prospectively as
the intangible asset is amortized over the revised remaining useful life.
In the fourth quarter of 2017, the
Company performed its annual assessment of the useful life of its finite-lived intangibles and concluded

2017 10-K Annual Report

Stericycle, Inc. • 54

Part II

its domestic medical waste customer relationship intangibles should be revised from 40 years to 30 years
due to the change in mix of small and large quantity customer relationships. The change in life is a
change in estimate to be accounted for prospectively with an estimated increase to amortization expense
of approximately $7.0 million annually. 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.

Environmental Remediation Liabilities: Our environmental remediation liabilities primarily include
costs associated with remediating air, groundwater, surface water, soil contamination, and applicable legal
costs. To estimate our ultimate liability at these sites, we evaluate several factors, including the nature
and extent of contamination at each identified site, the required remediation methods, timing of
expenditures, and the apportionment of responsibility among the potentially responsible parties (“PRPs”)
and the financial viability of those parties. We routinely review and evaluate sites that require
remediation, considering whether we were an owner, operator, transporter, or generator at the site, that
amount and type of waste hauled to the site and the number of years we were connected with the site.
Next, we review the same information with respect to other named and unnamed PRPs. Estimates of the
cost for the likely remedy are then either developed using our internal resources or by third party
environmental engineers or other service providers.

Income Taxes: We record a provision for income taxes for the anticipated tax consequences of our
reported results of operations using the asset and liability method. Deferred income taxes are recognized
by applying enacted statutory tax rates applicable to future years to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax basis as well as net
operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment date. The measurement of
deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future
realization is uncertain.

Although we believe our assumptions, judgments and estimates are reasonable, changes in tax laws or
our interpretation of tax laws and the resolution of any tax audits could significantly impact the amounts
provided for income taxes in our consolidated financial statements.

In evaluating our ability to recover our deferred tax assets, in full or in part, we consider all available
positive and negative evidence, including our past operating results, and our forecast of future earnings,
future taxable income and prudent and feasible tax planning strategies. The assumptions utilized in
determining future taxable income require significant judgment and are consistent with the plans and
estimates we are using to manage the underlying businesses. Actual operating results in future years
could differ from our current assumptions, judgments and estimates. However, we believe that it is more
likely than not that most of the deferred tax assets recorded on our Consolidated Balance Sheets will
ultimately be realized. We record a valuation allowance to reduce our deferred tax assets to the net
amount that we believe is more likely than not to be realized. At December 31, 2017, the valuation
allowance of $16.1 million was related to foreign net operating losses and tax deductible goodwill that we
are not expected to realize.

We did not recognize certain tax benefits from uncertain tax positions within the provision for income
taxes. We may recognize a tax benefit only if it is more likely than not the tax position will be sustained
on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such positions are then measured based on the largest
benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2017,

2017 10-K Annual Report

Stericycle, Inc. • 55

Part II

our estimated gross unrecognized tax benefits were $27.4 million of which $22.2 million, if recognized,
would favorably impact our future earnings. Due to uncertainties in any tax audit outcome, our estimates
of the ultimate settlement of our unrecognized tax positions may change and the actual tax benefits may
differ significantly from the estimates.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making
significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate
income tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the
transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time
transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31,
2017. The Tax Act results in a related change in assertion on expected foreign withholding taxes.

The SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") in December 2017 to address the
application of U.S. GAAP in situations when a registrant does not have the necessary information
available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting
for certain income tax effects of the Tax Act. That guidance specifies that, for income tax effects of the
Tax Act that can be reasonably estimated but for which the accounting and measurement analysis is not
yet complete, entities should report provisional amounts in the reporting period that includes the
enactment date and those provisional amounts can be adjusted for a measurement period not to exceed
one year from the enactment date. Additionally, for income tax effects of the Tax Act that cannot be
reasonably estimated, entities should report provisional amounts for those income tax effects in the first
reporting period in which a reasonable estimate can be determined, not to exceed one year from the
enactment date.

In accordance with SAB 118, based on our understanding of the Act and guidance available as of the date
of this filing, the Company has calculated with the involvement of a third party tax specialist its best
estimate of the impact of the Tax Act on its year end 2017 income tax provision and as a result has
recorded an income tax (benefit) of ($129.8) million in the fourth quarter of 2017, the period in which the
legislation was enacted. The provisional amount related to the remeasurement of certain deferred tax
assets and liabilities based on the rates at which they are expected to reverse in the future is an income
tax (benefit) of ($167.7) million. The provisional amount related to the one-time transition tax on the
mandatory deemed repatriation of foreign earnings is an income tax expense of $24.3 million based on
cumulative foreign earnings of $149.2 million and $13.6 million related to expected foreign withholding
taxes.

As a result of the Tax Act, the Company has re-evaluated its assertion related to the indefinite
reinvestment of unremitted foreign earnings and recorded a provisional deferred tax liability in the
amount of $13.6 million for expected withholding taxes related to remittances between certain foreign
subsidiaries. Although the Company has recorded this deferred tax liability, the Company is still
evaluating how the Tax Act will affect the Company’s accounting position related to the indefinite
reinvestment of unremitted foreign earnings. During the measurement period, the Company may reflect
adjustments to this provisional amount upon obtaining, preparing, and analyzing the necessary
information to complete the accounting under ASC 740 – Income Taxes. Any subsequent adjustment to
these amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is
complete.

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Part II

whether its accounting policy will be to recognize deferred taxes for basis differences that are expected to
affect the amount of GILTI inclusion upon reversal or to recognize taxes on GILTI as an expense in the
period incurred. While the Company is still evaluating its prospective accounting policy for taxes on GILTI,
the provisional estimates of the tax effects of the Tax Act were reported on the basis that the taxes on
GILTI will be recognized in tax expense in the year it is incurred as a period expense.

For further information see Part II, Item 8. Financial Statements and Supplementary Data; Note 8 – Income
Taxes in the Consolidated Financial Statements.

Insured and Self-Insured Claims: We have retained a significant portion of the risks related to our
employee benefit, auto/fleet, general liability and workers’ compensation claims programs. The exposure
for unpaid claims and associated expenses, including incurred but not reported losses, are based on third
party actuarial valuations and internal estimates. The accruals for these liabilities could be revised if future
occurrences or loss developments significantly differ from our assumptions used. Estimated recoveries
associated with our insured claims are recorded as assets when we believe that the receipt of such
amounts is probable.

Stock Based Compensation: We measure the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of the award or on the fair value of the
liabilities incurred. That cost is recognized over the period during which an employee is required to
provide service in exchange for the award—the requisite service period (usually the vesting period) for
date vesting awards. Performance based awards are recorded consistent with performance metrics and
ASC 718 Compensation – Stock Compensation. No compensation cost
is recognized for equity
instruments for which employees do not render the requisite service.

The grant-date fair value of incentive stock options (“ISOs”) and similar instruments are estimated using
option-pricing models adjusted for the unique characteristics of those instruments (unless observable
market prices for the same or similar instruments are available). Option-pricing models (Black Scholes)
include assumptions that are evaluated by a third party valuation specialist and evaluated and approved
by the VP and Treasurer based on historical experience, current company trends and comparative analysis
If an equity award is modified after the grant date, incremental compensation cost will
to industry trends.
be recognized in an amount equal to the excess of the fair value of the modified award over the fair value
of the original award immediately before the modification.

Restricted shares (“RSUs”) awarded to an employee and Performance-based restricted stock units (“PSUs”)
awarded to an executive officer are measured at its fair value, which is the same amount for which a
similarly restricted share would be issued to third parties. A non-vested equity share unit awarded to an
employee is measured at its fair value as if it were vested and issued on the grant date.

Forfeitures are accounted for as they occur.

For further detail, see Part II, Item 8. Financial Statements and Supplementary Data; Note 12 – Stock Based
Compensation in the Consolidated Financial Statements.

Restructuring:
Involuntary termination benefits are accrued upon the commitment to a termination plan
and when the benefit arrangement is communicated to affected employees, or when liabilities are
determined to be probable and estimable, depending on the existence of a substantive plan for severance
or termination. Costs for one-time termination benefits in which the employee is required to render
service until termination in order to receive the benefits are recognized ratably over the future service
period. Contract termination costs are recorded when contracts are terminated or when we cease to use

2017 10-K Annual Report

Stericycle, Inc. • 57

Part II

the leased facility and no longer derives economic benefit from the contract. All other exit costs are
expensed as incurred.

Restructuring liabilities might change in future periods based on several factors that could differ from
original estimates and assumptions. These include, but are not limited to, contract settlements on terms
different than originally expected, ability to sublease properties based on market conditions at rates or
timelines different than originally estimated or changes to original plans as a result of acquisitions. Such
changes might result in reversals of or additions to restructuring charges that could affect amounts
reported on the Consolidated Statements of Income of future periods.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business, we are exposed to market risks, including changes in interest rates,
certain commodity prices and foreign currency rates.

We are subject to market risks arising from changes in interest rates which related primarily to our
financing activities. We performed a sensitivity analysis to determine how market rate changes might
affect the fair value of our market risk-sensitive debt instruments. 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 $15.0
million on a pre-tax basis.

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.

We have exposure to foreign currency fluctuations. We have subsidiaries in 20 foreign countries whose
functional currency is the local currency. Our international subsidiaries use local currency denominated
lines of credit for their funding needs. We translate results of operations of our international operations
using an average exchange rate. We have quantified and described the impact of foreign currency
translation on our revenues.

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Part II

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Stericycle, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Stericycle, Inc. (the Company) as of
December 31, 2017 and 2016, the related consolidated statements of income, comprehensive income,
changes in equity and cash flows for each of the three years in the period ended December 31, 2017, and
the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to
as the “financial statements”).
in all material
respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2017, in
conformity with U.S. generally accepted accounting principles.

In our opinion, the financial statements present fairly,

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31,
2017, based on criteria established in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February
23, 2018 expressed an adverse opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud. Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures include examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as Stericycle Inc.’s auditor since 1991.

Chicago, Illinois
February 23, 2018

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Stericycle, Inc. • 59

Part II

STERICYCLE, INC.
CONSOLIDATED STATEMENTS OF INCOME

In millions, except per share data

Revenues
Cost of revenues
Gross profit
Selling, general and administrative expenses
(Loss) income from operations
Other income (expense):
Interest income
Interest expense
Other (expense) income, net
(Loss) income before income taxes
Income tax (benefit) expense
Net income
Net income attributable to noncontrolling interests
Net income attributable to Stericycle, Inc.
Mandatory convertible preferred stock dividend
Gain on repurchase of preferred stock
Net income attributable to Stericycle, Inc. common shareholders

Earnings per common share attributable to Stericycle, Inc.
common shareholders:

Basic

Diluted

Weighted average number of common shares

Outstanding:

Basic
Diluted

Years Ended December 31,
2016

2015

2017

3,580.7 $
2,118.2
1,462.5
1,470.1
(7.6)

0.3
(94.0)
(6.6)
(107.9)
(150.9)
43.0
0.6
42.4
36.3
(17.3)
23.4 $

0.27 $

85.3
85.6

3,562.3
2,075.4
1,486.9
1,053.1
433.8

2,985.9
1,731.1
1,254.8
767.2
487.6

-
(97.8)
(7.9)
328.1
120.2
207.9
1.6
206.3
39.4
(11.3)
178.2

2.10

2.08

84.9
85.6

0.2
(77.5)
0.6
410.9
142.9
268.0
1.0
267.0
10.1
-
256.9

3.02

2.98

84.9
86.2

See accompanying Notes to Consolidated Financial Statements.

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Part II

STERICYCLE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

In millions

Net income

Years Ended December 31,
2016

2015

2017

43.0 $

207.9

268.0

Other comprehensive income (loss):
Foreign currency translation adjustments
Amortization of cash flow hedge into income, net of tax expense ($0.7,
$0.8, and $0.4 for the years ended December 31, 2017, 2016, and 2015,
respectively)
Change in fair value of cash flow hedge, net of tax expense (benefit)
($0.0, $0.0, and ($2.6)) for the years ended December 31, 2017, 2016, and
2015, respectively)
Total other comprehensive income (loss)

Comprehensive income
Less: comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Stericycle, Inc. common
shareholders

80.5

(86.7)

(140.6 )

1.0

1.1

0.7

0.3
81.8

124.8
1.8

0.2
(85.4)

122.5
1.2

123.0 $

121.3

(4.1)
(144.0 )

124.0
1.2

122.8

See accompanying Notes to Consolidated Financial Statements.

2017 10-K Annual Report

Stericycle, Inc. • 61

STERICYCLE, INC.
CONSOLIDATED BALANCE SHEETS

In millions, except per share data

ASSETS
Current Assets:
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of $65.2 in 2017 and $49.6
in 2016
Prepaid expenses
Other current assets
Assets held for sale

Total Current Assets

Property, plant and equipment, less accumulated depreciation of $603.2 in 2017 and
$495.2 in 2016
Goodwill
Intangible assets, less accumulated amortization of $392.5 in 2017 and $271.6 in 2016
Other assets
Total Assets

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

Total Current Liabilities

Long-term debt, net
Deferred income taxes
Long-term tax payable
Other liabilities
Total Liabilities

Commitments and contingencies

Equity:
Preferred stock (par value $0.01 per share, 1.0 shares authorized), mandatory
convertible preferred stock, Series A, 0.7 issued and outstanding in 2017 and 2016
Common stock (par value $.01 per share, 120.0 shares authorized, 85.5 issued and
outstanding in 2017 and 85.2 issued and outstanding in 2016)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss

Total Stericycle, Inc.’s Equity

Noncontrolling interests

Total Equity

Total Liabilities and Equity

December 31,

2017

2016

42.2

624.1
80.0
46.3
20.8
813.4

741.0
3,604.0
1,791.5
38.4
6,988.3

119.5
7.0
195.2
588.1
17.9
36.6
5.1
969.4
2,615.3
371.1
55.8
68.1
4,079.7

0.9
1,153.2
2,029.5
(287.0)
2,896.6
12.0
2,908.6
6,988.3

Part II

44.2

634.9
46.2
39.2
9.1
773.6

723.9
3,591.0
1,862.0
29.6
6,980.1

72.8
4.4
172.3
228.5
17.9
44.1
2.9
542.9
2,877.3
645.4
34.2
63.9
4,163.7

0.8
1,166.5
2,006.1
(367.6)
2,805.8
10.6
2,816.4
6,980.1

See accompanying Notes to Consolidated Financial Statements.

2017 10-K Annual Report

Stericycle, Inc. • 62

STERICYCLE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Part II

2017

Years Ended December 31,
2016

2015

43.0

207.9

268.0

In millions

OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation
Intangible amortization
Stock-based compensation expense
Excess tax benefit of stock options exercised
Deferred income taxes
Asset impairment charges and loss (gain) on disposal of assets held for sale
Other, net

Changes in operating assets and liabilities, net of the effects of acquisitions and divestitures:

Accounts receivable
Prepaid expenses
Accounts payable
Accrued liabilities
Other assets and liabilities

Net cash provided by operating activities
INVESTING ACTIVITIES:
Capital expenditures
Payments for acquisitions, net of cash acquired
Proceeds from divestitures of businesses and sale of other assets
Other, net
Net cash used in investing activities
FINANCING ACTIVITIES:
Repayments of long-term debt and other obligations
Proceeds from foreign bank debt
Repayment of foreign bank debt
Proceeds from term loan
Repayment of term loan
Proceeds from private placement of long-term note
Repayment of private placement of long-term note
Proceeds from senior credit facility
Repayment of senior credit facility
Proceeds from (repayment of) bank overdrafts, net
Payments of capital lease obligations
Payments of deferred financing costs
Payment for hedge
Payments for repurchase of common stock
Proceeds from issuance of common stock, net of shares withheld for tax
Proceeds from issuance of mandatory convertible preferred stock
Payments for repurchase of mandatory convertible preferred stock
Dividends paid on mandatory convertible preferred stock
Excess tax benefit of stock options exercised
Payments to noncontrolling interests
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

SUPPLEMENTAL CASH FLOW INFORMATION:
Issuances of obligations for acquisitions
Accrued capital expenditures
Interest paid during the year
Income taxes paid during the year, net of refunds

$
$
$
$

131.1
118.4
21.3
-
(290.2 )
112.2
(6.7)

17.1
(33.9 )
22.9
363.0
10.4
508.6

(143.0 )
(52.5 )
2.5
-
(193.0 )

(62.1 )
13.3
(31.9 )
50.0
(100.0 )
-
(175.0 )
1,739.1
(1,689.7 )
2.4
(3.6)
(2.7)
-
-
10.2
-
(34.2 )
(36.3 )
-
(0.7)
(321.2 )
3.6
(2.0)
44.2
42.2

16.5
5.0
85.8
128.9

$
$
$
$

123.2
129.3
20.5
-
7.1
28.5
1.0

(43.1 )
(1.2)
5.2
28.5
53.9
560.8

(136.2 )
(63.9 )
2.1
2.4
(195.6 )

(89.2 )
76.2
(84.1 )
-
(250.0 )
-
-
1,464.9
(1,393.3 )
(13.6 )
(5.3)
(0.6)
-
(40.8 )
37.5
-
(30.9 )
(39.4 )
-
(8.2)
(376.8 )
0.2
(11.4 )
55.6
44.2

44.2
6.2
88.8
111.5

$
$
$
$

81.9
45.5
21.7
(16.9 )
(10.3 )
1.8
8.4

(55.9 )
(8.1 )
28.2
26.1
(4.3 )
386.1

(114.8 )
(2,419.4 )
-
0.3
(2,533.9 )

(93.2 )
53.7
(87.3 )
1,550.0
(300.0 )
600.0
(100.0 )
1,907.4
(2,004.4 )
4.3
(3.9 )
(9.9 )
(8.8 )
(130.6 )
60.1
746.9
-
(10.1 )
16.9
(5.7 )
2,185.4
(4.2 )
33.4
22.2
55.6

80.2
-
68.0
125.1

See accompanying Notes to Consolidated Financial Statements.

2017 10-K Annual Report

Stericycle, Inc. • 63

STERICYCLE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

In millions

Stericycle, Inc. Equity

Part II

Additional
Paid-In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Noncontrolling
Interests

Total Equity

Preferred Stock Common Stock
Shares Amount Shares Amount
-

84.9 $

0.0 $

0.8 $

289.2 $ 1,743.4 $

(138.4 ) $

267.0

Balance as of January 1, 2015
Net income
Currency translation adjustment
Change in qualifying cash flow hedge,
net of tax
Issuance of common stock for exercise of
options and employee stock purchases,
net of shares withheld for tax
Issuance of mandatory convertible
preferred stock
Purchase and cancellation of treasury
stock
Preferred stock dividend
Stock compensation expense
Excess tax benefit of stock options
exercised
Reduction to noncontrolling interests
due to additional ownership
Balance as of December 31, 2015
Net income
Currency translation adjustment
Change in qualifying cash flow hedge,
net of tax
Issuance of common stock for exercise of
options and employee stock purchases,
net of shares withheld for tax
Purchase and cancellation of treasury
stock
Purchase and cancellation of convertible
preferred stock
Preferred stock dividend
Stock compensation expense
Reduction to noncontrolling interests
due to additional ownership
Balance as of December 31, 2016
Net income
Currency translation adjustment
Change in qualifying cash flow hedge,
net of tax
Issuance of common stock for exercise of
options and employee stock purchases,
net of shares withheld for tax
Purchase and cancellation of convertible
preferred stock
Preferred stock dividend
Stock compensation expense
Reduction to noncontrolling interests
due to additional ownership
Balance as of December 31, 2017

(140.8 )

(3.4 )

(282.6 )

(86.3 )

1.3

(367.6 )

79.3

1.3

0.8

1.0

(1.0 )

68.6

746.9

21.7

16.9

(131.6 )
(10.1 )

0.8

84.9

0.8

(0.3 )
1,143.0

1,868.7
206.3

0.7

(0.4 )

(0.1 )

0.7

85.2

0.8

44.8

(42.2 )

20.5

0.4
1,166.5

(40.8 )

11.3
(39.4 )

2,006.1
42.4

0.3

0.1

17.2

(51.5 )

21.3

17.3
(36.3 )

22.2 $
1.0
0.2

1,917.2
268.0
(140.6 )

(3.4 )

68.6

746.9

(131.6 )
(10.1 )
21.7

16.9

(5.7 )
2,747.9
207.9
(86.7 )

1.3

44.8

(40.8 )

(30.9 )
(39.4 )
20.5

(8.2 )
2,816.4
43.0
80.5

1.3

17.3

(34.2 )
(36.3 )
21.3

(5.4 )
18.0
1.6
(0.4 )

(8.6 )
10.6
0.6
1.2

0.7 $

85.5 $

(0.3 )
0.9 $ 1,153.2 $ 2,029.5 $

(287.0 ) $

(0.4 )
12.0 $

(0.7 )
2,908.6

See accompanying Notes to Consolidated Financial Statements.

2017 10-K Annual Report

Stericycle, Inc. • 64

Part II

STERICYCLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share data and unless otherwise indicated)

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

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

Description of Business

We are a business-to-business services provider with a focus on regulated and compliance solutions for
healthcare, retail, and commercial businesses. This includes the collection and processing of regulated
and specialized waste for disposal and the collection of personal and confidential information for secure
destruction, plus a variety of training, consulting, recall/return, communication, and compliance services.

We were incorporated in 1989 and presently serve a diverse customer base of more than one million
customers throughout the United States, Argentina, Austria, Australia, Belgium, Brazil, Canada, Chile,
France, Germany, Ireland, Japan, Luxembourg, Mexico, the Netherlands, Portugal, Republic of Korea,
Romania, Singapore, Spain, and the United Kingdom.

For further information on the Company’s business, segments and services, see Part I, Item 1. Business and
Note 16 – Segment Reporting.

Summary of Significant Accounting Policies

Basis of Presentation: The accompanying consolidated financial statements include the accounts of
Stericycle, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation. The Company's consolidated financial statements were prepared in accordance with U.S.
liabilities, revenue and expenses of all wholly-owned subsidiaries and
GAAP and include the assets,
majority-owned subsidiaries over which the Company exercises control. Outside stockholders' interests in
subsidiaries are shown on the consolidated financial statements as “Noncontrolling interests."

The preparation of financial statements in conformity with generally accepted
Use of Estimates:
accounting principles requires us to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Some areas where we make estimates include our
allowance for doubtful accounts, credit memo reserve, accrued employee health and welfare benefits,
environmental liabilities, stock compensation expense, income tax liabilities, accrued auto and workers’
compensation insurance claims, intangible asset valuations, and goodwill impairment. 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.

Revenue Recognition: Revenues for our regulated medical waste management services, other than our
compliances services, and secure information destruction services are recognized at the time of waste
collection. Our compliance service revenues are recognized evenly over the contractual service period.
Payments received in advance are deferred and recognized as services are provided. Revenues from
hazardous waste services are recorded at the time waste is received at our processing facility or delivered
to a third party. Revenues from regulated recall and returns management services and communication

2017 10-K Annual Report

Stericycle, Inc. • 65

Part II

solutions 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.
Charges related to sales taxes and
international value added tax ("VAT") and other similar pass through taxes are not included as revenue.

Effective January 1, 2018, the Company will adopt ASU No. 2014-09 “Revenue from Contracts with
Customers (Topic 606) using the modified retrospective method. The Company will apply certain practical
expedients, including the right to invoice, where the criteria have been met. The Company has concluded
that there will not be a material change to its revenue recognition under the new standard. Certain costs
associated with obtaining contracts with customers will be capitalized and amortized over the expected
economic life of the contract. We are in the process of finalizing the measurement of the cumulative
effect of adopting the new guidance, which will primarily be related to capitalizing commission costs, for
recognition in our first quarter 2018 10-Q filing.

Cash and Cash Equivalents: We consider all highly liquid investments with a maturity of less than three
months when purchased to be cash equivalents. Cash equivalents are carried at cost.

Accounts Receivable and Allowance for Doubtful Accounts: Accounts receivable consist of amounts
due to us from our normal business activities. Our accounts receivable balance includes amounts related
to VAT and similar international pass-through taxes. We do not require collateral as part of our standard
trade credit policy. Accounts receivable balances are determined to be past due based on the contractual
terms with the customer. We maintain an allowance for doubtful accounts to reflect the expected
uncollectability 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 approximately
1.0% of our accounts receivable. During the year ended December 31, 2017, 2016 and 2015, bad debt
expense was $32.3 million, $41.8 million, and $13.7 million, respectively.

Financial Instruments: Our financial
instruments consist of cash and cash equivalents, short-term
investments, accounts receivable and payable, derivatives, and long-term debt. 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 approximately 1.0% of total accounts receivable. We perform ongoing
credit evaluation of our customers and maintain allowances for potential credit losses.

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

Building and improvements
Machinery and equipment
Containers
Vehicles
Office equipment and furniture
Software and Enterprise Resource Planning system

2 to 40 years
2 to 30 years
2 to 20 years
2 to 10 years
2 to 20 years
2 to 10 years

Capitalized Interest: We capitalize interest incurred associated with projects under construction for the
duration of the asset construction period. During the year ended December 31, 2017, we capitalized
interest of $1.6 million. We did not capitalized interest in 2016 and 2015.

2017 10-K Annual Report

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Part II

Goodwill and Other Identifiable Intangible Assets: Goodwill is not amortized but is subject to an
annual impairment test which we perform as of October 1 or whenever indicators of impairment exist.

If no such determination is made, then the impairment test is complete.

Indefinite lived intangibles may be assessed using either a qualitative or quantitative approach. The
qualitative approach first determines if it is more-likely-than-not that the fair value of the asset is less than
the carrying value.
If, however, it
is determined that there is a likely impairment, a quantitative assessment must then be made. One
determination on whether to use the qualitative approach is the time since the last quantitative
approach.
In the fourth quarter of 2017, the Company performed its annual impairment test on indefinite
lived intangibles, other than goodwill using the qualitative approach for certain assets and the
quantitative approach for the remaining assets.

We used a quantitative approach to assess goodwill for impairment. The fair value of each reporting unit
is calculated using the income approach (including discounted cash flows) and validated using a market
approach. The income approach uses expected future cash flows of each reporting unit and discounts
those cash flows to present value. Expected future cash flows are calculated using management
assumptions of growth rates,
including long-term growth rates, capital expenditures, and cost
efficiencies. Future acquisitions are not included in the expected future cash flows. We use a discount
rate based on a calculated weighted average cost of capital which is adjusted for each of our reporting
units based on size, country and company specific risk premiums. The market approach compares the
valuation multiples of similar companies to that of the associated reporting unit. We then reconcile the
calculated fair values to our market capitalization. The fair value is then compared to its carrying value
If the fair value is in excess of its carrying value, the related goodwill is not impaired.
including goodwill.
If the fair value is less than its carrying value. We recognize an impairment loss in the amount that
carrying value exceeds the fair value.

Long-lived assets, such as property, plant and equipment and
Impairment of Long-Lived Assets:
intangible assets which are amortized are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.
If
circumstances require that a long-lived asset or asset group to be held and used be tested for possible
impairment, the Company first compares the undiscounted cash flows expected to be generated by that
long-lived asset or asset group to its carrying amount.
If the carrying amount of the long-lived asset or
asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the
extent that the carrying amount exceeds its fair value.

Long-lived assets or disposal groups classified as held for sale are recorded at the lower of their carrying
amount or fair value less estimated selling costs. Long-lived assets are not depreciated or amortized
while classified as held for sale.

Insurance: Our insurance for workers’ compensation, auto/fleet, property 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, auto/fleet, and property claims to be
reported within 24 hours. As a result, we accrue these liabilities based upon the claim reserves established
by the third-party administrator at the end of each reporting period. Accruals include an estimate for

2017 10-K Annual Report

Stericycle, Inc. • 67

Part II

claims incurred but not yet reported. Our workers compensation, auto/fleet and employee health
insurance benefit liability is based on our historical claims experience.

Involuntary termination benefits are accrued upon the commitment to a
Restructuring Charges:
termination plan and when the benefit arrangement is communicated to affected employees, or when
liabilities are determined to be probable and estimable, depending on the existence of a substantive plan
for severance or termination. Costs for one-time termination benefits in which the employee is required
to render service until termination in order to receive the benefits are recognized ratably over the future
service period. Contract termination costs are recorded when contracts are terminated or when we cease
to use the leased facility and no longer derive economic benefit from the contract. All other exit costs are
expensed as incurred. For further discussion, see Note 3 – Restructuring, Divestitures, and Assets Held For
Sale.

Stock-Based Compensation: The Company recognizes stock-based compensation expense based on the
estimate grant-date fair value for all stock-based awards which include stock options, restricted stock
units, and performance stock units. Expense is generally recognized on a straight-line basis over the
service period during which awards are expected to vest. We present stock-based compensation expense
within the Consolidated Statements of Income based on the classification of the respective employees'
cash compensation. For further discussion, see Note 12 – Stock-Based Compensation.

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 basis 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. Tax liabilities are recorded when, in management’s judgment, a tax position does not meet the
more likely than not (i.e. a likelihood of more than fifty percent) threshold for recognition.
For tax
positions that meet the more likely than not threshold, a tax liability may still be recorded depending on
management’s assessment of how the tax position will ultimately be settled. The Company records
interest and penalties on unrecognized tax benefits in the provision for income taxes.
For further
discussion, see Note 8 – Income Taxes.

Lease and Asset Retirement Obligations: The Company classifies leases at their inception as either
operating or capital leases and may receive renewal or expansion options, rent holidays, and leasehold
improvement or other incentives on certain lease agreements. The Company recognizes operating lease
costs on a straight-line basis, taking into account adjustments for free or escalating rental payments and
deferred payment terms. Additionally, lease incentives are accounted for as a reduction of lease costs
over the lease term. Rent expense associated with operating lease obligations that relate to the delivery
of our services is presented in Cost of revenues (“COR”) and the remaining is classified within Selling,
general and administrative expenses (“SG&A”) on the Consolidated Statements of Income. Minimum
lease payments made under capital leases are apportioned between interest expense and a reduction of
the related capital lease obligations, which are classified within Accrued liabilities and Current portion of
long-term debt on the Consolidated Balance Sheets.

2017 10-K Annual Report

Stericycle, Inc. • 68

Part II

The Company establishes assets and liabilities for the present value of estimated future costs to retire
long-lived assets at the termination or expiration of a lease. Such assets are amortized over the lease
term, and the recorded liabilities are accreted to the future value of the estimated retirement costs. The
related amortization and accretion expenses are presented within COR if the leased asset is used in the
delivery of our services and the remaining expenses are presented within SG&A on the Consolidated
Statements of Income.

Foreign Currency: 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 accumulated other comprehensive loss on the Consolidated Balance
Foreign currency gains and losses resulting from transactions which are denominated in
Sheets.
currencies other than the entity’s functional currency, including foreign currency gains and losses on
intercompany balances that are not of a long-term investment nature, are included within Other
(expense)/income, net on the Consolidated Statements of Income.

Reclassifications: Certain amounts in previously issued financial statements have been reclassified to
conform to the current period presentation.

During 2017, we presented certain rent, utility and depreciation expenses in COR that had historically
been classified in SG&A. For the year ended December 31, 2016, we reclassified $15.0 million, of which
$7.3 million was for rent and utility expenses and $7.7 million was for depreciation expenses, from SG&A
to COR to conform to the current year presentation.
For the year ended December 31, 2015, we
reclassified $11.4 million, of which $7.2 million was for rent and utility expenses and $4.2 million was for
depreciation expenses, from SG&A to COR to conform to the current year presentation.

To conform to the current period cash flows presentation, we reclassified $13.6 million net repayments of
bank overdrafts from Operating Activities to Financing Activities for the year ended December 31, 2016
and $4.3 million net proceeds from bank overdrafts from Operating Activities to Financing Activities for
the year ended December 31, 2015.

New Accounting Standards:

Adoption of New Accounting Standards

Intangibles – Goodwill and Other – Simplifying the Test for Goodwill Impairment

Effective January 2017, the Company early adopted ASU 2017-04, Intangibles – Goodwill and Other (Topic
350) – Simplifying the Test for Goodwill Impairment. This guidance eliminates Step 2 of the goodwill
impairment test and requires a goodwill impairment to be measured as the amount by which a reporting
unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill. We
applied this standard to measure the goodwill
impairment recognized related to our Latin America
reporting unit.

Statement of Cash Flows

Effective January 2017, the Company early adopted the guidance in ASU No. 2016-15 “Statement of Cash
Flows” (Topic 230). This guidance clarifies diversity in practice on where in the Statement of Cash Flows to
recognize certain transactions, including the classification of payment of contingent consideration for
acquisitions between Financing and Operating activities. Based on the results of the Company’s analysis,

2017 10-K Annual Report

Stericycle, Inc. • 69

Part II

there is no impact on our financial statements, as our treatment of the relevant affected items within the
Consolidated Statement of Cash Flows is consistent with the requirements of this guidance.

Accounting Standards Issued But Not Yet Adopted

Revenue From Contracts With Customers

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" (Topic 606),
guidance to provide a single and comprehensive revenue recognition model for all contracts with
customers.
The revenue guidance contains principles that an entity will apply to determine the
measurement of revenue and timing of when it is recognized. The underlying principle is that an entity
will recognize revenue to depict the transfer of goods or services to customers at an amount that the
entity expects to be entitled to in exchange for those goods or services. The amended authoritative
guidance associated with revenue recognition was effective for the Company on January 1, 2018. The
Company will adopt this ASU using the modified retrospective method. The Company will apply certain
practical expedients, including the right to invoice, where the criteria have been met. The Company has
concluded that there will not be a material change to its revenue recognition under the new standard.
The Company will capitalize incremental costs of obtaining revenue generating contracts, such as sales
commissions paid in connection with multi-year service contracts, which will be amortized over the
economic life of the contract. We are in the process of finalizing the measurement of the cumulative
effect of adopting the new guidance, which will primarily be related to capitalizing commission costs, for
recognition in our first quarter 2018 Form 10-Q filing.

Definition of a Business

On January 5, 2017, the FASB issued ASU No. 2017-01, “Clarifying the Definition of a Business” (Topic ASC
805), guidance to clarify the definition of a business with the objective of adding guidance to assist
entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of
assets or businesses. The amendments in this ASU provide a screen to determine when an integrated set
of assets and activities (collectively referred to as a “set”) is not a business. The screen requires that when
substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single
identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces
If the screen is not met, the amendments
the number of transactions that need to be further evaluated.
require that to be considered a business, a set must include, at a minimum, an input and a substantive
process that together significantly contribute to the ability to create output and remove the evaluation of
whether a market participant could replace the missing elements. This ASU is effective for public business
entities in annual periods beginning after December 15, 2017, including interim periods therein. Due to
the number of acquisitions the Company completes in any year, there may be instances where the
acquisition will be determined to be an acquisition of assets instead of a business. The Company believes
this will be a minority of the acquisitions completed in any year and that there will not be a material
impact to our financial statements.

Leases

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842). This guidance will require
lessees to record a right-of-use asset and lease liability on the balance sheet for all leases with terms of
more than 12 months. This ASU also requires certain quantitative and qualitative disclosures. Accounting
guidance for lessors is largely unchanged. The guidance should be applied on a modified retrospective
basis. This ASU is effective for the Company beginning January 1, 2019. During the second quarter of
2017, the Company engaged a third party service provider to assist us in our implementation of the new
leases standard. The Company is currently gathering, documenting and analyzing lease agreements
related to this ASU and anticipates recognizing material right-of-use assets and related liabilities upon

2017 10-K Annual Report

Stericycle, Inc. • 70

Part II

adoption. Additionally, the Company is continuing to monitor industry activities and any additional
guidance provided by or changed by regulators, standards setters, or the accounting profession to adjust
the Company’s assessment and implementation plans accordingly.

Intra-Entity Transfers of Assets Other Than Inventory

In October 2016, the FASB issued ASU No. 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory.”
This ASU requires the income tax consequences of an intra-entity transfer of an asset other than inventory
to be recognized when the transfer occurs, instead of when the asset is sold to an outside party. This ASU
is effective for annual reporting periods beginning after December 15, 2017, including interim reporting
periods within those annual reporting periods, with early adoption permitted. The Company does not
expect the adoption to have a material impact on its financial statements.

Compensation – Stock Compensation

In May 2017, the FASB issued ASU No. 2017-09, “Compensation – Stock Compensation” (Topic 718) - Scope
of Modification Accounting. This ASU clarifies when to account for a change to the terms or conditions of
a share-based payment award as a modification. Under the new guidance, modification accounting is
required only if the fair value, the vesting conditions, or the classification of the award (as equity or
liability) changes as a result of the change in terms or conditions. This ASU is effective prospectively for
the annual period ending December 31, 2018 and interim periods within that annual period.
Early
adoption is permitted. The Company does not expect the adoption to have a material impact on our
financial statements.

Derivatives and Hedging

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted
Improvements to Accounting for Hedging Activities ("ASU 2017-12"). ASU 2017-12 amends the hedge
accounting recognition and presentation requirements with the objective of improving the financial
reporting of hedging relationships to better portray the economic results of an entity’s risk management
activities in its financial statements and enhance the transparency and understandability of hedge
transactions.
In addition, ASU 2017-12 makes improvements to simplify the application of the hedge
accounting guidance. ASU 2017-12 is effective for us on January 1, 2019, with early adoption permitted.
The Company does not expect the adoption to materially impact our financial statements.

NOTE 2 – ACQUISITIONS

Acquisitions

During the years ended December 31, 2017, 2016, and 2015, the Company completed 30, 31, and 43
acquisitions, respectively. The acquisitions were all considered to be business combinations under the
current guidance.

2017 10-K Annual Report

Stericycle, Inc. • 71

The following table summarizes the locations, services, and type of acquisitions:

Part II

2017 Acquisitions

Acquisition Locations
United States
Canada
France
Netherlands
Portugal
Republic of Korea
Spain
Total

2016 Acquisitions

Acquisition Locations
United States
Australia
Republic of Korea
Romania
Spain
United Kingdom
Total

2015 Acquisitions

Acquisition Locations
United States
Brazil
Canada
Ireland
Mexico
Netherlands
Republic of Korea
Romania
Spain
Total

Total Number
of
Acquisitions

Regulated
Waste

Service

Secure
Information
Destruction

Communication
Services

Type

Acquisitions
of Selected
Assets and
Liabilities

Acquisitions
of Stock

-
1
-
-
1
-
1
3

2
-
-
-
1
-
3

21
1
1
2
1
2
2
30

2
-
-
1
1
2
1
7

18
1
1
1
-
-
1
22

1
-
-
-
-
-
-
1

21
-
1
2
-
2
1
27

Type

Total Number
of
Acquisitions

Regulated
Waste

Service

Secure
Information
Destruction

21
3
1
2
3
1
31

5
-
1
2
2
1
11

15
3
-
-
1
-
19

Communication
Services

Acquisitions
of Selected
Assets and
Liabilities

Acquisitions
of Stock

1
-
-
-
-
-
1

19
3
1
2
2
1
28

Total Number
of
Acquisitions

Regulated
Waste

Service

Secure
Information
Destruction

Communication
Services

Type

Acquisitions
of Selected
Assets and
Liabilities

Acquisitions
of Stock

19
2
2
1
3
2
6
4
4
43

13
2
-
1
3
2
6
4
4
35

4
-
1
-
-
-
-
-
-
5

2
-
1
-
-
-
-
-
-
3

16
-
-
-
1
1
6
3
4
31

3
2
2
1
2
1
-
1
-
12

The following table summarizes the acquisition date fair value of consideration transferred for acquisitions
completed during the years ended December 31, 2017, 2016, and 2015, respectively:

In millions

Cash
Promissory notes
Deferred consideration
Contingent consideration
Total purchase price

2017

2016

2015

52.9
25.3
1.1
0.1
79.4

55.4
40.9
4.1
1.0
101.4

2,420.7
64.1
3.2
10.1
2,498.1

2017 10-K Annual Report

Stericycle, Inc. • 72

Part II

These acquisitions resulted in the recognition of goodwill

For financial reporting purposes, our acquisitions were accounted for using the acquisition method of
accounting.
in our financial statements,
reflecting the premium paid to acquire businesses that we believe are complementary to our existing
operations and fit our growth strategy. During the year ended December 31, 2017, we recognized an
increase in goodwill of $46.5 million related to current year acquisitions, excluding the effect of foreign
currency translation. Approximately $44.5 million of the goodwill recognized during the year ended
December 31, 2017 will be deductible for income taxes.

During the year ended December 31, 2017, we recognized an increase in estimated fair value of acquired
customer relationships from current year acquisitions of $28.2 million, excluding the effect of foreign
currency translation, with amortizable lives of 10 to 30 years.

The fair value of consideration transferred in a business combination is allocated to the tangible and
intangible assets assumed at the acquisition date, with the remaining unallocated amount recorded as
goodwill.
The allocations of the acquisition price for recent acquisitions have been prepared on a
preliminary basis, pending completion of certain intangible asset valuations and finalization of the
opening balance sheet.

The following table summarizes the preliminary purchase price allocation for current period acquisitions
and other adjustments to purchase price allocations for the years ended December 31, 2017, 2016, and
2015:

In millions

Fixed assets
Intangibles
Goodwill
Net other assets and liabilities
Net deferred tax liabilities
Total purchase price allocation

2017

2016

2015

3.9
28.2
46.5
1.1
(0.3)
79.4

13.1
35.5
52.8
2.2
(2.2)
101.4

196.2
1,016.8
1,450.9
59.5
(225.3)
2,498.1

The results of operations of these acquired businesses have been included on the Consolidated
Statements of Income from the date of the acquisition. Pro forma results of operations for these
acquisitions are not presented because the pro forma effects, individually or in the aggregate, were not
material to the Company’s consolidated results of operations.

As of December 31, 2017, purchase accounting has been completed for all of our 2016 acquisitions. The
following table summarizes the adjustments to the consideration transferred for prior year acquisitions
during 2017:

In millions

Adjustments to Prior
Year Acquisitions

Cash
Promissory notes
Contingent consideration
Total purchase price

(0.4)
(0.4)
(9.6)
(10.4)

2017 10-K Annual Report

Stericycle, Inc. • 73

The following table summarizes various adjustments to our prior year acquisitions during 2017:

Part II

In millions

Adjustments to Prior
Year Acquisitions

Fixed assets
Intangibles
Goodwill
Net other assets and liabilities
Net deferred tax liabilities
Total purchase price allocation

(6.0)
7.9
(7.4)
(1.5)
(3.4)
(10.4)

NOTE 3 – RESTRUCTURING, DIVESTITURES, AND ASSETS HELD FOR SALE

Restructuring - Business Transformation

Key initiatives of the Business Transformation include:

! Portfolio Rationalization: Executing on a comprehensive review of the Company’s global service

lines to identify and pursue the divestiture of non-strategic assets.

! Operational Optimization: Standardizing route planning logistics, modernizing field operations,

and driving network efficiency across facilities.

! Organizational Excellence and Efficiency: Redesigning the Company’s organizational structure

to optimize resources and align around a global shared business services model.

! Commercial Excellence: Aligning our sales and service organizations around the customer,
standardizing our customer relationship management process, and expanding customer self-
service options.

! Strategic Sourcing: Reducing spend through global procure-to-pay processes and leveraging

organizational scale.

For the year ended December 31, 2017, we incurred restructuring charges of $13.9 million related to
employee termination benefits of $11.5 million and non-cash long-lived assets impairment charges of
$2.4 million. These costs were incurred across all our segments.

As of December 31, 2017, the remaining liability for unpaid employee termination costs was $2.2 million
related to Business Transformation which is expected to be paid within the current year. All other
employee termination payments were complete by December 31, 2017. While the Company believes the

2017 10-K Annual Report

Stericycle, Inc. • 74

Part II

recorded restructuring liability is adequate, revisions to current estimates may be recorded in future
periods based on new information as it becomes available. There could be additional initiatives in the
future to further streamline our operations. As such, the Company expects further expenses related to
workforce reductions and other facility rationalization costs when those restructuring plans are finalized
and related expenses are estimable.

Divestitures

In the fourth quarter of 2017, we sold certain assets and liabilities in South Africa for $7.3 million, resulting
in a non-taxable gain of $3.0 million, which is included in SG&A on the Consolidated Statements of
Income.

In the second quarter of 2017, we sold certain assets in the U.K. for $1.2 million, resulting in a pretax loss
of $5.7 million ($4.6 million, net of tax), which is included in SG&A on the Consolidated Statements of
Income.

In the fourth quarter of 2016, we sold certain assets in the U.K. for $0.8 million, resulting in a pretax loss of
$1.6 million ($1.3 million, net of tax), which is included in SG&A on the Consolidated Statements of
Income.

There were no divestitures in 2015.

All divestiture activity in 2017 and 2016 was recorded within the International RCS segment.

Assets and Liabilities Held for Sale

As of December 31, 2017, certain of our international operations met the criteria to be classified as held
for sale. We recorded a $6.8 million non-cash impairment charge in SG&A on the Consolidated
Statements of Income related to changes in the fair value of assets held for sale in the U.K. The assets and
liabilities of the disposal groups are presented in assets held for sale and liabilities held for sale on the
Consolidated Balance Sheet.

As of December 31, 2016, certain of our international operations met the criteria to be classified as held
for sale. We recorded a $25.5 million impairment charge in SG&A on the Consolidated Statements of
Income to adjust the carrying value of the asset group to their fair value less estimated costs to sell.

The following table presents information related to the major classes of assets and liabilities that were
classified as held for sale on the Consolidated Balance Sheet at December 31:

In millions

Total current assets
Fixed assets
Goodwill
Intangibles
Other assets
Assets held for sale

Total current liabilities
Deferred income taxes
Liabilities held for sale

2017

2016

7.7
8.5
1.6
2.6
0.4

20.8 $

4.7
0.4
5.1

3.1
4.9
0.1
0.7
0.3
9.1

2.6
0.3
2.9

We determined that the operations included in the table above did not meet the criteria to be classified
as discontinued operations under the applicable guidance.

2017 10-K Annual Report

Stericycle, Inc. • 75

NOTE 4 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 2017 and 2016 consisted of the following:

In millions

Land and improvements
Building and improvements
Machinery and equipment
Vehicles
Containers
Office equipment and furniture
Software and Enterprise Resource Planning system
Construction in progress

Total property, plant and equipment

Less: accumulated depreciation

Property, plant and equipment, net

2017

2016

66.2
227.6
348.2
173.3
261.3
146.3
40.8
80.5
1,344.2
(603.2)
741.0

Part II

66.3
197.6
314.3
173.2
226.7
146.8
38.9
55.3
1,219.1
(495.2)
723.9

During 2017 and 2015, we impaired $7.3 million and $3.9 million, respectively, of property, plant and
equipment due to rationalizing certain of our operations, primarily in the International RCS segment.
There were no property, plant and equipment impairments in 2016.

NOTE 5 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill:

The changes in the carrying amount of goodwill for the years ended December 31, 2017 and 2016, by
reportable segment and for the “Other” category, were as follows:

In millions

Domestic and
Canada RCS

International
RCS

Other

Total

Balance as of January 1, 2016
Goodwill acquired during year
Purchase accounting adjustments
Write-offs related to disposition and assets held for sale
Changes due to foreign currency fluctuations
Balance as of December 31, 2016
Goodwill acquired during year
Purchase accounting adjustments
Impairments during the year
Write-offs related to disposition and assets held for sale
Changes due to foreign currency fluctuations
Balance as of December 31, 2017

2,842.7 $
41.5
(77.2)
-
4.8
2,811.8
36.9
(10.1)
-
-
11.6
2,850.2 $

632.5 $
8.4
(78.9)
(7.5 )
(56.1 )
498.4
4.9
1.2
(65.0)
(7.1 )
34.4
466.8 $

283.0 $
2.9
(5.1)
-
-
280.8
4.7
1.5
-
-
-
287.0 $

3,758.2
52.8
(161.2 )
(7.5)
(51.3)
3,591.0
46.5
(7.4)
(65.0)
(7.1)
46.0
3,604.0

In our Form 10-Q for the quarter ended September 30, 2017, we disclosed that we were in the process of
completing the valuation of our reporting units with the assistance of our external valuation specialist. At
that time, we were evaluating the impact of the prolonged declining market trends in Latin America and
continued softness in the Company’s Manufacturing and Industrial regional hazardous waste business.
We have experienced cost pressures in Latin America due to the strength of local competition resulting in
an increasing inability to pass along inflationary price increases to our customers.
In addition, the cost
savings initiatives that were anticipated in 2017 have taken longer than expected to implement and are

2017 10-K Annual Report

Stericycle, Inc. • 76

Part II

extending into 2018.
challenging conditions
Transformation will have on our prospective results.

In the fourth quarter 2017, we finalized our long rang plan (LRP) to reflect these
in Latin America partially offset by incorporating the impact Business

As a result, we recorded a $65.0 million non-cash goodwill impairment charge related to the Company’s
Latin America reporting unit which is reflected as part of SG&A in the Consolidated Statements of Income.
The impairment charge recognized was the amount by which the carrying value of the Latin America
reporting unit exceeded its fair value. The result of the factors described above on our LRP was an overall
decline in the forecasted financial information included in our income approach valuation model. The fair
value of the reporting unit is classified as a Level 3 measurement within the fair value hierarchy due to
significant unobservable inputs such as discount rates, projections of revenue, cost of revenue and
operating expense growth rates, long-term growth rates and income tax rates.

Current period adjustments to goodwill for certain prior year acquisitions are primarily due to the
finalization of intangible asset valuations among other opening balance sheet adjustments.

Other Intangible Assets:

At December 31, 2017 and 2016, the values of other intangible assets were as follows:

In millions

Gross Carrying
Amount

2017
Accumulated
Amortization

Net Value

Gross Carrying
Amount

2016
Accumulated
Amortization

Net Value

Amortizable
intangibles:
Customer relationships $
Covenants not-to-
compete
Tradenames
Other
Indefinite lived
intangibles:
Operating permits
Tradenames
Total

1,613.4 $

381.4 $

1,232.0 $

1,553.4 $

261.3 $

1,292.1

7.9
6.0
17.0

5.9
1.8
3.4

2.0
4.2
13.6

9.5
5.7
19.1

6.4
1.4
2.5

3.1
4.3
16.6

222.3
317.4
2,184.0 $

-
-
392.5 $

222.3
317.4
1,791.5 $

229.4
316.5
2,133.6 $

-
-
271.6 $

229.4
316.5
1,862.0

2017 10-K Annual Report

Stericycle, Inc. • 77

Part II

The changes in the carrying amount of intangible assets since January 1, 2016 were as follows:

In millions

Balance as of January 1, 2016
Intangible assets acquired during the year
Valuation adjustments for prior year acquisitions
Write-offs due to disposition and amounts reclassified to assets held for sale
Impairments during the year
Amortization during the year
Changes due to foreign currency fluctuations
Balance as of December 31, 2016
Intangible assets acquired during the year
Valuation adjustments for prior year acquisitions
Reclassification to assets held for sale
Impairments during the year
Amortization during the year
Changes due to foreign currency fluctuations
Balance as of December 31, 2017

Total

1,842.6
35.5
169.0
(16.0)
(1.4)
(129.3)
(38.4)
1,862.0
28.2
7.9
(2.6)
(21.0)
(118.4)
35.4
1,791.5

Our indefinite-lived intangible assets include permits and certain tradenames. We have determined that
our permits and certain tradenames have indefinite lives due to our ability to renew them with minimal
additional cost, and therefore these are not amortized. We perform our annual impairment test as of
October 1.

During 2017, 2016, and 2015, we impaired $21.0 million, $1.4 million, and $4.2 million, respectively.
Intangibles impaired in 2017 included $14.0 million of operating permits, $5.8 million of tradenames, and
$1.2 million of customer relationships due to rationalizing certain operations across all segments.

Our finite-lived intangible assets are amortized over their useful lives using the straight-line method. Our
customer relationships have useful lives ranging from 5 to 30 years, based upon the type of customer, and
a weighted average remaining useful life of 11.9 years. We have covenants not-to-compete with useful
lives ranging from 5 to 14 years and a weighted average remaining useful
life of 2.6 years. Our
tradenames have useful lives ranging from 4 to 40 years and a weighted average remaining useful life of
15.5 years. Other intangibles mainly consist of landfill air rights with a weighted average remaining useful
life of 16.7 years.

life of our intangible assets annually to determine whether events and
We evaluate the useful
circumstances warrant a revision to the remaining useful life and changes are reflected prospectively as
the intangible asset is amortized over the revised remaining useful life.
In the fourth quarter of 2017, the
Company performed its annual assessment of the useful life of its finite-lived intangibles and concluded
its domestic medical waste customer relationship intangibles should be revised from 40 years to 30 years
due to the change in mix of small and large quantity customer relationships. The change in life is a
change in estimate to be accounted for prospectively with an estimated increase to amortization expense
of approximately $7.0 million annually.

During the years ended December 31, 2017, 2016 and 2015, the aggregate intangible asset amortization
expense was $118.4 million, $129.3 million, and $45.5 million, respectively.

2017 10-K Annual Report

Stericycle, Inc. • 78

The estimated amortization expense for each of the next five years (based upon foreign exchange rates at
December 31, 2017) is as follows for the years ended December 31:

Part II

In millions
2018
2019
2020
2021
2022

126.8
126.6
125.8
125.4
125.3

NOTE 6 – ACCRUED LIABILITIES

Accrued liabilities at December 31, 2017 and 2016 consisted of the following items:

In millions

Accrued compensation
Accrued self-insurance
Accrued taxes
Accrued interest
Accrued small quantity customer class action legal
settlement (see Note 18 – Legal Proceedings)
Accrued professional services liabilities
Accrued disposal and landfill liabilities
Accrued liabilities - other
Total accrued liabilities

NOTE 7 – DEBT

2017

2016

52.0 $
77.9
41.2
13.6

295.0
34.3
13.2
60.9

588.1 $

64.6
53.6
18.3
14.1

-
10.1
13.0
54.8
228.5

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

In millions

Obligations under capital leases
$1.2 billion senior credit facility weighted average rate 2.55%, due in 2022
$1.0 billion term loan weighted average rate 2.83%, due in 2022
$175 million private placement notes 3.89%, due in 2017
$125 million private placement notes 2.68%, due in 2019
$225 million private placement notes 4.47%, due in 2020
$150 million private placement notes 2.89%, due in 2021
$125 million private placement notes 3.26%, due in 2022
$200 million private placement notes 2.72%, due in 2022
$100 million private placement notes 2.79%, due in 2023
$150 million private placement notes 3.18%, due in 2023
Promissory notes and deferred consideration weighted average rate of 1.49% and
weighted average maturity of 2.9 years
Foreign bank debt weighted average rate 6.11% and weighted average maturity of 1.7
years
Total debt
Less: current portion of total debt
Less: unamortized debt issuance costs
Long-term portion of total debt

2017

2016

9.4
471.7
950.0
-
125.0
225.0
150.0
125.0
200.0
100.0
150.0

155.9

85.2
2,747.2
119.5
12.4
2,615.3

11.1
407.1
1,000.0
175.0
125.0
225.0
150.0
125.0
200.0
100.0
150.0

191.7

99.4
2,959.3
72.8
9.2
2,877.3

2017 10-K Annual Report

Stericycle, Inc. • 79

Part II

Our senior credit facility, term loan, and the private placement notes all require us to comply with the
same financial, reporting and other covenants and restrictions,
including a restriction on dividend
payments. At December 31, 2017, we were in compliance with all of our financial debt covenants. Our
senior credit facility, term loan, and private placement notes rank pari passu to each other and all other
unsecured debt obligations.

At December 31, 2017 and 2016, we had $130.8 million and $138.0 million, respectively, committed to
outstanding letters of credit under our senior credit facility. The unused portion of the revolving credit
facility was $597.5 million and $654.9 million at December 31, 2017 and 2016, respectively.

The Company entered into a Credit Agreement (the “Credit Agreement”) dated as of November 17, 2017
that amended, restated and consolidated the Company’s existing revolver agreement dated as of June 4,
2014 and the Company’s existing term loan credit agreement dated as of August 15, 2015. The Credit
Agreement provided for a term loan facility of $950.0 million and a revolving credit facility of $1.2 billion.
The proceeds from this Credit Agreement were used on the closing date to refinance the loans and other
credit extensions made under the existing revolver and term loan credit facilities. The Company applied
the provisions of ASC 470-50, “Modifications and Extinguishments” and accounted for the refinance as a
modification.

The obligations under the Credit Agreement are unsecured. The Credit Agreement contains a financial
covenant to maintain a Consolidated Leverage Ratio of 3.75 to 1.00 at the end of any fiscal quarter, which
may be increased to 4.00 to 1.00 for up to 2 consecutive quarters in any fiscal quarter ending on or before
September 30, 2018, at the Company’s option, if following the settlement payment with respect to the
pending small quantity customer class action lawsuit (see Note 18 – Legal Proceedings), and if the
Consolidated Leverage Ratio, on a pro forma basis, is greater than 3.50 to 1.00. The Credit Agreement
matures on November 17, 2022.

Payments due on long-term debt, excluding capital
subsequent to December 31, 2017 are as follows:

lease obligations, during each of the five years

In millions
2018
2019
2020
2021
2022
Thereafter

117.0
269.9
318.7
211.8
1,563.0
257.4
2,737.8

During the years ended December 31, 2017, 2016 and 2015, we paid interest of $85.8 million, $88.8
million, and $68.0 million, respectively.

2017 10-K Annual Report

Stericycle, Inc. • 80

Property under capital leases included within property, plant and equipment on the Consolidated Balance
Sheets is as follows at December 31:

Part II

In millions

Land
Buildings
Machinery and equipment
Vehicles
Less: accumulated depreciation

2017

2016

0.2
0.9
6.7
9.4
(6.0 )
11.2

0.1
0.8
6.6
9.9
(5.5)
11.9

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

Minimum future lease payments under capital leases are as follows:

In millions
2018
2019
2020
2021
2022
Thereafter
Total minimum lease payments
Less: amounts representing interest
Present value of net minimum lease payments
Less: current portion included in current portion of long-term debt
Long-term obligations under capital leases

NOTE 8 – INCOME TAXES

3.0
3.4
1.9
1.9
0.1
0.3
10.6
(1.2)
9.4
(2.5)
6.9

The U.S. and International components of income before income taxes consisted of the following for the
years ended December 31, 2017, 2016 and 2015:

In millions

United States
Foreign

Total income before income taxes

2017

2016

2015

(9.6) $

(98.3)
(107.9) $

381.1
(53.0)
328.1

378.8
32.1
410.9

2017 10-K Annual Report

Stericycle, Inc. • 81

Part II

Significant components of our income tax expense for the years ended December 31, 2017, 2016 and
2015 are as follows:

In millions

Current

United States - federal
United States - state and local
Foreign

Deferred

United States - federal
United States - state and local
Foreign

Total (benefit) provision

2017

2016

2015

107.0
10.0
7.1
124.1

(256.1)
(9.8)
(9.1)
(275.0)
(150.9) $

102.0
11.6
10.6
124.2

19.1
(2.5)
(20.6)
(4.0)
120.2

105.9
15.6
16.5
138.0

23.8
2.5
(21.4)
4.9
142.9

A reconciliation of the income tax provision computed at the federal statutory rate to the effective tax rate
for the years ended December 31, 2017, 2016 and 2015 are as follows:

Federal statutory income tax rate
Effect of:

State and local taxes, net of federal tax effect
Foreign tax rates
Permanent - other items
Permanent - goodwill impairment
U.S. Tax Reform Act
Valuation allowance
Stock-based compensation
Other

Effective tax rate

2017

2016

2015

35.0%

3.9 %
(2.7 )%
(2.1 )%
(12.0)%
120.3%
(4.6 )%
(0.6 )%
2.7 %
139.9%

35.0%

1.5%
2.1%
0.8%
-
-
2.1%
(1.8)%
(3.1)%
36.6%

35.0%

3.1%
(0.4)%
0.4%
-
-
-
-
(3.3)%
34.8%

Cash payments for income taxes were $128.9 million, $111.5 million, and $125.1 million for the years
ended December 31, 2017, 2016, and 2015, respectively.

Our deferred tax liabilities and assets at December 31, 2017 and 2016 were as follows:

In millions

Deferred tax liabilities:

Property, plant and equipment
Goodwill and intangibles
Other

Total deferred tax liabilities
Deferred tax assets:

Accrued liabilities
Net operating tax loss carry-forwards
Other

Less: valuation allowance
Total deferred tax assets
Net deferred tax liabilities

2017

2016

(56.4) $

(490.0)
(17.2)
(563.6)

141.2
38.3
38.6
(16.1)
202.0
(361.6) $

(78.5)
(690.4)
(7.9)
(776.8)

93.7
38.3
17.9
(15.4)
134.5
(642.3)

2017 10-K Annual Report

Stericycle, Inc. • 82

Part II

In accordance with SAB 118 and our understanding of the Tax Act and guidance available as of the date of
this filing, the Company has calculated its best estimate of the impact of the Tax Act on its year end 2017
income tax benefit/provision and as a result has recorded an income tax (benefit) of ($129.8) million in the
fourth quarter of 2017, the period in which the legislation was enacted. The provisional amount related to
the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are
expected to reverse in the future, the one-time transition tax on the mandatory deemed repatriation of
foreign earnings and the related expected foreign withholding taxes on such earnings are reflected in the
table below. The provisional estimates may be impacted by the need for further analysis and future
clarification and guidance regarding available tax accounting methods and elections, earnings and profits
computations, clarification of the definition of cash and cash equivalents and state tax conformity to
federal tax changes.

The net tax (benefit) of recognized related to the Tax Act is as follows:

In millions
Remeasurment of net deferred tax liabilities due to enacted rate reduction
Section 965 transition tax on foreign earnings
Foreign withholding taxes on such earnings
Net tax benefit from the Tax Act

167.7
(24.3)
(13.6)
129.8

The Section 965 transition tax is based on a deemed repatriation of foreign earnings and profits of $149.2
million at December 31, 2017.

2017 10-K Annual Report

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Part II

these amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is
complete.

The Tax Act also establishes global intangible low-taxed income ("GILTI") provisions that impose a tax on
foreign income in excess of a deemed return on intangible assets of foreign corporations. The Company
is in the process of evaluating the impact of prospective taxes on GILTI and has not yet determined
whether its accounting policy will be to recognize deferred taxes for basis differences that are expected to
affect the amount of GILTI inclusion upon reversal or to recognize taxes on GILTI as an expense in the
period incurred. While the Company is still evaluating its prospective accounting policy for taxes on GILTI,
the provisional estimates of the tax effects of the Tax Act were reported on the basis that the taxes on
GILTI will be recognized in tax expense in the year it is incurred as a period expense.

At December 31, 2017, 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 on which
certain limitations are placed at December 31, 2017. The net operating loss carry-forwards from foreign
and domestic acquisitions are approximately $118.2 million and certain of these net operating loss carry-
forwards begin to expire in 2018. The tax benefit of these net operating losses is approximately $38.3
million at December 31, 2017, on which a valuation allowance of $8.6 million was recorded offsetting such
tax benefit. At December 31, 2017, the Company has recorded a valuation allowance of $7.5 million
against tax deductible goodwill.

We file income tax returns in the United States, in various states and in certain foreign jurisdictions.

income tax
With a few exceptions, we are no longer subject to U.S. federal, state, local, or non-U.S.
examinations by tax authorities for years prior to 2012. The U.S. Internal Revenue Service is currently
conducting an audit of our 2014 corporate income tax return and no significant adjustments are
anticipated.

The Company has recorded liabilities 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 the liability associated with the Company’s uncertain tax
positions that may significantly increase or decrease within the next twelve months cannot be reasonably
estimated.

The total amount of unrecognized tax benefit at December 31, 2017 is $27.4 million. The amount of
uncertain tax positions that,
if recognized, would affect the effective tax rate is approximately $22.2
million. We recognized interest and penalties related to income tax reserves in the amount of $0.3
million, $1.3 million, and $0.7 million for the years ended December 31, 2017, 2016 and 2015, respectively,
as a component of income tax expense.

2017 10-K Annual Report

Stericycle, Inc. • 84

The following table summarizes the aggregate changes in unrecognized tax benefits during the years
ended December 31, 2017 and 2016:

Part II

In millions
Unrecognized tax positions as of January 1, 2016
Gross increases - tax positions in prior periods
Gross increases - current period tax positions
Settlement
Lapse of statute of limitations

Unrecognized tax positions as of December 31, 2016
Gross increases - tax positions in prior periods
Gross increases - current period tax positions
Settlement
Lapse of statute of limitations

Unrecognized tax positions as of December 31, 2017

24.9
0.8
2.9
(0.2)
(1.7)
26.7
0.7
5.1
(0.5)
(4.6)
27.4

The table above includes amounts that relate to uncertain tax positions from acquired companies.
Purchase agreements to acquire the stock of a target generally provide that the seller is liable for and has
indemnified Stericycle against all income tax liabilities for periods prior to the acquisition. Stericycle will
be responsible for unrecognized tax benefits and related interest and penalties for periods after the
acquisition.

NOTE 9 – 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 as described below:

Level 1 – Quoted prices in active markets for identical assets or liabilities (highest priority).

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities,
quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities.

Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of
assumptions that market participants would use in pricing the asset or liability (lowest priority).

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 and non-performance
risk has been considered in the fair value measurements noted below. There were no movements of
items between fair value hierarchies in the periods presented.

2017 10-K Annual Report

Stericycle, Inc. • 85

Part II

The following table summarizes the basis used to measure financial assets and liabilities that are carried at
fair value on a recurring basis on the Consolidated Balance Sheets:

In millions

Total as of
December 31, 2017

Level 1
Inputs

Fair Value Measurements Using
Level 2
Inputs

Level 3
Inputs

Assets:

Derivative financial instruments

Total assets

Liabilities:

Contingent consideration

Total liabilities

$
$

In millions

0.4
0.4

12.4
12.4

Total as of
December 31, 2016

Assets:

Derivative financial instruments

Total assets

Liabilities:

Contingent consideration

Total liabilities

$
$

0.8
0.8

24.1
24.1

$
$

-
-

$
$

0.4
0.4

-
-

$
$

Level 1
Inputs

Fair Value Measurements Using
Level 2
Inputs

Level 3
Inputs

-
-

$
$

0.8
0.8

-
-

$
$

-
-

12.4
12.4

-
-

24.1
24.1

For our derivative financial
observable market transactions of spot and forward rates.

instruments, we use a market approach valuation technique based on

We recorded a $0.4 million asset related to the fair value of the U.S. dollar-Canadian dollar foreign
currency swap which was classified as Other assets at December 31, 2017. The objective of the swap is to
offset the foreign exchange risk to the U.S. dollar equivalent cash outflows for our Canadian subsidiary.

Our contingent consideration liabilities are recorded using Level 3 inputs and were $12.4 million as of
December 31, 2017, of which $4.6 million was classified as current liabilities. Contingent consideration
liabilities were $24.1 million at December 31, 2016, of which $8.1 million was classified as current liabilities.
Contingent consideration represents amounts expected to be paid as part of acquisition consideration
only if certain future events occur. These events are usually targets for revenues, earnings, or other
milestones related to the business acquired. We arrive at the fair value of contingent consideration by
applying a weighted probability of potential payment outcomes. The calculation of these potential
outcomes is dependent on both past financial performance and management assumptions about future
If the financial performance measures were all fully met, our maximum liability would be
performance.
$15.7 million at December 31, 2017. Contingent consideration liabilities are reassessed each reporting
period and are reflected on the Consolidated Balance Sheets as part of Other current liabilities and Other
liabilities.

2017 10-K Annual Report

Stericycle, Inc. • 86

Changes to contingent consideration are reflected in the table below:

In millions
Contingent consideration as of January 1, 2016

Increase due to current year acquisitions
Decrease due to payments
Changes due to foreign currency fluctuations
Change in fair value reflected in Selling, general, and administrative expenses

Contingent consideration as of December 31, 2016

Increase due to current year acquisitions
Purchase accounting adjustments
Decrease due to payments
Change in fair value reflected in Selling, general, and administrative expenses
Other

Contingent consideration as of December 31, 2017

Part II

25.4
1.0
(3.0)
2.8
(2.1)
24.1
0.1
(9.6)
(1.5)
(0.4)
(0.3)
12.4

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is
required to record certain assets and liabilities at fair value on a nonrecurring basis, generally as result of
acquisitions or the remeasurement of assets resulting in impairment charges. See Note 2 – Acquisitions,
Divestitures, and Assets Held For Sale and Note 3 – Restructuring, Divestitures, and Assets Held for Sale, for
further discussion on the fair value of assets and liabilities associated with Acquisitions and Assets Held
for Sale.

Fair Value of Debt: At December 31, 2017, the fair value of the Company’s debt obligations was
estimated, using Level 2 inputs, at $2.74 billion compared to a carrying amount of $2.75 billion. At
December 31, 2016, the fair value of the Company’s debt obligations was estimated, using Level 2 inputs,
at $2.97 billion compared to a carrying amount of $2.96 billion. The fair values were estimated using an
income approach by applying market interest rates for comparable instruments.

Accounts receivable, accounts payable and accrued liabilities are financial assets and liabilities,
respectively, with carrying values that approximate fair value, using Level 3 inputs.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Environmental Remediation Liabilities

We record a liability for environmental remediation when such liability becomes probable and the costs or
damages can be reasonably estimated. We accrue environmental remediation costs, on an undiscounted
basis, associated with identified sites where an assessment has indicated that cleanup costs are probable
and can be reasonably estimated, but the timing of such payments is not fixed and determinable. Such
accruals are based on currently available information, estimated timing of remedial actions, existing
technology, and enacted laws and regulations. The liability for environmental remediation is included on
the Consolidated Balance Sheets in current liabilities within Accrued liabilities and in noncurrent liabilities
within Other liabilities.

At December 31, 2017 and 2016, the total environmental remediation liabilities recorded were $30.8
million and $30.9 million of which $5.7 million and $2.4 million, respectively, were presented in Accrued
liabilities on the Consolidated Balance Sheets, respectively. We project payments over approximately 30
years.

2017 10-K Annual Report

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Part II

For the year ended December 31, 2017, we recorded an environmental liability of $2.0 million related to a
portion of a hazardous waste facility in Mexico. We continue to assess the level of remediation, as well as
other potentially responsible parties, and will adjust our estimate in the future as appropriate.

Operating 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 with the latest
maturity in 2043. The leases for most of the properties contain renewal provisions.

During the years ended December 31, 2017, 2016 and 2015, rent expense was $186.2 million, $181.6
million, and $139.0 million, respectively, included within COR and SG&A on the Consolidated Statements
of Income.

Minimum future rental payments under non-cancelable operating leases that have initial or remaining
terms in excess of one year as of December 31, 2017 for each of the next five years and in the aggregate
are as follows:

In millions
2018
2019
2020
2021
2022
Thereafter

145.9
118.2
95.0
70.7
44.4
86.9
561.1

Asset Retirement Obligations

We have asset retirement obligations that we are required to perform under law or contract once an asset
is permanently taken out of service. Most of these obligations are not expected to be paid until many
years in the future and are expected to be funded from general company resources at the time of
removal.

At December 31, 2017 and 2016, the total asset retirement obligation liabilities recorded were $18.2
million and $10.1 million, respectively, and were included in noncurrent liabilities within Other liabilities.

Unconditional Purchase Commitments

The Company has entered into non-cancelable arrangements with third-parties, primarily related to
information technology products and services. As of December 31, 2017, future payments under these
contractual obligations, not recognized on the Consolidated Balance Sheets, were as follows:

In millions
2018
2019
2020
2021
2022
Thereafter

37.1
16.8
15.3
1.3
0.6
-
71.1

2017 10-K Annual Report

Stericycle, Inc. • 88

Part II

NOTE 11 – RETIREMENT AND OTHER EMPLOYEE BENEFIT PROGRAMS

Defined Contribution Plans:

We have a 401(k) defined contribution retirement savings plan (the “Plan”) covering substantially all
domestic employees. Each participant may elect to defer a portion of his or her compensation subject to
certain limitations. The Company may contribute up to 50% of compensation contributed to the Plan by
each employee up to a maximum of $3,000 per annum. During the years ended December 31, 2017, 2016
and 2015, our contributions were $8.9 million, $5.9 million, and $4.8 million, respectively. Employees
associated with the 2015 Shred-it acquisition were allowed to continue to participate in the former Shred-
it 401(k) defined contribution retirement savings plan. During the years ended December 31, 2016 and
2015, our contributions were $3.4 million and $0.9 million, respectively. The Shred-it plan was officially
closed and all employees converted over to the Plan effective January 1, 2017.

The Company also has several foreign defined contribution plans, which require the Company to
contribute a percentage of the participating employee’s salary according to local regulations. During the
years ended December 31, 2017, 2016 and 2015, total contributions made by the Company for these
plans were approximately $3.4 million, $2.6 million, and $2.1 million, respectively.

Multiemployer Defined Benefit Pension Plans:

We participate in two trustee-managed multiemployer defined benefit pension plans (“Multiemployer
Pension Plans”) for employees who are covered by collective bargaining agreements. The risks of
participating in these Multiemployer Pension Plans are different from single-employer plans in that (i)
assets contributed to the Multiemployer Pension Plan by one employer may be used to provide benefits
to employees or former employees of other participating employers; (ii) if a participating employer stops
contributing to the plan, the unfunded obligations of the plan may be required to be assumed by the
remaining participating employers and (iii) if we choose to stop participating in any of our Multiemployer
Pension Plans or if any event should significantly reduce or eliminate our need to participate (such as
employee layoffs or closure of a location), we may be required to pay those plans a withdrawal amount
based on the underfunded status of the plan. Based upon the most recent information available, one of
the plans we participate in is in “critical” status due to an accumulated funding deficiency and has
adopted a rehabilitation plan to address the funding deficiency position.

The following table outlines our participation in Multiemployer Pension Plans:

Pension Protection
Act Zone Status (1), (3)

Company
Contributions (4)
(in millions)

Plan
Employer ID
Number

Plan #

2017

2016

FIP/RP Status
(2)

2017

2016

Expiration Date
of Collective
Bargaining
Agreement

Pension Plan Private
Sanitation Union,
Local 813 IBT
Nurses And Local 813
IBT Retirement Plan

13-1975659

13-3628926

Red/
Critical

Implemented $

0.6

Green

Red

N/A $

0.5

11/30/2019

various dates

(1) Zone status is defined by the Department of Labor and Pension Protection Act of 2006 and
represents the level at which the plan is funded. Plans in the red zone are less than 65% funded
plans in the green zone are at least 80% funded. Status is based on information received from
pension plans and is certified by the pension plans actuary.

2017 10-K Annual Report

Stericycle, Inc. • 89

Part II

(2)

The "FIP/RP Status" column indicates plans for which a Funding Improvement Plan ("FIP”) or a
Rehabilitation Plan ("RP") has been implemented or is pending.
The most recent Pension
Protection Act zone status available in 2017 and 2016 is for the plans’ year-end December 31,
2016 and 2015, respectively.

(3) A multiemployer defined benefit pension plan that has been certified as endangered, seriously
endangered or critical may begin to levy a statutory surcharge on contribution rates. Once
authorized, the surcharge is at the rate of 5% for the first 12 months and 10% for any periods
thereafter, until certain conditions are met. Contributing employers, however, may eliminate the
surcharge by entering into a collective bargaining agreement that meets the requirements of the
applicable FIP or RP.

(4)

The Company was listed in the Form 5500 for the Pension Plan Private Sanitation Union Local 813
IBT as individually significant for contributing more than 5% of total contributions to the plan
during the plan years ended December 31, 2016 and 2015. At the date these financial statements
were issued, Forms 5500 were not available for the plans for the year 2017.

NOTE 12 – STOCK BASED COMPENSATION

At December 31, 2017, we had the following incentive stock plans:

!
!
!
!
!
!
!

the 2017 Incentive Stock Plan, which our stockholders approved in May 2017;
the 2014 Incentive Stock Plan, which our stockholders approved in May 2014;
the 2011 Incentive Stock Plan, which our stockholders approved in May 2011;
the 2008 Incentive Stock Plan, which our stockholders approved in May 2008;
the 2005 Incentive Stock Plan, which our stockholders approved in April 2005;
the 2000 Non-statutory Stock Option plan, which expired on February 2010;
the Employee Stock Purchase Plan ("ESPP"), which our stockholders approved in May 2001 (as
amended and restated in May 2017), and
The Canadian Employee Stock Purchase Plan (“Canada ESPP”), which our stockholders approved
in May 2016.

At December 31, 2017, we have reserved a total of 9,295,973 shares for issuance under our Incentive Stock
plans.

In terms of the stock options authorized, the 2017 Plan, 2014 Plan, 2011 Plan, 2008 Plan, and the 2005
incentive stock options ("ISOs"),
Plan provide for the grant of non-statutory stock options ("NSOs"),
restricted stock units (“RSUs”), and performance-based restricted stock units (“PSUs”) intended to qualify
under section 422 of the Internal Revenue Code; and the 2000 Plan provides for the grant of NSOs. Our
Plans authorize awards to our officers, employees and consultants, and to our directors.

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 8 or 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.

Employee Stock Purchase Plan:

In October 2000, our Board of Directors adopted the Employee Stock Purchase Plan ("ESPP"), which our
stockholders approved in May 2001, and was made effective as of July 1, 2001. The ESPP authorizes

2017 10-K Annual Report

Stericycle, Inc. • 90

Part II

1,299,999 shares of our common stock, which substantially most employees may purchase through
payroll deductions at a price equal to 85% of the fair market values of the stock as of the end of the six-
month offering period. An employee's payroll deductions, and stock purchase, may not exceed $5,000
during any offering period. During 2017, 2016 and 2015, 111,528 shares, 89,100 shares, and 68,039
shares, respectively, were issued through the ESPP.
In May 2017, our shareholders approved an
‘Amended and Restated ESPP Plan’ which authorizes the issuance of an additional 300,000 shares. At
December 31, 2017, we had 390,835 shares available for issuance under the ESPP plan.

In March 2016, our Board of Directors approved the Canadian Employee Stock Purchase Plan (“Canada
ESPP”), which our stockholders approved in May 2016. The Canada ESPP authorizes 100,000 shares of our
common stock which substantially most Canadian employees may purchase through payroll deductions,
at a price equal to 95% of the fair market values of the stock at the end of the six-month offering period.
An employee's payroll deductions, and stock purchase, may not exceed $5,000 during any offering period.
During 2017 and 2016, 1,766 shares and 756 shares, respectively, were issued through the Canada ESPP.
At December 31, 2017, we had 97,478 shares available for issuance under the Canada ESPP plan.

Stock Based Compensation Expense:

During 2017, 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.

The following table presents the total stock-based compensation expense resulting from stock option
awards, RSUs, PSUs, and the ESPP included on the Consolidated Statements of Income:

In millions

Selling, general and administrative - stock option plan
Selling, general and administrative - RSUs
Selling, general and administrative - PSUs
Selling, general and administrative - ESPP
Total pre-tax expense

14.7
5.2
0.2
1.2
21.3

17.4
0.9
-
2.2
20.5

18.6
1.5
-
1.6
21.7

2017

Years Ended December 31,
2016

2015

Stock Options:

Options granted to directors vest in one year and options granted to officers and employees generally
vest over five years. Expense related to options with graded vesting is recognized using the straight-line
method over the vesting period.
Stock option activity for the year ended December 31, 2017 is
summarized as follows:

Outstanding at beginning of year
Granted
Exercised
Forfeited
Canceled or expired
Outstanding as of December 31, 2017

Exercisable as of December 31, 2017

Number of Options

5,468,732
456,424
(217,922)
(188,879)
(124,938)
5,393,417

Weighted Average
Exercise Price per Share
96.90
$
82.89
51.54
111.78
101.94
96.91

3,472,994

90.55

At December 31, 2017, there was $28.1 million of total unrecognized compensation expense related to
stock options, which is expected to be recognized over a weighted average period of 2.64 years.

2017 10-K Annual Report

Stericycle, Inc. • 91

Part II

The following table sets forth the intrinsic value of options exercised for the years ended December 31:

In millions

Total exercise intrinsic value of options exercised

4.8

26.0

62.6

2017

2016

2015

The exercise intrinsic value represents the total pre-tax intrinsic value (the difference between the fair
value on the trading day the option was exercised and the exercise price associated with the respective
option).

The following table sets forth the information related to outstanding and exercisable options for the years
ended December 31:

Weighted average remaining contractual life of outstanding options (in
years)
Total aggregate intrinsic value of outstanding options (in millions)
Weighted average remaining contractual life of exercisable options (in
years)
Total aggregate intrinsic value of exercisable options (in millions)

2017

2016

2015

4.56
12.8

3.87
12.8

5.25
25.1

4.40
25.1

5.70
162.4

4.70
130.6

The Company uses historical data to estimate expected life and volatility. The estimated fair value of
stock options at the time of the grant using the Black-Scholes option pricing model was as follows:

Stock options granted (shares)
Weighted average fair value at grant date
Assumptions:

Expected term (in years)
Expected volatility
Expected dividend yield
Risk free interest rate

Restricted Stock Units:

2017

Years Ended December 31,
2016

456,424
19.46

1,100,492
20.16

2015

1,056,490
22.90

4.82
22.68%
—%
1.90%

4.77
18.28%
—%
1.21%

4.79
16.71%
—%
1.47 %

The fair value of RSUs is based on the closing price of the Company's common stock on the date of grant
and is amortized to expense over the service period. RSUs vest at the end of three or five years. Our 2017
Plan includes a share reserve for RSUs granted at a 1-1 ratio while our 2008, 2011, and 2014 Plans reserve
at a 2-1 ratio. No RSUs were granted under the 2005 Plan.

The following table sets forth the information related to RSUs for the years ended December 31:

Total aggregate intrinsic value of outstanding units (in millions)
Per share weighted average fair value of units granted

$
$

18.2
82.93

$
$

8.8
106.01

$
$

8.4
114.27

2017

2016

2015

2017 10-K Annual Report

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Part II

A summary of the status of our non-vested RSUs and changes during the year ended December 31, 2017,
are as follows:

Non-vested at beginning of year
Granted
Vested and Released
Forfeited
Non-vested as of December 31, 2017

Number of Units

Weighted Average
Grant Date Fair Value

114,838
210,829
(37,225)
(21,145)
267,297

104.22
82.93
93.86
93.19
89.74

At December 31, 2017, there was $17.7 million of total unrecognized compensation expense related to
RSUs, which is expected to be recognized over a weighted average period of 3.55 years. The fair value of
units that vested during the year ended December 31, 2017 was $2.9 million. There were no units that
vested during the years ended December 31, 2016 and 2015.

Performance-Based Restricted Stock Units:

Our executive officers were granted PSUs in 2017. PSUs vest, or not, in three equal annual installments
based on the achievement of pre-determined annual earnings per share performance goals as approved
by the Compensation Committee. Each of the units granted represent the right to receive one share of
the Company’s common stock at a specified future date. The maximum number of common shares
issuable upon vesting of these PSUs under the first installment was 11,149 shares. Weighted average fair
value at grant date was $82.85 per share with the total fair value of $0.9 million. For the year ended
December 31, 2017, 25% of the performance goal was met which will result in 2,787 shares to vest in
February 2018.

NOTE 13 – PREFERRED STOCK

At December 31, 2017, we had 1,000,000 authorized shares of preferred stock and 673,380 shares issued
and outstanding of mandatory convertible preferred stock. At December 31, 2016, we had 1,000,000
authorized shares of preferred stock and 726,500 shares issued and outstanding.

Series A Mandatory Convertible Preferred Stock Offering: On September 15, 2015, we completed a
registered public offering of 7,700,000 depositary shares, each representing a 1/10th interest in a share of
our 5.25% Series A mandatory convertible preferred stock, par value $0.01 per share (the "Series A
Preferred Stock"), at a public offering price of $100.00 per depository share for total gross proceeds of
$770.0 million.

Unless earlier converted or redeemed, each share of the Series A Preferred Stock will automatically
convert into between 5.8716 and 7.3394 shares of our common stock, subject to anti-dilution and other
adjustments, on the mandatory conversion date, which is expected to be September 15, 2018. The
number of shares of our common stock issuable on conversion will be determined based on the volume-
weighted average price of our common stock over the 20 trading day period commencing on and
including the 23rd scheduled trading day prior to September 15, 2018. Subject to certain restrictions, at
any time prior to September 15, 2018, holders of the Series A Preferred Stock may elect to convert all or a
portion of their shares into common stock at the minimum conversion rate of 5.8716 shares of common
stock per share of Series A Preferred Stock, subject to adjustment.

Dividends on shares of the Series A Preferred Stock are payable on a cumulative basis when, as and if
declared by our board of directors, or an authorized committee thereof, at an annual rate of 5.25% on the

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liquidation preference of $1,000 per share (and, correspondingly, $100.00 per share with respect to the
depositary shares). The dividends may be payable in cash, or subject to certain limitations, in shares of
our common stock, or any combination of cash and shares of our common stock, on March 15, June 15,
September 15 and December 15 of each year, commencing on December 15, 2015, and to, and including,
September 15, 2018.

We declared and paid dividends of $36.3 million, $39.4 million, and $10.1 million to the preferred stock
shareholders during 2017, 2016, and 2015, respectively.

The following table provides information about our repurchases of depository shares of mandatory
convertible preferred stock during the year ended December 31, 2017:

In millions, except share and per share data

January 1 - January 31, 2017
February 1 - February 28 , 2017
March 1 - March 31 , 2017
April 1 - April 30 , 2017
May 1 - May 31 , 2017
June 1 - June 30 , 2017
July 1 - July 31 , 2017
August 1 - August 31 , 2017
September 1 - September 30 , 2017
October 1 - October 31 , 2017
November 1 - November 30 , 2017
December 1 - December 31, 2017
Total

Number of
Depository Shares
Repurchased

Amount Paid for
Repurchases

Average Price Paid
per Share

100,000
40,694
5,006
75,500
65,000
35,000
-
120,000
25,000
-
65,000
-
531,200

6.6
2.7
0.3
5.5
4.7
2.3
-
7.3
1.4
-
3.4
-
34.2

65.51
65.57
70.00
73.00
72.44
67.00
-
60.65
56.75
-
51.88
-
64.39

For the years 2017 and 2016, repurchases of our mandatory convertible preferred stock resulted in a $17.3
million and $11.3 million, respectively, increase in retained earnings, because we redeemed the preferred
stock at a discount. The 531,200 depository shares are equivalent to 53,120 units of preferred stock.

NOTE 14 – EARNINGS PER COMMON SHARE

Basic earnings per share is computed by dividing income available to common shareholders by the
weighted-average number of shares of common stock outstanding during the period. Diluted earnings
per share is computed by dividing income available to common shareholders by the weighted-average
number of shares of common stock outstanding during the period increased to include the number of
additional shares of common stock that would have been outstanding if the potentially dilutive securities
had been issued. Potentially dilutive securities include outstanding stock options, shares to be purchased
under the Company’s employee stock purchase plan, RSUs, PSUs and the assumed conversion of
mandatory convertible preferred stock. The effect of potentially dilutive securities is reflected in diluted
the "treasury stock method" for outstanding stock-based
earnings per share by application of
compensation awards. Under the treasury stock method, an increase in the fair market value of the
Company’s common stock can result in a greater dilutive effect from potentially dilutive securities. For the
issue of the mandatory convertible preferred stock, we use the "if-converted method." Under the if-
converted method, the preferred dividend applicable to convertible preferred stock is added back as an
adjustment to the numerator. The mandatory convertible preferred shares are assumed to be converted
to common shares at the beginning of the period or, if later, at the time of issuance, and the resulting

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Part II

common shares are included in the denominator.
not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive.
numerator is also adjusted for any premium or discount arising from redemption of the preferred stock.

In applying the if-converted method, conversion shall
The

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

In millions, except per share data

Numerator:

Net income attributable to Stericycle, Inc.
Mandatory convertible preferred stock dividend
Gain on repurchase of preferred stock

Numerator for basic earnings per share attributable to Stericycle, Inc.
common shareholders

Denominator:

Denominator for basic earnings per share - weighted average shares

Effect of dilutive securities:

Stock-based compensation awards
Mandatory convertible preferred stock (1)

Denominator for diluted earnings per share - adjusted weighted
average shares and after assumed exercises

Earnings per share – Basic

Earnings per share – Diluted

Years Ended December 31,
2016

2017

2015

42.4 $
36.3
(17.3)

206.3
39.4
(11.3)

23.4 $

178.2

85.3

0.3
-

85.6

0.27 $

84.9

0.7
-

85.6

2.10

2.08

267.0
10.1
-

256.9

84.9

1.3
-

86.2

3.02

2.98

(1) 2017, 2016 and 2015, the weighted average common shares (in thousands) issuable upon the
assumed conversion of the mandatory convertible preferred stock totaling 5,104, 5,528, and
1,648, respectively, were excluded from the computation of diluted earnings per share as such
conversion would have been anti-dilutive.

In 2017, 2016 and 2015, options to purchase shares (in thousands) of 4,724, 3,411, and 818, respectively,
at exercise prices of $62.50-$141.56, $83.49-$141.56, and $117.09-$141.56 were not included in the
computation of diluted earnings per share because the effect would have been anti-dilutive.

In 2017 and 2016, RSUs (in thousands) of 218 and 48, respectively, were not included in the computation
of diluted earnings per share because the effect would have been anti-dilutive.

During 2017, the Company had outstanding PSUs that were eligible to vest into a maximum of 11
thousand shares of common stock subject to the achievement of specified performance conditions.
Contingently issuable shares are excluded from the computation of diluted earnings per share if, based on
current period results, the shares would not be issuable if the end of the reporting period were the end of
the contingency period.
These outstanding PSUs have been excluded from the earnings per share
calculation for 2017 as the performance conditions were not satisfied as of the end of the respective
periods.

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Part II

NOTE 15 – ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table sets forth the changes in the components of accumulated other comprehensive loss
for 2017, 2016 and 2015:

In millions

Beginning balance as of January 1, 2015
Period change
Ending balance as of December 31, 2015
Period change
Ending balance as of December 31, 2016
Period change
Ending balance as of December 31, 2017

Currency Translation
(Loss) Income
Adjustments

Unrealized Gains
(Losses) on Cash
Flow Hedges

Accumulated Other
Comprehensive
(Loss) Income

(135.2) $
(140.8)
(276.0) $
(86.3)
(362.3) $
79.3
(283.0) $

(3.2) $
(3.4)
(6.6) $
1.3
(5.3) $
1.3
(4.0) $

(138.4)
(144.2)
(282.6)
(85.0)
(367.6)
80.6
(287.0)

During the years ended December 31, 2017, 2016 and 2015, the net tax impact of the unrealized (losses)
gains on cash flow hedges in accumulated other comprehensive income was $(0.7) million, $(0.8) million,
and $2.2 million, respectively.

NOTE 16 – SEGMENT REPORTING

Our three reportable segments are:
! Domestic and Canada RCS
!
!

International RCS
All Other (which includes Domestic CRS, Corporate and shared services)

Our Domestic and Canada, and International Regulated Waste and Compliance Services segments
include medical waste disposal, pharmaceutical waste disposal, hazardous waste management,
sustainability solutions for expired or unused inventory, secure information destruction of documents and
e-media, training and consulting through our Steri-Safe® and Clinical Services programs, and other
regulatory compliance services.

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The following tables show financial information for the Company's reportable segments:

In millions

Revenues
Domestic and Canada RCS
International RCS
All other
Total

Gross Profit
Domestic and Canada RCS
International RCS
All other
Total

Amortization
Domestic and Canada RCS
International RCS
All other
Total

Adjusted EBITA
Domestic and Canada RCS
International RCS
All other
Total

Total Assets
Domestic and Canada RCS
International RCS
All other
Total

2017

Years Ended December 31,
2016

2015

2,551.9
707.6
321.2
3,580.7

1,091.7
218.9
151.9
1,462.5

87.6
22.7
8.1
118.4

729.2
62.8
(111.1)
680.9

4,995.0
1,333.1
660.2
6,988.3

2,508.8
751.7
301.8
3,562.3

1,121.3
228.5
137.1
1,486.9

95.7
25.7
7.9
129.3

688.2
58.0
(18.6)
727.6

5,094.1
1,357.1
528.9
6,980.1

Part II

1,999.2
716.8
269.9
2,985.9

908.8
230.3
115.7
1,254.8

22.7
14.9
7.9
45.5

631.4
89.1
(13.0)
707.5

4,913.5
1,636.4
515.3
7,065.2

The following table reconciles the Company's primary measure of segment profitability (Adjusted EBITA)
to income from operations:

2017

In millions

Domestic and Canada RCS Adjusted EBITA
International RCS Adjusted EBITA
Subtotal reportable segments

All other Adjusted EBITA
Business Transformation
Intangible Amortization
Acquisition and Integration
Operational Optimization
Divestitures
Litigation, Settlements and Regulatory Compliance
Impairment
Other

729.2
62.8
792.0
(111.1)
(31.3)
(118.4)
(40.7)
(71.1)
(9.5)
(327.7)
(65.0)
(24.8)

Income from operations

(7.6) $

Years Ended December 31,
2016

2015

688.2
58.0
746.2
(18.6)
-
(129.3)
(60.9)
(59.1)
(27.1)
(7.2)
(1.4)
(8.8)
433.8

631.4
89.1
720.5
(13.0)
-
(45.5)
(79.9)
(34.8)
-
(59.7)
-
-
487.6

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NOTE 17 – GEOGRAPHIC AREA AND SERVICES INFORMATION

The following table presents consolidated revenues and long-lived assets by geographic region:

In millions

Revenues

United States
International:
Europe
Other international countries

Total international

Total

Long-Lived Assets
United States
International:
Europe
Other international countries

Total international

Total

2017

Years Ended December 31,
2016

2015

2,716.9

2,657.4

436.2
427.6
863.8
3,580.7

520.8

89.8
130.4
220.2
741.0

486.0
418.9
904.9
3,562.3

499.1

89.0
135.8
224.8
723.9

The following table presents consolidated revenues by service:

In millions

2017

Years Ended December 31,
2016

2015

Regulated Waste and Compliance Services
Secure Information Destruction Services
Communication and Related Services
Manufacturing and Industrial Services

Revenues

2,023.6
823.4
382.6
351.1
3,580.7

2,063.0
747.5
370.4
381.4
3,562.3

Part II

2,165.0

441.2
379.7
820.9
2,985.9

434.2

95.8
135.6
231.4
665.6

2,064.9
178.1
334.1
408.8
2,985.9

NOTE 18 – LEGAL PROCEEDINGS

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

The Company establishes an accrued liability for loss contingencies related to legal and regulatory matters
when the loss is both probable and reasonably estimable.
If a loss is not probable or a probable loss is
not reasonably estimable, no liability is recorded. These accruals represent management's best estimate
of probable losses and, in such cases, there may be an exposure to loss in excess of the amounts accrued.
Legal and regulatory matters inherently involve significant uncertainties based on, among other factors,
the stage of the proceedings, developments in the applicable facts or law, and the unpredictability of the
ultimate determination of the merits of any claim, any defenses the Company may assert against that
claim and the amount of any damages that may be awarded. The Company's accrued liabilities for loss
contingencies related to legal and regulatory matters may change in the future as a result of new
developments, including, but not limited to, the occurrence of new legal matters, changes in the law or
regulatory environment, adverse or favorable rulings, newly discovered facts relevant to the matter, or
changes in the strategy for the matter. Regardless of the outcome, litigation can have an adverse impact

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on the Company because of defense and settlement costs, diversion of management resources and other
factors.

Contract Class Action Lawsuits. We were served on March 12, 2013 with a class action complaint filed in
the U.S. District Court for the Western District of Pennsylvania by an individual plaintiff for itself and on
behalf of all other “similarly situated” customers of ours. The complaint alleged, among other things, that
we had imposed unauthorized or excessive price increases and other charges on our customers in breach
of our contracts and in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The
complaint sought certification of the lawsuit as a class action and the award to class members of
appropriate damages and injunctive relief.

The Pennsylvania class action complaint was filed in the wake of a settlement with the State of New York
of an investigation under the New York False Claims Act which arose out of the qui tam (or “whistle
blower”) action captioned United States of America ex rel. Jennifer D. Perez v. Stericycle, Inc., Case
No. 1:08-cv-2390, which was settled in the fourth quarter of 2015 as previously disclosed.

Following the filing of the Pennsylvania class action complaint, we were served with class action
complaints filed in federal and state courts in several jurisdictions. These complaints asserted claims and
allegations substantially similar to those made in the Pennsylvania class action complaint. All of these
cases appear to be follow-on litigation to our settlement with the State of New York. On August 9, 2013,
the Judicial Panel on Multidistrict Litigation granted our Motion to Transfer these related actions to the
United States District Court for the Northern District of Illinois for centralized pretrial proceedings (the
“MDL Action”). On December 10, 2013, we filed our answer to the Amended Consolidated Class Action
Complaint in the MDL Action, generally denying the allegations therein. Plaintiffs subsequently filed a
Second Amended Consolidated Complaint on March 8, 2016, and we filed an answer to that pleading on
March 25, 2016, generally denying the allegations therein and asserting a variety of affirmative defenses.

Plaintiffs filed a motion for class certification on January 29, 2016. On February 16, 2017, the Court entered
an order granting plaintiffs’ motion for class certification. The Court certified a class of “[a]ll persons and
entities that, between March 8, 2003 through the date of trial resided in the United States (except
Washington and Alaska), were identified by Stericycle as ‘Small Quantity’ or ‘SQ’ customer, and were
charged and paid more than their contractually-agreed price for Stericycle’s medical waste disposal goods
and services pursuant to Stericycle’s automated price increase policy. Governmental entities whose claims
were asserted in United States ex rel. Perez v. Stericycle Inc. shall be excluded from the class.” On March 2,
2017, Stericycle filed a motion for reconsideration and clarification relating to the Court’s class
certification decision. The parties engaged in discussions through and overseen by a mediator regarding a
potential resolution of the matter and reached an agreement in principle for settlement in July 2017 (the
“Proposed MDL Settlement”).

As we disclosed in a current report on Form 8-K filed on August 2, 2017, under the terms of the Proposed
MDL Settlement, we will establish a common fund of $295.0 million from which will be paid all
compensation to members of the settlement class, attorneys’ fees to class counsel, incentive awards to the
named class representatives and all costs of notice and administration. Our existing contracts with
customers will remain in force, while we will also establish as part of the Proposed MDL Settlement
guidelines for future price increases and provide customers additional transparency regarding such
increases. The Proposed MDL Settlement also addresses additional matters, including the availability of
alternative dispute resolution for members of the settlement class. In the Proposed MDL Settlement, we
are admitting no fault or wrongdoing whatsoever, and are entering into the Proposed MDL Settlement in
order to avoid the cost and uncertainty of litigation.

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In view of the Proposed MDL Settlement, we recorded a pre-tax accrual of $295.0 million in accrued
liabilities on the Consolidated Balance Sheet as of December 31, 2017 and a pre-tax charge of $295.0
million in SG&A on the Consolidated Statements of Income for the year ended December 31, 2017.

the agreement

On October 17, 2017, the Company executed a definitive written settlement agreement (the “Settlement”),
which incorporates the terms of
in principle announced in August 2017. The
Settlement incorporates the terms of the Proposed MDL Settlement, described above, and proposes a
global resolution of all cases and claims against the Company in the MDL Action; including the allegation
that price increases implemented by the Company allegedly violated the contracts between the Company
and its customers as well as various state consumer protection statutes. Under the terms of the
Settlement, the Company is admitting no fault or wrongdoing whatsoever, and it is entering into the
Settlement in order to avoid the cost and uncertainty of litigation. The Settlement, upon final approval by
the Court following a fairness hearing, will fully and finally resolve all claims against the Company alleged
in the MDL Action.

On October 17, 2017, plaintiffs in the MDL Action filed Plaintiffs’ Unopposed Motion for Preliminary
Approval of Class Settlement and Approval of Notice Plan. Following a hearing on October 26, 2017, the
Court granted preliminary approval of the Settlement and set certain deadlines, including for notification
of the class of the terms of the Settlement and the submission of opt-outs or objections to the
Settlement, which deadlines have now passed. On January 12, 2018, the MDL Action was reassigned to
the Honorable Robert W. Gettleman. On February 12, 2018, Plaintiffs filed a Motion for Final Approval of
Class Settlement with the Court. A fairness hearing on the Settlement is currently anticipated to be held
in March 2018.

Securities Class Action Lawsuit. On July 11, 2016, two purported stockholders filed a putative class
action complaint in the U.S. District Court for the Northern District of Illinois. The plaintiffs purported to
sue for themselves and on behalf of all purchasers of our publicly traded securities between February 7,
2013 and April 28, 2016,
inclusive, and all those who purchased securities in our public offering of
depositary shares, each representing a 1/10th interest in a share of our mandatory convertible preferred
stock, on or around September 15, 2015. The complaint named as defendants the Company, our directors
and certain of our current and former officers, and certain of the underwriters in the public offering. The
complaint purports to assert claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well as SEC Rule 10b-5, promulgated
thereunder. The complaint alleges, among other things, that the Company imposed unauthorized or
excessive price increases and other charges on its customers in breach of its contracts, and that
defendants failed to disclose those alleged practices in public filings and other statements issued during
the proposed class period beginning February 7, 2013 and ending April 28, 2016.

that purports to assert additional
On August 4, 2016, plaintiffs filed an Amended Complaint
misrepresentations in public statements through July 28, 2016, and therefore to change the putative class
period to the period from February 7, 2013 to July 28, 2016, inclusive. On October 21, 2016, plaintiffs filed
a Corrected Amended Complaint adding the Company as a named defendant in plaintiff’s claim under
Section 11 of the Securities Act, which had previously been asserted only against the Underwriters and
certain officers and directors.

On November 1, 2016, the Court appointed the Public Employees’ Retirement System of Mississippi and
the Arkansas Teacher Retirement System as Lead Plaintiffs and their counsel as Lead Counsel. On February
1, 2017, Lead Plaintiff filed a Consolidated Amended Complaint with additional purported factual material
supporting the same legal claims from the prior complaints for a class period from February 7, 2013

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through September 18, 2016. Defendants filed a motion to dismiss the Consolidated Amended Complaint
on April 1, 2017. On May 19, 2017, plaintiffs filed a response in opposition to the motion to dismiss and
on June 19, 2017, Defendants filed a reply brief in support of their motion. The motion to dismiss is
currently pending.

We intend to vigorously defend ourselves against this lawsuit.

We have not accrued any amounts in respect of this lawsuit, and we cannot estimate the reasonably
possible loss or the range of reasonably possible losses that we may incur. We are unable to make such
an estimate because (i) litigation is by its nature uncertain and unpredictable, (ii) we do not know whether
the court will certify any class of plaintiffs or, if any class is certified, how the class would be defined, and
(iii) in our judgment, the factual and legal allegations asserted by plaintiffs are sufficiently unique that we
are unable to identify other proceedings with circumstances sufficiently comparable to provide guidance
in making estimates.

Shareholder Derivative Lawsuits. On September 1, 2016, a purported stockholder filed a putative
derivative action complaint in the Circuit Court of Cook County, Illinois against certain officers and
directors of the Company, naming the Company as nominal defendant. The complaint alleges that
defendants breached their fiduciary duties to the Company and its stockholders by causing the Company
to allegedly overcharge certain customers in breach of those customers’ contracts, otherwise provide
unsatisfactory customer service and injure customer relationships, and make materially false and
misleading statements and omissions regarding the Company’s business, operational and compliance
policies between February 7, 2013 and the present.

On March 1, 2017, another purported stockholder filed a putative derivative action complaint containing
substantially similar allegations in the Circuit Court of Cook County, Illinois against certain officers and
directors of the Company, naming the Company as nominal defendant. The Company notes, among other
things that, in addition to failing to make the required demand on the board of directors, both of these
filings are in violation of the Company’s Bylaws, which require any such actions to be brought in a court in
Delaware.

On June 29, 2017, the Court entered an agreed order consolidating the two putative derivative actions for
all purposes under the caption Kausal Shah v. Charles A. Alutto, et al. On July 11, 2017, the Court entered a
further agreed order appointing lead counsel for plaintiffs and staying the action pending resolution of
the motion to dismiss the securities class action discussed above. Pursuant to the agreed order,
defendants reserve all potential defenses to both actions, should the stay be lifted.

We intend to vigorously defend ourselves against this consolidated lawsuit.

We have not accrued any amounts in respect of these lawsuits, and we cannot estimate the reasonably
possible loss or the range of reasonably possible losses that we may incur. We are unable to make such
an estimate because (i) litigation is by its nature uncertain and unpredictable and (ii) in our judgment; the
factual and legal allegations asserted by plaintiffs are sufficiently unique that we are unable to identify
other proceedings with circumstances sufficiently comparable to provide guidance in making estimates.

Shareholder Demand Letter. On October 18, 2016, the Company received a letter from an attorney
purporting to represent a current stockholder of the Company demanding, pursuant to Del. Ct. Ch. R.
23.1, that the Company’s Board of Directors take action to remedy alleged breaches of fiduciary duties by
certain officers and directors of the Company. The factual allegations set forth in the letter are similar to
those asserted in the Securities Class Action Lawsuit and the Shareholder Derivative Lawsuit. The letter

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asserts breaches of fiduciary duty in connection with the management, operation and oversight of the
Company’s business and in connection with alleged false, misleading and/or incomplete statements
regarding the Company’s business practices.

The Company’s Board of Directors has constituted a Special Demand Review Committee to investigate the
claims made in the demand letter and the Committee has retained independent counsel to assist with the
investigation. The Committee’s investigation is ongoing.

TCPA Lawsuit. On June 3, 2016, a plaintiff filed a putative class action, captioned Ibrahim v. Stericycle, Inc.,
No. 16-cv-4294 (N.D.
Ill.), against us and our wholly-owned subsidiary, Stericycle Communication
Solutions, Inc., under the Telephone Consumer Protection Act (“TCPA”), asserting that the defendants
called plaintiff and others in violation of that statute. Plaintiff challenges our use of pre-recorded
messages that urge the owners of recalled products to return or obtain repairs for those products.

Plaintiff seeks certification of two nationwide classes. One class includes people who received one or more
cellular telephone calls from Stericycle featuring a prerecorded or artificial voice message relating to a
product recall, where the called party was not the same individual who, according to Stericycle’s records,
was the intended recipient of the call. The second class includes people who received one or more cellular
telephone calls from Stericycle featuring a prerecorded or artificial voice message relating to a product
recall after such person had communicated to Stericycle that Stericycle did not have consent to make any
such calls to their cellular telephone number.

On July 28, 2016, we answered the complaint, denying the material allegations and raising certain
affirmative defenses. Among the asserted defenses is the “emergency” exception to the TCPA, which
exempts calls made to promote public health and safety. On December 19, 2016, before any substantial
discovery in the case, we filed a motion for summary judgment primarily on the basis of the “emergency”
exception. On February 1, 2017, plaintiff responded to our motion by requesting additional discovery. The
court permitted plaintiff to obtain some but not all of the requested discovery, and we have provided
additional documents in response to that order.

On April 5, 2017, plaintiff sought leave to file an amended complaint which would add a claim under the
Illinois Automatic Telephone Dialers Act (which does not include an “emergency” exception) and certain
additional allegations. We filed an opposition to this motion on April 28, 2017, contending that the
proposed amendments are futile and that we are entitled to summary judgment. On June 27, 2017, the
court permitted plaintiff to file the amended complaint. We have answered plaintiff’s amended complaint,
denying liability, and in light of the amended complaint, have withdrawn our motion for summary
judgment without prejudice.

The parties are currently conducting discovery. The deadline for completion of fact discovery is May 15,
2018.

We intend to vigorously defend ourselves against this lawsuit.

We have not accrued any amounts in respect of this lawsuit, and we cannot estimate the reasonably
possible loss or the range of reasonably possible losses that we may incur. We are unable to make such
an estimate because (i) litigation is by its nature uncertain and unpredictable, (ii) we do not know whether
the court will certify any class of plaintiffs or, if any class is certified, how the class would be defined, and
(iii) in our judgment, the factual and legal allegations asserted by plaintiff are sufficiently unique that we
are unable to identify other proceedings with circumstances sufficiently comparable to provide guidance
in making estimates.

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Part II

FCPA Investigation. On June 12, 2017, the SEC issued a subpoena to the Company, requesting
documents and information relating to the Company’s compliance with the Foreign Corrupt Practices Act
(“FCPA”) or other foreign or domestic anti-corruption laws with respect to certain of the Company’s
operations in Latin America. In addition, the Department of Justice has notified the Company that it is
investigating this matter in parallel with the SEC. The Company is cooperating with these agencies. The
Company is also conducting an internal investigation of these and other matters, including outside of
Latin America, under the oversight of the Audit Committee of the Board of Directors and with the
assistance of outside counsel, and this investigation has found evidence of improper conduct.

We have not accrued any amounts in respect of this matter, as we cannot estimate any reasonably
possible loss or any range of reasonably possible losses that we may incur. We are unable to make such
issues
an estimate because, based on what we know now,
presented in this matter are sufficiently unique that we are unable to identify other circumstances
sufficiently comparable to provide guidance in making estimates.

in our judgment, the factual and legal

Environmental Matters. Our Environmental Solutions business is regulated by federal, state and local
laws enacted to regulate the discharge of materials into the environment, remediate contaminated soil
and groundwater or otherwise protect the environment. As a result of this continuing regulation, we
frequently become a party to legal or administrative proceedings involving various governmental
authorities and other interested parties. The issues involved in these proceedings generally relate to
alleged violations of existing permits and licenses or alleged responsibility under federal or state
Superfund laws to remediate contamination at properties owned either by us or by other parties to which
either we or the prior owners of certain of its facilities shipped wastes. From time to time, we may be
subject to fines or penalties in regulatory proceedings relating primarily to waste treatment, storage or
disposal facilities.

North Salt Lake, Utah. The United States Attorney’s Office for the District of Utah (the “USAO”) and the
Criminal Investigation Division of the U.S. Environmental Protection Agency (the “EPA”) are conducting an
investigation of the same facts underlying the notice of violation (the “NOV”) issued by the State of Utah
Division of Air Quality (the “DAQ”) that resulted in our December 2014 settlement with the DAQ that we
have previously disclosed. The USAO and EPA investigated whether the matters forming the basis of the
NOV constitute criminal or civil violations of the Clean Air Act and other federal statutes. In February 2018,
the USAO advised us that it would not pursue criminal penalties in the matter.

We intend to continue cooperating with the EPA and DOJ to resolve the matter civilly.

The Company has accrued its estimate of the probable loss for this matter in accrued liabilities which is
not material.

Rancho Cordova, California. The California Department of Toxic Substances Control (“DTSC”) has alleged
violations of California’s Hazardous Waste Control Law for our hazardous waste facility in Rancho
Cordova, California for the years 2011 through 2017. DTSC has referred the matter to the California
Attorney General’s office. On March 3, 2016, we entered into a tolling agreement with the Attorney
General’s office, which was subsequently extended through October 30, 2017. Under
the tolling
agreement as extended, the period from February 29, 2016 through October 30, 2017 will be excluded
from any calculation of time for the purpose of determining the statute of limitations concerning any
charges that we violated the Hazardous Waste Control Law. The tolling agreement does not constitute an
admission of guilt or wrongdoing on our part and cannot be construed as a waiver of any other rights or
defenses that we may have in any resulting action or proceeding.

2017 10-K Annual Report

Stericycle, Inc. • 103

Part II

On October 26, 2017, DTSC filed a complaint in California Superior Court in Sacramento County for civil
penalties and injunctive relief for alleged violations of California's Hazardous Waste Control Law. We
continue to engage in discussions with DTSC regarding the parties’ current factual and legal positions. We
will continue to evaluate DTSC’s position and to explore a number of potential alternatives, including a
negotiated resolution and potential litigation.

The Company has accrued its estimate of the probable loss for this matter in accrued liabilities which is
not material.

Tabasco, Mexico. The National Agency for Industrial Security and the Protection of the Environment for the
Hydrocarbon Sector in Mexico (“ASEA”) has conducted a permit compliance inspection at a hazardous
waste treatment facility acquired by one of our subsidiaries in Dos Bocas, Tabasco, Mexico. ASEA has
claimed that the contaminated soil treatment process described in the treatment permit had not been
followed properly and has issued an order imposing a fine and directing that the facility be closed and
that alleged contamination on a certain portion of the facility be remediated. Our subsidiary has engaged
a firm of environmental technicians to assess the contamination described in the ASEA order and to
conduct a broader environmental assessment of the facility. The preliminary estimate of the remediation
costs necessary to address the ASEA order was $2.0 million. Our review and assessment of the overall
facility is ongoing. In November 2017, ASEA issued an order revoking the prior order imposing a fine and
requiring that ASEA reassess the evidence and arguments presented. At this time we are unable to
reasonably estimate the future cost of any remedial obligations at the facility beyond the preliminary
estimate.

We have recorded a pre-tax charge of $2.0 million for this matter in accrued liabilities on our
Consolidated Balance Sheet as of December 31, 2017.

NOTE 19 – QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table summarizes our unaudited consolidated quarterly results of operations as reported for
2017 and 2016:

In millions, except per share data

First
Quarter
2017

Second
Quarter
2017

Third
Quarter
2017

Fourth
Quarter
2017

Year 2017

Revenues
Gross profit
Business Transformation
Intangible Amortization
Acquisitions and Integration
Operational Optimization
Divestitures
Litigation, Settlements and Regulatory Compliance
Impairment
Other
Net income attributable to Stericycle, Inc.
Capital Allocation (Preferred stock dividend)
Net income attributable to Stericycle, Inc. common
shareholders
* Basic earnings per common share
* Diluted earnings per common share

$
$

892.4 $
368.7
-
(29.1)
(11.5)
(10.9)
-
(1.9)
-
(2.5)
58.2
(9.4)

53.4
0.63 $
0.62 $

917.7 $
381.8
-
(29.5)
(11.2)
(25.5)
(3.6)
(301.7)
-
(3.9)
(144.0)
(9.2)

(148.8)

(1.74) $
(1.74) $

882.8 $
368.0
(4.2)
(29.9)
(10.8)
(16.0)
(9.1)
(1.4)
-
(10.9)
39.0
(8.9)

35.5
0.42 $
0.41 $

887.8 $
344.0
(27.1)
(29.9)
(7.2)
(18.7)
3.2
(22.7)
(65.0)
(7.5)
89.2
(8.8)

83.3
0.98 $
0.97 $

3,580.7
1,462.5
(31.3)
(118.4)
(40.7)
(71.1)
(9.5)
(327.7)
(65.0)
(24.8)
42.4
(36.3)

23.4
0.27
0.27

2017 10-K Annual Report

Stericycle, Inc. • 104

Part II

In millions, except per share data

First
Quarter
2016

Second
Quarter
2016

Third
Quarter
2016

Fourth
Quarter
2016

Year 2016

Revenues
Gross profit
Intangible Amortization
Acquisitions and Integration
Operational Optimization
Divestitures
Litigation, Settlements and Regulatory Compliance
Impairment
Other
Net income attributable to Stericycle, Inc.
Capital Allocation (Preferred stock dividend)
Net income attributable to Stericycle, Inc. common
shareholders
* Basic earnings per common share
* Diluted earnings per common share

$
$

874.2 $
366.6
(18.3)
(11.3)
(8.5)
-
(1.3)
-
-
76.8
(10.1)

66.7
0.79 $
0.78 $

891.6 $
377.6
(50.9)
(18.5)
(20.4)
-
(2.7)
-
-
46.0
(10.0)

37.3
0.44 $
0.43 $

890.1 $
376.0
(33.1)
(16.2)
(16.4)
-
(1.4)
-
-
64.8
(9.7)

61.5
0.72 $
0.72 $

906.4 $
366.7
(27.0)
(14.9)
(13.8)
(27.1)
(1.8)
(1.4)
(8.8)
18.7
(9.6)

12.7
0.15 $
0.15 $

3,562.3
1,486.9
(129.3)
(60.9)
(59.1)
(27.1)
(7.2)
(1.4)
(8.8)
206.3
(39.4)

178.2
2.10
2.08

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

2017 10-K Annual Report

Stericycle, Inc. • 105

Part II

STERICYCLE, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

In millions

Allowance for doubtful
accounts
2015
2016
2017

$
$
$

Balance
Beginning
of Period

Charges to
Expenses

Other Charges/
(Reversals) (1)

Write-offs/
Payments

Balance End
of Period

$
19.1
22.3
$
49.6 $

$
13.7
41.8
$
32.3 $

$
3.0
2.7
$
2.7 $

(13.5) $
(17.2) $
(19.4 ) $

22.3
49.6
65.2

(1) Amounts consist primarily of currency translation adjustments.

In millions

Valuation Allowance on Deferred
Tax Assets
2015
2016
2017

$
$
$

Balance
Beginning of
Period

Additions/
(Deductions)
Charged to/
(from) Income
Tax Expense

Other Changes
to Reserves (2)

Balance End of
Period

0.1
17.6
15.4

$
$
$

-
6.9
4.5

$
$
$

17.5
$
(9.1) $
(3.8) $

17.6
15.4
16.1

(2) 2017 amount consists primarily of release of valuation allowance on net operating losses that
ceased upon merger. 2016 and 2015 amounts consist primarily of valuation allowances on
acquired deferred tax assets from business combinations.

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.

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 President and Chief Executive Officer and our Chief Financial Officer, as
appropriate to allow timely decisions regarding our required disclosures.

Our management, with the participation of our President and Chief Executive Officer and our Chief
Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures
as of the end of the fiscal year covered by this Report. Based upon that evaluation, our President and
Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and
procedures were not effective as of the end of the period covered by this annual report, because of
material weaknesses in internal control over financial reporting described below.

2017 10-K Annual Report

Stericycle, Inc. • 106

Part II

(b) Management’s Report on Internal Control Over Financial Reporting.

Management of Stericycle is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d(f) under the Exchange Act). 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 reporting purposes in
accordance with United States generally accepted accounting principles (US GAAP). 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. A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a
material misstatement of the company’s annual or interim financial statements will not be prevented or
detected on a timely basis.

Stericycle conducted an assessment of the effectiveness of its internal control over financial reporting as
of December 31, 2017 based on the criteria established by Internal Control-Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO Framework”).

As of December 31, 2016, we had identified material weaknesses that were pervasive across our internal
control processes. While the Company made progress in a number of areas, material weaknesses continue
to exist as of December 31, 2017.

As of December 31, 2017, Stericycle management has identified material weaknesses in the control
environment and control activity components of the COSO framework that continue to be pervasive
across our internal control processes. Specifically, the material weaknesses relate to not fully designing,
implementing and monitoring financial reporting controls that sufficiently mitigate the identified risks of
material misstatement to the financial statements and insufficient design, implementation and monitoring
of general information technology controls to support the effective operation of financial controls.

Planned Remediation of Material Weaknesses

Stericycle has invested considerable time and resources towards redesigning our internal controls over
financial reporting. The progress we have made can be summarized as follows:

! We engaged consultants to help review and make recommendation with respect to the redesign of

our internal controls over financial reporting;

! We added additional resources and enhanced existing positions in accounting, finance, tax, and
information technology to support the redesigned controls including hiring a Chief Accounting Officer
and a new General Counsel;

! We engaged subject matter experts to perform an assessment and develop a strategic information

technology infrastructure and architecture roadmap;

! We developed a framework to identify risks of material misstatement to our financial statements and

made progress towards designing appropriate controls to mitigate those risks;

! We issued significant and critical accounting policies later in 2017 to assist our finance organization
transactions appropriately and on a timely basis along with compliance

with accounting for
expectations;

2017 10-K Annual Report

Stericycle, Inc. • 107

Part II

! We expanded the training of our employees to reinforce the importance of a strong control

environment;

! We have developed and enhanced a number of standardized processes to enforce individual

accountability for performance and compliance across the Company;

! We established a technical accounting group within the Controllership function with responsibility to

ensure that the accounting for complex or non-routine transactions is appropriate;

! We implemented a tool to facilitate centralized monitoring. The tool is a central repository for policies,
quarterly checklists to confirm adherence with policies, account reconciliations and month end close
checklists and dash boarding;

! We instituted monthly legal entity and management reporting reviews of financial statements to
evaluate results, observe adherence to policies and agree on necessary actions to be taken before
considering the period closed; and

! We enhanced our Disclosure Committee processes and reviews by adding experienced and
knowledgeable members to the committee, implementing disclosure surveys to capture input from
appropriate areas and levels throughout the organization and evolving and expanding existing
processes.

While we have put forth significant effort in our remediation activities as described above, additional
In addition, while certain of the above
actions are required to fully remediate the material weaknesses.
activities have already improved our
these
financial
internal controls over
improvements have not operated for a sufficient period of time to be able to conclude on effectiveness.
We remain committed to continue investing significant time and resources and taking actions to
remediate the material weaknesses in our internal control over financial reporting as we work to further
streamline disparate information technology systems and enhance our control environment. We believe
the investment in our technology enabled business transformation is indicative of our commitment to
enhance our people, processes and systems and strengthen our internal control over financial reporting.

reporting, many of

Below we have described the remedial actions we are taking to address the identified material weaknesses
and enhance our overall control environment.

Control Environment

! We are developing, enhancing, and implementing the remaining necessary standardized policies in
the other areas of accounting and general information technology to communicate and reinforce
individual accountability for performance of internal control responsibilities across the Company;

! We are continuing to create new roles and hire additional accounting and information technology

personnel with appropriate backgrounds and skill sets;

! We are training our employees on our recently issued significant and critical accounting policies to
assist our finance organization with accounting for transactions appropriately and on a timely basis;

! The training of our employees to reinforce the importance of a strong control environment and clearly
communicate expectations will be ongoing, to emphasize the technical requirements for controls that
are designed,
implemented and operating effectively and to set the appropriate expectations on
internal controls through establishing the related policies and procedures; and

! We are continuing to review, analyze, and properly document our processes related to internal

controls over financial reporting.

2017 10-K Annual Report

Stericycle, Inc. • 108

Part II

Control Activities

! We are developing an internal control framework for our general information technology controls
which will ensure we are appropriately identifying and assessing changes that could significantly
impact the system of internal control;

! We are designing and implementing effective review and approval controls over the accurate
recording, presentation, and disclosure of revenue and related costs as well as complex and non-
routine transactions;

! We are designing and implementing effective review and approval controls over account
reconciliations,
journal entries, and management estimates across our remaining internal control
processes. These controls will address the accuracy and completeness of the data used in the
performance of the respective control;

! We have established a policy over the segregation of incompatible duties within our IT systems and
are working to implement such policy across the Company to advance required remediation efforts;

! We are implementing standardized policies to address the completeness and accuracy of data used in

the performance of controls and information technology controls across the Company; and

! We are working to standardize and simplify the Company’s disparate information systems.

When fully implemented and operational, we believe the measures described above will remediate the
control deficiencies that have led to the material weaknesses we have identified and strengthen our
internal controls over financial reporting. We are committed to continuing to improve our internal control
processes and we will continue to review our financial reporting controls and procedures. As we continue
to evaluate and work to improve our internal controls over financial reporting, we may determine to take
additional measures to address control deficiencies or modify certain activities of the remediation
measures described above.

Notwithstanding the existence of the material weaknesses as described above, we believe that the
consolidated financial statements in this Annual Report fairly present, in all material respects, our financial
position, results of operations and cash flows as of the dates, and for the periods, presented, in conformity
with U.S. GAAP.

Conclusion

As a result of the material weaknesses described above, management has concluded that, as of
December 31, 2017, our internal control over financial reporting was ineffective. The "Report of
Independent Registered Public Accounting Firm" relating to internal control over financial reporting as of
December 31, 2017, is included below.

As described above in the “Management’s Report on Internal Control over Financial Reporting” section,
we have undertaken strategic remediation actions to address the material weaknesses in our internal
controls over financial reporting. These remediation actions continued throughout the quarter ended
December 31, 2017 but have not materially affected our internal control over financial reporting.

2017 10-K Annual Report

Stericycle, Inc. • 109

Part II

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Stericycle, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Stericycle, Inc.’s (the Company) internal control over financial reporting as of December
31, 2017, based on criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO
criteria).
In our opinion, because of the effect of the material weaknesses described below on the
achievement of the objectives of the control criteria, the Company has not maintained effective internal
control over financial reporting as of December 31, 2017, based on the COSO criteria.

A material weakness is a deficiency, or combination of deficiencies,
in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual
or interim financial statements will not be prevented or detected on a timely basis. The following material
weaknesses have been identified and included in management’s assessment. Management has identified
material weaknesses related to: not fully designing,
implementing and monitoring financial reporting
controls that sufficiently mitigate the identified risks of material misstatement to the financial statements
and insufficient design, implementation and monitoring of general information technology controls to
support
These material weaknesses in the control
environment and control activity components of the COSO framework as of December 31, 2017, are
pervasive across the Company’s internal control processes.

the effective operation of

financial controls.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2017
and 2016, the related consolidated statements of income, comprehensive income, changes in equity and
cash flows for each of the three years in the period ended December 31, 2017, and the related notes and
financial statement schedule listed in the Index at Item 15(a). These material weaknesses were considered
in determining the nature, timing and extent of audit tests applied in our audit of the 2017 consolidated
financial statements, and this report does not affect our report dated February 23, 2018, which expressed
an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of the internal control over financial reporting
including 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 are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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

2017 10-K Annual Report

Stericycle, Inc. • 110

Part II

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.

Definition and Limitations of Internal Control Over Financial Reporting

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
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.

receipts and expenditures of

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.

/s/ Ernst & Young LLP

Chicago, Illinois
February 23, 2018

Item 9B. Other Information

None.

2017 10-K Annual Report

Stericycle, Inc. • 111

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
2018 Annual Meeting of Stockholders to be held on May 23, 2018, 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 2018 Annual
Meeting of Stockholders to be held on May 23, 2018, 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 business
conduct is available on our website, www.stericycle.com, under "About Us/Our Culture." 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 2018 Annual Meeting of Stockholders to be held on May 23, 2018, 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 2018 Annual Meeting of Stockholders to be held on May 23, 2018, 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 2017 Annual Meeting of Stockholders to be held on
May 23, 2018, to be filed pursuant to Regulation 14A.

Equity Compensation Plans

The following table summarizes information as of December 31, 2017 relating to our equity compensation
plans pursuant to which stock option grants, restricted stock units (“RSUs”) or other rights to acquire
shares of our common stock may be made or issued:

2017 10-K Annual Report

Stericycle, Inc. • 112

Equity Compensation Plan Information

In millions, except per share data

PART III

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

Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options and
Vesting of RSUs
(a)

Weighted-Average
Exercise Price
of Outstanding
Options
(b)

Plan Category
Equity compensation plans approved by our security holders
(1)

5.6

97.55

3.7

(1)

These plans consist of our 2014 Incentive Compensation Plan, 2011 Incentive Compensation Plan,
2008 Incentive Stock Plan, 2005 Incentive Stock Plan, and the Employee Stock Purchase Plan.

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 of 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 2018 Annual Meeting of Stockholders to be held on May 23, 2018, 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 2018 Annual Meeting of
Stockholders to be held on May 23, 2018, to be filed pursuant to Regulation 14A.

Item 14. Principal Accounting Fees and Services

Incorporated by reference from the information under the caption "Ratification of the Independent
Registered Public Accounting Firm" in our Proxy Statement for our 2018 Annual Meeting of Stockholders,
which will be filed with the SEC within 120 days of December 31, 2017.

2017 10-K Annual Report

Stericycle, Inc. • 113

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

Consolidated Financial Statements of Stericycle, Inc. and Subsidiaries

Consolidated Statements of Income for Each of the Years in the Three-Year Period Ended
December 31, 2017

Consolidated Statements of Comprehensive Income for Each of the Years in the Three-
Year Period Ended December 31, 2017

Consolidated Balance Sheets as of December 31, 2017 and 2016

Consolidated Statements of Cash Flows for Each of the Years in the Three-Year Period
Ended December 31, 2017

Consolidated Statements of Changes in Equity for Each of the Years in the Three-Year
Period Ended December 31, 2017

Notes to Consolidated Financial Statements

Schedule II - Valuation and Qualifying Accounts

Report of Independent Registered Public Accounting Firm on Internal Control Over
Financial Reporting

Page

106

110

2017 10-K Annual Report

Stericycle, Inc. • 114

All other financial statement schedules have been omitted because they are not applicable to us or the
required information is shown on the consolidated financial statements or notes thereto.

PART IV

Filed with
Electronic
Submission

We have filed the following exhibits with this report:

Exhibit Index Description

1.1*

3(i).1*

3(i).2*

3(i).3*

3(i).4*

3(i).5*

3(i).6*and 4.2*

3(i).7* and
4.3*

3(ii).1*

4.1*

4.4*

4.5*

4.6*

10.1*

Underwriting Agreement, dated September 9, 2015, among the Registrant, Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Goldman, Sachs & Co. and J.P. Morgan Securities LLC, as representatives
of the underwriters named therein (incorporated by reference to Exhibit 1.1 to our current report on
Form 8-K filed September 15, 2015)
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))
Fourth certificate of amendment to amended and restated certificate of incorporation (incorporated
by reference to Exhibit 3(i).1 to our quarterly report on Form 10-Q filed August 7, 2014)
Certificate of Elimination of the Certificate of Designations relating to Series A Convertible Preferred
Stock, par value 0.01 per share (incorporated by reference to Exhibit 3.1 and 4.1 to our current report
on Form 8-K filed September 15, 2015)
Certificate of Designations setting forth the specific rights, preferences, limitations, restrictions and
other terms and conditions of the Mandatory Convertible Preferred Stock (incorporated by reference
to Exhibit 4.1 to our Registration Statement on Form 8-A filed September 15, 2015)
Amended and restated bylaws (incorporated by reference to Exhibit 3(ii).1 to our current report on
Form 8-K filed June 1, 2016)
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))
Form of certificate representing the Mandatory Convertible Preferred Stock (see Exhibits 3(i).7 and 4.3)
Deposit Agreement, dated as of September 15, 2015, between the Registrant, Wells Fargo Bank, N.A.,
acting as depositary, and the holders from time to time of the Depositary Shares (incorporated by
reference to Exhibit 4.3 to our Registration Statement on Form 8-A filed September 15, 2015)
Form of Depositary Share (included in Exhibit 4.5)
Credit Agreement, dated as of November 17, 2017, among Stericycle, Inc. and certain subsidiaries as
borrowers, Bank of America, N.A., as administrative agent, swing line lender, a lender and a letter of
credit issuer, other lenders party to the credit agreement, JP Morgan Chase Bank, N.A., and HSBC
Securities (USA) Inc., as syndication agents, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Sumitomo Mitsui
Banking Corporation, and Wells Fargo Bank, National Association as co-documentation agents, and
Merrill Lynch, Pierce, Fenner & Smith Inc., HSBC Securities (USA) Inc., and JP Morgan Chase Bank, N.A.,
as joint lead arrangers and joint bookrunners (incorporated by reference to Exhibit 10.1 to our current
report on Form 8-K filed November 20, 2017)

2017 10-K Annual Report

Stericycle, Inc. • 115

PART IV

10.2*

10.3*

10.4*

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 Exhibit 10.1 to our
current report on Form 8-K filed August 27, 2010)
First Amendment, dated as of August 13, 2015, to the Note Purchase Agreement dated as of August
18, 2010, entered into by Stericycle, Inc. 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), Hartford
Life Insurance Company, Hartford Life and Accident Insurance Company, Hartford Fire 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, AXA Equitable Life Insurance Company, 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, CSAA Insurance Exchange and Country
Life Insurance Company (incorporated by reference to Exhibit 2.4 to our current report on Form 8-K
filed August 19, 2015)
Second Amendment, dated as of July 28, 2017, to the Note Purchase Agreement dated as of August
18, 2010, as amended, entered into by Stericycle, Inc. 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), Hartford Life Insurance Company, Hartford Life and Accident Insurance Company, Hartford
Fire 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, AXA Equitable Life Insurance Company,
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, CSAA Insurance
Exchange and Country Life Insurance Company (incorporated by reference to Exhibit 10.3 to our
current report on Form 8-K filed August 2, 2017)

2017 10-K Annual Report

Stericycle, Inc. • 116

PART IV

10.5*

10.6*

Note Purchase Agreement dated as of October 22, 2012 entered into by us, as issuer and seller, and
The Northwestern Mutual Life Insurance Company, Northwestern Long Term Care Insurance Company,
The Lincoln National Life Insurance Company, ING USA Annuity and Life Insurance Company, ING Life
Insurance and Annuity Company, Reliastar Life Insurance Company, Reliastar Life Insurance Company
of New York, Principal Life Insurance Company, Penn Mutual Life Insurance Company, Symetra Life
Insurance Company, Jackson National Life Insurance Company, Reassure America Life Insurance
Company, Aviva Life and Annuity Company, Royal Neighbors of America, Thrivent Financial for
Lutherans, AXA Equitable Life Insurance Company, MONY Life Insurance Company, RiverSource Life
Insurance Company (944), RiverSource Life Insurance Co. of New York (904), Western-Southern Life
Assurance Company, Columbus Life Insurance Company, Integrity Life Insurance Company, Integrity
Life Insurance Company Separate Account GPO, National Integrity Life Insurance Company Separate
Account GPO, Great-West Life & Annuity Insurance Company, Great-West Life & Annuity Insurance
Company of South Carolina, Hartford Life Insurance Company, The Guardian Life Insurance Company
of America, Modern Woodmen of America, National Life Insurance Company, Trinity Universal
Insurance Company, Catholic United Financial, Occidental Life Insurance Company of North Carolina,
Western Fraternal Life Association, Southern Farm Bureau Life Insurance Company, Woodmen of the
World Life Insurance Society, Americo Financial Life & Annuity Insurance Company, American United
Life Insurance Company, Ameritas Life Insurance Corp. of New York, Acacia Life Insurance Company,
The Union Central Life Insurance Company, USAA Life Insurance Company, Country Life Insurance
Company, ProAssurance Indemnity Company, Inc, ProAssurance Casualty Company, and State of
Wisconsin Investment Board, as purchasers (incorporated by reference to Exhibit 10.1 to our current
report on Form 8-K filed October 26, 2012)
First Amendment, dated as of August 13, 2015, to the Note Purchase Agreement dated as of October
22, 2012, entered into by Stericycle, Inc. and The Northwestern Mutual Life Insurance Company,
Northwestern Long Term Care Insurance Company, The Lincoln National Life Insurance Company,
Penn Mutual Life Insurance Company, Principal Life Insurance Company, Symetra Life Insurance
Company, Jackson National Life Insurance Company, Reassure America Life Insurance Company,
Athene Annuity and Life Company (f/k/a Aviva Life and Annuity Company), Royal Neighbors of
America, Thrivent Financial for Lutherans, AXA Equitable Life Insurance Company, RiverSource Life
Insurance Company, RiverSource Life Insurance Co. of New York, Western-Southern Life Assurance
Company, Columbus Life Insurance Company, Integrity Life Insurance Company, Integrity Life
Insurance Company Separate Account GPO, National Integrity Life Insurance Company Separate
Account GPO, Great-West Life & Annuity Insurance Company, Great-West Life & Annuity Insurance
Company of South Carolina, Hartford Life Insurance Company, The Guardian Life Insurance Company
of America, Modern Woodmen of America, National Life Insurance Company, Trinity Universal
Insurance Company, Catholic United Financial, Occidental Life Insurance Company of North Carolina,
Western Fraternal Life Association, Southern Farm Life Insurance Company, Woodmen of the World
Life Insurance Society, American United Life Insurance Company, Ameritas Life Insurance Corp.
successor by merger to Acacia Life Insurance Company, Ameritas Life Insurance Corp. successor by
merger to The Union Central Life Insurance Company, Ameritas Life Insurance Corp. of New York,
USAA Life Insurance Company, Country Life Insurance Company, ProAssurance Casualty Company,
ProAssurance Indemnity Company, Inc. and State of Wisconsin Investment Board (incorporated by
reference to Exhibit 2.3 to our current report on Form 8-K filed August 19, 2015)

2017 10-K Annual Report

Stericycle, Inc. • 117

PART IV

Second Amendment, dated as of July 28, 2017, to the Note Purchase Agreement dated as of October
22, 2012, as amended, entered into by Stericycle, Inc. and The Northwestern Mutual Life Insurance
Company, Northwestern Long Term Care Insurance Company, The Lincoln National Life Insurance
Company, Penn Mutual Life Insurance Company, Principal Life Insurance Company, Symetra Life
Insurance Company, Jackson National Life Insurance Company, Reassure America Life Insurance
Company, Athene Annuity and Life Company (f/k/a Aviva Life and Annuity Company), Royal Neighbors
of America, Thrivent Financial for Lutherans, AXA Equitable Life Insurance Company, RiverSource Life
Insurance Company, RiverSource Life Insurance Co. of New York, Western-Southern Life Assurance
Company, Columbus Life Insurance Company, Integrity Life Insurance Company, Integrity Life
Insurance Company Separate Account GPO, National Integrity Life Insurance Company Separate
Account GPO, Great-West Life & Annuity Insurance Company, Great-West Life & Annuity Insurance
Company of South Carolina, Hartford Life Insurance Company, The Guardian Life Insurance Company
of America, Modern Woodmen of America, National Life Insurance Company, Trinity Universal
Insurance Company, Catholic United Financial, Occidental Life Insurance Company of North Carolina,
Western Fraternal Life Association, Southern Farm Life Insurance Company, Woodmen of the World
Life Insurance Society, American United Life Insurance Company, Ameritas Life Insurance Corp.
successor by merger to Acacia Life Insurance Company, Ameritas Life Insurance Corp. successor by
merger to The Union Central Life Insurance Company, Ameritas Life Insurance Corp. of New York,
USAA Life Insurance Company, Country Life Insurance Company, ProAssurance Casualty Company,
ProAssurance Indemnity Company, Inc. and State of Wisconsin Investment Board (incorporated by
reference to Exhibit 10.4 to our current report on Form 8-K filed August 2, 2017)
Note Purchase Agreement dated as of April 30, 2015 entered into by Stericycle, Inc., as issuer and
seller, and 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 3-2), The Northwestern Mutual Life Insurance Company, The Northwestern Life Insurance
Company for its Group Annuity Separate Account, State Farm Life Insurance Company, State Farm Life
and Accident Assurance Company, Thrivent Financial for Lutherans, AXA Equitable Life Insurance
Company, Great-West Life & Annuity Insurance Company, the Guardian Life Insurance Company of
America, Metropolitan Life Insurance Company, MetLife Insurance Company USA, General American
Life Insurance Company, First MetLife Investors Insurance Company, MetLife Insurance K.K.,
Nationwide Life Insurance Company, RiverSource Life Insurance Company, RiverSource Life Insurance
Company, RiverSource Life Insurance Co. of New York, Life Insurance Company of the Southwest, State
of Wisconsin Investment Board, Catholic Financial Life, GuideOne Mutual Insurance Company and
GuideOne Property & Casualty Insurance Company (incorporated by reference to Exhibit 10.1 to our
current report on Form 8-K filed May 4, 2015)
Second Amendment, dated as of August 13, 2015, to the Note Purchase Agreement dated as of April
30, 2015, entered into by Stericycle, Inc. and 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 3-2), The Northwestern Mutual Life Insurance Company,
The Northwestern Life Insurance Company for its Group Annuity Separate Account, State Farm Life
Insurance Company, State Farm Life and Accident Assurance Company, Thrivent Financial for
Lutherans, AXA Equitable Life Insurance Company, Great-West Life & Annuity Insurance Company, The
Guardian Life Insurance Company of America, Metropolitan Life Insurance Company, MetLife
Insurance Company USA, General American Life Insurance Company, First MetLife Investors Insurance
Company, MetLife Insurance K.K., Nationwide Life Insurance Company, RiverSource Life Insurance
Company, RiverSource Life Insurance Co. of New York, Life Insurance Company of the Southwest, State
of Wisconsin Investment Board, Catholic Financial Life, GuideOne Mutual Insurance Company and
GuideOne Property & Casualty Insurance Company (incorporated by reference to Exhibit 2.2 to our
current report on Form 8-K filed August 19, 2015)

10.7*

10.8*

10.9*

2017 10-K Annual Report

Stericycle, Inc. • 118

PART IV

Third Amendment, dated as of July 28, 2017, to the Note Purchase Agreement dated as of April 30,
2015, as amended, entered into by Stericycle, Inc. and 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 3-2), The Northwestern Mutual Life
Insurance Company, The Northwestern Life Insurance Company for its Group Annuity Separate
Account, State Farm Life Insurance Company, State Farm Life and Accident Assurance Company,
Thrivent Financial for Lutherans, AXA Equitable Life Insurance Company, Great-West Life & Annuity
Insurance Company, The Guardian Life Insurance Company of America, Metropolitan Life Insurance
Company, MetLife Insurance Company USA, General American Life Insurance Company, First MetLife
Investors Insurance Company, MetLife Insurance K.K., Nationwide Life Insurance Company, RiverSource
Life Insurance Company, RiverSource Life Insurance Co. of New York, Life Insurance Company of the
Southwest, State of Wisconsin Investment Board, Catholic Financial Life, GuideOne Mutual Insurance
Company and GuideOne Property & Casualty Insurance Company (incorporated by reference to
Exhibit 10.5 to our current report on Form 8-K filed August 2, 2017)
Note Purchase Agreement dated as of October 1, 2015, entered into by Stericycle, Inc. and
Metropolitan Life Insurance Company, General American Life Insurance Company, MetLife Insurance
Company USA, Erie Family Life Insurance Company, The Northwestern Mutual Life Insurance Company,
The Northwestern Mutual Life Insurance Company for its Group Annuity Separate Account, 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 3), The Bank of
New York Mellon, State Farm Life Insurance Company, State Farm Life and Accident Assurance
Company, Nationwide Life Insurance Company, Thrivent Financial for Lutherans, Principal Life
Insurance Company, State of Wisconsin Investment Board, Auto-Owners Insurance Company, Auto-
Owners Life Insurance Company, American United Life Insurance Company, The State Life Insurance
Company, Ameritas Life Insurance Corp., Ameritas Life Insurance Corp. of New York, PHL Variable
Insurance Company, Woodmen of the World Life Insurance Society, Horizon Blue Cross Blue Shield of
New Jersey and Southern Farm Bureau Life Insurance Company (incorporated by reference to Exhibit
10.1 to our current report on Form 8-K filed. October 7, 2015)
First Amendment, dated as of July 28, 2017, to the Note Purchase Agreement dated as of October 1,
2015, entered into by Stericycle, Inc. and Metropolitan Life Insurance Company, General American Life
Insurance Company, MetLife Insurance Company USA, Erie Family Life Insurance Company, The
Northwestern Mutual Life Insurance Company, The Northwestern Mutual Life Insurance Company for
its Group Annuity Separate Account, 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 3), The Bank of New York Mellon, State Farm Life Insurance
Company, State Farm Life and Accident Assurance Company, Nationwide Life Insurance Company,
Thrivent Financial for Lutherans, Principal Life Insurance Company, State of Wisconsin Investment
Board, Auto-Owners Insurance Company, Auto-Owners Life Insurance Company, American United Life
Insurance Company, The State Life Insurance Company, Ameritas Life Insurance Corp., Ameritas Life
Insurance Corp. of New York, PHL Variable Insurance Company, Woodmen of the World Life Insurance
Society, Horizon Blue Cross Blue Shield of New Jersey and Southern Farm Bureau Life Insurance
Company (incorporated by reference to Exhibit 10.6 to our current report on Form 8-K filed August 2,
2017)
2000 Non-statutory 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))
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))
First amendment to 2005 Plan (incorporated by reference to Exhibit 10.15 to our annual report on
Form 10-K for 2008)
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))
First amendment to 2008 Plan (incorporated by reference to Exhibit 10.19 to our annual report on
Form 10-K for 2009)

10.10*

10.11*

10.12*

10.13*†

10.14*†

10.15*†

10.16*†

10.17*†

10.18*†

10.19*†

10.20*†

2017 10-K Annual Report

Stericycle, Inc. • 119

PART IV

10.21*†

10.22*†

10.23*†

10.24*†

10.25†

10.26*†

10.27*†

10.28†

10.29†

10.30*†

10.31*†

10.32†

10.33*†

10.34*†

10.35*†

14*
21
23
31.1
31.2
32

99.1

101.INS

101.SCH

101.CAL

101.DEF

101.LAB

101.PRE

Amendment to 2000 Plan, 2005 Plan and 2008 Plan (incorporated by reference to Exhibit 10.21 to our
annual report on Form 10-K for 2012)
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))
2014 Incentive Stock Plan ("2014 Plan") (incorporated by reference to Exhibit 4.1 to our registration
statement on Form S-8 filed December 23, 2014 (Registration No. 333-201236))
Stericycle, Inc. 2017 Long-Term Incentive Plan ("2017 Plan") (incorporated by reference to Exhibit B to
our Definitive Proxy Statement on Schedule 14A filed April 14, 2017)
Form of agreement for stock option grant under 2005, 2008, 2011 and 2014 Plans (incorporated by
reference to Exhibit 10.20 to our annual report on Form 10-K for 2011)
Form of agreement for restricted stock unit award under 2008, 2011 and 2014 Plans (incorporated by
reference to Exhibit 10.21 to our annual report on Form 10-K for 2011)
Form of agreement for performance-based restricted stock unit award under 2011 and 2014 Plans
(incorporated by reference to Exhibit 10.24 to our annual report on Form 10-K for 2016)
Bonus conversion program (2018 plan year)
Amended and Restated Employee Stock Purchase Plan effective May 24, 2017 (incorporated by
reference to Exhibit A to our Definitive Proxy Statement on Schedule 14A filed April 14, 2017)
Canadian Employee Stock Purchase Plan (incorporated by reference to Exhibit A to our Definitive
Proxy Statement on Schedule 14A filed April 15, 2016)
Plan of Compensation for Outside Directors (incorporated by reference to Exhibit 10.1 to our quarterly
report on Form 10-Q filed August 9, 2016)
Form of Director Restricted Stock Unit Award under 2017 Plan
Form of Indemnification Agreement for Directors and Officers (incorporated by reference to Exhibit
10.29 to our annual report on Form 10-K for 2016)
Executive Severance and Change in Control Plan (incorporated by reference to Exhibit 10.1 to our
current report on Form 8-K filed August 30, 2016)
Supplemental Retirement Plan (incorporated by reference to Exhibit 10.1 to our current report on
Form 8-K filed December 30, 2016)
Code of ethics (incorporated by reference to Exhibit 14 to our annual report on Form 10-K for 2003)
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
Settlement Agreement dated October 17, 2017 (incorporated by reference to Exhibit 99.1 to our
Current Report on Form 8-K filed October 18, 2017)

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

SBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

x
x
x
x
x

Filed herewith
Previously filed

x
*
† Management contract or compensatory plan required to be filed pursuant to Item 601 of

Regulation S-K

Item 16. Form 10-K Summary

None.

2017 10-K Annual Report

Stericycle, Inc. • 120

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.

SIGNATURES

Dated: February 23, 2018

STERICYCLE, INC.
(Registrant)
By:
Daniel V. Ginnetti
Executive Vice President and Chief Financial Officer

/s/ DANIEL V. GINNETTI

/s/ Richard J. Hoffman

STERICYCLE, INC.
(Registrant)
By:
Richard Hoffman
Senior Vice President and Chief Accounting
Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Dated: February 23, 2018

Name

Title

Date

/s/ CHARLES A. ALUTTO
Charles A. Alutto

/s/ DANIEL V. GINNETTI
Daniel V. Ginnetti

/s/ RICHARD J. HOFFMAN
Richard J. Hoffman

/s/ MARK C. MILLER
Mark C. Miller

President, Chief Executive Officer and Director (Principal
Executive Officer)

February 23, 2018

Executive Vice President and Chief Financial Officer (Principal
Financial and Accounting Officer)

February 23, 2018

Senior Vice President and Chief Accounting Officer (Principal
Accounting Officer)

February 23, 2018

Chairman of the Board of Directors

February 23, 2018

/s/

JACK W. SCHULER

Lead Director of the Board of Directors

February 23, 2018

Jack W. Schuler

/s/ BRIAN P. ANDERSON
Brian P. Anderson

/s/

LYNN D. BLEIL

Lynn D. Bleil

Director

/s/

THOMAS D. BROWN

Director

Thomas D. Brown

February 23, 2018

2017 10-K Annual Report

Stericycle, Inc. • 121

/s/

THOMAS F. CHEN

Director

Thomas F. Chen

/s/ ROBERT S. MURLEY
Robert S. Murley

Director

/s/

JOHN PATIENCE

Director

John Patience

/s/ MIKE S. ZAFIROVSKI
Mike S. Zafirovski

Director

SIGNATURES

February 23, 2018

2017 10-K Annual Report

Stericycle, Inc. • 122

(This page intentionally leftff blank)

2017 ANNUAL REPORT

Our Company
At A Glance

Stericycle is a global business-to-business services company. We provide
an array of highly specialized solutions serving healthcare organizations
and commercial businesses of every size. Since our founding in 1989,
we have grown from a small start-up in medical waste management into
a leader across a range of increasingly complex and highly regulated
arenas, such as:

• Brand protection solutions

• Environmental and sustainable solutions

• Patient and customer communication solutions

• Secure information destruction

• Regulated waste management and compliance solutions

Every organization today must comply with increasingly strict
regulatory guidelines and quality controls in the delivery of their core
businesses. Large or small, businesses can’t always do it on their own.
They seek out Stericycle to help them. We have the expertise and passion
to take on many complicated and often behind-the-scenes services our
clients don’t always know how to do well but that ultimately make their
businesses better.

O U R P U R P O S E :

To help our customers fulfill their
promises by providing solutions
that protect people and brands,
promote health and safeguard
the environment.

1989

FOUNDED IN 1989

HEADQUARTERS
LAKE FOREST, IL

2017 REVENUE OF
$3.6 BILLION

680+ locations
IN 21 COUNTRIES

MORE THAN
ONE MILLION CUSTOMERS
WORLDWIDE

23,200+
TEAM MEMBERS

2017 ANNUAL REPORT

Stericycle’s Global
Sustainability Highlights

Stericycle provides essential sustainability services that help protect communities from harmful wastes,
enable recycling and alternative use opportunities, and lead to greater consumer safety and satisfaction.
Here is sample of the global annual impact we make to protect what matters:

Medical Waste Management

1.7 BILLION POUNDS
of Medical Waste Safely Treated

Secure Information Destruction

1.5 BILLION POUNDS
of Paper Recycled

Pharmaceutical Waste Disposal

70.3 MILLION POUNDS
of Drugs Safely Disposed

Hazardous Waste Service

1 BILLION POUNDS
of RCRA Wastes Properly Managed

Sharps Management

48.3 MILLION POUNDS
of Plastic Diverted from Landfills

Sustainable Solutions

52.7 MILLION POUNDS
of Wastes Diverted from Landfills

Maritime Solutions

61 MILLION POUNDS
of Maritime Wastes Diverted from Landfills

Learn more about our sustainability efforts at
stericycle.com/about-us/sustainability.

2017 ANNUAL REPORT

Corporate Information

C O M P A N Y H E A D Q U A R T E R S

I N V E S T O R R E L A T I O N S

Stericycle, Inc.
28161 North Keith Drive
Lake Forest, IL 60045
800-643-0240
stericycle.com

For information on the company, additional copies
of this Annual Report or other information, please
contact Stericycle at Investor@stericycle.com or
800-643-0240 ext. 2012. You may also visit the
Investor section on the Company website at
Investors.stericycle.com.

I N D E P E N D E N T A U D I T O R S

A N N U A L M E E T I N G

Ernst & Young LLP
155 N. Wacker Drive
Chicago, Illinois 60606

The annual meeting of stockholders will be held
at 2:00pm CT on Wednesday, May 23, 2018 at:
Hilton Garden Inn
2930 South River Road
Des Plaines, IL 60018

T R A N S F E R A G E N T

N A S D A Q® S Y M B O L

EQ Shareowner Services
1110 Centre Pointe Curve, Suite #101
Mendota Heights, MN 55120-4100

SRCL

S A F E H A R B O R S T A T E M E N T

This document may contain forward-looking statements that involve risks and uncertainties, some of which are beyond our control (for example, general economic

and market conditions). Our actual results could differ significantly from the results described here. Factors that could cause such differences include changes in

governmental regulation of the collection, transportation, treatment and disposal of regulated waste or the proper handling and protection of personal and confidential

information, the level of government enforcement of regulations governing regulated waste collection and treatment or the proper handling and protection of personal

and confidential information, decreases in the volume of regulated wastes or personal and confidential information we collect from customers, our ability to execute on

our Business Transformation initiatives and achieve the anticipated benefits and cost savings, our obligations to service our substantial indebtedness and comply with

the covenants and restrictions contained in our private placement notes and our credit agreement, political, economic, inflationary, currency and other risks related to

our foreign operations, the outcome of pending or future litigation including litigation with respect to the U.S. Foreign Corrupt Practices Act, changing market conditions

in the healthcare industry, competition and demand for services in the regulated waste and secure information destruction industries, our failure to maintain an effective

system of internal control over financial reporting, disruptions in or attacks on our information technology systems, changes in the demand and price for recycled paper,

charges related to our portfolio optimization strategy or the failure of our portfolio optimization strategy to achieve the desired results, as well as other factors described

in our filings with the U.S. Securities and Exchange Commission, including this Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q. As

a result, past financial performance should not be considered a reliable indicator of future performance, and investors should not use historical trends to anticipate

future results or trends. To the extent permitted under applicable law, we make no commitment to disclose any subsequent revisions to forward-looking satements.

28161 N. Keith Drive
Lake Forest, IL 60045

800-643-0240 | stericycle.com