David Wolke RCMP – March 9, 2005

Headquarters: Lake Forest, IL Employees: ~3,500 History: Late 1980’s, heavy media attention on medical waste that washed up on shores in New York and New Jersey. Government has stepped in and made strict regulations for all business that are dealing with medical waste. Industry and business started soon after Medical Waste Tracking Act of 1988 was passed. Founders thought there would be a great need for companies to meet the federal regulations in a cost effective or efficient way.

Competitors

American Ecology Corporation (ECOL) Smaller company with ~ 300 Million Market Cap handles hazardous, more toxic materials Waste Management Inc. (WMI) Larger company with ~ 15 Billion Market Cap More diversified services Hit each stage along the way: collection, transport, disposal, landfill Also have a recycling and resource recovery business…energy source Announced in 2005 they would be entering the medical waste area

Stericyle & American Ecology & Waste Management Spike in ECOL followed a news release of landing a contract with Honeywell Intl. Past 12 Months

Stericyle & American Ecology & Waste Management Past 6 Months

Strengths Over 333,000 accounts 325,000 Small accounts 8,000 Large accounts No one client accounts for over 2% of revenues Top ten clients represent only 9% of revenues Well-diversified

Risks Industry is highly regulated Stericycle must follow numerous government regulations in addition to the Medical Waste Tracking Act, i.e. Clean Air act Acquiring in foreign markets Highly competitive industry Waste Management announced in Feb. 05 that they would be offering medical waste services to customers Stock Sensitivity…

Stock Fluctuations due to Market News Downgrade by Bank of America, stock drops 7.5% in days to follow “Investors snatch up Trash Hauler Stocks” article, stock jumps 6.2% Upgrade by William Blair, stock rises 5%

Small Customers 325,000 small medical waste clients Outpatient clinics, medical / dental offices, long-term care facilities High profit Trust Streicycle for compliance reasons Steri-Safe…

Program created to ensure compliance of federal rules and regulations Comprehensive training, education, safety concerns, and products to assist in ensuring a compliant and safe environment 43% of small customer growth in Q4 13.5% of Accounts on the Premium Level Steri-Safe

Interesting Treatment Technologies Autoclaving High temperature steam is used to destroy pathogens, waste is then sent to shredding or grinding. ETD Treatment Grind waste, then use an oscillating field of low- frequency radio waves to heat waste. The low- frequency waves destroy pathogens up to 5 inches deep.

Growth Acquisitions $63 million in revenue growth $47.6 million attributed to less than 1 year old acquisitions, approximately 75% of revenue growth Q4 Acquisitions account for over 57% of growth International opportunities UK, Canada, Mexico Purchase Pharmaceutical Service Companies New opportunities, lower margins Focus on Hospital pharmacies, product recalls, destruction services, and overall logistics in regulated industry

Financial Analysis Refer to Excel file. Revenue growth, cost of revenue assumptions Implied growth of EPS based on Forward P/E Discounted Cash Flow Analysis

Stericycle and our Portfolio (3/7/06) Own 400 Shares Bought at $ Current Price at $63.28, gain of about $17,500 or 225% Currently represents 8.9% of our portfolio.

Key Issues Stock trading at about 42 P/E, compared to a market P/E of around 18. Indication that Medical Waste Services industry has not grown the past few years. Waste Management Inc. may become a strong competitor or potential acquirer. Stericycle may begin to see more internal growth, in result, slower growth. Stock sensative to market news.

Key Issues continued Stericycle has produced good margins, leader in medical waste Pharmaceutical Services could be a good area for growth, although estimated to produce smaller margins International opportunities still an option Not main priority Different regulations in every country Risks of international business

Recommendation Sell 200 shares of Stericycle (SRCL) at the market. Action would decrease SRCL value from ~$25,600 to ~$12,800. Decrease weight in portfolio from about 9% to 4.5%