1. Justin Craigwell-Graham Charles Gambino Steven Kahan Jacob Rapp Prashant Tiwari Weiyi Zhou Yana Zalukina 10/27/2009 http://life2gether.files.wordpress.com/2007/04/cardiothoracic_surgery1.jpg http://life2gether.files.wordpress.com/2007/04/cardiothoracic_surgery1.jpg (Accessed 10/25/2009)

2. Company Timeline  Founded in 1989 after the passage of the Medical Waste Tracking Act  In 1993 started acquisition strategy  Launched IPO in 1996  Started International operations in 1998  Emerged as North America's largest provider of medical waste services in 2000.  Acquired Bio System Sharps in 2003  In 2003, entered the reverse pharmaceutical industry via acquisition.  In 2009, entered negotiations to acquire competitor MedServe Inc.

3. Company Logistics  In the business of the collection, transportation, treatment, disposal, and recycling of medical waste  Operations in the United States, Canada, Mexico, Argentina, Chile, the United Kingdom and Ireland  Full service for nearly 418,000 customers  Foreign customers nearly 23% of revenues  No single customer accounts for greater than 2% of revenues.

4. National Coverage  45 Treatment stations  100 Transfer stations  1200 Route Managers  Uniquely prepared to respond promptly to natural or internal disaster Stericycle.com (Accessed 10/25/09)

5. 5  For large-quantity generators of regulated waste such as hospitals, pharmaceutical companies and distributors, Stericycle offers: ◦ 11,000 customers worldwide ◦ Institutional regulated waste management services ◦ Bio Systems ® sharps management services to reduce the risk of needle sticks ◦ A variety of products and services for infection control ◦ Regulated returns management services for expired or recalled healthcare products

6. 6  For small-quantity generators of regulated waste such as doctors’ offices and for retail pharmacies, Stericycle offers: ◦ 407,000 customers worldwide ◦ Regulated waste management services ◦ Steri-Safe ® Occupational Safety and Health Act and Health ◦ Insurance Portability and Accountability Act (HIPAA) ◦ compliance programs ◦ A variety of products and services for infection control ◦ Regulated returns management services for expired or recalled healthcare products

7. 7 Collection of regulated waste Processing Facility Transfer Stations Recycling or Permanent Disposal Supply reusable leak-and puncture-resistant plastic containers Collect containers of regulated waste at intervals specified by contract Allows temporary hold of small loads of waste Consolidated into full truckloads then transported to processing facility Scanned to check for unacceptable hazardous materials Waste is processed via Autoclaving, ETD, Incineration, or Chem-Clav Resulting waste sent to resource recovery, recycling or disposal landfill Extensive documentation throughout

8. SWOT Analysis Strengths Diverse customer base Top 10 customers account for 7% of revenues Broad range of services Established national network Diverse customer base and revenue stability Ability to integrate acquisitions High barriers to entry Weaknesses Exposure to environmental liabilities Patents for ETD has started to expire in May 2009 Inability to complete acquisitions may slow down revenue and profit growth Opportunities Very fragmented industry: provides acquisition opportunities Growing global market High demand by small- quantity generators Threats Foreign currency exchange risk

9.  Domestic Growth ◦ Focus on Steri-Safe ℠, Bio Systems and Return Management Services offerings  International Growth ◦ Focus on integrating acquisitions completed and on pursuing attractive international market opportunities  Profit Growth ◦ Improve Operating margins through improvements in collection route densities, transportation costs and efficiency in processing plants

10.  From 10-K statement (Feb-27-2009): Different types of service providers, including a large number of regional and local companies On- site treatment of regulated waste by some large- quantity generators, particularly hospitals  Peers: Waste Management Republic Services, Inc. American Ecology Corporation Steris Corporation

11.  Private waste management: ◦ Industry Market Cap: 39 Billion ◦ Stericycle’s Market Cap: 4.5 Billion (11.6%)  Increased from 10.3% in 2008 and 9.3% in 2007  Industry Growth Factors ◦ Aging of population results in increased medical attention and an increase in quantity of regulated waste generated ◦ Pressure to reduce healthcare costs ◦ Increased incentives for hospitals to “Go Green”

12.  The Medical Waste Tracking Act of 1988: ◦ Medical waste is "any solid waste that is generated in the diagnosis, treatment, or immunization of human beings or animals, in research pertaining thereto, or in the production or testing of biologicals” Source: http://www.epa.gov/osw/nonhaz/industrial/medical/tracking.htm (Assessed Oct. 22, 2009)http://www.epa.gov/osw/nonhaz/industrial/medical/tracking.htm

13.  Subject to extensive and frequently changing laws and regulations: ◦ Proper handling and disposal of infectious agents carriers required ◦ Government permit to operate

14.  In the U.S., there is uncertainty over a new healthcare bill ◦ Likely to increase access to healthcare, increasing demand and as a result, SRCL’s potential market ◦ The government, however, is also looking for ways to cut costs, which may cut into SRCL’s pricing power ◦ SRCL tries to market itself as able to reduce costs for its customers

15.  Economy appears to have bottomed out on most factors, except employment ◦ Outlook over the next several quarters and years differs among the V-, U-, L-, and W-shape recession opinions ◦ Financial markets have thawed, but still tighter than before the crisis ◦ Acquisitions may be cheaper for SRCL

16.  SRCL uses derivatives to hedge interest rate and currency risk against the British Pound ◦ Other currencies, accounting for less than 25% of 2008 revenue, are not hedged  Fuel costs are hedged through customer contracts that allow for price adjustments due to gas and diesel fluctuations

17.  Globally and domestically, the population is aging ◦ Tends to increase the demand for healthcare, SRCL’s source of revenues ◦ The healthcare sector has weathered the recession better than others ◦ Being part of a regulated waste management industry also makes SRCL a more stable company

22.  Cautious optimism  S&P 500 > 60% since March lows  Shaky consumer confidence  9.8% unemployment  Defensive or Value oriented companies preferred

23. Deflation Cost Cutting and Layoffs Lower Bank Lending Low Borrowings demand

25. Historical Capitalization Balance Sheet as ofDec-31-2003Dec-31-2004Dec-31-2005Dec-31-2006Dec-31-2007Dec-31-2008Jun-30-2009 Pricing as ofMar-15-2004Mar-11-2005Mar-06-2006Mar-01-2007Feb-29-2008Feb-27-2009Oct-23-2009 Capitalization Detail Share Price $22.86 $22.93 $31.64 $39.19 $53.89 $47.98 $53.17 x Shares Out. 84.1 90.0 88.0 88.5 87.5 85.3 85.1 = Market Capitalization 1,923.2 2,064.4 2,784.5 3,468.0 4,714.6 4,090.4 4,522.2 - Cash & Short Term Investments 7.9 8.5 16.0 18.4 10.5 3.7 + Total Debt 167.8 203.6 360.9 465.8 635.8 792.7 785.6 + Pref. Equity 20.9----- 0 + Total Minority Interest------ 0 = Total Enterprise Value (TEV) 2,104.1 2,260.1 3,136.8 3,917.8 5,332.0 4,872.7 5,304.1 Book Value of Common Equity 407.8 495.4 521.6 625.1 714.1 670.5 766.6 + Pref. Equity 20.9----- 0 + Total Minority Interest------ 0 + Total Debt 167.8 203.6 360.9 465.8 635.8 792.7 785.6 = Total Capital 596.6 699.0 882.5 1,090.9 1,349.9 1,463.2 1,552.2

26. DCF Assumption

27. WACC Calculation

29. Sensitivity Analysis Sustainable Growth Rate WACC -6.00%6.75%7.50%8.25%9.00%9.75%10.25%11.00%11.75% 2.00%62.0548.5738.8231.4625.7021.0918.4915.1612.36 2.25%66.1451.2740.7032.8126.7121.8619.1515.6812.78 2.50%70.8154.2842.7634.2827.8022.6919.8416.2213.21 2.75%76.2157.6645.0335.8928.9723.5720.5816.8013.67 3.00%82.5061.5047.5637.6530.2524.5221.3717.4114.15 3.25%89.9365.8950.3939.5831.6325.5422.2218.0714.66 3.50%98.8670.9553.5741.7233.1426.6523.1318.7615.21

30. CompanyTickerCurrent Price# SharesTrailing P/EPrice/SalesPrice/BookEBITDA Multiple American Ecology Corp.ECOL19.2018.116.1641.9773.7497.198 Republic Services Inc.RSG27.71378.5---2.8461.40221.116 Steris Corp.STE32.0858.516.9531.4452.4637.906 Waste Management, Inc.WM31.48490.714.2111.1542.5547.649 High16.9532.8463.74921.116 Low14.2111.1541.4027.198 Average15.7761.8552.54210.967 Stericycle Inc.53.1785.0530.4100.0496.74416.788 Earning per share $ 1.75 Sales per share $ 12.74Trailing P/EP/SP/BEBITDA Multiple Book per share $ 7.88Low $ 24.85 $ 14.70 $ 11.05 $ 17.50 EBITDA315.94High $ 29.64 $ 36.26 $ 29.55 $ 69.20 Total Debt785.6Average $ 27.58 $ 23.64 $ 20.04 $ 31.50 Cash and Equivalent3.7High- Low4.79421.56318.50151.702 No of shares outstanding85.05

32. Valuation MethodWeightEstimated Value per Share Trailing P/E10%$27.58 Price/Sales10%$23.64 Price/Book10%$20.04 EBITDA Multiple10%$31.50 DCF60%$27.67 Triangulated Value per Share$26.88

33. Before SaleAfter Sale

34. Correlation Table Stericycle American Eagle0.0928 Diamond Offshore0.0548 First Industrial-0.0480 Jack Henry0.2402 Kimberly-Clark0.1155 McDonalds0.1487 Walgreens0.0742 MEMC Electronics0.1469 Ameren-0.0141

35. Recommendation  Triangulated value per share is $26.88  Market value per share i s $53.17, on October 27 th, 2009  Conclusion: SRCL is overvalued at the current market price  Sell 100 Shares but Keep on Watch List ◦ Good company versus good stock  Questions?  Comments?