Derek Ho

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Recommendation Hold
Derek Ho RCMP 12/09/2004
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• STERICYCLE is
• a regulated medical waste management company
  whose services and operations are comprised of
  collection, transportation, treatment, disposal
  and recycling, together with related training and
  education programs, consulting services and
  product sales.
• focused on management of infection control and a
  safer, more compliant workspace

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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. Contract and Service
Agreements Have long-term contracts and negotiate
individual service agreements to each customer.
Each agreement specifies customers obligation to
pack medical waste in approved containers.
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• BUSINESS DYNAMIC
• Corporate headquarters located in Lake Forest,
  Illinois
• 41 facilities in 25 states, Puerto Rico, Canada,
  and Mexico
• Growing in Australia, Asia, and South America

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• PORTFOLIO POSITION
• Bought 400 shares on 03/21/2001 at 19.47
• Cost Basis of 7,788.00
• Current Price is 45.88
• As of 12/9/04, Stericycle accounts for 6 of our
  portfolio
• Over the last 3 years, there has been a 136
  gain.

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• STOCK PERFORMANCE
• As of 12/19/04
• Current Price 45.88
• EPS 1.72
• This quarters estimates .45-.48 per share
• P/E 27.36
• Beta 0.156

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• MACROECONOMIC FACTORS
• Major Competitors
• 1. Waste Management
• 2. Republic Services
• 3. American Ecology Corporation
• As healthcare needs increase, medical waste will
  become an important factor.
• Controversy over rising healthcare costs
• Baby boom generation
• Diverse Customer Base

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STOCK PERFORMANCE vs. American Ecology
Corporation (ECOL)

• Possible Reasons for Difference
• Slightly different industry
• ECOL a smaller company

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STOCK PERFORMANCE vs. Waste Management Inc. (WMI)

• Possible Reasons for Difference
• WMI has fraud charges due to earnings
  overstatement
• Stock price depends on other industries also

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• STERICYCLES BUSINESS
• Medical Waste Industry is highly regulated by the
  following Federal groups
• Occupational Society Health Administration
  (OSHA)
• The Department of Transportation (DOT)
• Nuclear Regulatory Commission
• Food and Drug Administration (FDA)
• US Postal Service (USPS)
• Environmental Protection Agency (EPA)
• Also regulated at state-level

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• STERICYCLES BUSINESS (Cont.)
• The Stericycle network includes over 100 waste
  collection/transfer facilities and over 40
  treatment and disposal facilities throughout
  North America.
• Focus for future
• Revenue Growth sharp containers
• Profit Growth
• Service Innovation Consulting and HIPPA (1996)

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• Stericycles Business (Cont.)
• Offers products such as alcohol pads, gauze
  sponges, needle stick safety syringes, and
  personal protective equipment
• Auto enclave Technology and Incineration
  Technology
• Electro-thermal Deactivation (ETD) Technology

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Stericycles Growth Strategy

• Expansion into international markets through
  acquisitions, joint ventures and/or by licensing
  proprietary technology and selling associated
  equipment.
• 6 Foreseeable Acquisitions (new ETD facility in
  Japan- now 3)
• Reduce debt (about half of 2003 remaining cash
  used to extinguish)

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Valuation DCF Analysis PE Analysis

See Excel
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• RISKS
• Subject to extensive governmental regulation
• Handling and treatment of hazardous waste carries
  risk of personal injury
• Aggressive pricing by competitors and entrance of
  new competitors drive down profits
• Expansion into foreign countries expose firm to
  new growth obstacles
• Oil prices skyrocketing-highly sensitive to
  transportation costs

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• Stericycle in the News
• Third Quarter Earnings rose 23
• Stericycle Announces Exercise of Option to
  Redeem 50.9 Million of Senior Subordinated Debt
• October 18, 2004
• Stericycle (Business Wire)

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• Recommendation
• HOLD 400 Shares
• Highly Regulated Industry
• High Expectation for Growth
• Industry leader

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• Questions?