Elizabeth Brandel - VP of Finance Mark C. Miller - President and CEO Frank J.M.

ten Brink - EVP, CFO and Chief Administrative Officer Richard T. Kogler - EVP and COO

Ryan Daniels - William Blair David Manthey - Robert Baird Scott Schneeberger - Oppenheimer Scott Levine - JPMorgan Alina Cellura - Citi Jonathan Ellis - Merrill Lynch Anton Kawalsky - Canyon Capital Robert Willoughby - Banc of America Securities Peter Bates - T. Rowe Price

Thank you very much. Welcome to Stericycle's Quarterly Conference Call.

On today's call will be Frank ten Brink, Chief Financial Officer; Rich Kogler, Chief Operating Officer; and Mark Miller, Chief Executive Officer. I will now read the Safe Harbor statement.

Statements by Stericycle on this conference call that are not strictly historical are forward-looking. Forward-looking statements involve known and unknown risks, and should be viewed with caution.

Factors described in the company's Form 10-K, 10-Qs, as well as its other filings with the SEC could affect the company's actual results and could cause the company's actual results to differ materially from expected results. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events or circumstances after this date that may bear upon forward-looking statements.

I will now pass the call to Frank.

Thanks Liz. The results for the second quarter are as follows.

Revenues grew $44.9 million to $277.8 million, up 19.3% from $232.8 million in the second quarter of '07. Internal growth for the company was $27 million, or 11.7%, which is adjusted for foreign exchange.

Domestic growth was over 10%, and international growth adjusted for exchange was 17.5%. Domestic growth consisted of SQ up approximately 12% and LQ up approximately 8%.

The returns management revenues were $26 million. Gross profit was $123.2 million, or 44.3% of revenues, and SG&A expense including amortization was $51.8 million or 18.6% of revenues.

Operating income was $70.9 million, or 25.5% of revenues and interest expense was $8 million. Net income was $38.7 million or $0.44 per share.

At the end of the quarter, the revolver borrowings were approximately $436 million. As previously disclosed on the first quarter call, on April 15th, we closed a private placement note of $100 million with a seven year term and a fixed rate of 5.64%.

The unused portion of the revolver debt at the end of this quarter was approximately $245 million. In the quarter, we purchased 984,533 shares of common stock on the open market in an amount of approximately $51.7 million.

Cumulatively, we have purchased approximately 11 million shares and we still have authorization to purchase an additional 5.2 million shares. Our CapEx was $11.7 million in the quarter and our DSO was 56 days.

The cash provided from operations was $31 million for the quarter and $94.6 million year to date. And with that, I will turn it over to Rich.

Thanks Frank. We want to thank each member of our worldwide team for their solid performance and continued commitment to our customers and shareholders.

In the quarter we enjoyed strong sales growth in all of our business segments. The SQG growth was primarily driven by Steri-Safe, with three out of four new Steri-Safe customers choosing select and preferred.

Steri-Safe contributed over 59% of total small customer revenues. LQ sales growth was driven by the continued adoption of our Bio Systems offering and new LQG med waste contracts.

In summary, we ended Q2 with approximately 402,900 accounts, of which approximately 392,900 were small and the remainder large. Now let's turn it over to Mark.

Thanks Rich. I would now like to provide insight on our current outlook for 2008.

Please keep in mind that these are forward-looking statements. During the second quarter, we completed three acquisitions, two domestic and one international.

Incremental revenue impact in Q2 of 2008 was approximately $2.8 million, and the annualized revenues of these acquisitions is approximately $17 million. Please keep in mind our guidance does not include future acquisitions or divestitures, or the settlement charge of $0.04 per share reported in the first quarter.

We believe that the analyst EPS estimates will be in the range of $1.70 to $1.74, which we are comfortable with. Depending on their assumptions, we believe analysts' estimates for revenue for 2008 will be in the range of $1.08 billion to $1.096 billion.

We believe analysts will have estimates for net income between $150 million and $154 million, depending on assumptions for mix and interest expense. We believe analysts will have estimates for free cash flow of approximately $150 million, with capital expenditures anticipated between $45 million and $50 million for the year.

In closing, we're very excited about the tremendous growth opportunities in 2008 and beyond. We thank you for your time, and operator, we will now open up to Q&A.

QUESTION AND ANSWER

Thank you and good afternoon, guys, and congrats on another solid quarter. A couple quick housekeeping items upfront.

Can you give us the number of Large Quantity adds and Bio Systems adds? And then the second part of that is the current number of Steri-Safe accounts and the percentage now on Premium?

Yes, I can give you those numbers. The number of Bio Systems closes was 73 new accounts, 58 new med waste accounts.

Turning to Steri-Safe, we have 125,000 customers on Steri-Safe right now. And your last question was --?

What percentage of those on Premium. I think it was about 25% last quarter?

We're currently at 26.5%, closing in on 27%.

Okay, great. And then given the continued attention we've seen on energy costs, can you give us an update on what that was as a percent of revenue?

And I'm also curious when you guys think of energy costs, is the biggest component there diesel for you for the trucks, or is it more on the gasoline side?

The total energy as a percent of revenue was 7.56% in the quarter. And the larger portion of that is fuel for the trucks.

Okay, so was there any push-back or any delay, I know diesel for trucks, it seems like this quarter, the second quarter was probably the quickest increase we've seen by some magnitude over the last few years. Were you guys able to successfully pass that through, or will we see some of the ramifications from those price increases spilling into the third quarter, given how quickly they happened?

Our goal traditionally has always been to recover the energy costs, and we do that through pass-throughs because our contracts allow for that sort of thing. As we've said before, there is some lag effect and obviously when you have a quarter like Q2, where prices spike pretty dramatically, the lag effect is something that is challenging for us.

But what our team delivered and the one thing that we always like to remind people is when you're doing pass-throughs of fuel and energy, which is sort of dollar for dollar, there is an impact on comparability of sales growth and obviously gross margin.

Sure. Do you have an idea at least, Frank, what that contributed to sales growth in the period?

I think from a sales growth, probably about 1% to 2%.

Okay, so look pretty similar. And then last question I had, maybe you could give us an update on some of the international operations.

It sounds like great growth there, maybe anything driving that in particular, whether it's new sales or if you're launching some new subsidiaries? Any update you might have on the Asian markets for us?

Thanks.

There was strong growth throughout all the locations. There were some onetime revenues, probably the equivalent of maybe 3% to 4% of that growth; so it was $17 million; 3% to 4% of that was kind of onetime.

The volumes are strong and it's been a good market.

Okay, great. Thanks a lot, guys.

Thank you. Maybe Frank, if you could talk about the impact of higher fuel prices on gross profit.

I guess it might be -- it might have an impact there, I think you said it was 20 basis points last quarter. Could you talk about that?

If the things would have been constant during the quarter from a fuel point of view, which it obviously wasn't, we would have been probably about 60 basis points better on the gross margin line.

Okay. And then of the 402,900 customers, could you break that out by US versus international?

And I don't know if you can talk about Small Quantity versus Large Quantity international?

No, we don't break that out.

Okay, and then on the returns management side, the $26 million, a real solid number there. Is there any chance that you're thinking about updating the level that you plan on seeing for this year?

I think the guidance for this year probably is going to be in a range of $76 million to $87 million.

Great, all right, thank you.

Thank you. Just following up on that last question, a very strong number for returns recalls.

Could you just take us a little bit deeper as to, are you seeing more volume of recalls or are you getting bigger jobs per recall? Any further color there, that would be great.

Yes, I think it was a very strong recall quarter, as I've mentioned over the times. The key to recalls is what I would call the quality of the recalls.

So it really depends heavily on how deep we have to go for the respective customer, is it a recall all the way to the consumer level or not, what kind of services the customer is going to use from us and obviously over the years we have added services now to the whole portfolio. And all those engines were very strong in the quarter and so from that point, great.

Within SG&A spend, it was certainly, it came in below what I had been expecting. But it had been trending fairly high the last few quarters, in my view.

Are we seeing, is it just some scale on the revenue? Are you tapering back on spending?

And are you shifting where that spend is? I got the sense last year there was a big ramp in spend for returns management and now maybe that had shifted more to Steri-Safe and Bio Systems.

Just any deeper commentary there.

I think obviously, if you have a quarter where also we had very strong returns revenue, the pass-throughed incremental SG&A that we for instance get on that is obviously not equivalent in percentage, so you do get a little bit of a benefit as a percent to revenue coming through to us. And again, the higher volume, the higher revenues, we had at that point not passed as much on, not much good flow-through for those.

We are continuously looking for making strong investments for the future, and we'll continue to look for opportunities to do R&D and the new products and the like.

Thanks. Now, in the press release, a brief press release, but I believe something new, and I may be wrong, I didn't check back.

You noted international investment as a use of cash. Anything new or interesting that you're doing on the international front, beyond acquisitions, just with the investment dollars?

No, it's obviously, international investment means to us also that we are investing in now a larger portion of our business internationally, either through the capital spending and the like, it is mostly in that category and acquisitions.

Thanks very much. I appreciate it.

Good afternoon, guys.

Good afternoon.

With regard to the higher earnings guidance here, is that flow-through of acquisitions may be some of these onetime international revenues, is there anything else in terms of the assumptions that is coming up to drive that beyond those two items?

No. Again, the guidance that we're giving is again excluding the $0.04, so that's important.

But the second quarter, for most we were kind of beating by $0.02 and then for the next two quarters, kind of $0.01 each, so $0.04 up roughly.

And then on the acquisitions side, could you characterize the pipeline, do you have a sense that things maybe kind of pick up from here and, or is it kind of business as usual on a continuous of what you've seen?

Strong pipeline, definitely over $50 million. It's a busy market out there.

Okay. Any change in the developmental programs?

You guys are working the R&D pipeline, anything appreciable there?

No, not specific. As we mentioned before, we continue to explore the pharmaceutical waste and that's becoming a part of some of the areas of the offerings in the LQ space and that seems to be positive as a direction.

One last one then on diesel. Do you see any sensitivity on the part of either LQ or SQ customers to pass-throughs?

I know it's contractual by and large. But is there any sensitivity in terms of the recovery that you see, if fuel price [inaudible] to move up where at a certain point you might start getting some pushback or there might be less recovery on that side?

We have not seen that so far and I think we're all sort of downstream from this fuel issue. I'm sure when you go buy groceries, you realize that there is cost of the fuel involved in transporting the goods to your store, and you pay it and you recognize it and you're trying to manage through it.

Our customers understand the economic situation and our contracts are flexible. I think that we've done a good job of managing through it so far.

Thank you, guys.

It's actually Alina Cellura for Leone. Just a couple of little housekeeping questions, just curious what your cost of debt is right now?

I'd say we're at about LIBOR plus anywhere like 85 on our general domestic borrowings. Internationally, they could be a little bit more.

Okay, and then the tax rate was a little bit lower than what I had expected. Are you expecting to get back up to around 38.5%?

I would say for the year at 38.3% is a fair number to use.

Okay. And then just the acquisitions that you made in the quarter, were they in the core med waste business, or can you just talk a little bit about those?

Yes, they were two domestic and one international. All were in the med waste area.

Okay, great and is acquisition activity or discussions, are they picking up because of the potential change in administration in January and the potential for higher capital gains taxes? Are you seeing a pickup in activity?

I think in general, family businesses and owners don't start the discussion based on that. But once they get advice from their accountants and lawyers, they maybe will try to speed up the process.

I haven't seen anything specific, however, that people come to the table faster or slower.

Okay, all right, great. Thank you.

Thank you. Good evening, guys.

Just, which country did you make that international acquisition this quarter?

That was in Chile.

Chile. Okay.

And correct me if I'm wrong, that is a new market for you, given that I think the only the only wholly-owned subsidiary you had down there previously was in Argentina?

That's correct, yes.

And should I assume that Chile, does that have similar characteristics in terms of market structure as Argentina?

Yes, it does.

Okay, great. And just in the UK, can you update us on where the mix of Large Quantity versus Small Quantity stands?

It's right now the Small Quantity is in the low 20s.

And is there any reason structurally in that market why the mix of Small Quantity versus Large Quantity couldn't over time, eventually get to where it is in the United States?

No, it definitely has that potential to go up and reach what's in the United States. Structure in the market a little bit different with national health but there is still a lot of small providers under those structures and they really operate separately.

It's kind of too early, but it looks like that that has potential.

Okay, And can you just update us on, in the UK, the integration of STG, where that stands now, and if it's not completed when do you think you'll have that asset base fully integrated?

As everyone knows, it was last year that we finished the process with the competition commission and kind of said it would take us roughly a year to do the integration. And I would say in the third quarter, early fourth quarter is when the majority of that is completed.

There will always be opportunities with large customers and the like to keep looking for margin expansion as we've done in the US, etcetera. But that's kind of an ongoing improvement process.

Okay, great. And just one other question on the international market, did you engage in any new joint ventures or licensing agreements this quarter?

No.

No. Okay, great.

Just quickly on SG&A, previously, you had indicated that for the full year, SG&A would be probably anywhere in the 18.5% to 19% range, given the spending level for the first half of the year. Do you still feel comfortable with that range for the full year?

Yes, I think for the range is still in the high 18s is what we gave as a guidance and we would like to hold to that.

Okay. And then my final question from a cash flow standpoint, it seems like working capital in the second quarter tends to be a drag.

It certainly was in the second quarter 2008. Why is that?

Why do you typically find a working capital drag in the second quarter of each year? What's the seasonality behind that?

It's really the taxes. In the second quarter, you pay first and second quarter income taxes.

So, kind of as a macro, we probably paid about $27 million to $28 million taxes in Q2 versus cash taxes of about $14 million in Q1 and that's worldwide, roughly. The other thing is, in Q2, we had the payment of the settlement with Daniels and that negatively impacted probably by about $4 million to $5 million the kind of cash from ops in what you would call the working capital side of the business.

Okay. Great, thanks, guys.

Have you guys seen any changes at all in the competitive landscape? Do you see any of the big waste companies trying to enter the market, or has anything changed at all?

Yes, I think it on the change, we haven't seen any dramatic change in impact from the market. There is interesting things evolving in the domestic solid waste market, where there is several companies in discussions in play of combination.

I think from our point of view, it's still early in that consolidation, but it feels like regardless of the outcome, whether you're part of an acquirer or the acquired or merger or you're one of the parties that doesn't succeed, you're going to be pretty focused on what's happening with that acquisition and integration. And the focus rightfully so will be on the core solid waste business.

So, I think it won't bode well for those organizations to put a lot of priority behind this particular space.

And so is it fair to say that the acquisition multiples that you've been paying, are they still 3 to 7 times EBITDA, or have they gone up?

No, they have been very stable. Again, 3 to 7 is a good range for synergized kind of multiples.

Okay, thanks.

Questions were actually answered, thank you. Very nice quarter.

Hi, guys, what's the mix of sales in the quarter, domestic versus international and with your guidance range that you gave of $1.8 billion to $1.96 billion, what's the expectation for the split there, international, domestic?

I think the split right now is about 24% in the international side, it was $66.8 million on [inaudible] on the US side. I think it really depends on acquisitions a little bit, that probably could change that number in the future.

Again, we don't include any of that in our guidance and so that will drive it. The business keeps growing as is, as we said, SQ growing at 9% to 11%.

The overall international is growing a little faster right now, for the year, probably about 10% to 11% internal. So it shouldn't not dramatically change, maybe go 24% or 25%.

Okay, thanks.

Well, we thank everybody for your time. And we look forward to speaking with you next quarter.

Everybody be safe. Take care.