HOUSTON, Sept. 29 Sharps Compliance Corp.(OTC Bulletin Board: SCOM) ("Sharps" or the "Company"), a leading provider ofcost-effective disposal solutions for small quantity generators of medicalwaste, today reported its financial results for the fourth quarter of fiscal2008 which ended June 30, 2008. Revenue was $2.8 million in the fourthquarter of fiscal 2008 compared with $2.9 million in the same period the priorfiscal year. For the full year, revenue was $12.8 million in fiscal 2008, a7.4% increase compared with revenue of $12.0 million in fiscal 2007.
Fourth quarter fiscal 2008 customer billings were $2.8 million comparedwith $3.0 million in the same period the prior fiscal year. Billingsincreased across all markets except healthcare, retail and pharmaceuticalprimarily due to the timing of implementation of contracts and orders for theflu shot season combined with a temporary backorder of Pitch-It(TM) IV Polesfor the healthcare industry. Growth in the hospitality, commercial andprofessional markets was driven by continued strong demand for the Company'svalue-added products.
For fiscal 2008 year-end, customer billings increased to $13.2 million, up7.6% compared with $12.2 million in fiscal 2007. Growth in year-over-yearbillings was led by the pharmaceutical manufacturing, hospitality, andprofessional markets. Pharmaceutical market billings increased 61%year-over-year as a result of the Company's first Patient Support Program witha top-ten pharmaceutical manufacturer. The Patient Support Program combinesservices to support the pharmaceutical manufacturers' product delivery system,patient tracking and compliance. Sharps provides direct patient fulfillmentof the Sharps Disposal by Mail System(R), product timing and consumptiontracking with its proprietary SharpsTracer(TM) system and data feedback to themanufacturer. The Company recently renewed this program through June 2009 andexpects the total value of this contract to exceed $1.7 million, with billingsof approximately $800 thousand in the first quarter of fiscal 2009 and $900thousand in the second half of fiscal 2009.
Dr. Burton J. Kunik, Chairman, Chief Executive Officer and President ofSharps Compliance, commented, "Revenue and billings, and consequentlyearnings, were affected by the timing of new and renewed contracts which wereexecuted earlier in the year and began shipping in the first quarter of fiscal2009 and backorders that also shipped in fiscal 2009's first quarter. Moreimportantly, our success in fiscal 2008 should be measured by the manycontracts we were awarded which have already begun to positively impact ourfiscal 2009 performance. We invested heavily in our growth in fiscal 2008 inorder to be able to address both these opportunities, as well as several largeprojects that are quite active in our pipeline. Our expanded operations,strengthened infrastructure and enhanced sales and marketing team are designedto address the rapid growth we anticipate in fiscal 2009."
Fourth Quarter Fiscal 2008 Operating Performance
Gross margin was 34% in the fourth quarter of fiscal 2008, down from 39.5%in the fourth quarter of fiscal 2007. The reduction in gross margin wasprimarily a result of incremental air freight costs incurred in the quarterfor Pitch-It(TM) IV Poles in order to promptly fulfill backorders that grewdue to supplier issues. These issues were resolved in July 2008. Inaddition, approximately $150,000 in shipments that would have occurred in thefourth quarter were shipped in the fiscal 2009 first quarter which endsSeptember 30, 2008.
Selling, general and administrative (SG&A) expenses were $1.3 million inthe fourth quarter of fiscal 2008 compared with $1.1 million in the sameperiod of the prior year and $1.2 million in the third quarter of fiscal 2008.Higher SG&A expenses reflect increases in sales and marketing staff andactivities, expanded square footage under lease and investor relationsefforts. The Company also recorded a special charge of $67 thousand in thequarter ended June 30, 2008 related to severance costs.
Net loss was $456 thousand, or $0.04 per diluted share, for the fourthquarter of fiscal 2008 compared with a net loss of $10 thousand, or $0.0 perdiluted share, in the fourth quarter of fiscal 2007.
Fiscal Year 2008 Review
Gross margin for fiscal 2008 decreased to 40% compared with 42% for fiscal2007 due to increased costs, product and customer mix, and unplanned inboundshipping expenses. SG&A for fiscal 2008 was $4.8 million compared with$3.9 million in the same period of the prior fiscal year. The increasereflects higher non-cash stock-based compensation expense, recruiting fees andsimilar expenses as noted for the fourth quarter.
Net income was $82 thousand, or $0.01 per share, for fiscal 2008, comparedwith net income of $785 thousand, or $0.06 per diluted share, for fiscal 2007.The weighted average shares outstanding for fiscal 2008 were 13.5 million, upfrom 12.3 million for fiscal 2007 reflecting increased stock options exercisedduring the year.
Liquidity and Balance Sheet Strength
Cash and cash equivalents were $2.0 million at June 30, 2008, down from$2.2 million at March 31, 2008 and $2.1 million at June 30, 2007. Cashgenerated from operations of approximately $0.5 million and proceeds fromstock option exercises of about $0.6 million in fiscal 2008 were offset bycapital expenditures of $1.1 million which included the purchase of atreatment facility in Carthage, Texas plus associated facility improvementsand additions.
At June 30, 2008, stockholders' equity and total assets were $2.9 millionand $5.7 million, respectively, up from $2.2 million and $4.7 million at June30, 2007, respectively. Although, Sharps maintains a $2.5 million line ofcredit with JPMorgan Chase, no amounts were outstanding at June 30, 2008. Theline of credit is available to finance working capital, expansion and/orpotential acquisition opportunities.
Dr. Kunik added, "During fiscal 2008, we developed an infrastructure thatwill handle significantly larger orders which we are now realizing as a resultof our efforts to diversify the markets we address. We see the pharmaceuticalmanufacturers, government and retail markets expanding rapidly as the push toproperly dispose of syringes and other medical waste created by small quantitygenerators driven by efforts to maintain a safe, healthy and clean environmentcontinues to gain greater support. Fiscal 2008 was a year of major transitionand development, and we are starting fiscal 2009 already boasting recordbilling levels in the near-finished first quarter. We expect the rest offiscal 2009 to continue to reflect our successes in sales."
Strong Outlook for Fiscal 2009 led by Expected Record Billings in theFirst Quarter
The Company expects billings to increase approximately 30%, to$4.7 million, in the first quarter of fiscal 2009 compared with $3.6 millionin the first quarter of fiscal 2008. Increased sales to the pharmaceuticaland retail markets are expected to drive the increase from the renewal of theCompany's first Patient Support Program as well as contracts won for PatientSupport Programs with two additional pharmaceutical manufacturers. The retailmarket growth is from pharmacies and retail medical clinics increasing theiruse of the Sharps Disposal By Mail Systems(R) for the flu shot season.
Product Line Innovation to Increase Market Penetration
The Company recently launched a number of new product lines to furtherpenetrate the existing market of small quantity generators of medical waste.These products are expected to generate new sales opportunities in fiscal 2009and beyond.
The RxTakeAway(TM) line of products was launched in September 2008 and isspecifically designed for individual consumers and community facilities, suchas assisted living, long-term care, hospice and correctional operations, tosafely dispose of unused pharmaceuticals and medications. The product line isalso being marketed to national pharmacy chains as a part of "take back"programs to provide their customers with an alternative to disposing of unusedmedications by flushing or placing in the trash.
The Company launched the Medical Professional Sharps Disposal by MailSystem(R) in June 2008, a larger version of its flagship products specificallydesigned to meet the needs of physicians' and dentist clinics or offices.
Update on California Senate Bill 1305
Effective September 1, 2008, California Senate Bill 1305 requires theproper disposal of home-generated sharps waste (syringes, needles, lancets,etc.) to protect the general public and workers from potential exposure tocontagious diseases as well as health and safety risks when improperlydisposed biohazard waste enters the public waste stream. The Billspecifically acknowledges mail-back programs, like the Sharps Disposal by MailSystem(R), as one of the most convenient alternatives for the collection anddestruction of home-generated sharps.
Dr. Kunik concluded, "The catalysts that we have needed to drive therecognition of the value of our products have begun to ignite. We haveunprecedented numbers of inquiries regarding our products, and our sales forceis being readily received by the government offices of cities and countiesthat realize they must offer solutions to the individuals in theirjurisdictions for the disposal of medical waste."
About Sharps Compliance Corp.
Headquartered in Houston, Texas, Sharps Compliance is a leading providerof cost-effective disposal solutions for small quantity generators of medicalwaste and unused pharmaceuticals. The Company's flagship product, the SharpsDisposal by Mail System(R), is a cost-effective and easy-to-use solution todispose of medical waste such as hypodermic needles, lancets and any othermedical device or objects used to puncture or lacerate the skin (referred toas "sharps"). The Company also offers a number of products specificallydesigned for the home healthcare market and products for the safe disposal ofunused pharmaceuticals, RxTakeAway(TM). Sharps Compliance focuses on targetedgrowth markets such as the pharmaceutical, retail, commercial, and hospitalitymarkets, as well as serving a variety of additional markets. Sharps is aleading proponent and participant in the development of public awareness andsolutions for the safe disposal of needles, syringes and other sharps in thecommunity setting.
As a fully integrated manufacturer providing customer solutions andservices, Sharps Compliance's solid business model, with strong margins andsignificant operating leverage, and early penetration into emerging markets,uniquely positions the company for strong future growth.
More information on Sharps Compliance can be found on its website at:http://www.sharpsinc.com
Safe Harbor Statement
The information made available in this press release contains certainforward-looking statements which reflect Sharps Compliance Corp.'s currentview of future events and financial performance. Wherever used, the words"estimate", "expect", "plan", "anticipate", "believe", "may" and similarexpressions identify forward-looking statements. Any such forward-lookingstatements are subject to risks and uncertainties and the company's futureresults of operations could differ materially from historical results orcurrent expectations. Some of these risks include, without limitation, thecompany's ability to educate its customers, development of public awarenessprograms to educate the identified consumer, customer preferences, theCompany's ability to scale the business and manage its growth, the degree ofsuccess the Company has at gaining more large customer contracts, managingregulatory compliance and/or other factors that may be described in thecompany's annual report on Form 10-K, quarterly reports on Form 10-Q and/orother filings with the Securities and Exchange Commission. Future economicand industry trends that could potentially impact revenues and profitabilityare difficult to predict. The company assumes no obligation to publiclyupdate or revise its forward-looking statements even if experience or futurechanges make it clear that any projected results express or implied thereinwill not be realized.For more information contact: - OR - David P. Tusa Tammy Poblete Executive Vice President, Chief Kei Advisors LLC Financial Officer & Business Development Investor Relations Phone: (713) 660-3514 Phone: (716) 843-3853 [email protected]
Email: [email protected]
FINANCIAL TABLES FOLLOW. SHARPS COMPLIANCE CORP. AND SUBSIDIARIES Consolidated Statements of Income (Loss) (unaudited) Three-Months Ended Twelve-Months Ended June 30, June 30, 2008 2007 % 2008 2007 % (Unaudited) (Unaudited) Change Change Revenue $2,771,297 $2,889,704 (4.1%) $12,840,911 $11,956,016 7.4% Cost of revenue 1,835,827 1,747,742 5.0% 7,725,921 6,942,567 11.3% Gross profit 935,470 1,141,962 (18.1%) 5,114,990 5,013,449 2.0% Gross margin 33.8% 39.5% 39.8% 41.9% SG&A expense 1,267,656 1,114,489 13.7% 4,782,532 3,945,642 21.2% Special charge 67,541 - 100.0% 67,541 138,000 (51.1%) Depreciation and amortization 72,312 60,500 19.5% 265,613 202,502 31.2% Operating income (loss) (472,039) (33,027) (696) 727,305 Operating margin (17.0%) (1.1%) 0.0% 6.1% Other income 12,254 22,973 85,715 78,575 Net income (loss) before income taxes (459,785) ($10,054) $85,019 $805,880 Income taxes 3,438 (3,446) (21,180) Net income (loss) (456,347) ($10,054) $81,573 $784,700 Net income (loss) per share Basic (0.04) - $0.01 $0.07 Diluted (0.04) - $0.01 $0.06 Weighted Average Shares Outstanding Basic 12,561,337 11,894,855 12,313,160 11,161,367 Diluted 12,561,337 11,894,855 13,540,381 12,338,047 SHARPS COMPLIANCE CORP. AND SUBSIDIARIES Consolidated Balance Sheet 6/30/2008 6/30/2007 ASSETS: Current assets: Cash and cash equivalents $2,035,219 $2,134,152 Restricted cash 10,010 10,010 Accounts receivable, net 1,183,975 1,330,731 Inventory 580,861 364,005 Prepaid and other assets 359,894 186,101 Total current assets 4,169,959 4,024,999 Property and equipment, net 1,375,657 590,567 Intangible assets, net 130,702 75,002 Total assets $5,676,318 $4,690,568 LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable $778,423 $557,302 Accrued liabilities 432,971 613,851 Current portion of deferred revenue 1,063,016 883,678 Current maturities of capital lease obligations - 1,809 Total current liabilities 2,274,410 2,056,640 Long-term deferred revenue 516,372 392,803 Other - 72,000 Total liabilities 2,790,782 2,521,443 Stockholders' Equity: Total stockholders' equity 2,885,536 2,169,125 Total liabilities and stockholders' equity $5,676,318 $4,690,568 SHARPS COMPLIANCE CORP. AND SUBSIDIARIES Supplemental Customer Billing and Revenue Information (unaudited) Three-Months Ended June 30, 2008 % Total 2007 % Change BILLINGS BY MARKET: Health Care $1,663,849 59.3% $1,959,756 (15.1%) Hospitality 287,939 10.3% 239,780 20.1% Professional 218,986 7.8% 182,256 20.2% Commercial 204,345 7.3% 111,179 83.8% Agriculture 139,032 5.0% 75,303 84.6% ProTec 109,345 3.9% 104,810 4.3% Retail 79,538 2.8% 186,177 (57.3%) Government 45,493 1.6% 29,466 54.4% Other 36,983 1.3% 24,923 48.4% Pharmaceutical 20,187 0.7% 46,274 (56.4%) Subtotal 2,805,697 100.0% 2,959,924 (5.2%) GAAP Adjustment * (34,399) (70,220) (51.0%) Revenue Reported $2,771,298 $2,889,704 (4.1%) Twelve-Months Ended June 30, 2008 % Total 2007 % Change BILLINGS BY MARKET: Health Care $7,293,267 55.3% $7,327,530 (0.5%) Hospitality 1,202,330 9.1% 878,100 36.9% Professional 748,919 5.7% 615,014 21.8% Commercial 617,390 4.7% 528,915 16.7% Agriculture 502,878 3.8% 515,281 (2.4%) ProTec 457,788 3.5% 416,307 10.0% Retail 1,124,040 8.5% 1,107,442 1.5% Government 204,403 1.6% 177,790 15.0% Other 144,120 1.1% 128,810 11.9% Pharmaceutical 889,766 6.7% 553,885 60.6% Subtotal 13,184,901 100.0% 12,249,074 7.6% GAAP Adjustment * (343,990) (293,058) 17.4% Revenue Reported $12,840,911 $11,956,016 7.4% * Represents the net impact of the revenue recognition adjustments to arrive at reported GAAP revenue. Customer billings include all invoiced amounts for products shipped during the period reported. GAAP revenue includes customer billings as well as numerous adjustments necessary to reflect, (i) the deferral of a portion of current period sales and (ii) recognition of certain revenue associated with product returned for treatment and destruction. The difference between customer billings and GAAP revenue is reflected in the Company's balance sheet as deferred revenue.
SOURCE Sharps Compliance Corp.