- Record customer billings for Sharps Disposal by Mail System(R)
and other products reach $3.8 million; revenue increased 18% to
$3.75 million HOUSTON, Feb. 4 /PRNewswire-FirstCall/ -- Sharps
Compliance Corp. (OTC:SCOM) (BULLETIN BOARD: SCOM) ("Sharps" or the
"Company"), a leading provider of cost-effective disposal solutions
for small quantity generators of medical waste, today reported
record revenue of $3.75 million in the second quarter of fiscal
2008, an increase of 18% compared with revenue of $3.2 million in
the same period of the prior fiscal year, and up 11% sequentially
compared with revenue of $3.4 million in the first quarter of
fiscal 2008. Customer billings, which the Company believes is an
appropriate measure of performance and progress of the business,
also increased to a record level of $3.8 million for the fiscal
2008 second quarter, up 20% compared with the prior fiscal year's
second quarter billings of $3.2 million. Sales and Billings Growth
Customer billings of $3.8 million in the second quarter of fiscal
2008 were driven by strong growth in the pharmaceutical,
hospitality and retail sectors. The pharmaceutical market includes
$429 thousand in billings to a top ten pharmaceutical manufacturing
customer under the previously announced $1.4 million purchase
order. Sharps also received purchase orders from two additional
nationally recognized pharmaceutical manufacturers for its Sharps
Disposal by Mail System(R) and Sharps Transport Tube(TM). The
Sharps Transport Tube(TM) is designed to provide traveling
self-injectors with the ability to properly manage used syringes
while away from home. Billings for the new customers were $62
thousand in the second quarter of fiscal 2008 and the product was
shipped in December 2007. Sharps Compliance fulfills, directly to
pharmaceutical manufacturer patients, a specially designed Sharps
Disposal by Mail System(R). Sharps' proprietary SharpsTracer(TM)
system is used to track the return of the package by the patient to
the Company's treatment facility, where it is scanned and weighed
prior to destruction. This data, managed in Sharps proprietary
SharpsTracer(TM) system, is then electronically transmitted to the
pharmaceutical manufacturer which assists in monitoring drug usage
and provides a touch point for individual patient follow-up. Dr.
Burton J. Kunik, Chairman, President and Chief Executive Officer of
the Company, commented, "We have delivered approximately $900
thousand in products and services over the past twelve months on
our first contract with a top ten pharmaceutical manufacturer and
expect to ship approximately $400 thousand more in the third
quarter of this fiscal year. Awareness of the success of this
initial program within the pharmaceutical industry is growing and
has a positive impact in our discussions with other pharmaceutical
manufacturers. We believe pharmaceutical manufacturers will
continue to recognize the value of providing a safe and cost
effective method for disposal of their used syringes, and this
could become standard operating procedure in the industry. Our
products, combined with our fulfillment and tracking services,
defines our position as the leader in the industry for small
quantity generators of medical waste." Growth in the hospitality
market was driven by increasing penetration in major national hotel
and restaurant chains and assisted living facilities. Sales to the
hospitality sector were $307 thousand for the second quarter of
fiscal 2008, an increase of 60% or $115 thousand, compared with the
second quarter of fiscal 2007, reflecting higher demand of the
Sharps Disposal by Mail System(R) and Biohazard Spill Clean-Up Kit
products. Retail billings, which were up 15% year to date, reflect
the use of the Sharps Disposal By Mail Systems(R) by an increasing
number of retail health clinics and the use of our products to
facilitate the proper disposal of syringes used to administer flu
shots by national drug and grocery store chains. When including a
$162 thousand billing to a major distributor of flu vaccine in June
of 2007, retail billings were up 33% for the period. Customer
billings include all invoiced amounts associated with products
shipped during the period reported. A significant portion of
customer billings are deferred to future reporting periods and
recognized as GAAP revenue when the Sharps Disposal By Mail
Systems(R) products are returned to the Company's treatment
facility for processing and destruction. Revenue represents
customer billings adjusted to reflect the deferral of a portion of
current period billings and recognition of certain revenue
associated with product returned for treatment and destruction. The
difference between customer billings and revenue is reflected in
the Company's balance sheet as deferred revenue. Operating
Performance For the three-month period ended December 31, 2007,
gross margin was 42.8%, consistent with the same period of the
prior fiscal year and slightly up sequentially from gross margin of
42.3% in the first quarter of fiscal 2008. Gross margin is expected
to remain in the low to mid-40% range for the remainder of fiscal
2008. Selling, general and administrative (SG&A) expenses were
$1.2 million, or 31.6% of sales, in the second quarter of fiscal
2008 compared with $924 thousand, or 29.0% of sales, in the same
period the prior year and $1.2 million, or 34.1% of sales, in the
first quarter of fiscal 2008. The increase in SG&A expense over
the prior year period was a result of increased sales and marketing
expenses, facilities rent expense as well as expenses related to
investor relations. When compared with the fiscal 2008 first
quarter, SG&A was up 2.6%. SG&A is expected to be about
$4.5 million to $4.6 million for fiscal year 2008, exclusive of any
non-cash stock-based compensation expense (SFAS 123R). Dr. Kunik
added, "Although we remain focused on controlling our overhead, we
have increased our investment in sales and marketing in order to
address what we believe to be significant sales opportunities in
multiple markets. The increased sales and marketing spending is
directed toward accelerating our revenue growth and fully
capitalize on what we believe to be a one billion dollar emerging
market." Operating margin was 9.4% for the three months ended
December 31, 2007, compared with 12.3% for the corresponding period
of the prior fiscal year. The reduction in the operating margin on
a quarter over quarter basis was due to increases in SG&A, as
noted above. However, sequentially, operating income increased 61%
on just an 11% increase in revenue. Additionally, operating margin
improved 290 basis points from the sequential quarter demonstrating
significant operating leverage and the opportunity for strong
earnings growth as sales continue to increase. For the three months
ended December 31, 2007, the Company generated net income of $380
thousand, or $0.03 per diluted share, compared with net income of
$421 thousand, or $0.04 per diluted share in the second quarter of
fiscal 2007. The diluted earnings per share were adversely affected
by a significant increase in the diluted shares outstanding as a
result of stock options exercised. Six-Month Review For the
six-month period ended December 31, 2007, revenue was $7.1 million,
a 16% increase compared with revenue of $6.2 million in the first
six months of fiscal 2007. Customer billings for the same period
were $7.4 million in fiscal 2008 and $6.3 million in fiscal 2007,
an increase of 17%. Gross margin for the first six months of fiscal
2008 was 42.5% compared with 43.1% for the same period of the prior
year resulting from a lower percentage of higher margin products
sold in the first quarter fiscal 2008 versus the prior year.
SG&A for the first six months of fiscal 2008 was $2.3 million,
or 32.8% of sales, compared with $1.9 million, or 30.4% of sales,
in the same period the prior fiscal year. Higher sales and
marketing expenses, non-cash stock-based compensation expense,
recruiting fees and facilities rent expenses contributed to the
increase. For the six months ended December 31, 2007, the Company
reported net income of $621 thousand, or $0.05 per share, a
decrease compared with net income of $713 thousand, or $0.06 per
diluted share. The diluted earnings per share were adversely
affected by a significant increase in the diluted shares
outstanding as a result of stock options exercised. Liquidity and
Balance Sheet Strength Cash and cash equivalents was $2.7 million
at December 31, 2007, up from $2.1 million at June 30, 2007 and
$2.2 million at September 30, 2007. At December 31, 2007,
stockholders' equity and total assets were $3.0 million and $5.7
million, respectively, up from $2.2 million and $4.7 million at
June 30, 2007, respectively. Although, Sharps maintains a $2.5
million line of credit with JPMorgan Chase, no amounts were
outstanding at December 31, 2007. The line of credit is available
to finance working capital, expansion and/or potential acquisition
opportunities. Disposal Facility The Company recently announced the
purchase of its previously leased disposal facility in Carthage,
Texas. The purchase includes an incinerator with a maximum capacity
of thirty (30) tons per day, a 12,000 square foot building and 4.5
acres of land. The Company, through a subsidiary, has leased the
facility since June of 2000. The facility is currently permitted to
treat eleven (11) tons per day of waste. Additionally, the Company
has executed a purchase order for a state-of-the-art autoclave
system and technology capable of treating up to seven (7) tons per
day of medical waste at the same facility. Autoclaving is a process
that treats medical waste with steam at high temperature and
pressure to kill pathogens. An autoclave is environmentally cleaner
and is a less costly method of treating most medical waste versus
traditional incineration. With the addition of the autoclave, the
Company believes it will own one of only approximately ten (10)
permitted commercial disposal facilities in the country capable of
treating all types of medical waste. Sharps is also expanding its
ability to dispose of unused medications and expired pharmaceutical
waste including controlled substances. The Company is in the
process of installing Drug Enforcement Agency (DEA) approved
equipment necessary to obtain DEA certification for the disposal of
controlled substances. The total cost of the incineration facility
purchase, addition of the autoclave technology and other planned
improvements at the Carthage, Texas facility is estimated to be
approximately $900,000 and expected to be incurred in the third and
fourth quarters of fiscal year 2008. Outlook Dr. Kunik concluded,
"We continue to invest in growing our sales organization and
improving our operational capacity to be able to rapidly expand the
business and continue to provide high quality service. We expect to
see the benefits of our increased investment in sales and marketing
as a number of the significant opportunities that we are proposing
for prospective customers are awarded over the next six months. We
believe our additional capacity and treatment facility ownership
position will further differentiate us as the leader in the small
quantity generator market. Finally, we are very pleased to announce
the renewal of our contract with our largest home healthcare market
customer. This customer is a leader in the home healthcare industry
and we value our strong relationship with the organization and its
employees." Second Quarter 2008 Webcast and Conference Call The
Company will host a teleconference today beginning at 1:00 p.m.
Eastern Time. During the teleconference, Dr. Burton J. Kunik,
Chairman, Chief Executive Officer and President, and David P. Tusa,
Executive Vice President and Chief Financial Officer, will review
the financial and operating results for the period and discuss
Sharps' corporate strategy and outlook. A question-and-answer
session will follow. The Sharps conference call may be accessed the
following ways: -- The live webcast may be found at
http://www.sharpsinc.com/. Participants should go to the website 10
- 15 minutes prior to the scheduled conference in order to register
and download any necessary audio software. Webcast listeners will
have the opportunity to submit questions to the speakers (verbal or
via e-mail). Select questions will be summarized and addressed
during the question-and-answer portion of the call. -- The
teleconference may also be accessed by dialing (201) 689-8560 and
requesting conference ID number 268529, approximately 5 - 10
minutes prior to the call. To listen to the archived call: -- The
archived webcast will be at http://www.sharpsinc.com/. A transcript
will also be posted once available. -- A replay may also be heard
by calling (201) 612-7415, and entering account number 3055 and
conference ID number 268529. The telephonic replay will be
available from 4:00 p.m. Eastern Time the day of the teleconference
until 11:59 p.m. Eastern Time on Monday, February 11, 2008. About
Sharps Compliance Corp. Headquartered in Houston, Texas, Sharps
Compliance is a leading provider of cost-effective disposal
solutions for small quantity generators of medical waste. The
Company's flagship product, the Sharps Disposal by Mail System(R),
is a cost-effective and easy-to-use solution to dispose of medical
waste such as hypodermic needles, lancets and any other medical
device or objects used to puncture or lacerate the skin (referred
to as "sharps"). The Company also offers a number of products
specifically designed for the home healthcare market. Sharps
Compliance focuses on targeted growth markets such as the
pharmaceutical, retail, healthcare, commercial, professional and
hospitality markets, as well as serving a variety of additional
markets. Sharps is a leading proponent and participant in the
development of public awareness and solutions for the safe disposal
of needles, syringes and other sharps in the community setting. As
a fully integrated manufacturer providing customer solutions and
services, Sharps Compliance's solid business model, with strong
margins and significant 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
certain forward-looking statements which reflect Sharps Compliance
Corp.'s current view of future events and financial performance.
Wherever used, the words "estimate", "expect", "plan",
"anticipate", "believe", "may" and similar expressions identify
forward-looking statements. Any such forward-looking statements are
subject to risks and uncertainties and the company's future results
of operations could differ materially from historical results or
current expectations. Some of these risks include, without
limitation, the company's ability to educate its customers,
development of public awareness programs to educate the identified
consumer, customer preferences, the Company's ability to scale the
business and manage its growth, the degree of success the Company
has at gaining more large customer contracts, managing regulatory
compliance and/or other factors that may be described in the
company's annual report on Form 10-KSB, quarterly reports on Form
10-QSB and/or other filings with the Securities and Exchange
Commission. Future economic and industry trends that could
potentially impact revenues and profitability are difficult to
predict. The company assumes no obligation to publicly update or
revise its forward-looking statements even if experience or future
changes make it clear that any projected results express or implied
therein will 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:
FINANCIAL TABLES FOLLOW. SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (unaudited)
Three-Months Ended Six-Months Ended December 31, December 31, 2007
2006 % Change 2007 2006 % Change (Unaudited) (Unaudited)
(Unaudited) (Unaudited) Revenue $3,750,802 $3,181,777 17.9%
$7,141,914 $6,172,661 15.7% Cost of revenue 2,145,468 1,819,800
17.9% 4,103,203 3,513,388 16.8% Gross profit 1,605,334 1,361,977
17.9% 3,038,711 2,659,273 14.3% Gross margin 42.8% 42.8% 0.0% 42.5%
43.1% (1.2%) S G & A 1,185,046 924,122 28.2% 2,340,427
1,878,545 24.6% Depreciation and amortization 65,920 45,477 45.0%
123,617 89,689 37.8% Operating income 354,368 392,378 (9.7%)
574,667 691,039 (16.8%) Operating margin 9.4% 12.3% (23.4%) 8.0%
11.2% (28.1%) Other income 26,094 38,150 52,396 39,792 Net income
before income taxes $380,462 $430,528 (11.6%) $627,063 $730,831
(14.2%) Income taxes (558) (9,332) (5,555) (18,046) Net income
$379,904 $421,196 (9.8%) $621,508 $712,785 (12.8%) Net income per
share Basic $0.03 $0.04 $0.05 $0.07 Diluted $0.03 $0.04 $0.05 $0.06
Weighted Average Shares Outstanding Basic 12,157,441 10,664,557
12,109,845 10,608,314 Diluted 13,494,251 11,576,162 13,514,774
11,275,236 SHARPS COMPLIANCE CORP. AND SUBSIDIARIES Condensed
Consolidated Balance Sheet 12/31/2007 6/30/2007 (Unaudited) ASSETS:
Current assets: Cash and cash equivalents $2,673,970 $2,134,152
Restricted cash 10,010 10,010 Accounts receivable, net 1,395,943
1,330,731 Inventory 538,283 364,005 Prepaid and other assets
201,405 186,101 Total current assets 4,819,611 4,024,999 Property
and equipment, net 743,436 590,567 Intangible assets, net 116,376
75,002 Total assets $5,679,423 $4,690,568 LIABILITIES AND
STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable
$857,188 $557,302 Accrued liabilities 320,299 613,851 Current
portion of deferred revenue 1,008,108 883,678 Current maturities of
capital lease obligations - 1,809 Total current liabilities
2,185,595 2,056,640 Long-term deferred revenue 451,231 392,803
Other 70,500 72,000 Total liabilities 2,707,326 2,521,443
Stockholders' equity: Total stockholders' equity 2,972,097
2,169,125 Total liabilities and stockholders' equity $5,679,423
$4,690,568 SHARPS COMPLIANCE CORP. AND SUBSIDIARIES Supplemental
Customer Billing and Revenue Information (unaudited) Three Months
Ended Six Months Ended December 31, December 31, 2007 2006 % Change
2007 2006 % Change BILLINGS BY MARKET: Health Care $1,933,695
$1,899,277 1.8% $3,852,959 $3,716,863 3.7% Pharmaceutical 491,157
41,770 1075.9% 498,342 56,933 775.3% Retail 315,115 238,850 31.9%
1,000,551 871,853 14.8% Hospitality 306,779 191,584 60.1% 670,014
307,917 117.6% Agriculture 173,694 221,214 (21.5%) 266,998 341,905
(21.9%) Professional 168,317 138,713 21.3% 339,501 275,052 23.4%
Commercial/ Industrial 160,137 206,220 (22.3%) 276,246 316,854
(12.8%) Protec 116,253 100,944 15.2% 241,523 218,073 10.8%
Government 85,090 51,308 65.8% 141,151 105,165 34.2% Other 35,072
59,236 (40.8%) 84,276 80,830 4.3% Subtotal 3,785,309 3,149,116
20.2% 7,371,561 6,291,445 17.2% GAAP Adjustment* (34,507) 32,661
(229,647) (118,784) Revenue Reported 3,750,802 $3,181,777 17.9%
7,141,914 $6,172,661 15.7% * 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. DATASOURCE: Sharps Compliance Corp. CONTACT: David P.
Tusa, Executive Vice President, Chief Financial Officer &
Business Development of Sharps Compliance Corp., +1-713-660-3514, ;
or Tammy Poblete of Kei Advisors LLC, Investor Relations,
+1-716-843-3853, , for Sharps Compliance Corp. Web site:
http://www.sharpsinc.com/
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