- Customer billings grow to $3.0 million in fourth quarter and
$12.3 million for fiscal year 2007 HOUSTON, Aug. 14
/PRNewswire-FirstCall/ -- Sharps Compliance Corp. (OTC:SCOM)
(BULLETIN BOARD: SCOM) ("Sharps" or the "Company"), a leading
provider of cost-effective medical waste disposal solutions for
industry and consumers, today reported financial results for the
fourth quarter and fiscal year ending June 30, 2007. Revenue
increased 7%, to $2.9 million, in the fourth quarter of fiscal 2007
compared with the prior year's fourth quarter. Customer billings,
which the Company believes is an appropriate measure of performance
and progress of the business, increased to $3.0 million for the
fiscal 2007 fourth quarter, up 19% over the prior year period.
Higher customer billings in the quarter were driven by growth in
the healthcare, hospitality and retail markets. The difference
between customer billings and revenue is reflected as deferred
revenue on the Company's balance sheet. For fiscal year 2007,
revenue increased 13%, to $12.0 million, compared with $10.6
million for fiscal year 2006. During the same period, customer
billings increased 19%, to $12.3 million, over the prior year
period. Expansion of the retail, hospitality and professional
sector business and strong customer penetration contributed to
growth for the full-year period. Additionally, the contract awarded
to Sharps by a major pharmaceutical manufacturer that is providing
Sharps Disposal By Mail Systems(R) products to its patients
resulted in a four-fold increase in billings to this market. During
fiscal year 2007, Sharps doubled customer billings to the retail
market which consisted primarily of the sale of its flagship Sharps
Disposal By Mail Systems(R) products to facilitate the proper
disposal of flu shots administered in the retail setting, such as
pharmacies, grocery store chains and mass merchandisers, across the
country. Approximately 15% - 30% 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. This
GAAP revenue recognition method is the reason for the significant
difference in the reported revenue amounts, versus billings, for
both the fourth quarter and fiscal year ending June 30, 2007. Dr.
Burton J. Kunik, Chairman, President and Chief Executive Officer of
Sharps, commented, "During fiscal year 2007, we successfully
executed the initial order received from a major pharmaceutical
manufacturer that recognized the benefits of the Sharps Disposal by
Mail System(R) for its patients and the environment. We are very
focused on the pharmaceutical industry because of the magnitude of
opportunities this market presents, and we continue to make
measurable progress with several prospects. In addition, we believe
public opinion and patient behavior patterns regarding the proper
disposal of medical sharps in the small quantity generator market
are changing as a result of new and proposed legislation as well as
increased awareness of the proper means of sharps disposal." For
both three-month periods ended June 30, 2007 and 2006, the Company
generated essentially break-even results. GAAP net income for
fiscal year 2007 was $785 thousand, or $0.06 per diluted share, a
105% increase over net income of $382 thousand, or $0.03 per
diluted share, in fiscal 2006. Fourth Quarter Growth and
Performance Higher customer billings for the fourth quarter of
fiscal 2007 were led by a 17%, or $283 thousand, increase in
healthcare market billings. The hospitality market, which more than
doubled, and the retail market, which more than tripled, are
rapidly increasing as a percentage of total billings. Dr. Kunik
noted, "The retail clinic market, an ideal application for our
Sharps Disposal By Mail Systems(R) products, is a rapidly expanding
phenomenon in the U.S. Retail health clinics are described as being
an efficient means to reduce health care costs and improve
efficiencies in the healthcare system. The Sharps Disposal By Mail
Systems(R) products are currently being utilized by three of the
four largest retail health clinic operators in the country to
facilitate the convenient and cost-effective disposal of small
quantities of medical waste. Industry projections suggest that
there could be as many as 10,000 health clinics in retail settings
by the year 2010, up from the approximate 500 clinics in operation
today. We have successfully leveraged our relationships with major
pharmacy chains to capture a leadership position in the retail
clinic market." For the fourth quarter of fiscal year 2007, gross
margin was 40%, down from 43% in the prior year. The reduction in
fourth quarter gross margin was a result of (i) a lower percentage
of higher margin products (product mix) sold during the period and
(ii) increased material and transportation costs (inbound and
outbound). To address increasing costs, the Company implemented a
price increase in mid-May 2007 to coincide with a rate increase by
the United States Postal Service. The price increase should be
fully effective in all markets by September 2007. Selling, general
and administrative expense (SG&A) was up $36 thousand, or 3.4%,
for the quarter ended June 30, 2007 versus June 30, 2006. Fiscal
2007 Review For fiscal year 2007, customer billings increased $1.9
million, or 19%, led by growth in the retail, pharmaceutical,
hospitality and commercial markets. During the same period, revenue
increased by $1.4 million, or 13%. Fiscal year 2007 was highlighted
by the completion of the initial $450 thousand in billings to the
Company's first major pharmaceutical manufacturing customer. The
Sharps product and service package for this customer includes the
Sharps Disposal by Mail System(R), fulfillment services, including
product shipment direct to the pharmaceutical manufacturer's
patients, and data services utilizing the Company's proprietary
SharpsTracer(TM) system. The total contract value is $1.4 million.
GAAP net income of $785 thousand for the fiscal year ended June 30,
2007 included a special charge for severance and executive
recruiter expenses of $138 thousand related to the previously
announced re-alignment of the Company's sales organization.
Excluding this special charge, non-GAAP net income for fiscal year
2007 was $920 thousand, or $0.075 per diluted share. For fiscal
year 2007, gross margin was 42% compared with 42.5% in the prior
year. Fiscal year 2007 SG&A expense was down slightly from the
prior year period. Non-GAAP operating margin, which excludes the
effects of the $138,000 special charge, was 7.2% for fiscal year
2007 compared with an operating margin of 3.6% for the prior fiscal
year. Other income included in the Company's statement of
operations for fiscal year 2007 reflected higher interest income
resulting from corresponding higher cash balances and lower
interest expense associated with reduced capital leases. For the
year ended June 30, 2007, other income also included a $33 thousand
net recovery of amounts due to the Company under a garnishment
order recorded in the quarter ended December 31, 2006. Liquidity
and Balance Sheet Strength The Company's cash position at June 30,
2007, increased $1.8 million to $2.1 million as a result of cash
generated by operations and proceeds from the exercise of stock
options. At June 30, 2007, stockholders' equity and total assets
were $2.2 and $4.7 million, respectively, up from $0.3 million and
$2.2 million at June 30, 2006, respectively. Although Sharps
maintains a $2.5 million line of credit with JPMorgan Chase, no
amounts were outstanding at June 30, 2007. The line of credit is
available to finance working capital and/or potential acquisition
opportunities. Outlook Looking forward, the Company is targeting
customer billings of $15 to $16 million for fiscal year 2008 led by
expected growth in the pharmaceutical, retail, hospitality and
professional markets. The Company anticipates gross margin of
approximately 42% in fiscal year 2008 and an increase in SG&A
of approximately 10%, exclusive of any non-cash stock-based
compensation expense (SFAS 123R). The expected investment in
SG&A expense is primarily related to increased sales and
marketing related activities. Demand for the Company's primary
product, the Sharps Disposal by Mail System(R), which facilitates
the proper and cost-effective disposal of medical waste including
hypodermic needles, lancets and other devices or objects used to
puncture or lacerate the skin (referred to as "sharps"), has been
growing rapidly in the small quantity generator sector because of
its mail-back convenience and unique data tracking feature. In
addition, targeted opportunities continue to expand as a result of
the growing awareness of the need to properly handle sharps medical
waste for safety and environmental concerns, the expanding need for
self-injectable medications and the changing paradigm in the health
industry. The Company announced last week its support of
legislation introduced in the US House of Representatives and
Senate that proposes Medicare coverage for the safe needle disposal
for approximately 1.3 million insulin-dependent diabetic
beneficiaries enrolled in Medicare Part D. If passed, this would
become one of the first insurance reimbursement models supporting
the safe disposal of used needles on a nationwide basis. Dr. Kunik,
noted, "As an established leader in the market with the proven
Sharps Disposal by Mail System(R), we believe we are
well-positioned to capitalize on this and the many sales
opportunities in all key growth markets requiring medical sharps
disposal for small quantity generators." He concluded, "We believe
fiscal year 2008 could be a "break-out" year for the Company as
awareness of the proper disposal of medical sharps by small
quantity generators continues to spread across the country, the
need for such services expands through the growth of retail health
clinics, and as we aggressively pursue large magnitude sales
opportunities. Each market opportunity has the potential to
measurably influence our reported results in any given quarter."
Fourth Quarter 2007 Webcast and Conference Call The Company will
host a teleconference at 1:00 p.m. Eastern Time today August 14,
2007. 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. -- The teleconference
may also be accessed by dialing (973) 935-2970 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 (973) 341-3080, and entering the pin number 8977980. 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 August
21, 2007. About Non-GAAP Financial Measures To supplement our
consolidated financial statements, which are prepared and presented
in accordance with accounting principles generally accepted in the
United States of America ("GAAP"), we use the following non-GAAP
financial measures: non-GAAP operating income, non-GAAP operating
margin, non-GAAP net income and non-GAAP EPS. The presentation of
this financial information is not intended to be considered in
isolation or as a substitute for, or superior to, the financial
information prepared and presented in accordance with GAAP. For
more information on non-GAAP financial measures please see the
tables captioned "Non-GAAP Financial Measures and Reconciliations"
included at the end of this release. We use the above noted
non-GAAP financial measures for financial and operational decision
making and as a means to evaluate period-to-period comparisons. Our
management believes that these non-GAAP financial measures provide
meaningful supplemental information regarding our performance and
liquidity by excluding certain expenses that may not be indicative
of our "recurring core business operating results," meaning our
operating performance excluding items that are infrequent in
nature. We believe that both management and investors benefit from
referring to these non-GAAP financial measures in assessing our
performance and when planning, forecasting and analyzing future
periods. These non-GAAP financial measures also facilitate
management's internal comparisons with our historical performance
and liquidity, as well as comparisons with industry operating
results. We believe these non-GAAP financial measures are useful to
investors both because, (i) they allow for greater transparency
with respect to key metrics used by management in its financial and
operational decision making and (ii) they are used by our investors
and the analyst community to help them to evaluate our business.
Non-GAAP operating income and operating margin. We define non-GAAP
operating income as operating income minus the special charge
related to the Company's recently announced sales re-alignment.
Non-GAAP operating margin is defined as non-GAAP operating income
divided by revenue. Sharps considers these non-GAAP financial
measures to be useful metrics for management and investors because
they exclude the effect of the special charge so that the Company's
management and investors may compare Sharps' recurring core
business operating results over multiple periods. We believe that,
due to the significance and nature of the special charge, it is
difficult for investors to evaluate our GAAP results of operations
on a year-over-year basis because our GAAP results of operations
for fiscal year 2006 did not include such a special charge.
Therefore, investors cannot compare the fiscal year 2007 results to
that of the prior fiscal year of our recurring core business
operating results unless we exclude the special charge. Non-GAAP
net income and EPS. We define non-GAAP net income as net income
plus the special charge (net of taxes). We define non-GAAP EPS as
non-GAAP net income divided by the weighted average shares, on a
diluted basis, outstanding for the period presented. We consider
these non-GAAP financial measures to be a useful metric for
management and investors for the same reasons that Sharps uses
non-GAAP operating income and non-GAAP operating margin. About
Sharps Compliance Corp. Headquartered in Houston, Texas, Sharps
Compliance is a leading provider of cost-effective medical waste
disposal solutions for industry and consumers. 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, commercial, 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 Swiatek Executive Vice President, Chief Kei
Advisors LLC Financial Officer & Business Investor Relations
Development Phone: (713) 660-3514 Phone: (716) 843-3853 Email:
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES Condensed Consolidated
Statements of Operations Three-Months Ended Twelve-Months Ended
June 30, June 30, % % 2007 2006 Change 2007 2006 Change (Unaudited)
(Unaudited) (Unaudited) Revenue $2,889,704 $2,708,021 6.7%
$11,956,016 $10,562,720 13.2% Cost of revenue 1,747,742 1,543,881
13.2% 6,942,567 6,068,399 14.4% Gross profit 1,141,962 1,164,140
(1.9%) 5,013,449 4,494,321 11.6% Gross margin 39.5% 43.0% (8.1%)
41.9% 42.5% (1.4%) S, G & A expense 1,114,489 1,078,298 3.4%
3,945,642 3,957,653 (0.3%) Special charge - - - 138,000 - -
Depreciation and amortization 60,500 43,744 38.3% 202,502 154,475
31.1% Operating income (loss) (33,027) 42,098 727,305 382,193 90.3%
Operating margin (1.1%) 0 6.1% 3.6% 68.1% Other income (expense)
22,973 1,724 78,575 (564) Net income (loss) before income taxes
($10,054) $43,822 $805,880 $381,629 Income taxes 8,815 (21,180) Net
income (loss) ($10,054) $52,637 $784,700 $381,629 105.6% Net income
per share Basic - - $0.07 $0.04 94.3% Diluted - - $0.06 $0.03 82.6%
Weighted Average Shares Outstanding Basic 11,894,855 10,549,442
11,161,367 10,547,846 Diluted 11,894,855 10,950,196 12,338,047
10,953,831 SHARPS COMPLIANCE CORP. AND SUBSIDIARIES Condensed
Consolidated Balance Sheet June 30, 2007 June 30, 2006 (Unaudited)
ASSETS: Current assets: Cash and cash equivalents $2,134,152
$296,959 Restricted cash 10,010 10,010 Accounts receivable, net
1,330,731 935,283 Inventory 364,005 325,688 Prepaid and other
assets 186,101 88,348 Total current assets 4,024,999 1,656,288
Property and equipment, net 590,567 473,387 Intangible assets, net
75,002 60,427 Total assets $4,690,568 $2,190,102 LIABILITIES AND
STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable
$557,302 $526,582 Accrued liabilities 613,851 262,219 Current
portion of deferred revenue 883,678 826,764 Current maturities of
capital lease obligations 1,809 40,260 Total current liabilities
2,056,640 1,655,825 Long-term deferred revenue 392,803 211,568
Obligations under capital leases, net of current maturities - 1,809
Other 72,000 69,000 Total liabilities 2,521,443 1,938,202
Stockholders' Equity: Total Stockholders' Equity 2,169,125 251,900
Total Liabilities and Stockholders' Equity $4,690,568 $2,190,102
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES Supplemental Customer
Billing and Revenue Information (unaudited) Three Months Ended June
30, 2007 %Total 2006 %Total $Change %Change BILLINGS BY MARKET:
Health Care $1,959,756 66.2% $1,677,170 67.4% $282,586 16.8%
Hospitality 239,780 8.1% 108,382 4.4% 131,398 121.2% Retail 186,177
6.3% 46,076 1.9% 140,101 304.1% Professional 182,256 6.2% 143,171
5.8% 39,085 27.3% Commercial 111,179 3.8% 92,560 3.7% 18,619 20.1%
ProTec 104,810 3.5% 117,424 4.7% (12,614) (10.7%) Agriculture
75,303 2.5% 243,096 9.8% (167,793) (69.0%) Pharmaceutical 46,274
1.6% 5,986 0.2% 40,288 673% Government 29,466 1.0% 27,790 1.1%
1,676 6.0% Other 24,923 0.8% 25,017 1.0% (94) (0.4%) Subtotal
2,959,924 100.0% 2,486,672 100.0% 473,252 19.0% GAAP Adjustment*
(70,220) 221,349 (291,569) Revenue Reported $2,889,704 $2,708,021
$181,683 6.7% * Represents the net impact of the revenue
recognition adjustments to arrive at reported GAAP revenue.
Customer billings includes 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. SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
Supplemental Customer Billing and Revenue Information (unaudited)
Twelve Months Ended June 30, 2007 %Total 2006 %Total $ Change
%Change BILLINGS BY MARKET: Health Care $7,327,530 59.8% $6,986,727
67.7% $340,803 4.9% Retail 1,107,442 9.0% 559,078 5.4% 548,364
98.1% Hospitality 878,100 7.2% 552,356 5.4% 325,744 59.0%
Professional 615,014 5.0% 464,952 4.5% 150,062 32.3% Pharmaceutical
553,885 4.5% 101,158 1.0% 452,727 447.5% Commercial 528,915 4.3%
298,146 2.9% 230,769 77.4% Agriculture 515,281 4.2% 717,879 7.0%
(202,598) (28.2%) ProTec 416,307 3.4% 427,674 4.1% (11,367) (2.7%)
Government 177,790 1.5% 80,811 0.8% 96,979 120.0% Other 128,810
1.1% 127,958 1.2% 852 0.67% Subtotal 12,249,074 100.0% 10,316,739
100.0% 1,932,335 18.7% GAAP Adjustment* (293,058) 245,981 (539,039)
Revenue Reported $11,956,016 $10,562,720 $1,393,296 13.2% *
Represents the net impact of the revenue recognition adjustments to
arrive at reported GAAP revenue. Customer billings includes 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. SHARPS
COMPLIANCE CORP. AND SUBSIDIARIES Non-GAAP Financial Measures and
Reconciliations (unaudited) Twelve-Months Ended June 30, 2007
Non-GAAP GAAP Actual Adjustments Results Operating income $727,305
$138,000 (1) $865,305 Operating margin 6.1% 1.2% 7.2% Net income
before income taxes $805,880 $138,000 $943,880 Income taxes
(21,180) (2,760) (2) (23,940) Net income $784,700 $135,240 $919,940
Net income per share Basic $0.07 $0.08 Diluted $0.06 $0.07 Weighted
Average Shares Outstanding Basic 11,161,367 11,161,367 Diluted
12,338,047 12,338,047 Notes: (1) To eliminate the special charge
associated with the re-alignment of the Sales and Marketing
organization. The amount includes severance and executive recruiter
fees associated with the hiring of the new Senior Vice President of
Sales and Marketing. (2) Represents the tax effect of the special
charge noted in (1) above. DATASOURCE: Sharps Compliance Corp.
CONTACT: David P. Tusa, Executive Vice President, Chief Financial
Officer & Business Development of Sharp Compliance Corp.,
+1-713-660-3514, ; or Tammy Swiatek of Kei Advisors LLC, Investor
Relations +1-716-843-3853, , for Sharp Compliance Corp. Web site:
http://www.sharpsinc.com/
Copyright