Date: January 22, 2007
Source: Sharps Compliance Corp.
-- Operating margin improves 590 basis points to 12.3%
-- Earnings per share doubles to $0.04 in the second quarter
-- Continued revenue expansion in markets served
-- Strong growth in retail, commercial and hospitality markets
-- Retail sales expand to provide proper syringe disposal for flu shot season
Sharps Compliance Corp. (OTCBB: SCOM), a leading provider of cost-effective medical waste disposal solutions for industry and consumers, today reported growth of 19.5%, or $0.5 million, to $3.2 million for the second quarter of the fiscal year 2007 compared to revenue of $2.7 million in the same period last fiscal year. For the first six months of fiscal year 2007, revenue increased 16% to $6.2 million compared with $5.3 million during the same period last fiscal year.
Sales Growth
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 is a fully integrated manufacturer of the Sharps Disposal By Mail System(R) and markets its products to the healthcare, retail, agriculture, commercial, industrial, hospitality, professional, government and pharmaceutical markets.
Driving the strong fiscal 2007 second quarter and first half results were increasing sales to the retail market which grew more than 250%, or $0.17 million, over last year's second quarter and was up $0.42 million, or 94.3% in the first six months when compared with the prior fiscal year. The growth in revenue to the retail market was due to increased sales of the Sharps Disposal by Mail System(R) to pharmacies and grocery stores utilized to support seasonal flu shot clinics. The Company experienced revenue growth in most of its other markets lead by strong performance in the commercial/industrial, government, and professional segments.
Dr. Burton J. Kunik, Chairman, President and Chief Executive Officer of the Company, commented, "This is the third consecutive quarter that we have delivered record revenue and earnings growth. This growth is the result of our strategy to increase penetration in the markets we serve through broadened distribution channels and a heightened direct sales effort. As the early entrant and leader in the small quantity medical waste disposal market, we believe that the quality of our products, the value added we provide with our fully integrated services and the speed with which we build relationships in each key market are the keys to our success. We believe we should deliver continued strong revenue and earnings growth in our year-over-year financial and operating performance for fiscal year 2007."
Sequentially, the fiscal year 2007 second quarter revenue increased of $0.2 million, or 6%, over the first quarter of fiscal year 2007, which ended September 30, 2006.
Operating Performance
For both the three and six month periods of fiscal year 2007, gross margins were 43%, consistent with the same periods of last fiscal year. Selling, general and administrative ("S,G&A") expenses of $0.9 million for the quarter ended December 31, 2006 were 3.5% lower than the same period for the prior fiscal year due to the reduction in professional fees associated with the Attentus Medical litigation that was settled in July 2006. S, G & A expenses increased by 1% for the six-months ended December 31, 2006 compared to the corresponding prior year period.
Higher revenues and lower S, G & A expenses combined to result in an operating margin of 12.3% for the fiscal year 2007 second quarter compared with 6.4% during the second quarter last fiscal year. For the first six months of the fiscal year, operating margin was 11.2%, a 480 basis point improvement over an operating margin of 6.4% during the same period last year. On a sequential basis, higher revenue in the fiscal year 2007 second quarter resulted in Sharps generating a 31% increase in operating income to $0.4 million compared with $0.3 million in operating income for the first quarter fiscal year 2007. As a percentage of revenues, operating margin in the second quarter of fiscal year 2007 sequentially improved 230 basis points over the first quarter's operating margin of 10.0%.
Dr. Kunik continued, "Higher revenues coupled with strong gross margins and tightly controlled overhead results in significant operating leverage that is very apparent in the quarters' results. We believe that as our sales volumes grow we will continue to enhance earnings and shareholder value. In addition, our growing cash reserves and strong balance sheet provides us the financial strength and flexibility necessary for investing in markets with significant sales opportunities thereby facilitating our business plan."
Liquidity and Balance Sheet Strength
The Company's cash position at December 31, 2006 increased to $0.9 million from $0.3 million at June 30, 2006. At December 31, 2006, the Company reported stockholders' equity and total assets of $1.1 and $3.3 million, respectively, representing significant increases over that reported for prior periods. Although Sharps maintains a $1.5 million line of credit with JPMorgan Chase, no amounts were outstanding at December 31, 2006. The line of credit is available to finance working capital and/or potential acquisition opportunities.
The diluted shares outstanding increased to 11.6 million for the quarter ended December 31, 2006 as a result of the Company's increased stock price during later part of the second quarter. The excess of the diluted shares over the basic shares outstanding of 10.7 million is due to the inclusion of a portion of the Company's 3.4 million stock options in the computation of diluted shares outstanding (utilizing the treasury method of accounting). The diluted shares outstanding are expected to increase in the third and fourth quarters of fiscal year 2007.
Outlook
Dr. Kunik noted, "We believe we have the leading edge in products designed to facilitate the proper disposal of small quantity sharps waste as a result of, (i) our early market entry and leadership position, (ii) the quality and diversity of our products and (iii) the breadth of services we provide to support client information systems for our customers. We see continued growth in the markets we serve supported as noted by the drivers below:
-- Expanding number of retail chains and pharmacies focused on providing year-round, in-store health clinics designed to facilitate health care treatment and inoculations which need easy, cost-effective sharps waste disposal;
-- Rapidly growing market of self injectors, as a result of global health conditions, who need to properly handle sharps waste;
-- Continued implementation of municipal programs (19 cities to date) designed to facilitate the proper disposal of sharps in the home and community setting (interest expressed by 23 additional municipalities and counties);
-- Distribution of thousands of syringes and injectable drugs by pharmaceutical manufacturers to patients at home; and
-- New legislation in California (SB 1305) and Massachusetts (SB 2569) mandating the proper disposal of home-generated sharps waste; also acknowledges mail back programs as not only a convenient, but also approved method."
Kunik concluded, "We believe our proven and established products, leadership position and experienced management team will enable us to capitalize on the significant sales opportunities in all markets we serve."
About Sharps Compliance Corp.
Headquartered in Houston, Texas, Sharps is a leading provider of cost-effective medical waste disposal solutions for industry and consumers. The Company's primary products include the Sharps Disposal by Mail System(R), Pitch-It(TM) IV Poles, Trip LesSystem(R), Sharps Asset Return System, Sharps Secure(R), Sharps SureTemp Tote(R), Biohazard Spill Clean-Up Kit and Disposal System and IsoWash(R) Linen Recovery System and. 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 is a fully integrated manufacturer and markets its products to the healthcare, retail, agriculture, commercial, industrial, hospitality, professional, residential, government and pharmaceutical 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.
Sharps Compliance Corp. is the exclusive supplier of Sharps Disposal by Mail Systems(R) to the Consumer Health Care division of Becton, Dickinson and Company. The Company also maintains an exclusive sales and marketing arrangement with Waste Management, Inc. whereby Sharps provides safe disposal systems and related services for Waste Management's residential and commercial customers.
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
Condensed Consolidated Statements Of Operations
Three-Months Ended
December 31,
-------------------------
%
2006 2005 Change
------------ ------------
(Unaudited) (Unaudited)
------------ ------------
Revenue $3,181,777 $2,663,376 19.5%
Cost of revenue 1,819,800 1,496,692 21.6%
------------ ------------
Gross profit 1,361,977 1,166,684 16.7%
Gross margin 42.8% 43.8% (2%)
Selling, general and
administrative 924,122 960,325 (4%)
Depreciation and amortization 45,477 35,240 29.0%
------------ ------------
Operating income 392,378 171,119 129.3%
Operating margin 12.3% 6.4% 91.9%
Other income (expense) 38,150 (837)
------------ ------------
Net income before income taxes $430,528 $170,282 152.8%
Income taxes (9,332) (3,310) 181.9%
------------ ------------
Net income $421,196 $166,972 152.3%
============ ============
Net income per share
Basic $0.04 $0.02 100.0%
============ ============
Diluted $0.04 $0.02 100.0%
============ ============
Weighted Average
Shares Outstanding
Basic 10,664,557 10,547,311
Diluted 11,576,162 10,720,512
Six-Months Ended
December 31,
-------------------------
%
2006 2005 Change
------------ ------------
(Unaudited) (Unaudited)
------------ ------------
Revenue $6,172,661 $5,323,488 16.0%
Cost of revenue 3,513,388 3,057,611 14.9%
------------ ------------
Gross profit 2,659,273 2,265,877 17.4%
Gross margin 43.1% 42.6% 1.2%
Selling, general and
administrative 1,878,545 1,854,848 1.3%
Depreciation and amortization 89,689 68,104 31.7%
------------ ------------
Operating income 691,039 342,925 101.5%
Operating margin 11.2% 6.4% 73.8%
Other income (expense) 39,792 (2,606)
------------ ------------
Net income before income taxes $730,831 $340,319 114.7%
Income taxes (18,046) (8,815) 104.7%
------------ ------------
Net income $712,785 $331,504 115.0%
============ ============
Net income per share
Basic $0.07 $0.03 133.3%
============ ============
Diluted $0.06 $0.03 100.0%
============ ============
Weighted Average
Shares Outstanding
Basic 10,608,314 10,547,311
Diluted 11,275,236 10,726,626
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
12/31/2006 6/30/2006
(Unaudited)
-------------- -------------
ASSETS:
- ------------------------------------------
Current assets:
Cash and cash equivalents $883,353 $296,959
Restricted cash 10,010 10,010
Accounts receivable, net 1,444,627 935,283
Inventory 296,340 325,688
Prepaid and other assets 145,594 88,348
-------------- -------------
Total current assets 2,779,924 1,656,288
Property and equipment, net 445,124 473,387
Intangible assets, net 63,499 60,427
-------------- -------------
Total assets $3,288,547 $2,190,102
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
- ------------------------------------------
Current liabilities:
Accounts payable $661,682 $526,582
Accrued liabilities 299,379 262,219
Current portion of deferred revenue 915,796 826,764
Current maturities of capital lease
obligations 14,906 40,260
-------------- -------------
Total current liabilities 1,891,763 1,655,825
Long-term deferred revenue 240,959 211,568
Obligations under capital leases, net of
current maturities - 1,809
Other 70,500 69,000
-------------- -------------
Total liabilities 2,203,222 1,938,202
Stockholders' Equity:
Total Stockholders' Equity 1,085,325 251,900
-------------- -------------
Total Liabilities and Stockholders'
Equity $3,288,547 $2,190,102
============== =============
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
Supplemental Revenue Information
(unaudited)
Three Months Ended
December 31,
-----------------------
2006 2005 % Change
----------- ----------- ----------
BILLINGS BY MARKET:
- -----------------------------------
Health Care $1,899,277 $1,834,536 3.5%
Retail 238,850 67,130 255.8%
Agriculture 221,214 240,240 (8%)
Commercial/Industrial 206,220 75,671 172.5%
Hospitality 191,584 105,382 81.8%
Professional 138,713 109,699 26.4%
Protec 100,944 91,141 10.8%
Other 59,236 29,016 104.1%
Government 51,308 1,965 2511.1%
Pharmaceutical 41,770 95,172 (56%)
----------- ----------- ----------
Subtotal 3,149,116 2,649,952 18.8%
GAAP Adjustment (a) 32,661 13,424 143.3%
----------- ----------- ----------
Revenue Reported $3,181,777 $2,663,376 19.5%
=========== =========== ==========
Six Months Ended
December 31,
-----------------------
2006 2005 % Change
----------- ----------- ---------
BILLINGS BY MARKET:
- -----------------------------------
Health Care $3,716,863 $3,622,410 2.6%
Retail 871,853 448,605 94.3%
Agriculture 341,905 356,720 (4%)
Commercial/Industrial 316,854 139,867 126.5%
Hospitality 307,917 316,131 (3%)
Professional 275,052 211,201 30.2%
Protec 218,073 205,675 6.0%
Other 105,166 51,418 104.5%
Government 80,830 10,604 662.3%
Pharmaceutical 56,933 95,172 (40%)
----------- ----------- ---------
Subtotal 6,291,445 5,457,803 15.3%
GAAP Adjustment (a) (118,784) (134,315) (12%)
----------- ----------- ---------
Revenue Reported $6,172,661 5,323,488 16.0%
=========== =========== =========
(a) Represents the net impact of the revenue recognition adjustment
required to arrive at reported revenues. See Note 2 "Revenue
Recognition" in the Company's consolidated financial statements
included in its June 30, 2006 Form 10-KSB for additional
information.
For more information, contact:
Sharps Compliance Corp., Houston
Executive Vice President, Chief Financial Officer & Business Development
David P. Tusa, 713-660-3514
dtusa@sharpsinc.com.
or
Kei Advisors LLC
Investor Relations
Tammy Swiatek, 716-843-3853
tswiatek@keiadvisors.com.
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