Sharps Compliance
Annual Report 2008

Plain-text annual report

Sharps Compliance 2008 Annual Report Where You’ll Find Us... Everywhere you live, work and play Company Profile Headquartered in Houston, Texas, Sharps Compliance is a leading provider of cost-effective disposal solutions for small quantity generators of medical waste and unused pharmaceuticals. e Company’s flagship product, the Sharps Disposal by Mail System®, 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”). e Company also offers a number of products specifically designed for the home healthcare market and products for the safe disposal of unused pharmaceuticals, RxTakeAway™. Sharps Compliance focuses on targeted growth markets such as the pharmaceutical, retail, commercial, and hospitality, 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 com- munity setting. As a fully integrated manufacturer providing customer solutions and services, Sharps Compli- ance’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: www.sharpsinc.com. Sharps Compliance Corp. 2008 Annual Report 1 Dear Fellow Stockholders We ended fiscal year 2008 with record annual customer billings of $13.2 million, an increase of 8% over the prior year level of $12.2 million. Growth in year-over-year billings was led by the pharmaceutical manufacturing, hospitality, and professional markets. Although, the revenue and earnings generated for fiscal year 2008 were below our goals, I believe our success in fiscal 2008 should be measured by the many contracts we were awarded which have already begun to positively impact our fiscal 2009 performance. Additionally, fiscal year 2008 was a year of investment in sales and infra- structure that we believe to be very important to the future success of the Company. We were very pleased with the recently announced re- newal of the Company’s first Patient Support Program with a top-ten pharmaceutical manufacturer. The Patient Support Program combines services to support the pharmaceutical manufacturers’ product delivery system, patient tracking and compliance. Sharps provides direct patient fulfillment of the Sharps Disposal by Mail System®, product timing and con- sumption tracking with its proprietary SharpsTracer™ sys- tem and data feedback to the manufacturer. The Company recently renewed this program through June 2009 and ex- pects the total value of this contract to exceed $1.7 million, with billings of approximately $800 thousand in the first quarter of fiscal 2009 and $900 thousand in the second half of fiscal 2009. The Company also recently announced two additional pharmaceutical manufacturer Patient Support Programs using the Sharps Disposal By Mail System®. One of the pro- grams involves the implementation of the Sharps Disposal By Mail System® in conjunction with the launching of a self- injected drug recently approved for a new indication. The pro- grams are expected to be launched by December 31, 2008 and generate initial program billings of approximately $100,000 for the quarter ended September 30, 2008 and approximately $300,000 for the quarter ended December 31, 2008. Below, I have provided a further description of the sales activities in a few of our key markets. Key Market Activity Healthcare Market The Company generated $7.3 million in billings during fiscal year 2008 from our core healthcare market. We are the pri- mary vendor of multiple products to the leading home health- care companies and medical supply-related distributors in the nation. The products marketed include our Sharps Disposal by Mail System™, Pitch-It™ IV Poles, Trip LesSytem™, Sharps Pump Return Box, Sharps Enteral Pump Return Box and Sharps SureTemp Tote®. Financial Highlights (dollars in thousands, except earnings per share) Revenues Net Income Diluted EPS Total Assets Debt 2008 2007 2006 $12,841 $11,956 $10,563 82 0.01 5,676 – 785 0.06 4,690 – 382 0.03 2,190 – Stockholders’ Equity $ 2,885 $ 2,169 $ 252 2 Sharps Compliance Corp. 2008 Annual Report During fiscal year 2008, we entered into an exclusive contract with one of the leading national pharmacy chains with over 6,000 locations, for its Sharps Disposal By Mail Systems®, Biohazard Spill Clean-Up Kits, Asset Return System and Pitch-it™ IV poles. The products are expected to be utilized not only by the customer’s in-store immunizing pharmacists, but also its home healthcare, specialty and mail order pharmacy divisions. We have begun to receive orders from the new customer and expect this contract to boost fiscal year 2009 customer billings in the healthcare market. We remain focused on the healthcare market including the continued servicing of our existing customer base as well as marketing our proven products to potential customers in this market. Hospitality Market The Company generated billings of $1.2 million in the Hos- pitality market during the year ended June 30, 2008. This level of billings represents an increase of approximately 37% as compared to the prior year period. This growth was driven by increased demand for our products by existing and new customers. During fiscal year 2008 we received two orders for its Biohazard Spill Clean-Up Kits that will be used by a national fast food chain, with over 13,000 locations in the country, as well as a major auto parts chain. The combined value of the initial orders is approximately $250,000 with shipments completed beginning in the quarter ending June 30, 2008 and continuing throughout fiscal year 2009. The Company believes that re-order of the Biohazard Spill Clean- Up Kits for the national fast food chain could generate over $500,000 in annual billings. The Company’s Sharps Secure® Needle Disposal System is being sold successfully in the Hospitality market where the product is mounted on the wall inside of public rest- rooms to provide a visible collection point for self-injectors to safely and privately dispose of used needles, which are often discarded in the public waste. The Sharps Secure® is the first commercially available wall-mounted syringe col- lection and disposal by mail system product specifically designed for the commercial, industrial and hospitality markets. The system consists of a Sharps Disposal by Mail System® needle collection container, housed in the specially designed (patent pending) Sharps Secure® metal collection cabinet. The wall-mounted cabinet, which is manufactured from heavy gauge metal, has been designed with numerous safety features to ensure that needles properly disposed of will not present a hazard. Pharmaceutical Market Billings in the Pharmaceutical market for the fiscal year ended June 30, 2008 were about $900,000, an increase of 61% over the prior year period. Sharps currently has three active Patient Support Programs with major pharmaceutical manufacturers that combines services to support the phar- maceutical manufacturers’ product delivery system, patient tracking and compliance. Sharps provides direct patient fulfillment of the Sharps Disposal by Mail System®, product timing and consumption tracking with its proprietary SharpsTracer™ system and data feedback to the manufac- turer. The Company recently renewed its first Patient Sup- port Program through June 2009 and expects the total value of this contract to exceed $1.7 million, with billings of approximately $800 thousand in the first quarter of fiscal 2009 and $900 thousand in the second half of fiscal 2009. One of the newer Patient Support Programs involves the implementation of the Sharps Disposal By Mail System® in conjunction with the launching of a self-injected drug recently approved for a new indication. We believe our success fulfill- ing products and services for our first contract with a top-ten pharmaceutical manufacturer, as well as its fully-integrated capabilities, were differentiating factors leading to the con- tracting of the second and third Patient Support Programs. Retail Market The Company generated billings of over $1.1 million in the Retail market during the year ended June 30, 2008. These billings were driven by sales of the Company’s Sharps Disposal By Mail System® products to retail and grocery store pharmacies to support the proper disposal of syringes used to administer flu shots and other inoculations. Although the billings in this market were flat over the prior fiscal year we believe this market will generate significant growth in fiscal year 2009 consistent with the growing trend of flu and other shots administered outside the physician office environment as well as the significant growth in non-emergency clinics in the retail setting. This expected growth for fiscal year 2009 is further supported by the billings expected in the Retail mar- ket for the first quarter of fiscal year 2009 (ending September 30, 2008) of approximately $0.8 million, which is about 75% of the billings generated for the entire fiscal year 2008. Update on California Senate Bill 1305 Effective September 1, 2008, California Senate Bill 1305 re- quires the proper disposal of home-generated sharps waste (syringes, needles, lancets, etc.) to protect the general public and workers from potential exposure to contagious diseases as well as health and safety risks when improperly disposed biohazard waste enters the public waste stream. The Bill specifically acknowledges mail-back programs, such as the Sharps Disposal by Mail System®, as one of the most con- venient alternatives for the collection and destruction Sharps Compliance Corp. 2008 Annual Repor 3 “3 Billion Used Syringes Disposed of Annually in the United States in the Non-Healthcare Sector” “Less an 1% Penetration in a Billion Dollar Market Opportunity” “Leading Provider of Convenient, Cost-Effective and Value Added Products and Services” “Infrastructure in Place to Handle Significantly Larger Orders” “Leading Provider of Support Programs for Patients of Pharmaceutical Manufacturers” “Recently Launched Unused Medication Disposal Product Line” 4 Sharps Compliance Corp. 2008 Annual Report of home-generated sharps. We believe this legislation, in additional to similar legislation pending in other states, will continue to increase awareness of the need for proper disposal of used syringes. New Product Line Innovation Medical Professional Sharps Disposal by Mail System® In June of 2008, we launched a larger version of our flag- ship product, the Sharps Disposal By Mail System®, specif- ically designed to meet the needs of medical professionals, such as physician and dental offices, and provide a safe and efficient alternative to traditional, more costly medical waste pick-up services. In addition to the convenient and safe disposal of used syringes, the new 18 gallon Medical Professional Sharps Disposal By Mail System® (Model number 11800) can be used to collect all of the medical waste including red bag (biohaz- ard) waste as well as existing sharps containers located in each examination room. The product is permitted by the United States Postal System for transport to Sharps’ owned medical waste disposal facility. The mail back solution is a more cost effective and flexible solution as compared to the traditional pick-up service typically used today. With approximately 850,000 practicing physicians, dentists and veterinarians located across the country, we believe the market opportunity for the Medical Professional Sharps Disposal By Mail System® could exceed $350 million annually. We developed the new product offering based on feedback from the medical community as a comprehensive solution to reduce the cost of medical waste disposal outside of the hospital setting. We are marketing the new product through our direct sales force and via our website (internet marketing).The product has been very well received to date and we believe its sales will make a contri- bution to Company revenue in fiscal year 2009 and beyond. RxTakeAway™ In September 2008, the Company launched its new RxTakeAway™ product line specifically designed to facilitate the cost-effective and easy-to-use disposal of unused phar- maceuticals in the consumer/community market. With as many as 35% of the dispensed medications associated with the approximate 4 billion prescriptions written every year in the United States going unused, the Company estimates over 200 million pounds of pharmaceuticals could be adversely effecting our rivers, streams, municipal water systems and also placing our children at risk for accidental overdose. We believe our new line of products address a very serious disposal issue in the country that is currently harm- ing our environment and placing our children at risk for accidental overdose. Our existing infrastructure is uniquely positioned to facilitate the proper and cost-effective disposal of unused medications in the consumer/community mar- kets. Additionally, we are authorized by the USPS to trans- port unused medications, other than controlled substances. Markets targeted for the new line of products include con- sumer, community, assisted living, long-term care, hospice and corrections. Additionally, the products are being marketed to pharmacy chains as a part of “take back” programs. Outlook During fiscal 2008, we developed an infrastructure that, we believe, will handle significantly larger orders which we are now realizing as a result of our efforts to diversify the markets we address. We see the pharmaceutical manufacturers, gov- ernment and retail markets expanding rapidly as the push to properly dispose of syringes and other medical waste created by small quantity generators driven by efforts to maintain a safe, healthy and clean environment continues to gain greater support. Fiscal 2008 was a year of major transition and development, and we are starting fiscal 2009 already boasting record billing levels in the first quarter. The catalysts that we have needed to drive the recognition of the value of our products have begun to ignite. We have un- precedented numbers of inquiries regarding our products, and our sales force is being readily received by the city and county governments as well as major corporations that realize they must offer solutions to the individuals in their jurisdictions for the disposal of used syringes. Thank you for your continued support. We look forward to a successful fiscal year 2009. Sincerely, Dr. Burton J. Kunik Chairman of the Board, Chief Executive Officer and President Sharps Compliance Corp. 2008 Annual Report 5 s t e k r a M l a c i t u e c a m r a h P Healthcare The Company markets its Sharps Disposal by Mail System®, Pitch-It™ IV Poles, Sharps Pump Return Box, Sharps Enteral Pump Return Box, Trip LesSystem® and Sharps SureTemp Tote® products to the Healthcare segment. This market consists primarily of home healthcare companies and generated 55% of the Company’s billings for the year ended June 30, 2008. The Company’s flagship Sharps Disposal by Mail System® is a compre- hensive solution for the containment, transportation, destruction and tracking of medical waste. The Sharps Disposal by Mail System® contains a securely sealed, leak and puncture resistant sharps container in several sizes; U.S. Postal Service approved shipping carton with priority mail postage; absorbent material inside the container that can safely hold up to 150 milliliters of fluids; a red bag for additional containment and complete documentation and tracking manifest. Upon destruction, Sharps provides the customer with proof of destruction. The Sharps Pitch-It™ pole is designed for the home healthcare industry to im- prove logistical efficiencies by eliminating the costs and inconvenience of retrieving, cleaning, bagging, tagging and storing of traditional IV poles. The Pitch-It™ poles are available in three models: (i) tabletop; (ii) floor; and (iii) full-size with wheels. The innovative poles are not only dispos- The Company markets its Sharps Disposal By Mail System® products to the Patient Support Programs of major pharmaceuti- cal manufacturers. The Sharps product and service package includes the direct fulfill- ment of the Sharps Disposal By Mail Sys- tem® to the pharmaceutical manufacturers’ patients, who use the product as a conven- ient means of used syringe disposal for their self-injecting patients. Sharp’s pro- prietary SharpsTracer™ system is used to track the return of the Sharps Disposal By Mail System® by the patient to the treat- ment facility, where the package is scanned and weighed prior to destruction. This data, managed in Sharps’ proprietary SharpsTracer™ system, is electronically transmitted to the pharmaceutical manu- facturer which assists them in monitoring drug usage and provides a touch point for individual patient follow-up. We believe we have established the leadership position in this market. Through our direct sales force and industry expertise, we are very focused on the pharmaceutical manufacturing industry because of the magnitude of the opportunities in this market as well as our ability to serve the growing need for the proper and safe disposal of used syringes administered by the self-injecting patients of pharmaceutical manufacturers. 6 Sharps Compliance Corp. 2008 Annual Report able, but also cost-effective, portable, adjustable, lightweight, sturdy and easy to use. The Company’s Asset Return Sys- tem ensures timely return of infusion pumps or other expensive equipment from the home back to the home health- care provider. The prepaid boxes save time, eliminate expensive pick-up, opti- mize asset utilization and reduce loss of equipment. Sharps’ asset return boxes (i.e., the Sharps Pump Return Box and Sharps Enteral Pump Return Box) are marketed to home healthcare providers, primarily for use with home infusion pa- tients. The Sharps Asset Return System complies with all applicable federal, state and municipal regulations. The Trip LesSystem® is a solution for the home healthcare industry that eliminates costly trips by healthcare providers to the patient’s home after therapy has been completed. The Trip LesSystem® combines two complete pro- grams for return and disposal. All sys- tems contain the Sharps Disposal by Mail System® along with either, (i) a prepaid pump return box or (ii), a Pitch-It™ IV Pole, depending on the patient’s therapy. The system eliminates expensive pick- up of the IV poles and infusion therapy equipment, facilitating cost effective management of home healthcare pa- tients. The Sharps Trip LesSystem™ complies with all applicable federal, state and municipal regulations. The Sharps SureTemp Tote® is a disposable cooler that maintains a safe range for temperature-sensitive materials. Sharps’ primarily markets the product to home healthcare providers to protect IV medications used in home infusion. Its disposable nature relieves the home healthcare provider of tracking, cleaning and maintaining reusable coolers. Hospitality The Company markets its Sharps Disposal by Mail System®, Biohazard Spill Clean-Up Kit and Disposal System and IsoWash® Linen Recovery System products to the Hospitality segment. This market includes hotel, retirement and assisted living and contract food service provider companies. The Hospi- tality segment generated 9% of the Com- pany’s billings for the year ended June 30, 2008, which represented an approxi- mate 37% increase over the prior fiscal year billings for this segment. The Biohazard Spill Clean-Up Kit and Disposal System is a complete solu- tion for both cleanup and disposal by mail of bio-hazardous spill waste and ma- terials. This convenient system comes complete with everything necessary for cleanup of potentially bio-hazardous ma- terials such as blood and bodily fluids. The Sharps system provides a means to safely, easily and legally remove these materials from a customer’s location and transport them to a destruction facility via the U.S. Postal Service. The IsoWash® Linen Recovery Sys- tem is designed to address the safe han- dling of linens contaminated with blood, bodily fluids and other biohazards in the hospitality market. Contaminated linens are isolated from human contact by being placed into the IsoWash® water-soluble bag, which is clear to reveal the bag’s con- tents and is marked with a biohazard warning. The isolated linens are then placed in industrial laundry equipment for recovery. Once the wash cycle begins, the bag dissolves within two minutes allowing chemicals in the wash to safely clean the contaminated laundry with minimal handling. l a n o i s s e f o r P its Sharps The Company markets Disposal by Mail System® products to the Professional segment including physi- cian, dental, veterinarian and other serv- ice-related practices. The Professional segment generated 6% of the Company’s billings for the year ended June 30, 2008, which represented a 22% increase over the prior fiscal year billings for this segment. The Sharps Disposal by Mail System® is an excellent fit for many physician, dental and veterinarian offices which generate used syringes and small quantities of medical waste. The Com- pany’s recently launched Medical Profes- sional Sharps Disposal By Mail System® is an excellent fit for this market as physicians and dentists look for ways to reduces their medical waste disposal costs as well as alternatives to the traditional pick-up service. Sharps Compliance Corp. 2008 Annual Report 7 Agriculture The Company markets its Sharps Diposal by Mail System® products to the Agricul- ture segment. This market consists of companies that purchase the products to properly dispose of syringes used to inject farm animals. This segment generated 4% of the Company’s billings for the year ended June 30, 2008. The Sharps Dis- posal By Mail Systems® products are currently an integral component to the proper and cost-effective disposal of sy- ringes utilized by a global provider of technology-based solutions and agricul- tural products that improve dairy farm productivity. The Company is focused on additional sales opportunities in this segment as it intensifies its marketing efforts to the Agriculture industry. l a i r t s u d n I / l a i c r e m m o C Retail The Company markets it’s Sharps Dis- posal by Mail System® products to the Retail segment which consists primarily of organizations that purchase the prod- ucts to properly dispose of syringes uti- lized to administer flu shots and other inoculations in the retail setting (grocery and drug stores). Additionally, the Sharps Disposal by Mail System® products are uti- lized by the growing retail-based non- emergency clinic sector. The Retail market generated 9% of the Company’s billings for the year ended June 30, 2008. The Company anticipates continues growth in the Retail market as grocery and drug stores increase their focus on in-store convenient clinics designed to facilitate healthcare treatment and inoculations. Currently, there are over 1,000 non- emergency clinics across the country located in the retail setting, such as phar- macies, grocery store chains and mass merchandisers. The Company estimates its Sharps Disposal By Mail that System® products are used by approxi- mated 70% of these clinics. According to news and trends in the convenient care business, the total number of retail clin- ics could increase to as many as 10,000 by 2010. 8 Sharps Compliance Corp. 2008 Annual Report The Company markets its Sharps Disposal by Mail System®, Sharps Secure®, and Biohazard Spill Clean-Up Kit products to the Commercial/Indus- trial segment. This segment icludes a wide variety of customers including restaurant, industrial, retail and other facilities. The Commercial/Industrial segment generated 5% of the Com- pany’s billings for the year ended June 30, 2008, which represented a 17% in- crease over the prior fiscal year billings for this segment. The Sharps Secure® Needle Dis- posal System is the first commercially available wall-mounted syringe collec- tion combined with a disposal by mail system product specifically designed for the commercial and industrial mar- kets. The system is mounted on the wall inside of public restrooms to provide a visible collection point for self-injectors to safely and privately dispose of used needles, which are often discarded in the public waste at commercial and office buildings. The system consists of a Sharps Disposal by Mail System® needle collection con- tainer, housed in the newly designed (patent pending) Sharps Secure® metal collection cabinet. The wall-mounted cabinet, which is manufactured from heavy-gauge metal, has been designed with numerous safety features to en- sure that needles properly disposed of will not present a hazard. Corporate and Management Information Executive Officers Board of Directors Company Financial Information Dr. Burton J. Kunik Chairman of the Board, Chief Executive Officer & President David P. Tusa Executive Vice President, Chief Financial Officer & Business Development Claude A. Dance Senior Vice President, Sales & Marketing Khairan “Al” Aladwani Senior Vice President, Operations Corporate Management Gregory C. Davis Director of Information Tech- nology Thomas J. Gentempo Operations Manager Elizabeth “Liz” Martin Corporate Controller Dr. Burton J. Kunik Chairman of the Board, Chief Executive Officer & President, Sharps Compliance Corp. Houston, Texas Ramsay H. Gillman (1) (3) Chief Executive Officer & President, Gillman Companies Houston, Texas John R. Grow (1) (2) (4) Private Investor Memphis, Tennessee Parris H. Holmes (1) (2) (3) Private Investor San Antonio, Texas F. Gardner Parker (2) (3) (4) Parker Investments Houston, Texas Philip C. Zerrillo, Ph.D. (4) (5) Lecturer Goizietta Business School, Emory University Atlanta, Georgia (1) Member of the Compensation Committee (2) Member of the Acquisition Committee (3) Member of Nominating/Corporate Governance Committee (4) Member of the Audit Committee (5) Lead Independent Director Several periodic publications that contain information of interest to shareholders and potential investors are available. These publications include Forms 10-K, 10-Q and 8-K, which may be obtained at the Company’s website (www.sharpsinc.com) or at the website of the Securities and Exchange Commission (www.sec.gov). Additionally, these materials may be obtained, without charge, by writing to the Company at: Sharps Compliance Corp. Investor Relations 9220 Kirby Drive, Suite 500 Houston, Texas 77054 Website www.sharpsinc.com Ticker Symbol SCOM (OTCBB) Transfer Agent Registrar and Transfer Company 10 Commerce Drive Cranford, New Jersey 07016-3572 Independent Public Accountants UHY L.L.P. Houston, Texas Annual Shareholder Meeting November 21, 2008, at 10:00 am Hilton Houston Post Oak Hotel, Aesops Room 2001 Post Oak Blvd. Houston, Texas 77056 Investor Relations Investors, stockbrokers, security analysts and others seeking information about the Company should contact: David P. Tusa Executive Vice President, Chief Financial Officer & Business Development Phone: (713) 660-3514 dtusa@sharpsinc.com or Tammy S. Poblete Kei Advisors LLC Investor Relations Phone: (716) 843-3853 tpoblete@keiadvisor.com www.sharpsinc.com 9220 Kirby Drive, Suite 500 Houston, Texas 77054 713-432-0300 

Continue reading text version or see original annual report in PDF format above