UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
-----------------
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: October 24, 2000
------------------
(DATE OF EARLIEST EVENT REPORTED)
STERILE RECOVERIES, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
FLORIDA 000-20997 59-3252632
---------------------- ---------------- -------------------
(State or other juris- (Commission File (I. R. S. Employer
diction of incorporation) Number) Identification No.)
28100 U.S. HIGHWAY 19 NORTH, SUITE 201
CLEARWATER, FLORIDA 33761
----------------------------------------
(Address of Principal Executive Offices)
(727) 726-4421
----------------------------------------------------
(Registrant's Telephone Number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS.
SRI SIGNS IHN SURGICAL EXPRESS AGREEMENTS
On September 13, 2000, Sterile Recoveries, Inc. ("SRI") announced the
recent signings of UMass Memorial Medical Center, Inc., Worcester, Massachusetts
and Rex Healthcare, Raleigh, North Carolina to its "Surgical Express(TM)"
service. Surgical Express is SRI's comprehensive procedure-based surgical
products program. The agreements with these two independent hospital networks
(IHN's) provide for the exclusive use of SRI's Surgical Express program for
their reusable products and their custom disposable accessory packs for all
procedures. Service started at UMass Memorial at the beginning of this month and
will start at Rex Healthcare later this month. Management expects that these two
contracts, when fully implemented over the next six months, will generate
revenues of $8 million annually.
SRI INTRODUCES SURGICAL EXPRESS FOR LAPAROSCOPY
SRI recently began delivering to hospital customers its new laparoscopy
program, Surgical Express for Laparoscopy. This new program combines the
laparoscopic instruments of Aesculap, Inc. and SRI's Surgical Express products
and services into an integrated program that (a) provides hospital customers
with the reusable and disposable products, including instruments, that are
needed for laparoscopic surgical procedures and (b) includes arrangements to
deliver, retrieve and reprocess gowns, instruments, and other reusable product
components. SRI charges customers a single per procedure price for the supplies
and instruments required for a laparoscopic surgical procedure. SRI believes
that the "Surgical Express for Laparoscopy" program offers the most complete and
cost-effective supply management program on a procedure basis in the hospital
supply industry. SRI estimates that 12-14% of all surgical procedures are now
done with a laparoscope.
SRI is offering the program pursuant to a Joint Marketing Agreement
dated April 28, 2000, between SRI and Aesculap, Inc., one of the oldest and
largest worldwide suppliers of surgical instruments. The agreement is for three
years, and renews for additional three-year terms, unless either party provides
notice of non-renewal at least 120 days before its expiration. The agreement
provides for Aesculap to furnish and repair laparoscopic instruments. SRI
delivers, retrieves and reprocesses the instruments and is responsible for
customer relationships. Aesculap receives an agreed share of the revenues from
each procedure, based on the number and kinds of procedures, and the number and
combination of instruments for each procedure. Because Aesculap furnishes the
instruments, SRI's return on capital should be favorably impacted by this new
business.
Aesculap's design facilitates disassembly of its instruments for
cleaning and sterilization processes at SRI's facilities. SRI has installed and
validated instrument-reprocessing equipment especially designed for laparoscopic
instruments in three of its facilities, and expects to complete this process by
year-end in its remaining facilities.
SRI will focus its sales and marketing efforts in coming months on this
new program, with support from Aesculap's domestic sales force. SRI anticipates
it will benefit from a relatively shorter sales cycle for this new program than
it has experienced with its total Surgical Express program, for the following
reasons:
<PAGE>
o SRI believes that hospitals will be attracted by the convenience of a
complete supply management program that is provided and billed on a per
procedure basis.
o The new program should be attractive to surgeons because of the
recognized quality of Aesculap's instruments and SRI's reusable
products. SRI believes that physicians influence hospitals' selection
of surgical instruments more than other supply decisions.
o The new program represents a much smaller commitment for a hospital and
an easier, simpler purchase decision for its staff, relative to
comprehensive supply programs.
o SRI believes that hospitals now using disposable instruments will
perceive the program as an opportunity to reduce the high costs they
incur in constantly resupplying these instruments.
o SRI believes that hospitals now using reusable instruments are
challenged in their ability to keep instrument sets readily available
and maintain them in good repair. Hospitals also might not be able to
efficiently and properly reprocess and sterilize their instruments.
Effectively outsourcing this function is difficult.
o SRI believes that hospitals will find attractive an arrangement that
allows them to schedule delivery of only the products that they need
for scheduled surgical procedures, eliminating requirements that they
maintain supply inventories and the handling and paperwork associated
with purchasing, stocking, and moving, as well as accounting and paying
for, the many items used in these procedures.
If it enjoys success with its "Surgical Express for Laparoscopy" program, SRI
believes customers will seek to expand its instrument reprocessing services to
instruments needed for other procedures. SRI is exploring other procedures and
potential manufacturing partners that might be appropriate for these
arrangements.
RISKS OF THE NEW PROGRAM
Surgical Express for Laparoscopy is a new product offering for SRI. SRI
is in its initial stages of implementing the program and remains subject to a
risk that the market will not accept it. Further, SRI is relying on Aesculap as
its major source of supply of laparoscopic instruments for the program. The
Joint Marketing Agreement provides for Aesculap to furnish instruments for at
least three years, subject to terms and conditions stated in the agreement. Any
failure of Aesculap to furnish instruments for any reason would adversely affect
SRI's ability to implement this program.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
10.37 Joint Marketing Agreement dated as of April 28, 2000, between Aesculap,
Inc. and Sterile Recoveries, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STERILE RECOVERIES, INC.
(Registrant)
Dated: October 24, 2000 /s/ RICHARD T. ISEL
----------------------------------
Richard T. Isel
Chairman of the Board, President &
Chief Executive Officer
