Exhibit 99.1
For Immediate
Release
| Contacts: |
William R. Gargiulo,
Jr. |
231.526.1244 |
| |
Donna
Felch |
312.595.9123 |
The
Female Health Company Reports Record Profit for
Fiscal
Year 2009
Excluding
Restructuring Costs for Each, Operating Income Exceeds Previous Earnings
Guidance
Company
Completes FC1 to FC2 Transition
Considers
Payment of Dividend in Calendar 2010
Highlights:
Fourth
Quarter
| ● |
|
FHC records $1.5 million
restructuring charge reflecting transition from FC1 to
FC2 |
| ● |
|
Operating income of $0.5
million. Exclusive of restructuring charge, operating income increases 66%
to $2.0 million |
| ● |
|
Tax benefit of $1.6 million
recognized |
FY2009
| ● |
|
Operating income of $4.7
million. Exclusive of restructuring charge, operating income rises 95% to
$6.2 million, compared with previous earnings guidance of 60%-85%
increase. |
| ● |
|
Net
income, including restructuring charge and tax benefit, increases 32% to
$6.5 million |
CHICAGO, November 30, 2009 -
The Female Health Company (NASDAQ-CM: FHCO - News), which
manufactures and markets the FC2 Female Condom, today
reported record net revenues and operating income for the year ended September
30, 2009.
For the
three months ended September 30, 2009, net revenues increased slightly to $7.9
million, compared with $7.8 million in the three months ended September 30,
2008, reflecting the impact of the transition from FC1 (and limited FC1
production capacity) to the lower-priced, second-generation FC2 female
condom.
Gross
profit increased 9% to $3.8 million, compared with $3.5 million in the fourth
quarter of FY2008. Operating income declined to $0.5 million, after recording
the $1.5 million restructuring charge associated with the transition from FC1 to
FC2, in the three months ended September 30, 2009, compared with $1.2 million in
the prior-year quarter. Exclusive of the restructuring charge, operating income
increased 66% to approximately $2.0 million.
In the
fourth quarter of FY2009, the Company recorded a favorable currency gain of $92
thousand and a tax benefit of $1.6 million, compared with a favorable currency
gain of $893 thousand and a tax benefit of $219 thousand in the same period last
year.
The
Company reported net income attributable to common shareholders of $2.3 million,
or $0.08 per diluted share, in the fourth quarter of FY2009, which was identical
to the same period last year, in spite of the $1.5 million fourth quarter FY2009
restructuring charge.
The
Company expects significant quarter-to-quarter variations in its operating
results, due to the timing of large order receipts, production scheduling, and
shipping of products.
For the
year ended September 30, 2009, net revenues increased 7% to $27.5 million,
compared with $25.6 million in FY2008, reflecting a shift in customer purchases
towards the lower-priced FC2. Gross profit increased 26% to $13.5
million, compared with $10.7 million in FY2008. Operating income, including the
$1.5 million restructuring charge
associated with the transition from FC1 to FC2, increased 48% to $4.7 million,
compared with operating income of $3.2 million in FY2008. Exclusive of the
restructuring charge, operating income rose 95% to $6.2 million, compared with
the Company’s previous guidance that anticipated an increase in operating income
of 60%-85%. In FY2009, the Company sold 40.2 million FC female
condoms, for an increase of 16% when compared with 34.7 million units sold in
FY2008. FHC’s unit growth was limited by FC1 production capacity in
FY2009. All future orders and unit shipments will be the
second-generation product, FC2.
Net
income attributable to common stockholders for FY2009 increased 34% to $6.5
million, or $0.24 per diluted share, compared with net income attributable to
common stockholders of $4.8 million or $0.18 per diluted share, in
FY2008. In FY2009, the Company was able to recognize a tax benefit
for past losses which added $1.6 million to net income attributable to common
stockholders, as compared with a $0.8 million tax benefit recognized in
FY2008.
“We are
very pleased to report strong revenue and earnings growth for the year ended
September 30, 2009,” noted O.B. Parrish, Chief Executive Officer of The Female
Health Company. “We are particularly encouraged by the successful completion of
the transition from FC1 to the lower-priced but higher-margin
FC2. Our strong FY2009 operating performance reflects continued
growth in global demand for the female condom, including excellent acceptance of
our second-generation product. Most importantly, the growth in the
use of the female condom reflects increased protection against
HIV/AIDS.”
The
Company generated $5.8 million in cash from operations during FY2009, and its
year-end cash position was approximately $2.9 million, compared with $2.1
million at the end of FY2008. Cash expenditures in 2009 included
approximately $1.7 million for capital expenditures and $3.8 million for common
stock repurchases. The Company has no outstanding debt and $1.5
million in unused credit lines. Based on the Company’s strong cash
flow and completion of the FC1 to FC2 transition, the Board of Directors is
considering initiating dividend payments in calendar 2010.
Shareholders’
equity at September 30, 2009 totaled $13 million, versus $9.7 million at the end
of FY2008.
Restructuring Charge FC1 to
FC2 Transition
During
the year FHC announced (i) a 150% expansion of its Malaysian FC2 production
capacity, (ii) that it expected a 100% transition to FC2 during calendar 2009,
and (iii) that there would be certain one-time charges as a result of the
transition. There are two categories of charges.
Employee
Redundancy / General
In August
2009, the Company announced to its UK employees that the Company was evaluating
the future of its UK facility upon the decision of two of its largest customers
to switch their purchases from the first-generation product, FC1, which was
manufactured in the UK facility, to the second-generation product, FC2, which is
manufactured in Malaysia. As required by British labor law, the
Company went through an evaluation process, working in tandem with employee
representatives, in which various manufacturing alternatives were
considered. As the Company was unable to identify a satisfactory
alternative, the facility’s manufacturing operations ceased in October
2009. The Company incurred a one-time charge of $1.5 million for
restructuring costs, including redundancy payments to employees and associated
restructuring fees. The redundancy payments made to employees in late November
2009 were self-funded by the Company. This charge for restructuring
costs was accrued in the fourth quarter of FY2009.
Lease
Buy Out
The
Company leased its FC1 manufacturing facility in the U.K. In connection with the
evaluation of its U.K. FC1 manufacturing facility, the Company entered into new
lease and related agreements (collectively, the “New Lease”) with the new owner
of the U.K. facility. The New Lease replaces the Company’s previous
lease for its U.K. facility, which had an expiration date of December 10, 2016
and rent of £296,725 ($488,100) per year. The New Lease expires on
the earlier of (1) November 1, 2010 or (2) at least three months after the
Landlord provides a notice of termination, but in any event not before May 2,
2010. The rent remains £296,725 ($488,100) per year, and the Company
was required to deposit the amount of the annual rent upon execution of the New
Lease. In connection with the New Lease, the Company also made a
lease surrender payment of £600,000 ($986,940) to the Landlord on November 2,
2009, and will be required to make an additional lease surrender payment of
£300,000 ($493,470) to the Landlord on or before February 2,
2010. From a cash flow perspective, replacing the previous lease
eliminates future payments of approximately $4.3 million (for rent and related
expenses) over the remaining term of the previous lease, producing a positive
net impact of approximately $2.8 million, after deducting the surrender
payments. All dollar amounts with respect to the U.K. facility in
this report are translated from British pounds sterling based on an exchange
rate of 1.6449 dollars per British pound sterling.
The lease
exit and related costs of approximately $1.7 million, net of the recognition of
the deferred gain on sale of facility of $658 thousand, will be taken as a
one-time charge in FY 2010.
This
completes the 100% transition from FC1 to FC2 and the related one-time
charges. While FC1 production has ceased, the Company will continue
to maintain a significant operating presence in the U.K.
FY 2010 Earnings
Guidance
FHC
expects unit sales to increase 20%-25% in FY 2010 as compared with FY2009 and
operating earnings to increase 35% to 40% over the $6.2 million in operating
income recorded for FY2009 (exclusive of restructuring
charges).
As
previously announced, the Female Health Company will host an investor conference
call at 11:00 a.m. Eastern time, November 30, 2009. Shareholders and other
interested parties may participate in the conference call by dialing
800-860-2442 (international participants dial 412-858-4600) and asking to be
connected to “The Female Health Company” conference call, a few minutes before
11:00 a.m. Eastern Time on November 30, 2009. A replay call will be available
through December 14, 2009 by dialing 877-344-7529 (international callers dial
412-317-0088) and referencing the conference code ID 435960.
Use
of Non-GAAP Financial Information
In
addition to the results reported in accordance with U.S. generally accepted
accounting principles ("GAAP") included in this release, the Company has
provided certain non-GAAP financial information, specifically operating income
exclusive of the $1.5 million restructuring charge. Management believes that the
presentation of this non-GAAP financial measure provides useful information to
investors because this information may allow investors to better evaluate
ongoing business performance and certain components of the Company's results. In
addition, because the restructuring charge related to a non-recurring event in
the fourth quarter of FY2009, the Company believes that the presentation of this
non-GAAP financial measure enhances an investor's ability to make
period-to-period comparisons of the Company's operating results. This
information should be considered in addition to the results presented in
accordance with GAAP, and should not be considered a substitute for the GAAP
results. The Company has reconciled the non-GAAP financial information included
in this release in a table below.
About
The Female Health Company
The
Female Health Company, based in Chicago, Illinois, manufactures and markets the
FC2 Female Condom® (FC2), which is primarily distributed by public health
organizations and donor groups in about 100 countries around the world.
Globally, the FC Female Condoms (FC1 and FC2) are available in various
programs in 116 countries. The Company owns certain worldwide rights to the FC2
Female Condom®, including patents that have been issued in Europe, Canada,
Australia, South Africa and the People's Republic of China and are pending in
various other countries. FC2 Female Condom® is the only
available FDA-approved product controlled by a woman that offers dual protection
against sexually transmitted diseases, including HIV/AIDS, and unintended
pregnancy.
For more
information about the Female Health Company visit the Company's website at http://www.femalehealth.com
and http://www.femalecondom.org.
If you would like to be added to the Company's e-mail alert list, please send an
e-mail to FHCInvestor@femalehealthcompany.com
..
"Safe Harbor" statement
under the Private Securities Litigation Reform Act of
1995. –
The
statements in this release which are not historical fact are “forward-looking
statements” as that term is defined in the Private Securities Litigation Reform
Act of 1995. Forward-looking statements in this release include the
Company’s financial guidance for fiscal 2010 and its consideration of initiating
dividend payments in calendar 2010. These statements are based upon the
Company’s current plans and strategies, and reflect the Company’s current
assessment of the risks and uncertainties related to its business, and are made
as of the date of this release. The Company assumes no obligation to
update any forward-looking statements contained in this release as a result of
new information or future events, developments or circumstances. Such
forward-looking statements are inherently subject to known and unknown risks and
uncertainties. The Company’s actual results and future developments
could differ materially from the results or developments expressed in, or
implied by, these forward-looking statements. Factors that may cause
actual results to differ materially from those contemplated by such
forward-looking statements include, but are not limited to, the
following: product demand and market
acceptance; competition in the Company’s markets and the risk of new
competitors and new competitive product introductions; the Company’s
reliance on its international partners in the consumer sector and on the level
of spending on the female condom by country governments; global
donors and other public health organizations in the global public
sector; payment of dividends is in the discretion of the Board of
Directors and the Company may not have sufficient cash flows to initiate
dividends or to continue to pay dividends at whatever dividend level may be
established; the economic and business environment and the impact of government
pressures; risks involved in doing business on an international level, including
currency risks, regulatory requirements, political risks, export restrictions
and other trade barriers; the Company’s production capacity,
efficiency and supply constraints; and other risks detailed in the Company’s
press releases, shareholder communications and Securities and Exchange
Commission filings, including the Company’s Form 10-K for the fiscal year ended
September 30, 2008. Actual events affecting the Company and the
impact of such events on the Company’s operations may vary from those currently
anticipated.
|
The
Female Health Company
Unaudited
Condensed Consolidated Balance Sheets
|
|
| |
|
|
|
|
|
|
|
|
|
September
30,
2009
|
|
|
September
30,
2008
|
|
|
Cash
|
|
$ |
2,810,197 |
|
|
$ |
1,922,148 |
|
|
Restricted
cash
|
|
|
105,074 |
|
|
|
211,873 |
|
|
Accounts
receivable, net
|
|
|
7,806,007 |
|
|
|
6,810,050 |
|
|
Income
taxes recoverable
|
|
|
68,106 |
|
|
|
- |
|
|
Inventory
|
|
|
1,203,063 |
|
|
|
1,322,652 |
|
|
Prepaid
and other current assets
|
|
|
429,602 |
|
|
|
414,040 |
|
|
Deferred
income taxes
|
|
|
2,181,000 |
|
|
|
1,600,000 |
|
|
Total
current assets
|
|
|
14,603,049 |
|
|
|
12,280,763 |
|
|
|
|
|
|
|
|
|
|
|
|
Other
non-current assets
|
|
|
87,621 |
|
|
|
55,330 |
|
|
Net
property, plant & equipment
|
|
|
2,821,616 |
|
|
|
1,494,645 |
|
|
Deferred
income taxes – LT
|
|
|
1,028,149 |
|
|
|
- |
|
|
Total
assets
|
|
$ |
18,540,435 |
|
|
$ |
13,830,738 |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
602,196 |
|
|
$ |
621,115 |
|
|
Accrued
expenses
|
|
|
3,017,763 |
|
|
|
2,385,540 |
|
|
Redundancy
accrual
|
|
|
1,116,911 |
|
|
|
- |
|
|
Deferred
gain on sale of facility
|
|
|
657,605 |
|
|
|
- |
|
|
Preferred
dividends payable
|
|
|
- |
|
|
|
25,068 |
|
|
Total
current liabilities
|
|
|
5,394,475 |
|
|
|
3,031,723 |
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
under capital leases
|
|
|
34,428 |
|
|
|
49,597 |
|
|
Deferred
gain on sale of facilities
|
|
|
- |
|
|
|
836,733 |
|
|
Deferred
grant income
|
|
|
157,143 |
|
|
|
203,483 |
|
|
Total
liabilities
|
|
|
5,586,046 |
|
|
|
4,121,536 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
12,954,389 |
|
|
|
9,709,202 |
|
|
Total
liabilities and stockholders' equity
|
|
$ |
18,540,435 |
|
|
$ |
13,830,738 |
|
|
The
Female Health Company
Unaudited
Condensed Consolidated Income Statements
|
|
|
|
|
Three
Months Ended
September
30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
$ |
7,912,226 |
|
|
$ |
7,839,973 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
4,076,185 |
|
|
|
4,326,660 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
3,836,041 |
|
|
|
3,513,313 |
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
and promotion
|
|
|
54,794 |
|
|
|
62,455 |
|
|
Selling,
general and administrative
|
|
|
1,740,856 |
|
|
|
2,138,314 |
|
|
Research
and development
|
|
|
862 |
|
|
|
81,975 |
|
|
Restructuring
costs
|
|
|
1,496,624 |
|
|
|
- |
|
|
Total
operating expenses
|
|
|
3,293,136 |
|
|
|
2,282,744 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
542,905 |
|
|
|
1,230,569 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest,
net and other income
|
|
|
(48,140 |
) |
|
|
(22,816 |
) |
|
Foreign
currency transaction gain
|
|
|
(92,441 |
) |
|
|
(893,112 |
) |
|
Income
before income taxes
|
|
|
683,486 |
|
|
|
2,146,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit
|
|
|
(1,595,678 |
) |
|
|
(218,862 |
) |
|
Net
income
|
|
|
2,279,164 |
|
|
|
2,365,359 |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
dividends
|
|
|
10,548 |
|
|
|
25,068 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
income attributable to common stockholders
|
|
$ |
2,268,616 |
|
|
$ |
2,340,291 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share outstanding
|
|
$ |
0.09 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
|
|
25,839,397 |
|
|
|
26,112,376 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share outstanding
|
|
$ |
0.08 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average common shares outstanding
|
|
|
27,698,841 |
|
|
|
28,052,370 |
|
|
|
|
|
|
|
|
|
|
|
|
The
Female Health Company
Unaudited
Condensed Consolidated Income Statements
|
|
|
|
|
Twelve
Months Ended
September
30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
$ |
27,543,341 |
|
|
$ |
25,634,126 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
14,025,523 |
|
|
|
14,904,325 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
13,517,818 |
|
|
|
10,729,801 |
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
and promotion
|
|
|
191,153 |
|
|
|
223,800 |
|
|
Selling,
general and administrative
|
|
|
7,006,111 |
|
|
|
7,038,060 |
|
|
Research
and development
|
|
|
105,916 |
|
|
|
284,216 |
|
|
Restructuring
costs
|
|
|
1,496,624 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
8,799,804 |
|
|
|
7,546,076 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
4,718,014 |
|
|
|
3,183,725 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest,
net and other income
|
|
|
(55,984 |
) |
|
|
(53,445 |
) |
|
Foreign
currency transaction gain
|
|
|
(276,113 |
) |
|
|
(966,736 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
5,050,111 |
|
|
|
4,203,906 |
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit
|
|
|
(1,485,268 |
) |
|
|
(762,862 |
) |
|
Net
income
|
|
|
6,535,379 |
|
|
|
4,966,768 |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
dividends
|
|
|
79,717 |
|
|
|
137,506 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
income attributable to common stockholders
|
|
$ |
6,455,662 |
|
|
$ |
4,829,262 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share outstanding
|
|
$ |
0.25 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
|
|
25,651,915 |
|
|
|
26,116,499 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share outstanding
|
|
$ |
0.24 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average common shares outstanding
|
|
|
27,244,605 |
|
|
|
27,983,263 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Non-GAAP Financial Information
Following
is a reconciliation of the Non-GAAP financial measure of operating income
exclusive of restructuring charge to the nearest GAAP financial measure of
operating income for the three months and years ended September 30, 2009 and
2008.
|
|
|
For
the Three Months Ended
September 30,
|
|
|
For
the Twelve Months Ended
September
30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Operating
income exclusive of restructuring charge
|
|
$ |
2,039,529 |
|
|
$ |
1,230,569 |
|
|
$ |
6,214,638 |
|
|
$ |
3,183,725 |
|
|
Less:
Restructuring charge
|
|
$ |
1,496,624 |
|
|
|
- |
|
|
$ |
1,496,624 |
|
|
|
- |
|
|
Operating
income
|
|
$ |
542,905 |
|
|
$ |
1,230,569 |
|
|
$ |
4,718,014 |
|
|
$ |
3,183,725 |
|
9
