Exhibit 99.1
For Immediate
Release
Contacts: William
R. Gargiulo, Jr. 231.526.1244
Donna
Felch,
CFO 312.595.9123
The
Female Health Company
Reports
First Quarter Operating Results and Confirms Annual
Guidance
Highlights:
| ● |
|
FHC records $1.9 M
restructuring charge reflecting final transition from FC1 to
FC2 |
| ● |
|
Unit sales up 20%, Net Revenues
up 3%, reflecting transition to FC2 |
| ● |
|
Gross Margin rises to 58.4% of
net revenues, up 31% |
| ● |
|
Excluding restructuring charge,
operating income increases 190% to $1.3 million (23.2% of
net revenues) |
| ● |
|
Including restructuring charge,
Company records operating loss of
$(624,132) |
CHICAGO,
February 8, 2010 - The Female Health Company (NASDAQ-CM: FHCO - News), which
manufactures and markets the FC2 Female Condom®, today reported its operating
results for the first quarter of FY2010.
During
the three months ended December 31, 2009, the Company’s net revenues increased
3% to approximately $5.5 million, compared with approximately $5.3 million in
the first quarter of the previous fiscal year. The modest increase in
revenues reflects the transition by the Company’s customers from the
first-generation FC1 Female
Condom to the lower-priced FC2 Female
Condom®. The final FC1 orders were shipped in
October 2009.
The
Company recorded a net loss attributable to common stockholders of $(698,351),
or $(0.03) per diluted share, in the first quarter of FY2010 compared with net
income attributable to common stockholders of $1,608,816, or $0.06 per diluted
share, in the first quarter of FY2009. The net loss in the most
recent quarter resulted entirely from a previously announced one-time
restructuring charge of $1,896,353, along with a foreign currency loss of
$48,689 in the first quarter of FY2010, versus a foreign currency gain of
$1,194,107 in the first quarter of FY2009. The Company expects the
impact of foreign currency fluctuations in the future to be modest, reflecting
its U.K. and Malaysian subsidiaries’ adoption of the US dollar as their
functional currency effective October 1, 2009.
Cost of
sales decreased 21% to $2,285,813 in the first quarter of FY2010 compared with
$2,903,644 in the first quarter of FY2009, on the 20% increase in unit sales,
reflecting the transition to FC2. As a result,
gross profit increased 31% to $3,202,861 in the most recent quarter, compared
with $2,441,194 in the first quarter of FY2009. Gross profit as a
percentage of net revenues increased to 58.4% in the quarter ended December 31,
2009, compared with 45.7% in the prior-year quarter.
Recognition
of the one-time restructuring expense of $1,896,353 resulted in an operating
loss of $(624,132) in the three months ended December 31, 2009, compared with
operating income of $438,935, in the three months ended December 31,
2008. Exclusive of the restructuring expense, operating income rose
190% to $1,272,221, versus $438,935 in the same period last year, reflecting
customers’ transition to the more profitable second generation product, FC2.
Earnings
Guidance
“We
maintain our FY2010 guidance that unit sales should increase by 20% to 25%, and
operating earnings should increase 35% to 40% over FY2009 results, exclusive of
restructuring charges" noted O.B. Parrish, Chief Executive Officer of The Female
Health Company. "The transition to our second-generation FC2 Female Condom® and its
favorable impact on our profitability is particularly encouraging. We
ended the first quarter with a strong, debt-free balance sheet, approximately
$3.3 million of cash in the bank, and a current ratio of 4.0 to
1.0.”
As noted
in previous news releases, 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.
FC1 to FC2 Transition Restructuring
Expenses
The UK
employee redundancy charges relating to the FC1 to FC2 transition were recorded
in the fourth quarter of FY2009. In connection with the evaluation of
its leased 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 in November 2009. The New Lease replaces the Company’s previous lease
for its U.K. facility, which had an expiration date of December 10, 2016 and
required rental payments of $484,049 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 annual rent remains $484,049 per year, which the Company
was required to deposit upon execution of the New Lease. In
connection with the New Lease, the Company also made a lease surrender payment
of $975,746 to the Landlord on November 2, 2009. A second and final
lease surrender payment of $477,859 was made to the landlord on February 1,
2010. As of this date, the landlord has not yet provided a notice of
termination.
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.
The
restructuring costs relating to the lease of approximately $1.9 million, net of
the recognition of a deferred gain on sale of the facility, are recorded as a
one-time charge in the first quarter of FY2010. The Company expects to incur up
to $200,000 in additional restructuring costs, which will be expensed in the
period in which they occur. Per the lease terms, the owner has the
right to ask the Company to exit the facility prior to the November 1, 2010
lease expiration date. As the actual lease term is uncertain, there is the
potential that part of the charge taken in the first quarter of FY2010 would be
reversed if the lease term ends before November 1, 2010. The
potential reversal of part of the charge could be as much as $246,000 if the
lease is terminated as of May 15, 2010. The potential reversal of
part of the charge diminishes proportionately over time as the number of months
between the early termination date and November 1, 2010
decreases. In addition to the impact on income, if the lease
terminates prior to November 1, 2010, the Company would receive a
proportionate refund of its rent deposit. Such a refund has a
positive cash effect but no income statement impact.
The exit
from the new facility lease will complete the FC1 to FC2 transition and related
one-time restructuring charges. While FC1 production has ceased,
the Company continues to maintain a significant operating presence in the
U.K.
Investor
Conference Call
As
previously announced, the Female Health Company will host an investor conference
call at 11:00 a.m. EST today, February 8, 2010. 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. EST on February 8, 2010. A replay of the call will be
available one hour after the call through 5:00 p.m. EST on Monday, February 22,
2010 by dialing 877-344-7529 (international callers dial 412-317-0088) and
entering the conference ID 437017.
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 $1.9 million restructuring charge relating to the U.K. lease.
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 first quarter of FY2010, 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. 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
Japan 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. The World Health Organization has cleared
FC2 for purchase by U.N. agencies.
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, the amount of any additional
restructuring costs relating to the Company's UK lease, and the termination date
relating to the U.K. lease and any potential reversal of the restructuring
charge. 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 continue to pay dividends; 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, 2009. Actual events affecting
the Company and the impact of such events on the Company’s operations may vary
from those currently anticipated.
(Financial
Highlights Follow)
The Female Health Company
Unaudited Condensed Consolidated Balance
Sheet
| |
|
|
|
|
|
|
| |
|
December
31, |
|
|
December
31, |
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash
|
|
$ |
3,183,776 |
|
|
$ |
3,190,841 |
|
|
Restricted
cash
|
|
|
105,074 |
|
|
|
173,970 |
|
|
Accounts
receivable, net
|
|
|
4,086,204 |
|
|
|
3,444,439 |
|
|
Income
tax recoverable
|
|
|
69,259 |
|
|
|
- |
|
|
Inventory
|
|
|
1,743,964 |
|
|
|
1,817,324 |
|
|
Prepaid
and other current assets
|
|
|
298,773 |
|
|
|
282,884 |
|
|
Deferred
income taxes
|
|
|
2,181,000 |
|
|
|
1,600,000 |
|
|
Total
current assets
|
|
|
11,668,050 |
|
|
|
10,509,458 |
|
|
|
|
|
|
|
|
|
|
|
|
Other
non-current assets
|
|
|
88,826 |
|
|
|
56,000 |
|
|
Net
property, plant & equipment
|
|
|
2,708,390 |
|
|
|
1,446,858 |
|
|
Deferred
income tax
|
|
|
1,028,149 |
|
|
|
- |
|
|
Total
assets
|
|
$ |
15,493,415 |
|
|
$ |
12,012,316 |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
624,747 |
|
|
$ |
1,047,221 |
|
|
Accrued
expenses
|
|
|
591,127 |
|
|
|
1,037,671 |
|
|
Accrued
compensation
|
|
|
370,716 |
|
|
|
336,578 |
|
|
Restructuring
accrual
|
|
|
1,364,105 |
|
|
|
- |
|
|
Preferred
dividends payable
|
|
|
- |
|
|
|
24,575 |
|
|
Total
current liabilities
|
|
|
2,950,695 |
|
|
|
2,446,045 |
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
under capital leases
|
|
|
27,406 |
|
|
|
30,573 |
|
|
Deferred
gain on sale of facility
|
|
|
- |
|
|
|
666,233 |
|
|
Deferred
grant income
|
|
|
150,935 |
|
|
|
161,382 |
|
|
Total
liabilities
|
|
|
3,129,036 |
|
|
|
3,304,233 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
12,364,379 |
|
|
|
8,708,083 |
|
|
Total
liabilities and stockholders' equity
|
|
$ |
15,493,415 |
|
|
$ |
12,012,316 |
|
|
The
Female Health Company
Unaudited
Condensed Consolidated Statements of Operations
|
|
| |
|
|
|
|
Three
Months Ended
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
$ |
5,488,674 |
|
|
$ |
5,344,838 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
2,285,813 |
|
|
|
2,903,644 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
3,202,861 |
|
|
|
2,441,194 |
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
and promotion
|
|
|
69,851 |
|
|
|
70,794 |
|
|
Selling,
general and administrative
|
|
|
1,860,408 |
|
|
|
1,861,045 |
|
|
Research
and development
|
|
|
381 |
|
|
|
70,420 |
|
|
Restructuring
costs, net
|
|
|
1,896,353 |
|
|
|
- |
|
|
Total
operating expenses
|
|
|
3,826,993 |
|
|
|
2,002,259 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(loss) income
|
|
|
(624,132 |
) |
|
|
438,935 |
|
| |
|
|
|
|
|
|
|
|
|
Non-operating
loss (income):
|
|
|
|
|
|
|
|
|
|
Interest,
net and other income
|
|
|
(12,331 |
) |
|
|
(8,889 |
) |
|
Foreign
currency transaction loss (gain)
|
|
|
48,689 |
|
|
|
(1,194,107 |
) |
|
(Loss)
income before income taxes
|
|
|
(660,490 |
) |
|
|
1,641,931 |
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
37,861 |
|
|
|
8,540 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
|
(698,351 |
) |
|
|
1,633,391 |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
dividends
|
|
|
- |
|
|
|
24,575 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income attributable to common stockholders
|
|
$ |
(698,351 |
) |
|
$ |
1,608,816 |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income per basic common share outstanding
|
|
$ |
(0.03 |
) |
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
|
|
26,300,571 |
|
|
|
25,820,224 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income per diluted common share outstanding
|
|
$ |
(0.03 |
) |
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average common shares outstanding
|
|
|
26,300,571 |
|
|
|
27,984,633 |
|
|
|
|
|
|
|
|
|
|
|
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 ended December 31, 2009 and
2008.
|
|
|
For
the Three Month Ended
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Operating
income exclusive of
restructuring charge
|
|
$ |
1,272,221 |
|
|
$ |
438,935 |
|
|
Less: Restructuring
charge
|
|
$ |
1,896,353 |
|
|
|
- |
|
|
Operating
(loss) income
|
|
$ |
(624,132 |
) |
|
$ |
438,935 |
|
7
