Exhibit 99.1
For Immediate Release
 
Contacts William R. Gargiulo, Jr.  231.526.1244
  Donna Felch 312.595.9123
     
                     
 
The Female Health Company Reports Fiscal Year 2010 Results

Fourth Quarter Operating Income Hits New Record
Highlights:

Fourth Quarter
Records  
    Unit sales rise 19% to 13.8 million
  Gross margin 59.0% vs. 48.5% in prior-year quarter
  Operating income rises to $3.1 million
Tax benefit of $2.5 million recognized  

FY2010
Operating income of $4.3 million.
Gross margin increases to 58.2%, from 49.1% in FY2009
Net income, including restructuring charge and tax benefit, equals $6.7 million
FC1 to FC2 transition completed

CHICAGO, December 3, 2010 - The Female Health Company (NASDAQ-CM: FHCO -News), which manufactures and markets the FC2 Female Condom, today reported its financial results for the quarter and fiscal year ended September 30, 2010.

For the three months ended September 30, 2010, female condom shipments increased 19% to 13.8 million units.  Net revenues decreased slightly to $7.8 million, compared with $7.9 million in the three months ended September 30, 2009, due to the fact that lower priced FC2 condoms comprised 100% of units shipped in the most recent quarter, versus 61% of units shipped in the fourth quarter of FY2009.

Gross profit increased 20% to $4.6 million, or 59.0% of net revenues, compared with $3.8 million, or 48.5% of net revenues, in the fourth quarter of FY2009. Operating income increased to a record $3.1 million in the three months ended September 30, 2010, compared with $0.5 million in the prior-year quarter.  Restructuring costs in the fourth quarter of FY2010 were nominal, compared with $1.5 million in restructuring costs during the prior-year quarter.  Operating income for the fourth quarter of FY2010 increased five-fold over the prior-year quarter when $1.5 million restructuring charge was taken.
 
 
 
 

 

In the fourth quarter of FY2010, the Company recorded an unfavorable currency loss of $0.1 million and a tax benefit of $2.5 million, compared with a favorable currency gain of $0.1 million and a tax benefit of $1.6 million in the same period last year.

The Company reported net income attributable to common shareholders of $5.5 million, or $0.19 per diluted share, in the fourth quarter of FY2010, up 143% and 137%, respectively, over the fourth quarter of FY2009, with net income attributable to common shareholders of $2.3 million, or $0.08 per diluted share.

The Company expects significant quarter-to-quarter variations in its operating results, due to the timing, receipt and requested shipping schedules of large orders.

For the year ended September 30, 2010, net revenues decreased 19% to $22.2 million, compared with $27.5 million in FY2009, reflecting the influence on average unit prices of the transition to the Company’s second-generation FC2 female condom.  Unit sales decreased 3% to 38.9 million female condoms in FY2010, almost 100% of which were FC2 female condoms.  In FY2009, the Company shipped 40.2 million units, approximately 49% of which were FC2 female condoms.  Unit shipments in FY2010 were negatively impacted by delays in the receipt of two large orders, which the Company announced when reporting its third fiscal quarter operating results.  Gross profit decreased 4% to $12.9 million (58.2% of net revenues), compared with $13.5 million (49.1% of net revenues) in FY2009. Operating income, including a $1.9 million restructuring charge associated with the transition from FC1 to FC2 (see Table 1), decreased 8% to $4.3 million in FY2010, compared with operating income of $4.7 million in FY2009, including a $1.5 million restructuring charge.

Net income attributable to common stockholders increased 3% to $6.7 million, or $0.24 per diluted share, in FY2010, compared with net income attributable to common stockholders of $6.5 million, or $0.24 per diluted share, in FY2009.  In FY2010, the Company was able to recognize a tax benefit for past losses that added $2.5 million to net income attributable to common stockholders, as compared with a $1.5 million tax benefit recognized in FY2009.

“We are very pleased to report that FY2010 represented another year of solid profitability for our Company,” noted O.B. Parrish, Chief Executive Officer of The Female Health Company. “The fourth quarter was particularly strong, with unit sales rising 19% and gross profit margins reaching 59.0%, compared with 48.5% in the prior-year quarter.  This clearly reflects the favorable impact of our second-generation FC2 female condom upon profitability, despite the negative influence upon revenue comparisons of the transition to the lower priced FC2.  Fourth quarter sales did not include revenues from either of the two delayed orders that caused us to report lower shipments in the third quarter of FY2010.”
 
 
 
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“Our solid FY2010 operating performance reflects sustained global demand for the FC2 female condom,” continued Parrish.  “Most importantly, the global distribution of the FC2 female condom provides women increased protection against HIV/AIDS.”

The Company’s operations generated $4.0 million in cash during FY2010, and its year-end cash position approximated $2.9 million, compared with $2.8 million at the end of FY2009. Cash payments in FY2010 included approximately $4.1 million for cash dividends and approximately $3.6 million in restructuring payments. The Company remains debt-free and has $2 million in unused credit lines available.

Stockholders’ equity at September 30, 2010 totaled $16.1 million, versus $13.0 million at the end of FY2009.

In accordance with SEC regulations, the Company’s filing status was evaluated on March 31, 2010, resulting in a change in the Company’s status to that of an “accelerated filer”. Our registered independent public accounting firm audited the Company’s system of internal control over financial reporting as part of their FY2010 audit. At the conclusion of their audit, the Company received an unqualified opinion in connection with our system of internal control over financial reporting.

In late November 2010, the Brazilian Government issued a tender for the purchase for 10 million female condoms with bid submission due December 1, 2010.  The Company submitted a timely bid for 10 million FC2 female condoms.

FY 2011 Earnings Guidance
 
FHC expects FY2011 unit sales to increase 15%-20% from FY2010 levels.  Operating earnings are expected to increase 10% - 15% over the $6.3 million in operating income recorded for FY2010 (exclusive of restructuring charges of $1.9 million).  The Company expects the first quarter of FY2011 to be lower than first quarter FY2010, with unit sales accelerating as the fiscal year progresses.  As experienced in FY2010, the principal challenge in providing guidance is the timing of orders that represent a significant portion of the Company’s annual sales.  As a result, the figures could be impacted positively or negatively, depending of the timing of such orders.

Investor Conference Call

As previously announced, the Female Health Company will host an investor conference call at 11:00 a.m. Eastern time, December 3, 2010. Shareholders and other interested parties may participate in the conference call by dialing 877-317-6789 (international participants dial 412-317-6789) and asking to be connected to “The Female Health Company” conference call, a few minutes before 11:00 a.m. Eastern Time on December 3, 2010. A replay call will be available through December 17, 2010 by dialing 877-344-7529 (international callers dial 412-317-0088) and referencing the conference code ID 446393.

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.  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.
 
 
 
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About The Female Health Company

The Female Health Company, based in Chicago, Illinois, manufactures and markets the FC2 Female Condom® (FC2), which is available in the U.S. and about 107 other countries around the world.  The Company owns certain worldwide rights to the FC2 Female Condom®, including patents that have been issued in the U.S., Europe, Canada, Australia, South Africa, Japan, Spain, Greece, Turkey and the People’s Republic of China, and pending in various countries.  The 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 (WHO) has cleared FC2 for purchase by U.N. agencies.

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995:

The statements in this release which are not historical facts are "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995.  Forward-looking statements in this release relate to expected results for the year ending September 30, 2011.  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; 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, 2010.  Actual events affecting the Company and the impact of such events on the Company's operations may vary from those currently anticipated.

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.


(Financial Highlights Follow)


 
 
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The Female Health Company
Unaudited Condensed Consolidated Balance Sheets
 
   
September 30,
2010
   
September 30,
2009
 
Cash
  $ 2,918,776     $ 2,810,197  
Restricted cash
    4,578       105,074  
Accounts receivable, net
    4,460,517       7,806,007  
Income tax receivable
    28,179       68,106  
Inventory
    2,194,330       1,203,063  
Prepaid expenses and other current assets
    284,948       429,602  
Deferred income taxes
    1,900,000       2,181,000  
Total current assets
    11,791,328       14,603,049  
                 
Other non-current assets
    178,713       87,621  
Net property, plant & equipment
    2,398,060       2,821,616  
Deferred income taxes
    4,000,000       1,028,149  
Total assets
  $ 18,368,101     $ 18,540,435  
                 
Accounts payable
  $ 586,596     $ 602,196  
Accrued expenses and other current liabilities
    906,994       1,420,099  
Accrued compensation
    444,843       1,597,662  
Redundancy accrual
    -       1,116,911  
Deferred gain on sale of facility
    -       657,605  
Total current liabilities
    1,938,433       5,394,473  
                 
Obligations under capital leases
    12,999       34,428  
Deferred grant income
    132,312       157,143  
Deferred income taxes
    152,227       -  
Total liabilities
    2,235,971       5,586,044  
                 
Total stockholders’ equity
    16,132,130       12,954,391  
Total liabilities and stockholders' equity
  $ 18,368,101     $ 18,540,435  




 
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The Female Health Company
Unaudited Condensed Consolidated Income Statements

    Three Months Ended
      September 30, 
 
   
2010
   
2009
 
             
Net revenues
  $ 7,799,923     $ 7,912,227  
                 
Cost of sales
    3,197,435       4,076,185  
                 
Gross profit
    4,602,488       3,836,042  
                 
Advertising and promotion
    22,991       54,794  
Selling, general and administrative
    1,514,485       1,740,855  
Research and development
    -       862  
Restructuring costs
    3,478       1,496,624  
Total operating expenses
    1,540,954       3,293,135  
                 
Operating income
    3,061,534       542,907  
                 
Interest, net and other income
    1,264       48,140  
Foreign currency transaction (loss) gain
    (91,937 )     92,441  
Income before income taxes
    2,970,861       683,488  
                 
                 
Income tax benefit
    (2,544,878 )     (1,595,678 )
Net income
    5,515,739       2,279,166  
                 
Preferred dividends
    -       10,547  
                 
Net income attributable to common stockholders
  $ 5,515,739     $ 2,268,619  
                 
Basic earnings per common share outstanding
  $ 0.20     $ 0.09  
                 
Basic weighted average common shares outstanding
    27,203,770       25,839,397  
                 
Diluted earnings per common share outstanding
  $ 0.19     $ 0.08  
                 
Diluted weighted average common shares outstanding
    28,714,084       27,698,841  




 
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The Female Health Company
Unaudited Condensed Consolidated Income Statements

     
Twelve Months Ended
September 30, 
 
      2010          2009  
Net revenues
  $ 22,221,955     $ 27,543,341  
                 
Cost of sales
    9,297,136       14,025,523  
                 
Gross profit
    12,924,819       13,517,818  
                 
Advertising and promotion
    220,181       191,153  
Selling, general and administrative
    6,425,175       7,006,111  
Research and development
    381       105,916  
Restructuring costs
    1,929,922       1,496,624  
                 
Total operating expenses
    8,575,659       8,799,804  
                 
Operating income
    4,349,160       4,718,014  
                 
Interest, net and other income
    29,168       55,984  
Foreign currency transaction (loss) gain
    (154,196 )     276,113  
                 
Income before income taxes
    4,224,132       5,050,111  
                 
Income tax benefit
    (2,512,946 )     (1,485,268 )
Net income
    6,737,078       6,535,379  
                 
Preferred dividends
    -       79,717  
                 
Net income attributable to common stockholders
  $ 6,737,078     $ 6,455,662  
                 
Basic earnings per common share outstanding
  $ 0.25     $ 0.25  
                 
Basic weighted average common shares outstanding
    26,981,275       25,651,915  
                 
Diluted earnings per common share outstanding
  $ 0.24     $ 0.24  
                 
Diluted weighted average common shares outstanding
    28,545,391       27,806,832  




 
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Table 1

FC1 – FC2 Transition

In November 2009, the Company executed an agreement for early exit of its long-term U.K. manufacturing facility lease.  Under the terms of the agreement, the Company made lease exit payments, accepted responsibility for removal of leasehold improvements (dilapidations) and signed a short-term lease at the existing rental rate.   These lease exit expenses were partially offset by the reversal of a deferred gain on the original sale-leaseback transaction.  In April 2010, the Company entered into an agreement to exit the short-term lease that required the Company to make a lease exit payment and a payment in lieu of dilapidations, while granting the Company rent-free occupation of the premises for approximately 60 days.  Following the rent-free period, the Company’s U.K. operations were relocated to a leased office space. This completed the 100% transition from FC1 to FC2 and the related one-time charges.

The components of restructuring expenses recognized in the years ended September 30, 2010 and 2009, respectively, are as follows:

   
2010
   
2009
 
Redundancy costs
        $ 1,116,911  
Lease surrender payments and related costs
  $ 1,734,496       -  
Excess capacity costs
    302,683       -  
Proportionate recognition of deferred gain on original sale/leaseback of plant
    (657,605 )     -  
Dilapidations and related costs
    550,348       379,713  
Total
  $ 1,929,922     $ 1,496,624  
 
While FC1 production has ceased, the Company continues to conduct significant operating activities in the U.K.  Such activities include global sales and marketing of the FC2 Female Condom, management and direction of Global Manufacturing Operations (including production planning, inventory management, quality assurance and quality control, finished goods release, compliance with good manufacturing practices),  relationships with worldwide regulatory agencies, oversight of the Global Technical Support Team and new product development.


 
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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 twelve months ended September 30, 2010.

   
For Twelve Months
 Ended
September 30, 2010
 
Operating income exclusive of restructuring charge
  $ 6,279,082  
Less:  Restructuring charge
  $ 1,929,922  
Operating Income
  $ 4,349,160  

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