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, Feb. 8 /PRNewswire-FirstCall/
-- The Female Health Company (NASDAQ:FHCO), 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 . "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 Months 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 DATASOURCE: The Female Health Company CONTACT: William R.
Gargiulo, Jr., +1-231-526-1244, or Donna Felch, CFO,
+1-312-595-9123, both of The Female Health Company Web Site:
http://www.femalehealth.com/
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