Full Press Release Details
R. Gargiulo, Jr. 231.526.1244
Female Health Company
First Quarter Operating Results and Confirms Annual
| 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) |
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.
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
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.
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.
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.
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
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
employee redundancy charges relating to the FC1 to FC2 transition were recorded
in the fourth quarter of FY2009. In connection with the evaluation of
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
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.
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.
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
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.
of Non-GAAP Financial Information
addition to the results reported in accordance with U.S. generally accepted
accounting principles ("GAAP") included in this release, the Company has