The Female Health Company ( 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