The Quigley Corporation announces financial results for the third quarter of 2009

Nov 12 2009

The Quigley Corporation, (Nasdaq: QGLY) www.quigleyco.com today reported net sales of $5.0 million for the three months ended September 30, 2009, compared to net sales of $6.4 million for the three months ended September 30, 2008.

The Company generated net income for the three months ended September 30, 2009, of $1.2 million, or $0.09 per share, compared to net income of $879,000, or $0.07 per share, for the three months ended September 30, 2008.

Results for the third quarter of 2009 compared to the third quarter of 2008 primarily reflect a decrease in net sales of $1.4 million and a corresponding decrease of $467,000 in gross profit. These decreases were offset by reductions of $236,000 in sales, marketing and administration expenses and $614,000 in research and development costs. The decrease in these costs was principally due to reduced personnel costs, and a reduction in clinical study related costs incurred as a result of the completion of the QR-333 Diabetic Neuropathy Phase IIb study, results of which were previously reported on July 22, 2009.

For the nine months ended September 30, 2009, net sales were $10.7 million, compared to net sales of $13.7 million, for the nine months ended September 30, 2008.

The net loss for the nine months ended September 30, 2009 was $5.6 million, or ($0.43) per share, compared to a net loss of $3.6 million, or ($0.28) per share, for the nine months ended September 30, 2008. The net loss for the nine months ended September 30, 2009 includes approximately $2.5 million in costs incurred (primarily legal expenses) as a consequence of the proxy contest between differing slates of proposed boards of directors. In addition to the effect of the costs incurred in the proxy contest, the financial results for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008 reflect a decrease in net sales of $3.0 million and a corresponding $2.3 million decrease in gross profit. These decreases were offset by a reduction of $1.3 million in sales, marketing and administration expenses and $2.6 million in research and development costs. The decrease in these costs was principally due to the aforementioned reduction in personnel costs, lower head count and a reduction in clinical study related costs incurred as a result of the completion of the QR-333 Diabetic Neuropathy Phase IIb study. Additionally, the net loss for the nine months ended September 30, 2008 included a one-time aggregate benefit of $875,000 as a result of income from discontinued operations of $139,000 and a gain on the disposal of the health and wellness operations of $736,000.

The gross profits for both the three and nine month periods ended September 30, 2009 declined compared to the three and nine month periods ended September 30, 2008 due to the net effect of an increase in sales allowances (returns, discounts and cooperative marketing incentives), an adverse impact to net sales as a consequence of the inventory reduction programs maintained by the Company's larger retail customers, and costs associated with the Elizabethtown manufacturing facility closing. These items were offset by the elimination of the production and facility overhead expenses attributable to the Company's Elizabethtown manufacturing facility that was closed in June 2009. Gross margins are influenced by fluctuations in quarter-to-quarter production volume, fixed production costs and related overhead absorption, and the timing of shipments to customers which are factors of the seasonality of the Company's sales activities and products.

Ted Karkus, Chairman and CEO said, "During the third quarter of 2009 we worked diligently to create a strong foundation for the Company's future. We focused on reducing costs and improving our position in the marketplace. We implemented staff and other overhead reductions without adversely impacting our efficiency or performance, and we are more strategically focused on our sales and marketing initiatives. As a result of our efforts, we achieved an increase in net income year-over-year despite a decline in net sales. In addition, we are actively focused on our key retail relationships. We have been meeting with our retail customers to make certain we are in sync with their changing needs and that we retain important shelf space and product placement. These visits have already significantly strengthened our working relationships with important retailers."

Mr. Karkus further stated, "We have projects underway to improve our product packaging, product positioning and the communication of the Cold-EEZE(R) message to consumers. Our new marketing efforts are designed to increase sales, generate brand loyalty and collect critical information about our customers. We are looking for opportunities for future growth that may include expanding our OTC new product pipeline, product acquisitions and other line and brand extensions. The Company continues to focus on data-driven strategic planning. Our goal is to avoid investing in marketing efforts, brand development initiatives and new product launches that do not add to the Company's shareholder value. While we are pleased with this initial progress, we are still in the early phases of our restructuring and rebuilding efforts and look forward to delivering significantly better performance in the months and years to come."