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Physicians Formula delisting threat

This article was originally published in The Rose Sheet

Executive Summary

Embattled makeup brand is threatened with delisting from NASDAQ if it does not appoint a new independent director to the board of directors, according to Physicians Formula's June 3 release. On June 1, the company received a staff deficiency letter from NASDAQ notifying it of noncompliance with the stock exchange's independent director requirement. Jeff M. Berry resigned from Physicians Formula's board and committees May 29 when he was appointed interim chief financial officer (1"The Rose Sheet," May 25, 2009, p. 10, People In Brief). Following his resignation, two of the board's four remaining directors are independent, and the company has two independent directors sitting on its audit committee. Physicians Formula has until Nov. 25 to restore compliance and is in the process of evaluating candidates; it will fill the vacancy "as expeditiously as possible" and before the given deadline, the firm says

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A new multi-media approach to marketing, expansion into South Africa and the discontinuation of low-performing products are anticipated to help mass market company in its recovery after a challenging 2009, execs indicated during Aug. 5 earnings call. Despite strong performances from bronzers, mineral makeup and the new Bamboo Wear line, second-quarter net sales were down 1.4% to $20.8 mil., versus the same period last year. The "customer continues to exhibit skittish behaviors," CEO Ingrid Jackel said. Natural and organic products will remain part of firm's strategy going forward, she noted. Based on retail sales data from ACNielsen, company's share of the masstige market, or mass market prestige, was 6.7% for the 52 weeks ended June 12, 2010, compared with 7.9% for the same period in the prior year. Firm struggled in 2009 with the loss of a major customer and potential delisting from NASDAQ (1"The Rose Sheet" June 8, 2009, In Brief)

People In Brief

Physicians Formula CFO resigns: Company appoints Jeff Berry interim CFO in place of Joseph Jaeger, who is resigning for family reasons, according to May 15 release. While acting as CFO, Berry will step down from the board of directors on which he has served since October 2007 as a member of the Audit Committee and chair of the Compensation Committee and the Corporate Governance and Nominating Committee. Previously Berry was treasurer and head of strategy and business development for Del Monte Foods, Physicians Formula notes. Announcement of changes comes four days after firm posted first-quarter sales of $20.2 mil., compared with $42.7 mil. in the prior-year period, due to significant retailer destocking (1"The Rose Sheet" May 18, 2009, p. 12). CEO and Chairwoman Ingrid Jackel states: "I have worked with Jeff over the last two years in his capacity as a board member, and he will bring a high level of strategic focus and financial acumen to our company as we navigate through these challenging economic times.

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