Contacts:               William R. Gargiulo, Jr.   231.526.1244
         Michele Greco, CFO       312.595.9123
 
 
The Female Health Company Reports
Fourth Quarter and Fiscal Year 2015 Operating Results

61 Million Units Sold in FY2015

Highlights FY2015:

Year
- Unit sales up 43% to 61.0 million.
- Net revenues up 33% to $32.6 million.
- Gross profit up 45% to $19.0 million or 58% of net revenues versus 54% in FY2014.
- Operating income up 69% to $6.6 million, for a 20% operating margin.
- Net income up 79% to $4.3 million.
- Diluted EPS up 88% to $0.15 per share from $0.08 per share in FY2014.
 
Fourth Quarter
- Unit sales up 41% to 13.7 million.
- Net revenues up 29% to $7.2 million.
- Net income of $0.7 million and diluted EPS of $0.02 per share versus a net loss of $(0.6) million and diluted EPS of $(0.02) per share in the fourth quarter of FY2014.
 
Long-Term Record
- 500 million female condoms sold.
- 16% 10 year compound annual unit sales growth rate.
 
Adjusted EBITDA
- Adjusted EBITDA of $7.7 million and adjusted diluted EBITDA per share of $0.27 in FY2015.
- Adjusted EBITDA of $0.8 million and adjusted diluted EBITDA per share of $0.03 in fourth quarter FY2015.
 
CHICAGO (December 1, 2015) - The Female Health Company (NASDAQ: FHCO) (the Company), which manufactures and markets the FC2 Female Condom® (FC2), today reported its operating results for the quarter and year ended September 30, 2015.  The Company will host an investor conference call today at 11:15 a.m. Eastern Time to discuss these results (see details below).

Management Comments

“We are pleased with the solid growth in unit sales, net revenues, operating income and earnings per share for FY2015,” stated O.B. Parrish, Chairman and Chief Executive Officer.

“We believe these results reflect continued growth in long-term demand for female condoms for two reasons.  First, the global need for effective ways to prevent sexually transmitted infections, including HIV/AIDS, and unintended pregnancies continue to expand.  Second, the organized advocacy on a gender equity basis by independent women’s and other groups for increased investment in and availability of female condoms continues to gain momentum.  Women account for more than 50% of all new HIV/AIDS cases, and AIDS remains the leading cause of death globally among women 15-44 years of age.”
 
 
 
 
 
 

“Operating income for FY2015 increased 69% to $6.6 million, while operating margin widened to 20% of net revenues, compared with 16% in the previous fiscal year.”

“Net income for FY2015 increased 79% to $4.3 million, while earnings per diluted share increased 88% to $0.15, versus $0.08 in FY2014.”

“The Company recorded income tax expense of $2,341,004 for FY2015.  However, because the Company continues to use its net operating loss carryforwards to reduce the amount of income taxes actually paid, the amount of cash income tax payments totaled only $294,441, or 13% of the income tax expense.  This resulted in a cash savings of $2,046,563.  The Company’s net operating tax loss carryforwards, which may be used to reduce future cash income tax payments, each total $13 million for federal and state in the U.S. and $62 million in the U.K.”

“I am optimistic regarding the Company’s future for four reasons:
 
“Our goal is to generate profitable growth and increase shareholder value on a long-term basis,” concluded Parrish.
 
 
Fiscal Year Results

Net revenues totaled $32,604,865 and net income totaled $4,346,036, or $0.15 per diluted share, in FY2015, compared with net revenues of $24,490,586 and net income of $2,433,061, or $0.08 per diluted share, in FY2014.

Net revenues increased $8,114,279, or 33%, in FY2015 when compared with the prior-year period.  Effective January 1, 2015, the unit FC2 price was reduced for major public sector purchasers, replacing the Company’s previous 5% no-cost product volume-based purchasing incentive program.  The FC2 average sales price per unit declined 7.2% in FY2015 when compared with FY2014, due to changes in sales mix and the price adjustment.

Gross profit increased $5,848,481, or 45%, to $18,969,959 in FY2015, from $13,121,478 in FY2014.  Gross profit margin in FY2015 approximated 58% of net revenues versus 54% of net revenues for the same period last year.  The increase reflects the favorable impact of changes in currency exchange rates, increased volume and improved efficiency.
 
 
 
 
 
 

Operating expenses increased $3,153,986, or 34%, to $12,351,552 in FY2015, versus $9,197,566 in FY2014.  Approximately 53 percent of the increased spending related to programming, marketing and management fees related to the Brazilian tender.  $398,000 of the increase was for the Company’s share of tariff cost related expenses for the Brazilian tender.  Other expense increases included an accrual for fiscal year end incentive compensation, business development consulting costs associated with the portfolio diversification strategy and product development costs for new versions of FC2.  These increased expenses were partially offset by a reduction of expenses relating to employee compensation.

Operating income in FY2015 increased $2,694,495, or 69%, to $6,618,407, versus operating income of $3,923,912 in FY2014.  The increase resulted from higher net revenue and improved gross margins, partially offset by higher operating expenses.

Income tax expense in FY2015 totaled $2,341,004, compared with $1,524,130 in FY2014.  During the period ended December 31, 2013, the valuation allowance on the Company’s deferred tax assets related to net operating losses was fully reversed. As a result, after December 31, 2013, the Company no longer recognizes significant income tax benefits in its consolidated statements of income relating to such deferred tax assets.  However the Company’s net operating loss carryforwards will be utilized to reduce cash payments for income taxes based on the statutory rate in effect at the time of such utilization.  In FY2015, the Company’s cash payments for income taxes totaled $294,441, or 13 percent of the income tax expense recorded for the period.

The Company's net income increased $1,912,975, or 79%, to $4,346,036 in FY2015, versus net income of $2,433,061 in FY2014.  Net income per diluted share increased 88% to $0.15 in FY2015, compared with $0.08 in FY2014.

Adjusted EBITDA improved to $7,666,505 in FY2015, compared with adjusted EBITDA of $5,400,540 in FY2014.  Adjusted diluted EBITDA per share increased 42% to $0.27 in FY2015, compared with $0.19 in FY2014.  A reconciliation of non-GAAP measures is included in the table in the section entitled “Additional Non-GAAP Performance Measures” at the end of this release.

Fourth Quarter Results

Net revenues totaled $7,154,985 and net income totaled $702,571, or $0.02 per diluted share, for the three months ended September 30, 2015, compared with net revenues of $5,554,113 and a net loss of $(566,121), or $(0.02) per diluted share, for the three months ended September 30, 2014.

Net revenues increased $1,600,872, or 29%, on a 41% increase in unit sales, for the three months ended September 30, 2015, when compared with the same period last year.  To better serve its customers, the Company replaced its volume-based 5% no-cost product program with a 5% price reduction for major public sector customers effective January 1, 2015.  The FC2 average sales price per unit decreased 8.7% versus the same period last year due to this reduction and changes in sales mix.
 
 
Gross profit increased $1,236,871, or 43%, to $4,123,644 for the three months ended September 30, 2015, compared with $2,886,773 for the three months ended September 30, 2014.  Gross profit margin for the three months ended September 30, 2015 improved six percentage points to approximately 58% of net revenues, versus 52% of net revenues for the same period last year.  The increase reflects the favorable impact of changes in currency exchange rates, increased volume and improved efficiency.
 
 
 
 
 

Significant quarter-to-quarter variations in the Company’s results have historically resulted from the timing and shipment of large orders rather than from any fundamental changes in the business or the underlying demand for female condoms.

Operating expenses decreased $7,023 to $3,362,327 in the three months ended September 30, 2015, from $3,369,350 in the prior-year period.

Operating income for the quarter ended September 30, 2015 totaled $761,317, versus an operating loss of $(482,577) in the fourth quarter of FY2014, an increase of $1,243,894.  The increase was primarily due to higher net revenues.

Income tax expense for the three months ended September 30, 2015 totaled $79,229, compared with $69,036 for the same period in FY2014.

The Company's net income was $702,571 for the three months ended September 30, 2015, compared to a net loss of $(566,121) in the same period of the prior year.  Earnings per diluted share were $0.02 versus a loss of $(0.02) in the prior year quarter.

Adjusted EBITDA totaled $848,629 in the fourth quarter of FY2015, compared with adjusted EBITDA of $(95,725) in the comparable FY2014 period.  Adjusted diluted EBITDA per share was $0.03 in the fourth quarter FY2015 compared with $(0.00) in the fourth quarter of FY2014. A reconciliation of non-GAAP measures is included in the table in the section entitled “Additional Non-GAAP Performance Measures” at the end of this release.

Investor Conference Call

As previously announced, The Female Health Company will host an investor conference call at 11:15 a.m. Eastern Time, today, December 1, 2015, to discuss its fourth quarter and full year operating results, along with other topics of interest.  Shareholders and other interested parties may participate in the conference call by dialing 1-877-374-8416 (international participants dial 1-412-317-6716) and asking to be connected to "The Female Health Company Conference Call" a few minutes before 11:15 a.m. ET today.

A replay of the conference call will be available one hour after the call through 9:00 a.m. ET on Tuesday, December 8, 2015, by dialing 1-877-344-7529 (international callers dial 1-412-317-0088) and entering the conference ID # 10076672. After Tuesday, December 8, 2015, the replay of the call will be available on the Company’s website at www.fhcinvestor.com.

About The Female Health Company

The Female Health Company, based in Chicago, Illinois, manufactures and markets the FC2 Female Condom® (FC2). Since the Company began distributing FC2 in 2007, the product has been shipped to 144 countries. The Company owns certain worldwide rights to the FC2 Female Condom®, including patents that have been issued in a number of countries around the world. The patents cover key aspects of FC2, including its overall design and manufacturing process.  The FC2 Female Condom® is the only currently available female-controlled product approved by FDA that offers dual protection against sexually transmitted infections, including HIV/AIDS, and unintended pregnancy. The World Health Organization (WHO) has cleared FC2 for purchase by U.N. agencies.
 
 
 
 
 
 

"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 statements relating to long-term demand for female condoms, the Company’s ability to maintain its position in the market, the Company's ability to successfully complete an acquisition of a new product, technology or business and to successfully implement sales and marketing initiatives for FC2, and the effect of such initiatives on the Company's business and results of operations.  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; government contracting risks, including the appropriations process and funding priorities, potential bureaucratic delays in awarding contracts, process errors, politics or other pressures, and the risk that government tenders and contracts may be subject to cancellation, delay or restructuring; a governmental tender award indicates acceptance of the bidder's price rather than an order or guarantee of the purchase of any minimum number of units, and as a result government ministries or other public sector customers may order and purchase fewer units than the full maximum tender amount; 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; 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; the Company’s ability to identify, successfully negotiate and complete suitable acquisitions or other strategic initiatives; the Company’s ability to successfully integrate acquired businesses, technologies or products; 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 year ended September 30, 2015.  Actual events affecting the Company and the impact of such events on the Company's operations may vary from those currently anticipated.

 
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 FHCInvestor@femalehealthcompany.com.
 


(Financial Highlights Follow)
 
 
 
 
 
 
 
 
 
The Female Health Company
Unaudited Condensed Consolidated Balance Sheets


   
September 30,
    
September 30,
  
   
2015
    
2014
  
Cash
   $ 4,105,814     $ 5,796,223  
Accounts receivable, net
     14,088,390       2,943,850  
Income tax receivable
     21,251       -  
Inventory, net
     1,745,180       2,983,447  
Prepaid expenses and other current assets
     609,320       638,243  
Deferred income taxes
     1,016,000       711,000  
Total current assets
     21,585,955       13,072,763  
                 
Other non-current assets
     136,766       166,084  
Plant and equipment, net
     1,239,990       1,602,307  
Deferred income taxes
     14,509,000       16,832,000  
Total assets
   $ 37,471,711     $ 31,673,154  
                 
Accounts payable
   $ 1,077,349     $ 1,124,859  
Accrued expenses and other current liabilities
     2,555,231       1,816,508  
Accrued compensation
     592,428       436,843  
Total current liabilities
     4,225,008       3,378,210  
                 
Deferred rent
     15,389       39,105  
Deferred income taxes
     98,252       190,513  
Total liabilities
     4,338,649       3,607,828  
                 
Total stockholders' equity
     33,133,062       28,065,326  
Total liabilities and stockholders’ equity
   $ 37,471,711     $ 31,673,154  
 
 
 
 
 
 
The Female Health Company
Unaudited Condensed Consolidated Statements of Operations
   
Three Months Ended
  
   
September 30,
  
   
2015
    
2014
  
             
Net revenues
   $ 7,154,985     $ 5,554,113  
                 
Cost of sales
     3,031,341       2,667,340  
                 
Gross profit
     4,123,644       2,886,773  
                 
Operating expenses
     3,362,327       3,369,350  
                 
Operating income (loss)
     761,317       (482,577 )
                 
Interest and other income, net
     15,280       11,124  
Foreign currency transaction gain (loss)
     5,203       (25,632 )
                 
Income (loss) before income taxes
     781,800       (497,085 )
                 
Income tax expense
     79,229       69,036  
Net income (loss)
   $ 702,571     $ (566,121 )
                 
Net income (loss) per basic common share outstanding
   $ 0.02     $ (0.02 )
                 
Basic weighted average common shares outstanding
     28,566,021       28,487,507  
                 
Net income (loss) per diluted common share outstanding
   $ 0.02     $ (0.02 )
                 
Diluted weighted average common shares outstanding
     28,918,231       28,780,330  
                 
 
 
 
 
 
 
The Female Health Company
Unaudited Condensed Consolidated Statements of Income
 
 
   
Year Ended
  
   
September 30,
  
   
2015
    
2014
  
             
Net revenues
   $ 32,604,865     $ 24,490,586  
                 
Cost of sales
     13,634,906       11,369,108  
                 
Gross profit
     18,969,959       13,121,478  
                 
Operating expenses
     12,351,552       9,197,566  
                 
Operating income
     6,618,407       3,923,912  
                 
Interest and other income, net
     10,150       117,123  
Foreign currency transaction gain (loss)
     58,483       (83,844 )
                 
Income before income taxes
     6,687,040       3,957,191  
                 
Income tax expense
     2,341,004       1,524,130  
Net income
   $ 4,346,036     $ 2,433,061  
                 
Net income per basic common share outstanding
   $ 0.15     $ 0.09  
                 
Basic weighted average common shares outstanding
     28,532,327       28,522,525  
                 
Net income per diluted common share outstanding
   $ 0.15     $ 0.08  
                 
Diluted weighted average common shares outstanding
     28,917,048       28,865,384  
                 
Cash dividends declared per common share
   $ -     $ 0.21  
 
 
 
 
 
 
The Female Health Company
Unaudited Condensed Consolidated Statements of Cash Flows
 
   
Year Ended
  
   
September 30,
  
   
2015
    
2014
  
Net income
   $ 4,346,036     $ 2,433,061  
                 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
  
    Depreciation and amortization
     494,258       589,343  
    Provision for obsolete inventory
     173,634       37,603  
    Provision for bad debts
     -       38,068  
    Share-based compensation
     489,689       858,615  
    Deferred income taxes
     1,925,739       1,012,334  
    Loss on disposal of fixed assets
     3,483       491  
    Changes in current assets and liabilities:
     (8,981,536 )     (1,304,102 )
Net cash (used in) provided by operating activities
     (1,548,697 )     3,665,413  
Net cash used in investing activities
     (135,424 )     (97,311 )
Net cash used in financing activities
     (6,288 )     (6,694,309 )
Net decrease in cash
     (1,690,409 )     (3,126,207 )
Cash at beginning of period
     5,796,223       8,922,430  
Cash at end of period
   $ 4,105,814     $ 5,796,223  

 
 
 
 
 
 
The Female Health Company
Additional Non-GAAP Performance Measures

In addition to the results reported in accordance with U.S. generally accepted accounting principles ("GAAP") included in this release, the Company has provided the non-GAAP measures of Adjusted EBITDA and adjusted diluted EBITDA per share in this release.  Adjusted EBITDA represents net income before interest income or expense, income tax expense, depreciation and amortization, and further adjusted for the share-based compensation reflected in the reconciliation table set forth below.  Adjusted diluted EBITDA per share represent Adjusted EBITDA divided by the weighted average shares outstanding amounts used in the calculation of diluted earnings per share in accordance with GAAP for the relevant periods.

We believe that adjusted EBITDA is a useful measure for investors for the following reasons:
 
Adjusted EBITDA is not adjusted for all non-cash expenses or for working capital, capital expenditures or other investment requirements and, accordingly, is not necessarily indicative of amounts of cash that may be available for discretionary uses.  Thus, Adjusted EBITDA should not be considered in isolation or as a substitute for net income or cash (used in) provided by operating activities, each prepared in accordance with GAAP, when measuring profitability or liquidity.
 
 
 
 
 
 
 
The following table reconciles Adjusted EBITDA to net income:
 
   
Three Months Ended
    
Twelve Months Ended
  
   
September 30,
    
September 30,
  
   
2015
    
2014
    
2015
    
2014
  
Net income (loss)
   $ 702,571     $ (566,121 )   $ 4,346,036     $ 2,433,061  
Adjustments:
                                
Interest income
     (1,859 )     (917 )     (4,482 )     (4,609 )
Income tax expense
     79,229       69,036       2,341,004       1,524,130  
                                 
Depreciation and amortization
     121,723       160,155       494,258       589,343  
                                 
Share-based compensation
     (53,035 )     242,122       489,689       858,615  
Adjusted EBITDA
   $ 848,629     $ (95,725 )   $ 7,666,505     $ 5,400,540  
                                 
Diluted EBITDA per share, as adjusted
   $ 0.03     $ (0.00 )   $ 0.27     $ 0.19