Highlights:
- Unit sales totaled 14.4 million in third quarter and 47.3 million in first nine months of FY2015.
- Net revenues increase 34% to $25.4 million in first nine months of FY2015.
- Gross profit up 45% to $14.8 million in first nine months of FY2015, 58% of net revenues vs. 54% in prior-year period.
- Operating income improves 33% to $5.9 million, 23% of net revenues in first nine months of FY2015.
- Diluted EPS up 30% to $0.13 per share in first nine months of FY2015 from $0.10 per share in prior-year period.
Adjusted EBITDA
- Adjusted EBITDA of $1.7 million and adjusted diluted EBITDA per share of $0.06 in third quarter.
- Adjusted EBITDA of $6.8 million and adjusted diluted EBITDA per share of $0.24 in first nine months of FY2015.
CHICAGO, July 30, 2015 (GLOBE NEWSWIRE) -- The Female Health Company (NASDAQ:FHCO) (“FHC” or the “Company”), which manufactures and markets the FC2 Female Condom® (FC2), today reported its operating results for the quarter and nine months ended June 30, 2015 (third quarter and first nine months of FY2015). The Company will host an investor conference call today at 11:15 a.m. Eastern Time (EDT) to discuss these results and other topics of interest (see details below).
Unit sales for the third quarter of FY2015 increased 5% over the prior-year period to 14.4 million, and unit sales for the first nine months of FY2015 increased 44% over the prior-year period to 47.3 million. Net revenues totaled $7.8 million for the third quarter of FY2015, down 1% when compared with the prior year period, and $25.4 million for the first nine months of FY2015, up 34% relative to the prior-year period.
Management Comments
“I am particularly pleased with the unit sales growth we have achieved year to date,” stated O. B. Parrish, Chairman and Chief Executive Officer of The Female Health Company, “which we believe reflects increasing long-term demand for female condoms. Such growth in demand is due to two important factors. First, the increasing worldwide need for the prevention of sexually transmitted diseases, including HIV/AIDS, and unwanted pregnancies. Second, the aggressive global advocacy by well organized women’s groups to deliver gender equality to women by providing such benefits through increased funding for, and greater availability of, female condoms.”
“Operating income for the third quarter of FY2015 totaled $1.5 million, a decrease of 28% when compared with the third quarter of FY2014, while operating income increased 33% to $5.9 million during the first nine months of FY2015. Both periods were impacted by significant increases in expense due primarily to market development costs and our share of tariff costs related to the Brazilian tender.”
“The Company posted net income of $1.2 million, or $0.04 per diluted share, for the quarter ended June 30, 2015, which was relatively flat when compared with the prior-year period. Net income of $3.6 million during the nine months ended June 30, 2015 increased 21% versus the first nine months of the previous fiscal year. Year-to-date earnings per diluted share increased 30% to $0.13, compared with $0.10 per share for the prior-year period.”
“Year-to-date net income included income tax expense of $2,261,775, compared with income tax expense of $1,455,094 in the corresponding period of the previous fiscal year,” continued Parrish. “Effective the period ending December 31, 2013, the Company’s valuation allowances on the its deferred tax assets related to net operating loss carryforwards were fully reversed. As a result, 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 are still available to reduce cash payments of income taxes.”
“While the Company recorded income tax expense of $2,261,775 for the first nine months of FY2015, its cash payments of income taxes totaled only $267,394, or 12% of reported income tax expense for the period.”
“I am optimistic regarding the Company’s future for four reasons:
- We expect that the long-term demand for female condoms to increase and that the Company should profitably retain a significant share of this growing market.
- We believe significant opportunities exist to expand female condom usage in the U.S. and other developed countries. The Company is actively pursuing such opportunities in accordance with return on investment criteria and the potential impact on shareholder value.
- We plan to review our operating expenses to identify potential reductions that can better align our cost structure with current revenue levels.
- Pursuant to its diversification program, the Company is actively evaluating acquisition candidates based on potential for growth and impact on shareholder value.”
“In addition, given recent management changes, I have asked two of our highly experienced directors to contribute on a consulting basis: Donna Felch in reference to FC2 and Dave Bethune relative to the diversification program. Their backgrounds are provided at the end of this release.
“Our principal goal is to create profitable growth and increase shareholder value,” concluded Parrish.
Third Quarter Results
The Company generated net revenues of $7,813,207 and net income of $1,170,974, or $0.04 per diluted share, for the three months ended June 30, 2015, compared with net revenues of $7,900,055 and net income of $1,159,498, or $0.04 per diluted share, for the three months ended June 30, 2014.
Net revenues decreased $86,848, or 1%, on a 5% increase in unit sales, for the three months ended June 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 6% versus the same period last year due to this reduction and changes in sales mix.
Gross profit increased $462,265, or 11%, to $4,632,535 for the three months ended June 30, 2015, compared with $4,170,270 for the three months ended June 30, 2014. Gross profit margin for the three months ended June 30, 2015 improved six percentage points to approximately 59% of net revenues, versus 53% of net revenues for the same period last year. The increase reflects the favorable impact of changes in currency exchange rates, slightly offset by higher costs associated with increased unit sales.
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 increased $1,036,047, or 48%, to $3,178,687 in the three months ended June 30, 2015, from $2,142,640 in the prior-year period. Approximately 46% of the increased spending was due to payments to our Brazilian distributor for marketing and management fees associated with the 2014 tender. In addition, $398,000 of the increase reflected the Company’s share of tariff costs related to the Brazilian tender. The remaining increase was primarily due to FC2 product development and portfolio diversification costs that were not incurred in the prior-year period.
Operating income for the quarter ended June 30, 2015 totaled $1,453,848, versus operating income of $2,027,630 in the third quarter of FY2014, a decrease of 28 percent. The decrease was primarily due to higher operating expenses, partially offset by improved gross profit margins.
Income tax expense for the three months ended June 30, 2015 declined to $284,900, compared with $851,321 for the same period in FY2014. The reduction in income tax expense was due to changes in the mix of tax jurisdictions in which the Company recognized income before income taxes and a reduction in the Illinois state income tax rate effective January 1, 2015 from 9.5 percent to 7.75 percent.
The Company’s net income increased $11,476, or 1%, to $1,170,974 in the three months ended June 30, 2015, versus net income of $1,159,498 in the same period of the prior year. Net income approximated 15% of net revenues for the third quarters of both FY2015 and FY2014.
Adjusted EBITDA totaled $1,739,360 in the third quarter of FY2015, compared with adjusted EBITDA of $2,363,945 in the same period last year. Adjusted diluted EBITDA per share of $0.06 in the third quarter of the current fiscal year compared with $0.08 in the third 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.
Nine-Month Results
The Company generated net revenues of $25,449,880 and net income of $3,643,465, or $0.13 per diluted share, for the nine months ended June 30, 2015, compared with net revenues of $18,936,473 and net income of $2,999,182, or $0.10 per diluted share, for the nine months ended June 30, 2014.
Net revenues increased $6,513,407, or 34%, for the nine months ended June 30, 2015, 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 6.8% during the first nine months of FY2015 when compared with the same period last year, due to changes in sales mix and the price adjustment.
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