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The Female Health Company Reports 67% Increase in Second Quarter Earnings
Date:5/8/2009

Operating Income Rises 172% to Record $2.3 Million

CHICAGO, May 8 /PRNewswire-FirstCall/ --

Second quarter highlights:

  • 172% Operating Profit Increase to $2.3 Million
  • Gross Profit Margin widens to 53% of net revenues vs. 42% in prior year quarter
  • 46% Gross Profit Increase
  • E.P.S. of $0.07 vs. $0.04 in prior-year quarter

Year-to-date highlights:

  • Gross Margin widens to 50% of net revenue vs. 42% in first half of fiscal year 2008
  • Operating income up 73%
  • Operating margin widens to 21% of revenues vs. 13% in first half of FY2008
  • E.P.S. rise 85% to $0.13 vs. $0.07 in first half of FY 2008

The Female Health Company (NYSE Amex: FHC), which manufactures and markets the FC and FC2 Female Condom(R), today reported its operating results for the second quarter and first half of FY2009. The Company will host an investor conference call at 11:00 a.m. Eastern Time today, May 8, 2009, to discuss its operating results and other topics of interest (see details below).

For the three months ended March 31, 2009, the Company's net revenues increased 14% to $7.3 million, compared with $6.4 million in the three months ended March 31, 2008. For the quarter ended March 31, 2009, unit sales increased 21% over the same period in FY 2008. The Company's net income attributable to common stockholders increased 67% to $1,951,786, or $0.07 per diluted share, during the second quarter of FY2009, compared with $1,165,936, or $0.04 per diluted share, in the corresponding period of the previous fiscal year.

Gross profit increased 46% to $3.9 million (53% of net revenues) in the most recent quarter, compared with $2.7 million (42% of net revenues) in the second quarter of FY2008. Operating income increased 172% to $2.3 million (31% of net revenues) in the three months ended March 31, 2009, compared with operating income of $0.8 million (13% of net revenues) in the quarter ended March 31, 2008.

"We are very pleased to report quarterly operating earnings exceeding $2 million for the first time in the Company's history," stated O.B. Parrish, Chief Executive Officer of The Female Health Company. "The favorable financial results for the three and six months ended March 31, 2009 reflect the increasing impact of FC2 upon our operating results, as evidenced by the widening of the second quarter gross margin to 53% of net revenues from 42% in the prior-year quarter. FC2 accounted for 46% of unit sales for the six months ended March 31, 2009 vs. 39% for the same period in FY 2008. It is also important to note that the increase in unit shipments was greater than the 14% increase in second quarter revenues, due to the higher percentage of FC2 in our sales mix. FC2 sells at a lower price, but contributes a higher gross margin than the FC1 female condom."

The Company expects significant quarter to quarter variations due to the receipt of large orders, production scheduling, and shipping of products.

For the six months ended March 31, 2009, the Company's net revenues increased 4% to $12.7 million, compared with $12.1 million in the six months ended March 31, 2008. Unit sales were up 16% for the first half of FY 2009 vs. the same period last year. For the six months ended March 31, 2009, net income attributable to common stockholders increased to $3.6 million, or $0.13 per diluted share, compared with $2.0 million, or $0.07 per diluted share, in the corresponding period of the previous fiscal year.

Gross profit increased 26% to $6.3 million (50% of net revenues) in the first six months of FY2009, compared with $5.0 million (42% of net revenues) in the first half of FY2008. Operating income increased 73% to $2.7 million (21% of net revenues) in the six months ended March 31, 2009, compared with operating income of $1.6 million (13% of net revenues) in the same period last year.

The Company recorded a foreign currency transaction loss of $194,286 in the second quarter of FY2009, versus a foreign currency transaction loss of $5,053 in the quarter ended March 31, 2008. For the six months ended March 31, 2009, the Company recorded a foreign currency transaction gain of $999,820, compared with a foreign currency transaction gain of $110,304 in the corresponding period of the previous fiscal year.

The Company evaluates its ability to realize deferred tax assets on a regular basis. The net income attributable to common stockholders for the three and six months ended March 31, 2008, included a benefit for income taxes of $377,000, related to such evaluation.

The Company has Federal and state net operating loss carryforwards of approximately $42 million and $22 million respectively, expiring in years 2009 to 2028. The Company's UK subsidiary, The Female Health Company-UK plc. has UK net operating losses of approximately $65 million. The UK tax loss carryforwards can be carried forward indefinitely to offset future U.K. taxable income.

"With the recent FDA approval of FC2, some of FHC's major customers that require such approval will transition to the second generation product, which should further improve the Company's financial results," added Parrish. "Growing global acceptance of the Female Condom, the only available barrier method initiated by women that allows them to protect themselves against HIV/AIDS and unintended pregnancy, is the basis for our growth. The Female Condom is now available in over 100 countries, and we believe it will play an increasingly important role in the global battle against HIV/AIDS in the future. The FC2 Female Condom is currently being distributed in 77 countries."

"We are reaffirming our annual guidance for FY 2009 that unit sales should increase 20% to 25% and that operating earnings should rise 50% to 75% from last year's $3,183,725 record level," concluded Parrish.

During the first half of FY 2009, the Company generated $3.2 million in cash from operations. The Company has no outstanding debt and $1.5 million in unused credit lines.

Investor Conference Call

As previously announced, the Female Health Company will host an investor conference call at 11:00 a.m. Eastern time, May 8, 2009. Shareholders and other interested parties may participate in the conference call by dialing 800-860-2442 (international/local participants dial 412-858-4600) and asking to be connected to "The Female Health Company" conference call, a few minutes before 11:00 a.m. EDT on May 8, 2009. A replay of the call will be available through May 26, 2009 by dialing 877-344-7529 (international callers dial 412-317-0088) and referencing the conference code ID 430401.

About The Female Health Company

The Female Health Company, based in Chicago, Illinois, manufactures and markets the FC Female Condom(R) (FC1) and the FC2 Female Condom (FC2), which are primarily distributed by public health organizations and donor groups in over 90 developing countries around the world. Globally, the Female Condoms are available in various programs in 116 countries. The Company owns certain worldwide rights to the FC Female Condom(R), including patents that have been issued in the United States, United Kingdom, Japan, France, Italy, Germany, Spain, the European Patent Convention, the People's Republic of China, Canada, South Korea and Australia. FC2 patents have been granted in Australia and South Africa and are pending in various other countries. FC1 and FC2 Female Condom(R) are the only available FDA-approved products controlled by a woman that offer dual protection against sexually transmitted diseases, including HIV/AIDS, and unintended pregnancy.

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.

"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 the Company's financial guidance for fiscal 2009 as well as the expected transition of customers to FC2 and its effect on the Company's financial results. 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; 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; 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 fiscal year ended September 30, 2008. Actual events affecting the Company and the impact of such events on the Company's operations may vary from those currently anticipated.

                            The Female Health Company
                 Unaudited Condensed Consolidated Balance Sheets

                                                    March 31,     March 31,
                                                      2009          2008
    Cash                                          $1,546,277    $2,464,036
    Restricted cash                                  202,696       236,280
    Accounts receivable, net                       6,062,108     5,495,489
    Inventory                                      1,576,040     1,967,212
    Prepaid and other current assets                 333,369       304,061
    Deferred income taxes                          1,600,000     1,202,000
    Total current assets                          11,320,490    11,669,078

    Other non-current assets                          56,664       247,609
    Net property, plant & equipment                1,744,063     1,542,121
    Total assets                                 $13,121,217   $13,458,808

    Accounts payable                                $937,422      $627,503
    Accrued expenses                               1,756,485     2,105,842
    Preferred dividends payable                       22,780        51,025
    Total current liabilities                      2,716,687     2,784,370

    Obligations under capital leases                  23,102        58,396
    Deferred gain on sale of facilities              627,538       989,663
    Deferred grant income                            151,369       242,407
    Total liabilities                              3,518,696     4,074,836

    Total stockholders' equity                     9,602,521     9,383,972
    Total liabilities and stockholders' equity   $13,121,217   $13,458,808



                          The Female Health Company
              Unaudited Condensed Consolidated Income Statements

                                                  Three Months Ended
                                                       March 31,
                                               2009                2008

    Net revenues                           $7,319,509          $6,401,277

    Cost of products sold                   3,426,574           3,728,630

    Gross profit                            3,892,935           2,672,647

    Advertising and promotion                  30,377              68,858
    Selling, general and administrative     1,587,723           1,690,409
    Research and development                   24,354              86,247

    Total operating expenses                1,642,454           1,845,514

    Operating income                        2,250,481             827,133

    Interest, net and other income                590              (7,057)
    Foreign currency transaction loss         194,286               5,053

    Income before income taxes              2,055,605             829,137

    Income tax expense (benefit)               81,039            (377,000)
    Net income                              1,974,566           1,206,137

    Preferred dividends                        22,780              40,201

    Net income attributable to common
     stockholders                          $1,951,786          $1,165,936

    Basic earnings per common share
     outstanding                                $0.08               $0.04

    Basic weighted average common shares
     outstanding                           25,489,097          26,087,245

    Diluted earnings per common share
     outstanding                                $0.07               $0.04

    Diluted weighted average common shares
     outstanding                           27,747,588          28,403,263




                          The Female Health Company
              Unaudited Condensed Consolidated Income Statements

                                                    Six Months Ended
                                                        March 31,
                                                2009                2008

    Net revenues                           $12,664,347         $12,136,028

    Cost of goods sold                       6,330,218           7,097,265

    Gross profit                             6,334,129           5,038,763

    Advertising and promotion                  101,171             110,376
    Selling, general and administrative      3,448,767           3,184,232
    Research and development                    94,774             187,376

    Total operating expenses                 3,644,712           3,481,984

    Operating income                         2,689,417           1,556,779

    Interest, net and other income              (8,299)            (16,666)
    Foreign currency transactions gain        (999,820)           (110,304)

    Income before income taxes               3,697,536           1,683,749

    Income tax expense (benefit)                89,579            (377,000)
    Net income                               3,607,957           2,060,749

    Preferred dividends                         47,355              80,845

    Net income attributable to common
     stockholders                           $3,560,602          $1,979,904

    Basic earnings per common share
     outstanding                                 $0.14               $0.08

    Basic weighted average common shares
     outstanding                            25,656,480          26,104,540

    Diluted earnings per common share
     outstanding                                 $0.13               $0.07

    Diluted weighted average common shares
     outstanding                            27,852,443          28,501,611



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SOURCE Female Health Company
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