Chattem, Inc. Announces Fourth Quarter and Fiscal 2001 Results Exceeding Earlier Estimates; Gives Estimates for Fiscal 2002.Business Editors CHATTANOOGA, Tenn.--(BUSINESS WIRE)--Jan. 24, 2002 Chattem, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CHTT), a leading marketer and manufacturer of branded consumer products, announced today financial results for the fiscal year and fourth quarter ended November 30, 2001. For the fiscal year, net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight were $198.3 million, earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
For the fourth fiscal quarter, net sales were $44.7 million, EBITDA was $9.5 million, net income was $1.7 million, or $.18 per share, and cash earnings were $2.6 million, or $.28 per share. Fiscal fourth quarter results also equaled or exceeded the Company's earlier guidance of $43-45 million of net sales, $9-10 million of EBITDA and $.12-.16 earnings per share. Comparisons to the 2000 fiscal year and fourth quarter are not meaningful because of the sale of the BAN(R) line of antiperspirants and deodorants in September 2000, and the recording of approximately $20 million in one-time items during the fourth quarter of fiscal 2000. During fiscal 2001 Chattem recorded an extraordinary gain of $7.5 million, or $.83 per share, on the early extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt in connection with the consent solicitation Consent Solicitation A solicitation by one party to the stakeholders of a particular security for the consent of a material change. Notes: Should the majority of stakeholders provide valid consent prior to the consent expiry date, the issuer may then follow through with of the Company's 8 7/8% and 12 3/4% senior subordinated notes. Additionally, a $.6 million, or $.06 per share, extraordinary loss was recorded in connection with the repurchase of the remaining $21.7 million of the Company's 12 3/4% notes. For the 2001 fiscal year the Company again experienced strong results from its topical analgesic analgesic (ăn'əljē`zĭk), any of a diverse group of drugs used to relieve pain. Analgesic drugs include the nonsteroidal anti-inflammatory drugs (NSAIDs) such as the salicylates, narcotic drugs such as morphine, and synthetic drugs franchise (FlexAll(R), Icy Hot(R), Aspercreme(R), Sportscreme(R), Capzasin-P(R), Capzasin-HP(R) and Arthritis Hot(R)) which enjoyed a 6.7% increase in gross sales Gross Sales A measure of overall sales that isn't adjusted for customer discounts or returns, calculated simply by adding all sales invoices, and not including operating expenses, cost of goods sold, payment of taxes, or any other charge. over fiscal 2000, led by the performance of the Icy Hot Pain-Relieving Patch. Dexatrim(R) Natural gross sales of $27.6 million trailed 2000 gross sales of Dexatrim by only $1.3 million, when the Company was selling Dexatrim with PPA PPA 1. Palpation, Percussion & Ausculation 2. Pittsburgh pneumonia agent 3. Postpartum amenorrhea 4. Price per accession 5. Pure pulmonary atresia which generated approximately $20 million of annual sales and was discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: for regulatory reasons in November, 2000. Sales of the Company's Gold Bond(R) line of products declined 1.5% from fiscal 2000 to fiscal 2001, but increased approximately 3.4% in the fourth quarter of fiscal 2001 compared to the corresponding year-ago period, continuing the strengthening of this component of Chattem's business during the second half of the year. Finally, the Company's Sunsource line of dietary supplements Noun 1. dietary supplement - something added to complete a diet or to make up for a dietary deficiency diet - a prescribed selection of foods vitamin pill - a pill containing one or more vitamins; taken as a dietary supplement continued to stabilize stabilize See peg. in the second half of fiscal 2001, up 4.7% in the fourth quarter over the corresponding year-ago period, led by Garlique(R). For the fiscal year, gross margins were 73.5%, while selling, general and administrative expense as a percentage of sales was 17.5%. Advertising and promotion as a percentage of sales was 39.3%. For the year, the Company's EBITDA margin (EBITDA divided by net sales) was 21.3%. All of these measurements were within the estimated ranges previously announced by the Company. Finally, at year-end, days' sales outstanding Days' sales outstanding Average collection period. in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying were 42 compared to 67 for fiscal 2000, while inventories adjusted for brands sold or discontinued declined from $15.1 million in fiscal 2000 to $14.3 million in fiscal 2001. These results reflect Chattem's continued dedication to working capital management. During the 2001 fiscal year, the Company reduced long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. by $99.3 million. Chattem's net debt (long-term debt less cash) at fiscal year-end Fiscal Year-End The completion of a one-year, or 12-month, accounting period. Notes: The reason that a company's fiscal year often differs from the calendar year and does not close on Dec 31, is due to the nature of company's needs. was $169.3 million. Regarding the recent bankruptcy filing by K-Mart Corp. and its effect on the Company, Chattem is currently owed approximately $1.2 million by K-Mart. The Company is assessing what effect, if any, the K-Mart bankruptcy filing will have on fiscal 2002 sales and earnings. Included in the Company's income statement are substantial non-cash expenses Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) related to the amortization of intangibles associated principally with the acquisition of certain brands. These expenses, net of tax, amounted to $1.0 million, or $.11 per share, for the fiscal fourth quarter, and $3.9 million, or $.43 per share, for fiscal 2001. Effective the first quarter of the Company's 2002 fiscal year with the adoption of Statement of Financial Accounting No. 142 "Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 142)," the amortization of goodwill and intangibles with indefinite INDEFINITE. That which is undefined; uncertain. INDEFINITE, NUMBER. A number which may be increased or diminished at pleasure. 2. When a corporation is composed of an indefinite number of persons, any number of them consisting of a majority of those lives will be eliminated and will positively impact the Company's fiscal 2002 income statement by approximately $.38 per share. In addition, SFAS 142 provides new measurement techniques for impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of goodwill and other intangible assets. The Company has not completed the revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. of its intangible assets pursuant to SFAS 142. Upon completion of this initial revaluation, any charge that might result would be a one-time, non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. and would be reflected as a cumulative effect of adopting a change in accounting principle and would have no effect on the Company's income from operations. Regarding fiscal 2002, the Company currently estimates net sales to fall in a range of $205-210 million, earnings per share to be in the range of $1.35-1.40 and EBITDA to be from $42.5-44.0 million. All estimates are prior to any extraordinary items or cumulative effects of adopting a change in accounting principle which might be recorded during the year. These estimates also are before any charges or loss of sales that might result from the K-Mart bankruptcy filing. On a quarterly basis, Chattem currently estimates the following ranges of performance:
($ in millions, except per share data)
Q1 Q2 Q3 Q4 FY 02
----------------------------------------------------------------------
Net Sales 48-50 57-59 51-53 46-48 205-210
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EPS .20-.22 .45-.47 .42-.44 .27-.29 $1.35-$1.40
----------------------------------------------------------------------
EBITDA 8.5-9.0 12.0-13.0 11.5-12.5 9.5-10.5 42.5-44.0
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These expected results are premised on sales growth of 3-5% and an earnings increase of 6-8% over fiscal year 2001 results. The Company expects this growth to be driven by the newly launched Dexatrim Results, Gold Bond Foot Spray, and pHisoderm(R) body wash and acne acne, common inflammatory disease of the hair follicles and sebaceous glands characterized by blackheads, whiteheads, pustules, nodules and, in the more severe forms, by cysts and scarring. The lesions appear on the face, neck, back, chest, and arms. masque masque, courtly form of dramatic spectacle, popular in England in the first half of the 17th cent. The masque developed from the early 16th-century disguising, or mummery, in which disguised guests bearing presents would break into a festival and then join with their . Additionally, Chattem expects further sales gains to be achieved by the Icy Hot Pain-Relieving Patch, which was launched in Spring 2001. For fiscal 2002, Chattem expects gross margins in a range of 72-74%, advertising and promotional spending as a percentage of sales in a range of 35-38% (after adoption of SFAS 142), EBITDA margins of 20-22% and a tax rate of approximately 38%. Quarterly results may vary more widely than the indicated ranges due to seasonality and other factors. During the fourth quarter of fiscal 2001 the Company repurchased 14,000 shares of its common stock, constituting all of the stock repurchases Stock repurchase A firm's repurchase of outstanding shares of its common stock. for the year. None of the Company's 8 7/8% senior subordinated notes were repurchased during the fourth quarter. The Company continues to review opportunities for accretive acquisitions Accretive Acquisition An acquisition that will increase the acquiring company's EPS. Notes: As they are expected to increase the acquiring company's future earnings, these acquisitions tend to be favorable for the company's market price. of brands which are leaders in niche categories or possess unique functional characteristics, have high gross margins and are sold principally in over-the-counter drug over-the-counter drug A therapeutic agent that does not require a prescription, which the FDA feels can be safely self-prescribed by non-physicians. Cf Prescription drug, Under-the-counter. market. Paragraphs 10, 11 and 12 above of this press release constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, which contains a safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. for forward looking statements. The Company relies on this safe harbor in making such disclosures. The forward looking statements are based on management's current beliefs and assumptions about expectations, estimates, strategies and projections for the Company. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward looking statements. The Company undertakes no obligations to update publicly any forward looking statements whether as a result of new information, future events or otherwise. The risks, uncertainties and assumptions regarding forward looking statements include, but are not limited to, existing and possible future product liability claims relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the prior existence of PPA in Dexatrim; the possible effect of the negative public perception resulting from product liability claims on sales of Dexatrim products without PPA; the lack of availability, limits of coverage and expense related to product liability insurance; the possibility of other products liability claims, including claims relating to the existence of ephedrine ephedrine (ĭfĕd`rĭn, ĕf`ĭdrēn'), drug derived from plants of the genus Ephedra (see Pinophyta), most commonly used to prevent mild or moderate attacks of bronchial asthma. in Dexatrim Natural; product demand and market acceptance risks; product development risks, such as delays or difficulties in developing, producing and marketing new products or line extensions; the impact of competitive products, pricing and advertising; constraints resulting from financial condition of the Company, including the degree to which the Company is leveraged, debt service requirements and restrictions under indentures; government regulations; risks of loss of material customers; public perception regarding the Company's products; dependence on third party manufacturers; environmental matters; and other risks described in the Company's Securities and Exchange Commission filings. Chattem will provide an online Web simulcast and rebroadcast of its fourth quarter and fiscal 2001 conference call. The live broadcast of the call will be available online at www.chattem.com and www.streetevents.com on Friday, January 25th beginning at 8:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . The online replay will follow shortly after the call and be available through February 25, 2002. Please note Webcast requires Windows Media Player Digital jukebox software for Windows from Microsoft that plays a variety of audio, video and streaming formats including MP3, WMA, CD audio and MIDI. Starting with Version 6.2 in 1999, the Windows Media Rights Manager was added for securing copyrighted content. .
CHATTEM, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
For the Three Months For the Twelve Months
Ended November 30, Ended November 30,
--------------------- ---------------------
2001 2000 2001 2000
---- ---- ---- ----
NET SALES $ 44,697 $ 37,439 $198,300 $252,699
--------------------- ---------------------
COSTS AND EXPENSES:
Cost of sales 11,959 17,661 52,512 74,957
Advertising and
promotion 16,573 24,421 77,964 106,868
Selling, general and
administrative 8,976 7,797 34,646 31,994
--------------------- ---------------------
Total costs and
expenses 37,508 49,879 165,122 213,819
--------------------- ---------------------
INCOME (LOSS) FROM
OPERATIONS 7,189 (12,440) 33,178 38,880
--------------------- ---------------------
OTHER INCOME (EXPENSE):
Interest expense (4,832) (8,400) (21,856) (35,729)
Loss on product
divestiture - (5,018) - (5,018)
Investment and other
income, net 308 1,438 2,218 1,566
--------------------- ---------------------
Total other income
(expense) (4,524) (11,980) (19,638) (39,181)
--------------------- ---------------------
Income (loss) before
income taxes,
extraordinary items,
and accounting change 2,665 (24,420) 13,540 (301)
(Provision) benefit
for income taxes (1,013) 9,245 (5,145) 104
--------------------- ---------------------
Income (loss) before
extraordinary (loss)
gain and accounting
change 1,652 (15,175) 8,395 (197)
Extraordinary (loss)
gain on early
extinguishment of
debt, net of taxes - (810) 6,948 (920)
Cumulative effect of
change in accounting
principle, net of
taxes - - - (542)
--------------------- ---------------------
NET INCOME (LOSS) $ 1,652 $(15,985) $ 15,343 $ (1,659)
===================== =====================
Diluted shares
outstanding 9,257 9,115 9,038 9,411
===================== =====================
NET INCOME PER COMMON
SHARE (DILUTED):
Income (loss) before
extraordinary (loss)
gain and accounting
change $ 0.18 $ (1.66) $ 0.93 $ (0.02)
Extraordinary
(loss) gain $ - $ (0.09) $ 0.77 $ (0.10)
Accounting change $ - $ - $ - $ (0.06)
--------------------- ---------------------
Net income per
common share $ 0.18 $ (1.75) $ 1.70 $ (0.18)
===================== =====================
CASH EARNINGS:
Cash earnings from
operations $ 2,604 $(14,075) $ 12,294 $ 5,894
===================== =====================
Cash earnings per
share $ 0.28 $ (1.54) $ 1.36 $ 0.63
===================== =====================
EBITDA $ 9,535 $ (9,922) $ 42,261 $ 51,251
EBITDA margin 21.3% -26.5% 21.3% 20.3%
Depreciation &
amortization $ 2,614 $ 3,539 $ 10,241 $ 14,943
Capital expenditures $ 342 $ 380 $ 1,854 $ 5,673
At November 30
2001 2000
---------------------
BALANCE SHEET DATA:
Cash and cash
equivalents $ 35,445 $102,534
Accounts receivable $ 20,860 $ 40,691
Inventories $ 14,260 $ 15,052
Accounts payable $ 9,010 $ 8,790
Senior bank debt $ - $ -
Subordinated debt 204,740 304,077
---------------------
Total debt $204,740 $304,077
=====================
Shareholders' equity $ 52,618 $ 37,653
Total assets $299,673 $402,076
Statements in this press release which are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements involve
risks, uncertainties and assumptions including, but not limited to,
those described in Paragraph 15 of this press release.
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