Chattem, Inc. Announces Second Quarter Financial Results.Business Editors CHATTANOOGA Chattanooga (chăt'ən  `gə), city (1990 pop. 152,466), seat of Hamilton co., E Tenn., on both sides of the Tennessee River near the Georgia line; inc. 1839. , Tenn.--(BUSINESS WIRE)--June 29, 2000Chattem Chattem NASDAQ: CHTT is a Chattanooga, TN based producer and marketer of over-the-counter healthcare products, toiletries, dietary supplements, topical analgesics, and medicated skin care products. , Inc. (Nasdaq:CHTT CHTT may refer to:
($ in millions, except
per share data) Second Fiscal Quarter Ended May 31,
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2000 1999 $ change % change
---- ---- ---- ----
Net Sales 79.6 83.4 (3.8) (5)
Operating Income 19.2 20.3 (1.1) (5)
EBITDA(a) 22.4 23.6 (1.2) (5)
Earnings per Share(a) .65 .69 (.04) (6)
Cash Earnings per Share(a) .82 .87 (.05) (6)
($ in millions, except
per share data) First Six Months Ended May 31,
---------------------------------
2000 1999 $ change % change
---- ---- ---- ----
Net Sales 142.0 146.2 (4.2) (3)
Operating Income 33.9 34.8 (.9) (3)
EBITDA(a) 40.4 41.1 (.7) (2)
Earnings per Share(a) 1.01 1.04 (.03) (3)
Cash Earnings per Share(a) 1.35 1.37 (.02) (1)
(a) Before Extraordinary Items
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 of $79.6 million for the quarter declined 5% versus a year ago. For the six months, net sales of $142 million were down 3%. Earnings per share before extraordinary items of $.65 for the quarter and $1.01 for the six months were down 6% and 3%, respectively, versus last year. As previously reported, results for the quarter were impacted by continuing sales declines in the Company's SUNSOURCE business. Additionally, BAN sales declined versus the year ago period due to several factors. First, the Company is dedicating its entire BAN annual advertising budget to support BAN NATURALS in the second half of fiscal 2000. Consequently, BAN received no advertising support during the first half of fiscal 2000. Second, the year-over-year sales comparison is impacted by the successful Ultra Dry launch during the second quarter of fiscal 1999. Finally, the antiperspirant/deodorant category experienced strong competition during the first half of fiscal 2000, led by Lever lever, simple machine consisting of a bar supported at some stationary point along its length and used to overcome resistance at a second point by application of force at a third point. The stationary point of a lever is known as its fulcrum. Brothers' DOVE Dove, river, England Dove (dŭv), river, c.40 mi (60 km) long, rising in the Pennines, Derbyshire, central England, and flowing S and SE to the River Trent near Burton upon Trent. It forms much of the Derbyshire-Staffordshire boundary. antiperspirant antiperspirant /an·ti·per·spir·ant/ (-per´spir-ant) inhibiting or preventing perspiration, or an agent that does this. an·ti·per·spi·rant n. and deodorant deodorant /de·odor·ant/ (de-o´der-int) 1. masking offensive odors. 2. an agent that so acts. de·o·dor·ant n. launch. Net sales of the Company's remaining brands grew 4.1% for the quarter and 5.5% for the six months compared to the year ago periods. This growth was driven by strong performances from Chattem's topical topical /top·i·cal/ (top´i-k'l) pertaining to a particular area, as a topical antiinfective applied to a certain area of the skin and affecting only the area to which it is applied. top·i·cal adj. 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 (including FLEXALL and ICY ic·y adj. ic·i·er, ic·i·est 1. Containing or covered with ice: an icy road. 2. Bitterly cold; freezing: an icy day. See Synonyms at cold. HOT), its PHISODERM, MUDD MUDD Multi-User Dungeons and Dragons (game) MUDD Multi-User Detector/Decoder and HERPECIN-L brands, and its international division. Chattem maintained its strong EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become margins (EBITDA divided by net sales) of 28.2% for the quarter and 28.4% for the six months versus 28.2% and 28.1%, respectively, for the year ago periods. These margins reflect the Company's success in achieving high gross margins and in controlling selling, general and administrative expenses. Gross margins for the quarter were 73.1%, while S,G&A expenses as a percentage of sales were 10.4%. For the six months these results were 73.1% and 11.0%, respectively. Additionally, the Company continued its heavy promotional, marketing and advertising support, spending 38.6% of net sales in brand support during the quarter. 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 Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. associated principally with the acquisition of certain brands. These expenses, net of tax, amounted to $1.7 million, or $0.17 per share, for the fiscal second quarter. For the first six months of fiscal 2000 these expenses, net of taxes, were $3.3 million, or $.34 per share. The Company is required to amortize amortize To write off gradually and systematically a given amount of money within a specific number of time periods. For example, an accountant amortizes the cost of a long-term asset by deducting a portion of that cost against income in each period. the purchase price of acquired brands for accounting purposes, while at the same time it attempts to increase these brands' value through advertising and promotional programs, product enhancements and line extensions. The Company thus believes cash earnings - net income before extraordinary items plus non-cash amortization - are the most appropriate measure of its financial performance. Cash earnings for the second quarter were $.82 per share, and were $1.35 per share for the six months. During the quarter, the Company incurred an extraordinary loss on 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, net of taxes, of $110,000, or $.01 per share. This charge related to the Company's repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. during the quarter of $2.4 million of its 12 3/4% notes due 2004. Chattem repurchased 135,000 shares of its common stock during the second quarter under its $10 million share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. authorization The right or permission to use a system resource; the process of granting access. See access control. . The Company intends to utilize its significant debt-free cash flow - cash flow after capital expenditures and scheduled amortization of principal on debt - to continue buying back stock up to the $10 million authorization, as well as prepaying debt. As of the end of the second quarter, the Company had repurchased a total of 407,500 shares of its stock at an aggregate price of $8.0 million since the buyback Buyback The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may program commenced in February February: see month. , 1999. Since the end of the second quarter Chattem has repurchased an additional 166,500 shares of its common stock. A total of $3.9 million remains available under the Company's bank loan agreement stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. authorization. Finally, 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. and strategic divestitures. As previously announced, Chattem is launching a number of new products this year. DEXATRIM Dexatrim is a dietary supplement meant to assist with weight loss. Its formula has changed over the years and at times Dexatrim has contained phenylpropanolamine and ephedra. NATURAL was supported with extensive media and promotional support during the quarter, and enjoyed strong factory and retail sales. BAN NATURALS began shipping at the end of the quarter and will receive strong media and promotional support during the balance of the fiscal year, including a TV and radio campaign, nationally distributed coupons COUPONS. Those parts of a commercial instrument which are. to be cut, and which are evidence of something connected with the contract mentioned in the instrument. They are generally attached to certificates of loan, where the interest is payable at particular periods, and, when the and in-store promotion. PHISODERM Patch began shipping during the second quarter, with media and promotional support beginning in the third quarter. Additionally, GOLD BOND Fragrance Free Lotion lotion /lo·tion/ (lo´shun) a liquid suspension, solution, or emulsion for external application to the body. lo·tion n. 1. will begin shipping in the third quarter with media and promotional support beginning during the fourth quarter. Chattem currently projects fiscal year 2000 net sales in the range of $290-300 million, earnings per share in the range of $2.05-2.20, and EBITDA in the range of $82-85 million. These results could be positively impacted if the launches of BAN NATURALS and GOLD BOND Fragrance Free Lotion are successful, and if strong re-orders of DEXATRIM NATURAL occur. Conversely con·verse 1 intr.v. con·versed, con·vers·ing, con·vers·es 1. To engage in a spoken exchange of thoughts, ideas, or feelings; talk. See Synonyms at speak. 2. , continuing heavy competitive activity in the antiperspirant/deodorant category and sales declines in the SUNSOURCE business, among other factors, could negatively impact results. Statements concerning the Company's business outlook, anticipated profitability, sales or expenses and sales growth including the statements in the immediately preceding paragraph, together with other statements made in this press release that are not historical facts are "forward looking statements" as that term is defined under the federal securities laws. It is possible that actual results might differ from the statements made in the press release. All forward looking statements are subject to the risks and uncertainties which could cause actual results to differ materially from those projected, including those described in the Company's filings with the Securities and Exchange Commission.
CHATTEM, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(unaudited)
For the Three Months For the Six Months
Ended May 31, Ended May 31,
2000 1999 2000 1999
---- ---- ---- ----
NET SALES $79,636 $83,441 $142,007 $146,169
----------------- ------------------
COSTS AND EXPENSES:
Cost of sales 21,455 21,794 38,137 38,674
Advertising and promotion 30,757 33,315 54,339 58,053
Selling, general and
administrative 8,255 7,984 15,658 14,684
----------------- ------------------
Total costs and expenses 60,467 63,093 108,134 111,411
----------------- ------------------
INCOME FROM OPERATIONS 19,169 20,348 33,873 34,758
----------------- ------------------
OTHER INCOME (EXPENSE):
Interest expense (9,216) (9,373) (18,190) (18,179)
Investment and other
income, net 53 113 127 244
----------------- ------------------
Total other income
(expense) (9,163) (9,260) (18,063) (17,935)
----------------- ------------------
Income before
income taxes 10,006 11,088 15,810 16,823
Provision for
income taxes (3,787) (4,167) (5,983) (6,325)
----------------- ------------------
Income before
extraordinary items 6,219 6,921 9,827 10,498
Extraordinary loss on
early extinguishment
of debt, net of taxes (110) (1,157) (110) (1,584)
Cumulative effect of
change in accounting
principle, net
of taxes (542) --
----------------- ------------------
NET INCOME $6,109 $5,764 $9,175 $8,914
================= ==================
Fully diluted shares
outstanding 9,594 10,112 9,732 10,105
================= ==================
NET INCOME PER COMMON
SHARE (DILUTED):
Continuing operations $0.65 $0.69 $1.01 $1.04
Extraordinary loss $(0.01) $(0.12) $(0.01) $(0.16)
Cumulative effect of
accounting change $ -- $ -- $(0.06) $ --
----------------- ------------------
Net income per
common share $0.64 $0.57 $0.94 $0.88
================= ==================
CASH EARNINGS:
Cash earnings from
continuing operations $7,878 $8,698 $13,146 $13,860
================= ==================
Cash earnings per share $0.82 $0.87 $1.35 $1.37
================= ==================
EBITDA $22,427 $23,558 $40,352 $41,064
EBITDA margin 28.2% 28.2% 28.4% 28.1%
Depreciation
& amortization $3,787 $3,626 $7,529 $7,114
Capital expenditures $1,480 $1,609 $4,294 $2,473
At May 31,
2000 1999
--------------------------
BALANCE SHEET DATA:
Cash and cash equivalents $ 2,325 $ 4,869
Accounts receivable $ 61,462 $ 58,400
Inventories $ 25,129 $ 22,980
Accounts payable $ 10,885 $ 13,244
Senior bank debt $ 66,600 $ 70,000
Subordinated debt 307,014 317,547
--------------------------
Total debt $ 373,614 $ 387,547
==========================
Shareholders' equity $ 54,007 $ 38,332
Total assets $ 491,712 $ 490,901
Statements in this press release which are not historical facts, including statements about the Company's confidence, strategies and expectations about new and existing products and opportunities, the demand and acceptance of new and existing products and markets and the return on investments in products and markets are 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. These forward looking statements involve risks and uncertainties. These include, but are not limited to, product demand and market acceptance risks; product development risks, such as delays or difficulties in developing, producing and marketing new products; the impact of competitive products, pricing and advertising; constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. resulting from the financial condition of the Company, including the degree to which the Company is leveraged, debt service requirements and restrictions under bank loan agreements and indentures; and other risks described in the Company's Securities and Exchange Commission filings. |
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