Chattem, Inc. Reports 2003 Third Quarter Earnings Per Share Increase 6%; Gives Initial Guidance for Fiscal 2004.Business Editors CHATTANOOGA, Tenn.--(BUSINESS WIRE)--Sept. 18, 2003 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 third quarter and nine-month period ended August 31, 2003. Total revenues for the quarter were $59.2 million, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $15.9 million and income before accounting change was $6.8 million. Earnings per share for the fiscal 2003 third quarter were $.34, which was $.02 or 6.25% above the third quarter of fiscal 2002 earnings per share. For the first nine months of fiscal 2003, total revenues were $181.2 million, operating income was $45.4 million and income before accounting change was $18.9 million. Earnings per share before accounting change for the first nine months of fiscal 2003 were $.95 versus $.75 for the same period of fiscal 2002, representing a 27% increase. Third quarter results were highlighted by year-over-year sales increases from Gold Bond(R), Selsun blue Selsun Blue is a shampoo, developed by Ross Laboratories, a subsidiary of Abbott Laboratories and later bought by Chattem, that functions as an over-the-counter treatment for dandruff. (R), Garlique(R) and NewPhase(R), offset by declines in the 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 portfolio, Dexatrim(R), pHisoderm(R) and Pamprin(R). 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 the Gold Bond franchise were up 18% led by the three new items shipped in the second quarter and the continuing strength of the foot care portion of the business. Gold Bond Lotion lotion /lo·tion/ (lo´shun) a liquid suspension, solution, or emulsion for external application to the body. lo·tion n. 1. also experienced year-over-year strong sales growth. Domestic net sales of Selsun blue increased 14%, continuing the excellent performance of this brand acquired in March 2002. Garlique's net sales rose 17% from the year-ago comparable quarter, extending its leadership position in the cholesterol health garlic extract category. NewPhase, a menopausal supplement, experienced a net sales increase of 142%, responding to an effective media campaign. Icy Hot(R), the flagship of the Company's topical analgesic portfolio, experienced flat sales in the quarter while sales of the balance of the portfolio (FlexAll(R), Aspercreme(R), Sportscreme(R), Capzasin(R) and Arthritis Hot(R)) were down. Total net sales of the topical analgesic portfolio were off 8% for the quarter. Initial orders of the new Icy Hot Back Patch were received more slowly than anticipated and adversely affected results. However, since the end of the quarter sales of the Icy Hot Back Patch have achieved anticipated levels. Net sales of Dexatrim were down 19% from the corresponding year-ago quarter, as the brand continues to suffer from a weak diet pill diet pill Drug slang A euphemism for an amphetamine Vox populi An agent that either ↓ appetite or ↑ basal metabolic rate–eg, amphetamines–by prescription and OTC diet aids–eg phenylpropanolamine, ephedrine, caffeine; in high doses, DPs category. Sales of pHisoderm were off 29% as the brand began to compare to a year-ago period when the brand was relaunched and the Clear Confidence Clear Swab was initially shipped to retailers. However, retail sales for pHisoderm for the 13-week period ended August 23rd were down 1%. Finally, sales of Pamprin declined 17% compared to the prior year period, although retail sales for the latest 13-week period were down 2%. The retail sales percentages are based on A.C. Nielsen data plus Wal-Mart Stores, Inc.'s point of sales information. This data does not necessarily reflect trade account sales of the Company's brands for the same period. Sales of the balance of the Company's brands were flat to down for the quarter. International total revenues for the third quarter of 2003 declined 22% over the prior year comparable period, due principally to weakness in sales of Gold Bond in Canada, sales softness in European markets and a slower-than-expected transition of Selsun blue to the Company's distributors in certain countries. Abbott Laboratories Abbott Laboratories (NYSE: ABT) is a diversified pharmaceuticals and health care company. It has over 65,000 employees and operates in 130 countries. The corporate headquarters are in Abbott Park, Illinois, a neighborhood of North Chicago, Illinois. , from whom the Company acquired Selsun blue on March 28, 2002 for $75 million plus $1.4 million in inventories, is manufacturing and selling the product for Chattem in certain foreign markets during a transition period, and paying Chattem an initial royalty of 28% on international sales, reducing to 14% in certain countries if local regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. are satisfied prior to the Company's assumption of sales and marketing responsibility in such countries. As the Company takes over responsibility for the sales and marketing effort in a foreign country, the royalty arrangement with respect to such country will terminate and Chattem will record the international sales resulting in an increase in net sales but with no material impact to net income. The Company expects to have substantially completed this transition by the second anniversary of the acquisition of Selsun blue. Chattem's gross margin based on total revenues was a strong 73% for the third fiscal quarter, due principally to the completion of the integration of Selsun blue domestic manufacturing into the Company's facilities and various cost savings programs. Selling, general and administrative expense (S,G&A) as a percentage of total revenues was 17%. Advertising and promotion as a percentage of total revenue was 29%. For the first nine months of fiscal 2003, gross margin, S,G&A and advertising and promotion as a percentage of total revenues were 72%, 17% and 30%, respectively. 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.
adv. To this document, matter, or proposition. hereto Adverb Formal or law to this place, matter, or document Adv. 1. .) During the third quarter Chattem repurchased 87,200 shares of its common stock at an average price of $16.65. A total of approximately $4.6 million remains available under each of the Company's $10 million board stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. authorization and the $10 million stock repurchase basket contained in its bank senior credit facility. The Company did not complete the previously announced proposed amendment to its senior credit facility. The Company's current senior credit facility consists of a $45 million term loan with an outstanding balance of $10 million, and a $15 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility which remained undrawn un·draw tr.v. un·drew , un·drawn , un·draw·ing, un·draws To draw to one side, as a curtain. Adj. 1. undrawn - not represented in a drawing undelineated - not represented accurately or precisely upon during the third fiscal quarter. As previously disclosed, Kemper Indemnity Insurance indemnity insurance Managed care A type of health insurance in which a Pt can choose the hospital and provider, and the insurer reimburses the Pt or provider for a set percentage of the cost, minus deductibles and co-payments Company ("Kemper") has filed a lawsuit against Chattem seeking to rescind To declare a contract void—of no legal force or binding effect—from its inception and thereby restore the parties to the positions they would have occupied had no contract ever been made. rescind v. a $50 million policy of excess insurance coverage for product liability claims relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the existence of phenylpropanolamine phenylpropanolamine /phen·yl·pro·pa·nol·amine/ (-pro?pah-nol´ah-men) an adrenergic, used in the form of the hydrochloride salt as a nasal and sinus decongestant, as an appetite suppressant, and in the treatment of stress incontinence. ("PPA PPA 1. Palpation, Percussion & Ausculation 2. Pittsburgh pneumonia agent 3. Postpartum amenorrhea 4. Price per accession 5. Pure pulmonary atresia ") in Chattem's Dexatrim brand. The Kemper suit also sought a declaratory judgment declaratory judgment In law, a judgment merely declaring a right or establishing the legal status or interpretation of a law or instrument. It is binding but is distinguished from other judgments or court opinions in that it includes no executive element (an order that on certain policy interpretation issues. Chattem has filed an answer denying that Kemper is entitled to any of the relief sought and counterclaims against Kemper and affiliated parties including Berkshire Hathaway Berkshire Hathaway (NYSE: BRKA, NYSE: BRKB) is a conglomerate holding company headquartered in Omaha, Nebraska, U.S., that oversees and manages a number of subsidiary companies. Inc. alleging, among other things, a civil conspiracy to deny coverage, tortuous tor·tu·ous adj. Having many turns; winding or twisting. tortuous adjective Referring to complexly twisted thing. Cf Tortious. interference with Chattem's insurance contract with Kemper, bad faith, violation of Tennessee's consumer protection law and fraud. For the fourth fiscal quarter 2003, Chattem currently expects total revenues to be in the $51-53 million range. The Company further estimates earnings per share to be in the $.21-.23 range, which would result in earnings per share for the fiscal year of $1.16-1.18, an increase of approximately 20% from fiscal 2002 results. For fiscal 2004, Chattem's current expectations are that total revenues will grow 5-8% over fiscal 2003 levels, with earnings per share growth to be in the 10-15% range. The Company's expectations and estimates are subject to risks, uncertainties and assumptions, including those summarized in paragraph 17 below or included in filings with the Securities and Exchange Commission. Chattem also announced an exciting line-up of product line extensions Product line Extensions and Patient safety In a world of product line extensions, there are many different products with similar names. Examples of these include oxycodone versus oxycontin (oycodone CR), buproprion vs buprion SR vs bruproprion XL, codeine versus codeine contin for fiscal 2004. The Dexatrim All-In-One Bar(TM) is a highly nutritious diet and energy bar containing green tea and will be offered in three flavors. Gold Bond Ultimate Healing Skin Therapy Lotion(TM) brings healing and intensive moisturization to dry, cracked and irritated ir·ri·tate v. ir·ri·tat·ed, ir·ri·tat·ing, ir·ri·tates v.tr. 1. To rouse to impatience or anger; annoy: a loud bossy voice that irritates listeners. skin with seven intensive moisturizers moisturizers hydroscopic agents, applied to the skin and hair, as creams, rinses or shampoos, to increase hydration of the stratum corneum. Examples are propylene glycol, glycerine and lactate. clinically shown to deliver 24-hour moisturization. pHisoderm Clear Confidence Self-Heating Daily Scrub(TM) is a unique daily-use scrub that provides a gentle burst of heat while micro scrubbing beads remove excess oils, makeup and deep impurities. Also being launched under the pHisoderm brand is the Clear Confidence Herbal Astringent astringent (əstrĭn`jənt), substance that shrinks body tissues. Astringent medicines cause shrinkage of mucous membranes or exposed tissues and are often used internally to check discharge of serum or mucous secretions in sore throat, (TM) containing aloe, chamomile chamomile or camomile (both: kăm`əmīl', –mēl') [Gr.,=ground apple], name for various related plants of the family Asteraceae (aster family), especially the perennial Anthemis nobilis, and lavender to treat, clean, prevent and nurture acne-prone skin. Pamprin All-Day Relief provides up to 12 hours of relief from painful menstrual menstrual /men·stru·al/ (men´stroo-al) pertaining to the menses or to menstruation. men·stru·al or men·stru·ous adj. Of or relating to menstruation. symptoms in one easy dose. Chattem also plans to announce fiscal 2004 line extensions under the Icy Hot, Selsun blue and BullFrog bullfrog, common name of the largest North American frog, Rana catesbeiana. Native to the E United States, this species has been successfully introduced in the West and in other parts of the world. The body length is 4 to 8 in. brands during the first half of the coming fiscal year. Paragraphs 15 and 16 above of this press release constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 of the forward-looking statements include, but are not limited to existing and possible additional future product liability claims relating to the prior existence of PPA in Dexatrim; the availability of Chattem's $50 million excess product liability coverage to be determined in the Kemper rescission The abrogation of a contract, effective from its inception, thereby restoring the parties to the positions they would have occupied if no contract had ever been formed. By Agreement and declaratory judgment lawsuit; the lack of availability, limits of coverage and expense related to product liability insurance including the outcome of the rescission and declaration judgment action filed by Kemper; the reduction of available insurance coverage as proceeds are used to fund any product liability settlements or awards; the possibility of other product liability claims, including claims relating to the prior 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 products; the ability of the Company to fund liabilities from product liability claims greater than its insurance coverage or outside the scope of insurance coverage; the possible effect of the negative public perception resulting from product liability claims on sales of Dexatrim products without PPA or ephedrine; the impact of brand acquisitions and divestitures; the impact of gains or losses resulting from product acquisitions or divestitures; 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; the Company's ability to sell and market Selsun blue internationally where it has only limited experience and infrastructure; constraints resulting from the financial condition of the Company, including the degree to which the Company is leveraged, debt service requirements and restrictions under indentures and loan agreements; 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 third fiscal quarter 2003 conference call. The live broadcast of the call will be available online at www.chattem.com and www.streetevents.com on Friday, September 19 beginning at 8:30 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . The online replay will follow shortly after the call and be available through October 19, 2003. 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 For the Nine
Months Ended Months Ended
August 31, August 31,
------------------ ------------------
2003 2002 2003 2002
------------------ ------------------
NET SALES $ 58,972 $ 63,457 $180,366 $169,617
Royalty Income 210 947 874 1,873
------------------ ------------------
Total Revenue 59,182 64,404 181,240 171,490
COSTS AND EXPENSES:
Cost of sales 15,995 17,526 51,399 48,673
Advertising and promotion 17,075 21,307 54,009 55,276
Selling, general and
administrative 10,234 9,926 30,445 29,002
------------------ ------------------
Total costs and expenses 43,304 48,759 135,853 132,951
------------------ ------------------
INCOME FROM OPERATIONS 15,878 15,645 45,387 38,539
------------------ ------------------
OTHER INCOME (EXPENSE):
Interest expense (5,057) (5,374) (15,431) (15,518)
Investment and other income,
net 32 79 119 243
------------------ ------------------
Total other expense (5,025) (5,295) (15,312) (15,275)
------------------ ------------------
Income before income taxes and
accounting change 10,853 10,350 30,075 23,264
Provision for income taxes (4,016) (3,933) (11,128) (8,840)
------------------ ------------------
Income before accounting change 6,837 6,417 18,947 14,424
Cumulative effect of change in
accounting principle, net of
taxes - - - (8,877)
------------------ ------------------
NET INCOME $ 6,837 $ 6,417 $ 18,947 $ 5,547
================== ==================
Diluted shares outstanding 19,905 19,870 19,897 19,246
================== ==================
NET INCOME PER COMMON SHARE
(DILUTED):
Income before accounting
change $ 0.34 $ 0.32 $ 0.95 $ 0.75
Accounting change - - - (0.46)
------------------ ------------------
Net income per common share $ 0.34 $ 0.32 $ 0.95 $ 0.29
================== ==================
EBITDA:
Income before accounting change $ 6,837 $ 6,417 $ 18,947 $ 14,424
Add: Provision for income taxes 4,016 3,933 11,128 8,840
Interest expense, net 5,025 5,295 15,312 15,275
Depreciation and
amortization (excluding
amounts included in
interest) 1,153 1,046 3,305 3,075
------------------ ------------------
EBITDA $ 17,031 $ 16,691 $ 48,692 $ 41,614
------------------ ------------------
EBITDA margin 28.8% 25.9% 26.9% 24.3%
Depreciation & amortization $ 1,544 $ 1,368 $ 4,565 $ 3,969
Capital expenditures $ 1,367 $ 574 $ 3,933 $ 2,622
BALANCE SHEET DATA:
Cash and cash equivalents $ 21,721 $ 34,625
Accounts receivable $ 28,540 $ 29,150
Inventories $ 19,778 $ 14,504
Accounts payable $ 9,798 $ 12,903
Senior bank debt $ 10,000 $ 37,000
Subordinated debt 204,684 204,716
------------------
Total debt $214,684 $241,716
==================
Shareholders' equity $ 92,137 $ 66,764
Total assets $368,880 $372,452
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 Paragraphs 15 and 16 of this press release. |
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