Chattem, Inc. Reports First Quarter Fiscal 2004 Results; Revises Upward Earnings Estimate for Fiscal Year.Business Editors/Health/Medical Writers CHATTANOOGA, Tenn.--(BUSINESS WIRE)--March 18, 2004 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 record financial results for the fiscal first quarter ended February 29, 2004. Total revenues for the quarter were $61.2 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 $14.9 million and net income excluding debt 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. charges was $6.6 million, representing increases of 5%, 19% and 45%, respectively, over the corresponding year-ago results. Earnings per share excluding debt extinguishment charges for the fiscal 2004 first quarter were $.33, a 43% increase over the first quarter of fiscal 2003 earnings per share. Chattem's earlier estimates for its first fiscal quarter were $58-60 million of total revenues and $.28-.30 earnings per share. After giving effect to charges related to the Company's recent debt refinancing Refinancing An extension and/or increase in amount of existing debt. , the Company had a net loss of $0.7 million, or $.04 per share, for the fiscal 2004 first quarter. See the reconciliation of net income excluding debt extinguishment charges in Chattem's unaudited income statement attached hereto here·to adv. To this document, matter, or proposition. hereto Adverb Formal or law to this place, matter, or document Adv. 1. . The 5% increase in total revenues for the first fiscal quarter of 2004 over the first fiscal quarter of 2003 was principally led by Icy Hot(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) and Gold Bond(R). Icy Hot recorded a 32% gain in sales due primarily to the continuing successful introduction of the Icy Hot Back Patch. Shipments of the revolutionary Icy Hot Medicated medicated /med·i·cat·ed/ (med´i-kat?id) imbued with a medicinal substance. medicated contains a medicinal substance. Sleeve top·i·cal adj. analgesics Analgesics Definition Analgesics are medicines that relieve pain. Purpose Analgesics are those drugs that mainly provide pain relief. , Aspercreme(R), Capzasin(R) and Arthritis Hot(R), also experienced sales increases when compared to the first quarter of fiscal 2003. Selsun blue achieved a 13% increase in domestic 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 in the first quarter versus the comparable year-ago period due to a strong marketing campaign and initial shipments of Selsun blue Conditioner conditioner, n 1. an additive substance used to increase the effectiveness of another substance. 2. a substance added to enamel that improves a sealant's ability to adhere. . Net sales of the Gold Bond franchise increased 2%, led by double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" increases from the Lotion lotion /lo·tion/ (lo´shun) a liquid suspension, solution, or emulsion for external application to the body. lo·tion n. 1. , Cream and Foot segments of the business, which were somewhat offset by declines in the first aid portion of the business which was being launched a year ago. Also enjoying year-over-year sales increases during the first fiscal quarter were Pamprin(R), 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. (R), Herpecin(R), New Phase(R) and Garlique(R). Partially negating these sales increases was a 47% year-over-year sales decline in Chattem's Dexatrim(R) 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 business. This weakness was countered in part by the introduction of the All In One Bar, which experienced better-than-expected initial sell-in at retail accounts. A comprehensive marketing campaign supporting the launch of the Dexatrim All In One Bar will begin in Chattem's second fiscal quarter. International total revenues declined 2% for the first fiscal quarter of 2004, principally due to the termination of a European distributor. For the quarter, gross margin based on total revenues was a strong 72.3%, while selling, general and administrative expense as a percentage of total revenue was 17.7%. Advertising and promotion as a percentage of total revenue was 30.3%. Finally, inventories declined from $19.9 million in the first quarter of fiscal 2003 to $17.6 million in the same quarter of fiscal 2004 despite the year-over-year increase in sales, demonstrating Chattem's continuing commitment to working capital management. Chattem's tax rate for the quarter was 35% compared to 38% in the corresponding quarter of fiscal 2003, reflecting the implementation of a number of foreign and state tax savings initiatives. 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.
As previously reported, during the quarter Chattem completed the refinancing of approximately $210 million of 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. , resulting in a loss net of taxes from the early extinguishment of debt of $7.4 million, or $.37 per share. The Company expects to record an additional loss net of taxes from the early extinguishment of debt of approximately $1.1 million, or $.06 per share, in its second fiscal quarter. These charges do not affect on-going operating results. No other charges related to the debt refinancing are expected thereafter. Annual savings on interest expense from the debt refinancing will be approximately $3.7 million after tax, or $.19 per share. Also as previously reported, during the first fiscal quarter Chattem announced that it had entered into a memorandum of understanding A Memorandum of Understanding (MoU) is a legal document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action and may not imply a legal commitment. with the plaintiffs' steering committee steer·ing committee n. A committee that sets agendas and schedules of business, as for a legislative body or other assemblage. steering committee Noun which memorializes certain settlement terms concerning lawsuits relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Dexatrim with 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 ), and the settlement of certain related suits with its product liability insurance carriers. See the Company's filings with the Securities and Exchange Commission for a complete discussion of this litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. . If the settlement is completed, based on the information currently known to the Company, Chattem expects to record a one-time pre-tax charge of $20-25 million, or $13-16 million net of taxes in the second half of fiscal 2004, although the exact time and amount of this charge cannot yet be determined. During its first fiscal quarter, Chattem purchased 16,000 of its shares at an average price of $19.87 per share. A total of $19.7 million remains available under the Company's previously announced $20 million board stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. authorization. For the balance of the 2004 fiscal year, Chattem currently expects to record results in the following ranges:
($ in millions, except per share data)
Q1A Q2E Q3E Q4E FYE04
--------------------- ------ --------- --------- --------- -----------
Total Revenues $61.2 $64-66 $63-65 $57-59 $245-251
--------------------- ------ --------- --------- --------- -----------
EPS $0.33 $.42-.44 $.41-.43 $.33-.35 $1.48-1.54
--------------------- ------ --------- --------- --------- -----------
All estimates are prior to any cumulative effects of adopting a change in accounting principle which might be recorded during the year, prior to any charges expected to be recorded relative to the Dexatrim with PPA litigation and related insurance coverage litigation discussed above, and before charges associated with the debt refinancing, also discussed above. See the attached reconciliation of estimated per share excluding debt extinguishment charges to estimated earnings per share after giving effect to charges related to the Company's recent debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay . Full fiscal year results may not equal the sum of quarterly projections due to rounding and, in the case of EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. , variations in share count. These estimates 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. and are subject to a number of risks, uncertainties and assumptions, including those described below and in the Company's filings with the Securities and Exchange Commission. Statements in this press release which are not historical facts 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, uncertainties and assumptions that could cause actual outcomes and results to differ materially from those expressed or projected. Chattem will provide an online Web simulcast and rebroadcast of its first quarter 2004 conference call. The live broadcast of the call will be available online at www.chattem.com and www.streetevents.com on Friday, March 19 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 April 19, 2004. 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 Ended
--------------------------
February 29, February 28,
2004 2003
------------- ------------
REVENUES:
Net sales $60,927 $58,125
Royalties 310 300
------------- ------------
Total revenues 61,237 58,425
COSTS AND EXPENSES:
Cost of sales 16,952 17,691
Advertising and promotion 18,532 18,405
Selling, general and administrative 10,829 9,814
------------- ------------
Total costs and expenses 46,313 45,910
------------- ------------
INCOME FROM OPERATIONS 14,924 12,515
------------- ------------
OTHER INCOME (EXPENSE):
Interest expense (4,755) (5,147)
Investment and other income, net 45 34
Loss on early extinguishment of debt (11,309) -
------------- ------------
Total other income (expense) (16,019) (5,113)
------------- ------------
(LOSS) INCOME BEFORE INCOME TAXES (1,095) 7,402
(BENEFIT FROM) PROVISION FOR INCOME TAXES (383) 2,813
------------- ------------
NET (LOSS) INCOME $(712) $4,589
============= ============
DILUTED SHARES OUTSTANDING 19,881 19,949
============= ============
NET (LOSS) INCOME PER COMMON SHARE (DILUTED) $(0.04) $0.23
============= ============
----------------------------------------------------------------------
NET INCOME (EXCLUDING DEBT EXTINGUISHMENT CHARGES) PER COMMON SHARE
(DILUTED):
Net loss $(712)
Add:
Loss on early extinguishment of debt 11,309
Benefit from income taxes (3,958)
-------------
Net income (excluding debt extinguishment
charges) $6,639
=============
Net income (excluding debt extinguishment
charges) per common share (diluted) $0.33
=============
----------------------------------------------------------------------
EBITDA RECONCILIATION:
Net (loss) income $(712) $4,589
Add:
(Benefit from) provision for income taxes (383) 2,813
Interest expense, net (includes loss on
early extinguishment of debt) 16,019 5,113
Depreciation and amortization less amounts
included in interest 1,268 1,134
------------- ------------
EBITDA $16,192 $13,649
------------- ------------
Depreciation & amortization $1,537 $1,499
Capital expenditures $491 $1,464
----------------------------------------------------------------------
MARGIN DATA:
EBITDA margin (EBITDA/total revenues) 26.4% 23.4%
Net (loss) income margin (net (loss)
income/total revenues) -1.2% 7.9%
Net income (excluding debt extinguishment
charges) margin (net income (excluding debt
extinguishment charges)/total revenues) 10.8% -
----------------------------------------------------------------------
February 29, February 28,
2004 2003
------------- ------------
BALANCE SHEET DATA:
Cash and cash equivalents $29,283 $20,726
Restricted cash $32,227 $ -
Accounts receivable, net $34,586 $32,443
Inventories $17,568 $19,885
Accounts payable $11,746 $12,477
Called subordinated debt $30,028 $ -
Senior bank debt 25,000 18,250
Subordinated debt 200,000 204,700
------------- ------------
Total debt $255,028 $222,950
============= ============
Shareholders' equity $97,613 $78,591
Total assets $409,041 $365,032
----------------------------------------------------------------------
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 that could
cause actual outcomes and results to differ materially from those
expressed or projected.
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