Chattem Announces First Quarter Fiscal 2001 Financial Results Exceeding Earlier Guidance, and $7.6 Million Gain On Debt Retirement.Business Editors
CHATTANOOGA, Tenn.--(BUSINESS WIRE)--March 22, 2001
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 first quarter ended February 28, 2001.
Net sales Net Sales
The amount a seller receives from the buyer after costs associated with the sale are deducted.
This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the quarter were $47.4 million, a 5% increase over first quarter 2000 pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts.
The phrase pro forma sales, which exclude sales of the BAN(R) and Norwich(R) brands. First quarter 2001 operating income Operating Income
The profit realized from a business' own operations.
This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $6.4 million, while 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.
The 5% increase in net sales for the fiscal first quarter of 2001 over pro forma first quarter 2000 results was led by Dexatrim(R), which exceeded expectations. Aided by the launch of Dexatrim Natural 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. Free, Dexatrim net sales in the first fiscal quarter increased almost 5% over the first quarter of 2000, despite the discontinuation dis·con·tin·u·a·tion
A cessation; a discontinuance.
Noun 1. discontinuation - the act of discontinuing or breaking off; an interruption (temporary or permanent)
discontinuance of Dexatrim with PPA PPA 1. Palpation, Percussion & Ausculation 2. Pittsburgh pneumonia agent 3. Postpartum amenorrhea 4. Price per accession 5. Pure pulmonary atresia , which was being sold in the corresponding year-ago period. Also, sales of the Company's toiletry and skin care brands were up approximately 13% from the first quarter of 2000, led by the performances of 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) and pHisoderm(R). Sales of the Gold Bond(R) family of products improved approximately 3% from the first quarter of 2000, led by Gold Bond Lotion lotion /lo·tion/ (lo´shun) a liquid suspension, solution, or emulsion for external application to the body.
1. , which benefited from the launch of Gold Bond Fragrance Free Lotion, a colder winter and an enhanced marketing program. Finally, the Company'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.
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 (Flexall(R), Icy Hot(R), Aspercreme(R), Sportscreme(R), Capzasin-P(R), Capzasin-HP(R), Arthritis Hot(R)), again performed solidly.
Net sales of $47.4 million bettered the Company's earlier guidance of $41-43 million. Likewise, earnings per share before extraordinary gain for the quarter of $.07 exceeded the Company's earlier forecast of a loss of $.04-$.08 and EBITDA of $8.6 million exceeded Chattem's earlier prediction of $6-7 million.
During the quarter, the Company recorded an extraordinary after-tax gain of $7.6 million or $.85 per share from 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 resulting from the successful completion of the tender offer and consent solicitation Consent Solicitation
A solicitation by one party to the stakeholders of a particular security for the consent of a material change.
Should the majority of stakeholders provide valid consent prior to the consent expiry date, the issuer may then follow through with pursuant to which Chattem repurchased a total of approximately $78 million of 8 7/8% and 12 3/4% senior subordinated notes for approximately $65 million. This extraordinary gain contributed to the $8.4 million or 22.3% increase in shareholders' equity Shareholders' Equity
A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. achieved since the end of the 2000 fiscal year.
For the quarter, gross margin was a strong 73.7% while selling, general and administrative expense as a percentage of sales was 15.8%. Advertising and promotion as a percentage of sales for the quarter was 44.4%, slightly higher than the annual target of 38-40%, reflecting, in particular, aggressive marketing campaigns supporting Dexatrim and Gold Bond, and the timing of certain promotional payments. Chattem maintained its strong EBITDA margins (EBITDA divided by net sales) of 18.1% for the quarter. Finally, 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 decreased to 61 in the first quarter of 2001 from 67 in the fourth quarter of 2000, and from 75 in the year-ago corresponding 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 associated principally with the acquisition of certain brands. These expenses, net of tax, amounted to $1.0 million, or $.11 per share, for the first fiscal quarter. For the 2001 fiscal year, these expenses are expected to be $3.9 million, or $.43 per share. The Company is currently 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. The Financial Accounting Standards Board Financial Accounting Standards Board (FASB)
Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). has issued a revised exposure draft of a statement which, among other things, will have the effect of eliminating amortization of goodwill and intangibles with an 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 life. The change in accounting principle is currently expected to become effective during the third quarter and positively impact the Company's fourth fiscal quarter income statement by approximately $.10 per share.
For the balance of the fiscal year, the Company is reaffirming its guidance given in the fourth quarter 2000 earnings release, and is cautiously optimistic op·ti·mist
1. One who usually expects a favorable outcome.
2. A believer in philosophical optimism.
op that actual results will now be at the upper end of the ranges indicated in that guidance.
Chattem has begun shipping Dexatrim Natural Ephedrine Free and the Icy Hot Pain-Relieving Patch, both of which will be supported with heavy media and promotional spending, beginning in the second fiscal quarter. The Company also expects to launch yet-to-be announced Gold Bond and pHisoderm line extensions and additional Dexatrim products during its fourth fiscal quarter.
No shares of the Company's stock were repurchased in the first fiscal quarter. A total of approximately $6.6 million remains available under the Company's $10 million board 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.
As they are expected to increase the acquiring company's future earnings, these acquisitions tend to be favorable for the company's market price. , divestitures of non-core brands and strategic alliances. Chattem continues to hold approximately $35 million from the sale of BAN in September, 2000 which can be used for acquisitions and the further reduction of indebtedness.
Paragraph eight above of this press release constitutes 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, the impact of the loss of sales from Dexatrim with ephedrine; the increased likelihood that claims relating to relating to relate prep → concernant
relating to relate prep → bezüglich +gen, mit Bezug auf +acc the existence of PPA in Dexatrim will be filed against the Company; 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 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 indentures; government regulations; risk of loss of material customers; public perception regarding the Company's products; dependence on third party manufacturers; environmental matters; product liability insurance and other risks described in the Company's Securities and Exchange Commission filings.
Chattem will provide an online Web simulcast and rebroadcast of its first quarter 2001 conference call. The live broadcast of the call will be available online at www.chattem.com and www.streetevents.com on Friday, March 23, 2001 beginning at 8:30 a.m. EST EST electroshock therapy.
electroshock therapy . The online replay will follow shortly after the call and continue through April 23, 2001. Please note Webcast requires RealPlayer G2 Software to participate in the conference call. Software is available free at www.real.com. Please allow up to 30 minutes for download to occur, depending on connection.
CHATTEM, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (unaudited) For the Three Months Ended February 28, February 29, 2001 2000 ---- ---- --------- --------- --------- --------- NET SALES $47,420 $62,371 ------------------------------------ --------- --------- COSTS AND EXPENSES: Cost of sales 12,484 16,682 Advertising and promotion 21,065 23,582 Selling, general and administrative 7,510 7,403 ------------------------------------ --------- --------- Total costs and expenses 41,059 47,667 ------------------------------------ --------- --------- INCOME FROM OPERATIONS 6,361 14,704 ------------------------------------ --------- --------- OTHER INCOME (EXPENSE): Interest expense (6,504) (8,974) Investment and other income, net 1,089 74 ------------------------------------ Total other income (expense) (5,415) (8,900) ------------------------------------ --------- --------- Income before income taxes 946 5,804 Provision for income taxes (360) (2,196) ------------------------------------ --------- --------- Income before extraordinary gain and accounting change 586 3,608 --------- --------- --------- --------- Extraordinary gain 7,559 - Cumulative effect of change in accounting principle, net of taxes - (542) ------------------------------------ --------- --------- NET INCOME $8,145 $3,066 ==================================== ========= ========= Diluted shares outstanding 8,889 9,861 ==================================== NET INCOME PER COMMON SHARE (DILUTED): Continuing operations $ 0.07 $ 0.37 Extraordinary gain $ 0.85 $ - Cumulative effect of accounting change $ - $(0.06) ------------------------------------ Net income per common share $ 0.92 $ 0.31 ==================================== CASH EARNINGS: Cash earnings from continuing operations $1,564 $5,268 ==================================== Cash earnings per share $ 0.18 $ 0.53 ==================================== EBITDA $8,566 $17,934 EBITDA margin 18.1% 28.8% Depreciation & amortization $2,533 $3,742 Capital expenditures $ 332 $2,814 BALANCE SHEET DATA: Cash and cash equivalents $ 37,581 $ 2,481 Accounts receivable $ 31,977 $ 51,861 Inventories $ 16,085 $ 29,450 Accounts payable $ 5,826 $ 12,235 Senior bank debt $ - $ 58,600 Subordinated debt $226,306 $309,368 ------------------------------------ Total debt $226,306 $367,968 ==================================== Shareholders' equity $ 46,052 $ 50,144 Total assets $327,473 $488,538
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 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 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.