Chattem Reports First Quarter Fiscal 2002 Earnings Per Share Up 56%; Increases Sales and Earnings Forecasts for Balance of Fiscal Year.Business Editors CHATTANOOGA, Tenn.--(BUSINESS WIRE)--March 26, 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 first quarter ended February 28, 2002, all of which exceeded results for the first quarter of fiscal 2001 and also the Company's previous estimates. 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 for the quarter were $51.9 million, income before extraordinary gain and accounting change was $2.4 million and earnings before interest taxes, depreciation and amortization (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 ) was $9.5 million, representing increases of 9.4%, 59.6% and 11.2%, respectively, over the corresponding year-ago period results. Earnings per share before extraordinary gain and accounting change for the fiscal 2002 first quarter were $.25, a 56% increase over the first quarter of fiscal 2001 pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. per share (2001 actual earnings per share of $.07 plus $.09 in non-cash amortization) of $.16, a 257% increase from actual earnings per share. Chattem's first quarter results also exceeded its earlier guidance of $48-50 million of net sales, $.20-.22 earnings per share and $8.5-9.0 million of EBITDA. The increase in net sales for the first fiscal quarter of 2002 over the first quarter of 2001 was led by the 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 brands, Dexatrim(R), Gold Bond(R) Powder and Foot, Garlique(R) and pHisoderm(R). Sales of the topical analgesic franchise (FlexAll(R), Icy Hot(R), Aspercreme(R), Sportscreme(R), Capzasin-P(R), Capzasin-HP(R), Arthritis arthritis, painful inflammation of a joint or joints of the body, usually producing heat and redness. There are many kinds of arthritis. In its various forms, arthritis disables more people than any other chronic disorder. Hot(R)) were up 31% over the corresponding year-ago period, led by Icy Hot whose sales increased 97% on the continuing strength of the Icy Hot Pain-Relieving Patch. Dexatrim continued the strong performance exhibited throughout the prior fiscal year with sales increasing 6% over the first quarter of fiscal 2001. Sales of the Company's Gold Bond line of products were up less than 1% from the year-ago period, but both Gold Bond Powder and Gold Bond Foot recorded impressive sales increases, up 12% and 114%, respectively. Sales of the overall Gold Bond franchise were hurt by weak sales of Gold Bond Lotion lotion /lo·tion/ (lo´shun) a liquid suspension, solution, or emulsion for external application to the body. lo·tion n. 1. , adversely affected by the mild winter weather. Garlique experienced a strong first quarter with sales increasing 29% over the same period a year ago. Finally, pHisoderm reversed a declining sales trend and saw revenues increase 12% over the first quarter of fiscal 2001. International sales for the first quarter of 2002 increased 12% over the prior year comparable period, again led by a strong performance from Gold Bond in Canada. During its first quarter Chattem achieved excellent distribution of its four newly launched products: Dexatrim Results(R), Gold Bond Foot Spray, pHisoderm 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. Body Wash and pHisoderm Acne Facial 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 . Media support will begin in the second fiscal quarter for the new Dexatrim and Gold Bond products, and in the third quarter for the new pHisoderm items. Additionally, during the first quarter the Company entered into a license agreement for the pHisoderm clear swab, an acne treatment in a patented cotton tip swab delivery system. Chattem has likewise received strong acceptance from the trade for this product and will begin shipping it during the third fiscal quarter. Commenting on the first quarter results, Zan Guerry, Chattem's Chairman and Chief Executive Officer, said, "We were extremely pleased with our business in our first fiscal quarter of 2002. All of our major brands performed at or above expectations, and we were gratified grat·i·fy tr.v. grat·i·fied, grat·i·fy·ing, grat·i·fies 1. To please or satisfy: His achievement gratified his father. See Synonyms at please. 2. by the market's reception of our new line extensions. We believe this performance, combined with the expected positive effect of soon-to-be acquired 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), should position us for another strong year of sales and earnings in 2002." For the quarter, gross margins were 72.1%, while selling, general and administrative expense (SG&A) as a percentage of sales was 18.4%. Advertising and promotion as a percentage of sales was 31.0%. The Company's EBITDA margin (EBITDA divided by net sales) was 18.4%. SG&A and EBITDA margin were both adversely affected by the charge taken relative to Kmart, discussed below. 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 49, compared to 61 at the end of the first quarter of 2001. Days' sales outstanding were up slightly from the 2001 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. level of 42, reflecting the Company's sale of seasonal products with dated terms. Finally, inventories at quarter-end were $15.5 million, an improvement of $565,000 from the first quarter of 2001, and modestly up from $14.3 million at the end of the 2001 fiscal year, indicating larger inventories to support the Company's new product launches. During the quarter Chattem increased its allowance for doubtful accounts Allowance for Doubtful Accounts An estimation made by a company and documented on its balance sheet for receivables that might go uncollected. Notes: It is standard practice for a company to have funds set aside for money that cannot be collected. by $1.0 million in light of a $1.2 million outstanding receivable from Kmart Corporation, which filed a Chapter 11 bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most petition in January. As was previously announced, on March 5, 2002 Chattem entered into a definitive agreement with 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. to purchase worldwide rights (except India) for Selsun Blue, a leading medicated medicated /med·i·cat·ed/ (med´i-kat?id) imbued with a medicinal substance. medicated contains a medicinal substance. dandruff dandruff, excessive flaking of skin from the scalp, apparent as dry or greasy diffuse scaling with variable itching. It is the sign of a skin disease, such as seborrhea or a fungal infection. shampoo shampoo a cleaning agent, usually liquid, for hair; usually consists of a detergent and perfume. Some, usually referred to as medicated shampoos, contain therapeutic substances such as parasiticides, antimicrobials, ketatolytic agents, and antiseborrheic compounds such as selenium , for $75 million cash. Selsun Blue's 2001 net sales were approximately $41 million. Chattem expects the transaction to close during its current fiscal quarter. For the balance of fiscal 2002, the Company expects Selsun Blue to contribute net sales of $20-22 million, EBITDA of $6-7 million and earnings per share of approximately $.20-.22. For fiscal 2003, Chattem currently expects Selsun Blue to contribute $36-40 million in net sales. Regarding revised guidance for fiscal 2002, the Company now estimates net sales to fall in a range of $225-230 million, earnings per share to be in the range of $1.57-1.62 and EBITDA to be from $50-52 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. On a quarterly basis, Chattem currently estimates the following ranges of performance:
(in millions, except per share data)
---------- --------- ----------- ------------ ---------- ------------
Q1 Q2 Q3 Q4 FY02
---------- --------- ----------- ------------ ---------- ------------
Net Sales 51.9 62-64 58-60 54-56 225-230
---------- --------- ----------- ------------ ---------- ------------
EPS .25 .48-.50 .48-.50 .36-.38 1.57-1.62
---------- --------- ----------- ------------ ---------- ------------
EBITDA 9.6 14-15 14-15 11-12 50-52
---------- --------- ----------- ------------ ---------- ------------
Full fiscal year projected 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. During the first fiscal quarter the Company repurchased 44,000 shares of its stock. A total of approximately $6.0 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 The right or permission to use a system resource; the process of granting access. See access control. . Chattem adopted 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") regarding 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 effective its first quarter. Adoption of SFAS 142 eliminated amortization of intangibles with indefinite lives, which positively impacted the Company's earnings by $.09 during the first quarter of 2002. In addition, SFAS 142 provides new techniques for measuring 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 intangible assets with indefinite lives. As a result of the adoption of SFAS 142, the Company was required to have all intangible assets with indefinite lives appraised to determine their fair market value. To the extent any individual intangible assets with an indefinite life is being carried on the books in excess of fair market value a write-down to fair market value is required. SFAS 142 does not permit the Company to write-up above book value any intangible asset with an indefinite life where the fair market value exceeds book value. To conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" these new measurement techniques, the Company recorded a one-time non-cash write-down of $8,877,000 or $.95 per share (net of tax) in its income statement during the first fiscal quarter of 2002. This charge is the cumulative effect of adopting SFAS 142 and does not affect the Company's operations. In total, the Company's intangible assets with indefinite lives were independently appraised at values significantly greater than their book value. During the first quarter, Chattem implemented Emerging Issues Task Force bulletins Numbers 14 and 25 (EITF-00-14 and EITF-00-25). These new accounting standards had no impact on the Company's first quarter net income; however, they did have the effect of classifying certain promotional costs that were previously reported as a component of advertising and promotion expense as reduction of net revenues. This resulted in a reduction in first quarter 2002 revenues of $3,474,812 and a reduction of first quarter 2001 revenues of $4,963,000, with corresponding reductions in advertising and promotion expense during the respective periods. The discussion above of net sales is prior to making these adjustments for ease of comparison. Paragraphs 7, 10 and 11 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 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 PPA 1. Palpation, Percussion & Ausculation 2. Pittsburgh pneumonia agent 3. Postpartum amenorrhea 4. Price per accession 5. Pure pulmonary atresia in Dexatrim; the possible effect of the negative public perception resulting from product liability claims or sales of Dexatrim products without PPA; the lack of availability, limits of coverage and expense related to product liability insurance; the possibility of other product 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; the impact of brand acquisitions and divestitures; the impact of extraordinary gains or losses resulting from product acquisitions or divestitures, financings or debt repayments; 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 integrate Selsun Blue into its own operations; the Company's ability to sell and market Selsun Blue internationally where it has only limited experience and infrastructure; 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 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 first quarter 2002 conference call. The live broadcast of the call will be available online at www.chattem.com and www.streetevents.com on Wednesday, March 27, 2002 beginning at 8:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . The online replay will follow shortly after the call and continue through April 27, 2002.
CHATTEM, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
For the Three Months Ended February 28,
2002 2001
---- ----
NET SALES as previously reported $ 51,889 $ 47,420
Sales deductions related to
EITF 00-14 and EITF 00-25 3,475 4,963
-----------------------------
NET SALES 48,414 42,457
COSTS AND EXPENSES:
Cost of sales 14,461 12,484
Advertising and promotion 15,874 16,339
Selling, general
and administrative 9,537 7,273
-----------------------------
Total costs and expenses 39,872 36,096
-----------------------------
INCOME FROM OPERATIONS 8,542 6,361
-----------------------------
OTHER INCOME (EXPENSE):
Interest expense (4,841) (6,504)
Investment and other
income, net 106 1,089
-----------------------------
Total other expense (4,735) (5,415)
-----------------------------
Income before income taxes,
extraordinary items, and
accounting change 3,807 946
Provision for income taxes (1,435) (360)
-----------------------------
Income before extraordinary gain
and accounting change 2,372 586
Extraordinary gain on early
extinguishment of debt, net
of taxes 7,559
Cumulative effect of change in
accounting principle, net
of taxes (8,877) -
-----------------------------
NET INCOME (LOSS) $ (6,505) $ 8,145
=============================
Diluted shares outstanding 9,318 8,889
=============================
NET INCOME (LOSS) PER COMMON
SHARE (DILUTED):
Income before extraordinary
gain and accounting change $ 0.25 $ 0.07
Extraordinary gain $ - $ 0.85
Accounting change $ (0.95) $ -
-----------------------------
Net income (loss) per
common share $ (0.70) $ 0.92
=============================
EBITDA $ 9,537 $ 8,575
EBITDA margin 18.4% 18.1%
Depreciation & amortization $ 1,263 $ 2,533
Capital expenditures $ 510 $ 332
BALANCE SHEET DATA:
Cash and cash equivalents $ 40,606 $ 37,581
Accounts receivable $ 28,114 $ 31,977
Inventories $ 15,520 $ 16,085
Accounts payable $ 5,908 $ 5,826
Senior bank debt $ - $ -
Subordinated debt $ 204,732 $ 226,306
-----------------------------
Total debt $ 204,732 $ 226,306
=============================
Shareholders' equity $ 45,619 $ 46,052
Total assets $ 296,505 $ 327,473
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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