Chattem Reports Increase in Revenues and Earnings for the Second Quarter and First Six Months of Fiscal 2008.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. -- Chattem, Inc. (NASDAQ NASDAQin 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, today announced financial results for the second fiscal quarter and six months ended May 31, 2008. "The continued strength of our Big 6 brands, ACT[R], Gold Bond[R], Icy Hot[R], Cortizone-10[R], Selsun Sel·sun A trademark for a preparation of selenium disulfide. [R] and Unisom[R], behind effective advertising, and the early results of the 2008 new product introductions has maintained our positive momentum and put us in a strong position for the second half of fiscal 2008," said Zan Guerry, Chairman and Chief Executive Officer of Chattem. "Our revenue growth of 11% for the first six months was driven by ACT, Gold Bond, Unisom, Icy Hot and Selsun, and an additional month of revenue from the five brands acquired from Johnson & Johnson on January 2, 2007. Gross margins continued to improve and we utilized our free cash flow to reduce outstanding debt and 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. our common stock," Guerry also highlighted. FIRST SIX MONTHS FINANCIAL RESULTS Total revenues for the first six months of fiscal 2008 were $237.5 million compared to total revenues of $213.8 million in the prior year period, representing an 11% increase. Revenue growth for the first half of fiscal 2008 was led by the five acquired brands and strong sales growth from Gold Bond, Icy Hot, Selsun and Aspercreme[R]. Offsetting these increases was a reduction in sales of Dexatrim[R] due to increased competition in the diet aid category, Icy Hot Heat Therapy as a result of our voluntary recall of the product in our first fiscal quarter of 2008 and Icy Hot Pro Therapy[R] resulting from decreased distribution. Excluding the impact of Icy Hot Heat Therapy and Icy Hot Pro Therapy and the additional one month of revenue from the five acquired brands, total revenues increased 9% in the first six months of fiscal 2008 compared to the prior year period. Net income in the first six months of fiscal 2008 was $35.6 million, compared to $28.6 million in the prior year period, and earnings per share were $1.82, compared to $1.48 in the prior year period. Net income in the first six months of fiscal 2008 included a 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, employee stock option expenses under 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 123R and non-recurring expenses related to the voluntary recall of Icy Hot Heat Therapy. Net income in the first six months of fiscal 2007 included a loss on early extinguishment of debt and employee stock option expenses under SFAS 123R. As adjusted to exclude these items, net income in the first six months of fiscal 2008 was $41.5 million, compared to $31.7 million in the prior year period, and earnings per share were $2.12, compared to $1.65 in the prior year period, an increase of 28%. SECOND QUARTER FINANCIAL RESULTS Total revenues for the second quarter of fiscal 2008 were $116.7 million compared to total revenues of $113.0 million in the prior year quarter, representing a 3% increase. Revenue growth for the quarter was driven by strong sales of ACT, Icy Hot, Gold Bond, Unisom and Cortizone-10. These sales increases were offset by lower sales 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], Dexatrim, Icy Hot Heat Therapy and Icy Hot Pro Therapy. Excluding the impact of Icy Hot Heat Therapy and Icy Hot Pro Therapy, total revenues increased 6% in the second quarter of fiscal 2008 compared to the prior year quarter. Net income for the second quarter of fiscal 2008 was $20.7 million, up 39%, compared to net income of $14.9 million in the prior year quarter. Earnings per share for the second quarter were $1.06, up 38%, compared to $0.77 in the prior year quarter. Net income in the second quarter of fiscal 2008 included employee stock option expenses under SFAS 123R. Net income in the second quarter of fiscal 2007 included employee stock option expenses under SFAS 123R and a loss on early extinguishment of debt. As adjusted to exclude these items, net income in the second quarter of fiscal 2008 was $21.5 million, or $1.10 per share, compared to $17.3 million, or $0.89 per share, in the prior year quarter, up 24% for both net income and earnings per share as compared to the prior year. KEY HIGHLIGHTS * Gross margin for the second quarter of fiscal 2008 was 72.0%, compared to 68.9% in the prior year quarter. For the first six months of fiscal 2008 gross margin was 71.6% compared to 69.1% for the prior year period. The gross margin increase was largely attributable to the integration of the manufacturing of certain of the brands acquired from Johnson & Johnson in January 2007. To partially offset cost increases, effective April 18, 2008 the Company implemented a 5% price increase on approximately 15% of its domestic volume across various brands. * Advertising and promotion expense (A&P) in the second quarter of fiscal 2008 increased by $0.5 million to $30.2 million, or 25.9% as a percentage of total revenues for the second quarter of fiscal 2008, as compared to 26.2% in the prior year quarter. For the first six months of fiscal 2008 A&P expense increased by $6.2 million to $64.7 million, from $58.5 million in the prior year period, but remained consistent at 27.3% of total revenues. * Selling, general and administrative expenses (SG&A) in the second quarter of fiscal 2008 increased by $0.9 million to $15.2 million or 13.0% as a percentage of total revenues for the second quarter of fiscal 2008, as compared to 12.7% in the prior year quarter. SG&A increased by $3.9 million during the first six months of fiscal 2008 to $30.7 million or 12.9% as a percentage of total revenues, as compared to 12.5% for the first six months of fiscal 2007. In the second quarter and first six months of fiscal 2008, the Company absorbed transition services costs similar to those paid to Johnson & Johnson related to freight and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. that were recorded as acquisition expenses in the second quarter and first six months of fiscal 2007. * 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.
* Interest expense decreased $1.8 million in the second quarter of fiscal 2008 as compared to the prior year quarter and $2.4 million for the first six months of fiscal 2008 as compared to the same year ago period reflecting the use of free cash flow to repay debt. * In the second quarter of fiscal 2008, the Company repurchased 183,681 shares of the Company's common stock for approximately $12.3 million, or an average cost of $67.04 per share. Subsequent to May 31, 2008 and through July 9, 2008, the Company purchased an additional 230,900 shares of the Company's common stock for approximately $13.8 million, or $59.65 per share. During fiscal 2008, the Company has repurchased a total of 418,281 shares of the Company's common stock for approximately $26.3 million, or $62.94 per share. FISCAL 2008 GUIDANCE The Company currently expects earnings per share in fiscal 2008 to be in the range of $4.00 - $4.20, trending toward the upper end of this range, excluding the non-cash stock option expense under SFAS 123R of $0.21 per share, any non-cash loss on debt extinguishment, which was $0.02 per share in the first six months of fiscal 2008, and the estimated $0.20 per share impact of the non-recurring recall expenses recorded in connection with the Company's February 8, 2008 voluntary recall of its air activated activated a state of being more than usually active. In biological systems this is usually brought about by chemical or electrical means. Commonly said of pharmaceutical and chemical products. Icy Hot Heat Therapy patch product. NON-GAAP FINANCIAL MEASURES In addition to presenting financial results in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with accounting principles generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , or U.S. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , this earnings release also presents certain non-GAAP financial measures, including adjusted net income, adjusted earnings per share, EBITDA, EBITDA excluding one-time product recall expenses and free cash flow. A reconciliation of adjusted net income, EBITDA and EBITDA excluding one-time product recall expenses to net income reported in accordance with GAAP for the fiscal second quarter and first six months of fiscal 2008 and fiscal 2007 is provided in the unaudited consolidated statements of income attached hereto here·to adv. To this document, matter, or proposition. hereto Adverb Formal or law to this place, matter, or document Adv. 1. . As discussed in this release, the Company defines free cash flow as cash flows from operations less capital expenditures. A reconciliation of free cash flow to cash flows from operations reported in accordance with GAAP is presented in the unaudited financial statements attached hereto. Chattem believes these non-GAAP financial measures provide both management and investors with additional insight into the Company's operational strength and ongoing operating performance. These non-GAAP financial measures should be considered in conjunction with, but not as a substitute for, the financial information presented in accordance with U.S. GAAP. See the accompanying Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. under which this earnings release is furnished fur·nish tr.v. fur·nished, fur·nish·ing, fur·nish·es 1. To equip with what is needed, especially to provide furniture for. 2. to the Securities and Exchange Commission for further discussion of the utility of these non-GAAP measures and the purposes for which they are used by management. FORWARD LOOKING STATEMENTS This press release contains 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 federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words, "believes," "expects," "anticipates," "plans," "estimates" or similar expressions. Examples of forward-looking statements in this press release include the estimated product recall expenses and the fiscal 2008 earnings per share guidance. Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on beliefs and assumptions of management, which in turn are based on currently available information. The forward-looking statements also involve risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict. Important factors that could cause actual results to differ materially from those contained in any forward-looking statement include, but are not limited to the expected impact of the product recall on sales of other 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 products, the amount of the estimated product recall expenses and the risk factors disclosed in our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended November 30, 2007, as added or revised by our subsequent Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. , under the caption "Risk Factors." We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of these in light of new information or future events. WEBCAST Chattem will provide an online Web simulcast and rebroadcast of its fiscal second quarter 2008 conference call. The live broadcast of the call will be available online at www.chattem.com and www.streetevents.com today, Thursday July 10, 2008 beginning at 9:00 a.m. ET. The online replay will follow shortly after the call and be available through July 17, 2008. Please note that the 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. . For additional information please contact Robert Long Robert Long refer to:
ABOUT CHATTEM Chattem, Inc. is a leading marketer and manufacturer of a broad portfolio of branded OTC OTC See: Over-the-counter. OTC See over-the-counter market (OTC). healthcare products, toiletries toi·let·ry n. pl. toi·let·ries An article, such as toothpaste or a hairbrush, used in personal grooming or dressing. toiletries npl → artículos mpl de aseo (= and dietary supplements Noun 1. dietary supplement - something added to complete a diet or to make up for a dietary deficiency diet - a prescribed selection of foods vitamin pill - a pill containing one or more vitamins; taken as a dietary supplement . The Company's products target niche market A niche market also known as a target market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. segments and are among the market leaders in their respective categories across food, drug and mass merchandisers. The Company's portfolio of products includes well-recognized brands such as Icy Hot, Gold Bond, 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. , ACT, Cortizone-10 and Unisom. Chattem conducts a portion of its global business through subsidiaries in the United Kingdom, Ireland and Canada. For more information, please visit the Company's website: www.chattem.com. [TABLE OMITTED] [TABLE OMITTED] |
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