Chattem Reports Increased Revenues and Earnings; Affirms Fiscal 2009 Guidance.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 Chattem NASDAQ: CHTT is a Chattanooga, TN based producer and marketer of over-the-counter healthcare products, toiletries, dietary supplements, topical analgesics, and medicated skin care products. , 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 CHTT may refer to:
"The strength of Gold Bond[R], ACT[R], Icy Hot[R] and Cortizone-10[R] and the successes of our 2009 new product launches for these brands produced another period of strong earnings and operating results. Our earnings and cash flow growth has allowed us to increase our cash reserves Cash reserves See: Cash investments cash reserves Investment funds that are held in short-term assets such as Treasury bills and certificates of deposit until more permanent investment opportunities are available. and manage our capital structure by reducing debt and repurchasing approximately 491,000 shares of our common stock in the first nine months of fiscal 2009. The Company's domestic business, representing 95% of our total revenues, achieved growth of 3.9% and 3.5% over the year ago nine and three month periods, respectively, when excluding the discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: Icy Hot Heat Therapy product from the first quarter of fiscal 2008," stated Zan Guerry, Chairman and Chief Executive Officer of Chattem. FIRST NINE MONTHS FINANCIAL RESULTS Total revenues for the first nine months of fiscal 2009 were $353.1 million, compared to total revenues of $349.4 million in the prior year period, representing a 1.1% increase. Total domestic revenues, excluding $1.9 million of sales of Icy Hot Heat Therapy, which was recalled in the first quarter of fiscal 2008, increased $12.6 million, or 3.9%, in the first nine months of fiscal 2009 to $335.6 million, as compared to $323.0 million in the prior year period. The increase in domestic revenues was led by sales of Gold Bond, ACT, Icy Hot and Cortizone-10. Offsetting these increases were lower revenues from certain smaller brands and an $8.5 million, or 51%, increase in promotional programs recorded as a reduction of revenue rather than as advertising and promotion expense in our consolidated statement of income during the nine months ended August 31, 2009 as compared to the same year ago period. Revenues of our international division decreased by $7.0 million, or 29%, in the first nine months of fiscal 2009, resulting from our change in distributors in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , general sales weakness in our European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. markets due to the weak economy and an adverse foreign exchange rate impact. On a constant currency basis, international revenues for the first nine months of fiscal 2009 decreased $4.6 million, or 19%, compared to the prior year period. Net income in the first nine months of fiscal 2009 was $67.2 million, compared to $49.6 million in the prior year period, and earnings per share were $3.48, compared to $2.56 in the prior year period. Net income in the first nine months of fiscal 2009 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 and 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. Net income in the first nine months of fiscal 2008 included a loss on early extinguishment of debt, employee stock option expenses under SFAS 123R, non-recurring expenses related to the voluntary recall of Icy Hot Heat Therapy and a settlement related to claims alleging injury as a result of ingestion ingestion /in·ges·tion/ (-chun) the taking of food, drugs, etc., into the body by mouth. in·ges·tion n. 1. The act of taking food and drink into the body by the mouth. 2. of Dexatrim[R] products in 1998 through 2003. As adjusted to exclude these items, net income in the first nine months of fiscal 2009 was $71.5 million, compared to $63.8 million in the prior year period, and earnings per share were $3.70, compared to $3.29 in the prior year period, an increase of 12% for both net income and earnings per share, as compared to the prior year period. THIRD QUARTER FINANCIAL RESULTS Total revenues for the third quarter of fiscal 2009 were $115.2 million compared to total revenues of $111.9 million in the prior year quarter, representing a 2.9% increase. Total domestic revenues increased $3.6 million, or 3.5%, in the third quarter of fiscal 2009 to $108.6 million, as compared to $105.0 million in the prior year period. The increase in domestic revenues was led by sales of Gold Bond, ACT, Icy Hot and Cortizone-10. Partially offsetting these increases were decreased sales of certain smaller brands and a $1.8 million, or 30%, increase in promotional programs recorded as a reduction of revenue rather than as advertising and promotion expense in our consolidated statement of income during the quarter ended August 31, 2009 as compared to the same year ago period. Revenues of our international division decreased by $0.4 million, or 5.6%, in the third quarter of fiscal 2009 resulting from our change in distributors in Latin America, general sales weakness in our European markets due to the weak economy and an adverse foreign exchange rate impact. On a constant currency basis, international revenues for the third quarter of fiscal 2009 increased $0.2 million, or 3%, compared to the prior year period. Net income in the third quarter of fiscal 2009 was $23.4 million compared to net income of $14.0 million in the prior year quarter. Earnings per share in the third quarter of fiscal 2009 were $1.22 compared to $0.73 in the prior year quarter. Net income in the third quarter of fiscal 2009 included a loss on early extinguishment of debt and employee stock option expenses under SFAS 123R. Net income in the third quarter of fiscal 2008 included employee stock option expenses under SFAS 123R, a non-recurring adjustment related to the voluntary recall of Icy Hot Heat Therapy products and a settlement related to claims alleging injury as a result of ingestion of Dexatrim products in 1998 through 2003. As adjusted to exclude these items, net income in the third quarter of fiscal 2009 was $25.0 million, or $1.31 per share, compared to $22.3 million, or $1.17 per share, in the prior year quarter, reflecting increases of 12% for both net income and earnings per share, as compared to the prior year quarter. KEY FINANCIAL HIGHLIGHTS * Alterations in the strategy for trade promotions by our retail customers has resulted in greater utilization of price promotion programs in fiscal 2009 as compared to fiscal 2008 (an increase of $8.5 million for the first nine months of fiscal 2009 as compared to the same period in 2008). The cost of these price promotion programs is reflected as a reduction of our total revenues and not as a component of advertising and promotion expense (A&P). The utilization by retailers of more price promotion programs and the resulting impact on our reported total revenues for fiscal 2009 also arithmetically reduces our gross margin, decreases our reported A&P and the ratio of A&P as a percentage of total revenues and increases the ratio of selling, general and administrative expense as a percentage of total revenues. * Gross margin for the first nine months of fiscal 2009 was 69.7%, compared to 71.6% for the prior year period. For the third quarter of fiscal 2009, gross margin was 69.8%, compared to 71.6% in the prior year quarter. These gross margin decreases resulted in part from higher input costs for certain product components in fiscal 2009 as compared to the same year ago periods, offset in part by consistent, and in some cases slightly lower, costs realized on certain other input components. * Advertising and promotion expense (A&P) for the first nine months of fiscal 2009 decreased to $78.4 million or 22.2% as a percentage of total revenues, from $91.5 million, or 26.2% as a percentage of total revenues in the prior year period. For the third quarter of fiscal 2009, A&P decreased to $22.9 million, or 19.8% as a percentage of total revenues, as compared to 23.9% in the prior year quarter. We have continued to support the new product launches for fiscal 2009, which are principally from the Gold Bond, ACT, Icy Hot, Cortizone-10 and 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] franchises, with strong A&P support to drive consumer trial of the new products and continued growth of the base business. * Selling, general and administrative expenses (SG&A) for the first nine months of fiscal 2009 decreased to $45.0 million or 12.8% as a percentage of total revenues, from $45.7 million, or 13.0% as a percentage of total revenues for the first nine months of fiscal 2008. SG&A as a percentage of total revenues for the third quarter of fiscal 2009 decreased to 13.3% as compared to 13.4% in the prior year quarter. * 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.
When a person begins a civil lawsuit, the person enters into a process called litigation. settlement costs and one-time product recall expenses, of $121.7 million, or 34.8% of total revenues, for the first nine months of fiscal 2008. EBITDA was $45.7 million, or 39.6% of total revenues, for the third quarter of fiscal 2009, up 10.0%, as compared to EBITDA, excluding litigation settlement costs and one-time product recall expenses, of $41.5 million, or 37.1% of total revenues, for the prior year quarter. * For the first nine months of fiscal 2009, cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses increased to $83.9 million, compared to $77.3 million in the year ago period. Free cash flow, defined as cash flow from operations less capital expenditures, was $80.3 million, compared to $73.7 million in the year ago period. Our total debt was reduced during the first nine months of fiscal 2009 by $59.6 million to $399.9 million as a result of the repayment of $21.8 million of senior bank debt, the issuance of 487,123 shares of our common stock on December 4, 2008 in exchange for $28.7 million of our 2% Convertible Senior Notes due 2013 and the 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. of $9.1 million of our 7.0% Senior Subordinated Notes (7% Notes) in the third quarter of fiscal 2009 at prices approximately equal to the par value of the 7% Notes. Subsequent to August 31, 2009, we have repurchased an additional $7.0 million of the 7% Notes at a premium to par value of 1.5%. As of the date of this release, no amounts are outstanding under our $100.0 million revolving line-of-credit. * Effective September 30, 2009, we entered into an amendment to the credit agreement that governs our revolving line-of-credit and senior secured bank term loan to, among other things, extend the maturity date of the revolving line-of-credit portion to January 2013 and increase our flexibility to repurchase shares of our common stock and the 7% Notes. In connection with the amendment to our credit agreement our Board of Directors increased the authorization The right or permission to use a system resource; the process of granting access. See access control. under our stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program to repurchase shares of our common stock to a total of $100.0 million. * In the first nine months of fiscal 2009, we repurchased 491,392 shares of our common stock for approximately $26.1 million, or an average cost of $53.13 per share. FISCAL 2009 GUIDANCE We currently expect earnings per share in fiscal 2009 to be in the range of $4.80 - $4.90, excluding non-cash employee stock option expense under SFAS 123R of $0.26 per share, any loss on debt extinguishment, which was $0.04 per share for the first nine months of fiscal 2009, and any non-cash brand asset value 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. charge. 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 U.S. GAAP for the first nine months and third fiscal quarter of fiscal 2009 and fiscal 2008 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 U.S. 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 financial 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 stock option expense under SFAS 123R for fiscal 2009 and the fiscal 2009 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 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, 2008, 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 third fiscal quarter conference call. The live broadcast of the call will be available online at www.chattem.com and www.streetevents.com today, October 6, 2009, beginning at 8:30 a.m. ET. The online replay will follow shortly after the call and be available through October 13, 2009. 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, ACT, Cortizone-10 and Unisom[R]. 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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