Chattem Reports Revenue Increase of 19.8% for Fiscal First Quarter 2008; Affirms EPS Guidance for Fiscal 2008.CHATTANOOGA, Tenn. -- 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, today announced results for the fiscal first quarter ended February 29, 2008. "The delivery of innovative new products combined with strong advertising support of our brands continued to drive impressive revenue growth of 19.8% for the quarter," said Zan Guerry, Chattem's Chairman and Chief Executive Officer. "This momentum was fueled by our Big 6 brands, Gold Bond[R], Icy Hot[R], ACT[R], Cortizone-10[R], Selsun[R] and Unisom[R], and an additional month of revenue from the brands acquired on January 2, 2007 from Johnson & Johnson. During the first quarter of fiscal 2008, new products under the Gold Bond, Icy Hot, Cortizone-10, Selsun, Aspercreme and Dexatrim franchises were shipped while new products for Unisom and Balmex will be introduced during the second quarter. Gross margins improved significantly as a result of the manufacturing integration of certain of the brands acquired from Johnson & Johnson and we continued to utilize our free cash flow to de-lever the balance sheet," Guerry also highlighted. FIRST QUARTER FINANCIAL RESULTS Total revenues for the first quarter of fiscal 2008 were $120.8 million, compared to total revenues of $100.8 million in the prior year quarter, representing a 19.8% increase. Revenue growth for the quarter was led by the five acquired brands as well as strong performances from the Gold Bond, 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. , Aspercreme and Selsun brands. Offsetting these increases was a reduction in sales of Dexatrim due to increased competition in the weight loss category and lower sales of Icy Hot Heat Therapy as a result of the February 8, 2008 voluntary recall of the product. Excluding the impact of the acquired brands and sales of Icy Hot Pro-Therapy, total revenues increased 5% in the first quarter of fiscal 2008 compared to the prior year quarter. Net income in the first quarter of fiscal 2008 rose to $14.9 million, compared to $13.7 million for the prior year quarter, and earnings per share were $0.75, compared to $0.71 for the prior year quarter. Net income for the first quarter of fiscal 2008 included 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 employee stock option expense, 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 and non-recurring expenses discussed below related to the voluntary recall of Icy Hot Heat Therapy. Net income for the first quarter of fiscal 2007 included employee stock option expenses under SFAS 123R. As adjusted to exclude these items, net income for the first quarter of fiscal 2008 was $20.0 million, compared to $14.4 million for the prior year quarter, and earnings per share were $1.01 compared to $0.75 for the prior year quarter, a 34.7% increase. On February 8, 2008, Chattem announced the voluntary recall of its air-activated, self-heating Icy Hot Heat Therapy patch product. In the first fiscal quarter of 2008, Chattem recorded an estimate of product recall expenses of $6.0 million, or $0.20 per share. The charge encompasses an estimate of costs related to product returns, impairment of in-house inventory and other expenses related to the Icy Hot Heat Therapy recall. KEY HIGHLIGHTS * Gross margin for the quarter rose to 71.2%, compared to 69.3% for the prior year quarter. Gross margin for fiscal 2008 is expected to remain at historical levels as a result of the full year impact of the manufacturing integration of certain of the five brands acquired from Johnson & Johnson. * Advertising and promotion expense (A&P) in the first quarter of fiscal 2008 increased by $5.7 million to $34.5 million, or 28.6% as a percentage of total revenues as compared to 28.5% of total revenues in the prior year quarter. The Company anticipates A&P spending to remain consistent with historical levels of 26% to 28% as a percentage of total revenues in fiscal 2008. * Selling, general and administrative expenses (SG&A) in the first quarter of fiscal 2008 increased by $3.1 million to $15.5 million, or 12.8% of total revenues as compared to 12.3% of total revenues in the prior year quarter. In the first quarter of fiscal 2008, the Company absorbed transition service 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 first quarter of fiscal 2007. SG&A expenses are not expected to rise commensurate with increases in total revenues. * 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.
Also sometimes known as last twelve months (LTM). excluding product recall expenses) was 3.49x as of February 29, 2008. The Company expects to reduce this ratio well below 3.0x as of November 30, 2008 as it utilizes its free cash flow to further reduce debt, absent a brand acquisition or repurchase of its common stock. * In the first quarter of fiscal 2008, the Company repurchased 3,700 shares of the Company's common stock for approximately $0.2 million, or an average cost of $64.93 per share. FISCAL 2008 GUIDANCE The Company currently expects earnings per share for fiscal 2008 to be in the range of $4.00 to $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 quarter of fiscal 2008, and the estimated impact of the non-recurring Icy Hot Heat Therapy recall expenses of $0.20 per share. NON-GAAP FINANCIAL MEASURES In addition to presenting financial results in accordance 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 product recall expenses and free cash flow. A reconciliation of adjusted net income, EBITDA and EBITDA excluding product recall expenses to net income reported in accordance with GAAP for the fiscal first quarter of 2008 and 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 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 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 first quarter conference call. The live broadcast of the call will be available online at www.chattem.com and www.streetevents.com today, Tuesday, April 8, 2008 beginning at 9:00 a.m. ET. The online replay will follow shortly after the call and be available through April 15, 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 Catherine Baker Catherine Baker (born 16 July 1947 in Lille) is a French journalist and home schooling essayist. She has also more recently written against the whole prison system, arguing for a complete abolition. , Investor Relations Investor relations The process by which the corporation communicates with its investors. at 423-821-2037 ext. 3209. 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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