Chattem Reports Revenues Up 20%; Raises Earnings Guidance; Integration of Recently Acquired Brands On-Track.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 first quarter of fiscal 2007. Total revenues for the first quarter of fiscal 2007 were $100.8 million compared to total revenues of $84.0 million in the prior year quarter representing a 20% increase. Revenue growth for the quarter was driven by sales of the five brands acquired from Johnson & Johnson on January 2, 2007, continued growth of the Gold Bond[R] franchise, up 27%, the strength of the Icy Hot[R] business, up 23%, led by new product launches, and steady growth from Dexatrim[R] and Pamprin[R], each up 11%. Offsetting these increases was a reduction in sales of Icy Hot Pro-Therapy[TM] from launch levels in the first quarter of fiscal 2006. Excluding the impact of the acquired brands and Icy Hot Pro-Therapy, total revenues from the base business increased by 11% in the first quarter of fiscal 2007, compared to the prior year quarter. Net income for the first quarter of fiscal 2007 was $13.7 million, down 7%, compared to net income of $14.8 million in the prior year quarter. Earnings per share for the first quarter were $0.71, down 5%, compared to $0.75 in the prior year quarter. Net income in the first quarter of fiscal 2007 included 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 ($0.04 per share after taxes). Net income in the first quarter of fiscal 2006 included employee stock option expense under SFAS 123R ($0.03 per share after taxes), a gain related to a recovery of legal expenses ($0.29 per share after taxes), and 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 ($0.10 per share after taxes). As adjusted to exclude these items, net income in the first quarter of fiscal 2007 was $14.4 million, up 25%, compared to $11.5 million in the prior year quarter and earnings per share were $0.75, up 27%, compared to $0.59 in the prior year quarter. "The Company completed its first quarter in history with revenues over $100 million," said Chief Executive Officer Zan Guerry. "The level of enthusiasm at the Company is greater than ever. With sales of Gold Bond continuing to exceed expectations, the Selsun[R] franchise continuing to perform well at retail with Nielsen data showing a 12% increase for the latest 13 week period ending February 24, 2007, a strong sell-in of our new products in the topical pain care category and the integration of our newly acquired brands progressing smoothly, Chattem is well positioned to deliver on its growth objectives in fiscal year 2007 and beyond. We are extremely pleased with the Company's 27% increase in adjusted earnings per share as we view this as a meaningful measure of our operating performance." KEY HIGHLIGHTS * Gross margin for the first quarter of fiscal 2007 was 69.3%, compared to 69.0% in the prior year quarter. The increase in gross margin primarily reflected reduced sales of the relatively low margin Icy Hot Pro-Therapy line. Gross margins on the acquired business were in line with original expectations and should increase over time as the Company plans to bring manufacturing for certain of the brands in-house. * Advertising and promotion expense (A&P) for the first quarter of fiscal 2007 increased to $28.8 million from $27.2 million in the prior year quarter. A&P expense as a percentage of total revenues decreased to 28.5% for the first quarter of fiscal 2007, as compared to 32.4% in the prior year quarter, with the reduction as a percentage of total revenues declining largely as a result of the heavy investment spending on Icy Hot Pro-Therapy in the first quarter of fiscal 2006. The Company continues to support both the base business and the acquired brands with strong advertising and promotional programs. * Selling, general and administrative expenses (SG&A) for the first quarter of fiscal 2007 increased to $12.6 million from $11.6 million in the prior year quarter. SG&A as a percentage of total revenues for the first quarter of fiscal 2007 decreased to 12.5%, as compared to 13.8% in the prior year quarter reflecting the Company's ability to leverage its operating infrastructure. * Acquisition costs primarily reflect payments made to Johnson & Johnson for services rendered under a Transition Services Agreement related to the acquired brands. * 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 items was $28.7 million, or 28.5% of total revenues, for the first quarter of fiscal 2007, up 40%, compared to the prior year quarter. * Interest expense increased $4.4 million in the first quarter of fiscal 2007 as compared to the prior year quarter reflecting the impact of the additional indebtedness incurred to finance the acquisition of brands from Johnson & Johnson. * The Company reduced outstanding borrowings under its revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility to $15.0 million as of March 21, 2007, versus an outstanding balance of $30.0 million at February 28, 2007 and an acquisition funding balance of $38.0 million on January 2, 2007. * To date, the integration of the acquired brands is progressing very well and the Company expects any remaining transition services being provided by Johnson & Johnson to cease during the second fiscal quarter. FISCAL 2007 GUIDANCE Based on the strength of our base business and the progression of the integration of the acquired brands, the Company currently expects earnings per share in fiscal 2007 to be in the range of $2.85 to $3.10 as compared to earlier estimates of $2.80 to $3.05, in each case excluding stock option expense under SFAS 123R. Stock option expense under SFAS 123R for fiscal 2007 is estimated to be $0.14 per share prior to the impact of any additional option grants in fiscal 2007. [TABLE OMITTED] NON-GAAP FINANCIAL MEASURES In addition to presenting financial results in accordance with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting , or 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 and adjusted EBITDA. The non-GAAP financial measures exclude certain non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. , such as stock option expenses, and certain charges, such as debt extinguishment charges, and litigation settlement items. Chattem believes these measures provide both management and investors with additional insight into the Company's operational strength and ongoing operating performance. The additional non-GAAP financial measures should be considered in conjunction with, but not as a substitute for, the financial information presented in accordance with 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 Statements in this press release which are not historical facts, including, without limitation, statements in the Fiscal 2007 Guidance section of this release, are 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. These forward-looking statements involve risks, uncertainties and assumptions, including those described in our filings with the Securities and Exchange Commission, that could cause actual outcomes and results to differ materially from those expressed or projected. WEBCAST Chattem will provide an online Web simulcast and rebroadcast of its fiscal first quarter 2007 conference call. The live broadcast of the call will be available online at www.chattem.com and www.streetevents.com today, Thursday, March 22, 2007 beginning at 9:00 a.m. ET. The online replay will follow shortly after the call and be available through March 29, 2007. 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. 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 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. (1) See the reconciliation of adjusted net income to net income reported in accordance with GAAP for the first quarter fiscal 2007, 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. . [TABLE OMITTED] [TABLE OMITTED] |
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