Exhibit 99.1
Chattem, Inc. Reports First Quarter Fiscal 2004 Results;
Revises Upward Earnings Estimate for Fiscal Year
CHATTANOOGA, Tenn.--(BUSINESS WIRE)--March 18, 2004--Chattem, Inc.
(NASDAQ:CHTT), a leading marketer and manufacturer of branded consumer
products, announced today record financial results for the fiscal
first quarter ended February 29, 2004.
Total revenues for the quarter were $61.2 million, operating
income was $14.9 million and net income excluding debt extinguishment
charges was $6.6 million, representing increases of 5%, 19% and 45%,
respectively, over the corresponding year-ago results. Earnings per
share excluding debt extinguishment charges for the fiscal 2004 first
quarter were $.33, a 43% increase over the first quarter of fiscal
2003 earnings per share.
Chattem's earlier estimates for its first fiscal quarter were
$58-60 million of total revenues and $.28-.30 earnings per share.
After giving effect to charges related to the Company's recent
debt refinancing, the Company had a net loss of $0.7 million, or $.04
per share, for the fiscal 2004 first quarter. See the reconciliation
of net income excluding debt extinguishment charges in Chattem's
unaudited income statement attached hereto.
The 5% increase in total revenues for the first fiscal quarter of
2004 over the first fiscal quarter of 2003 was principally led by Icy
Hot(R), Selsun blue(R) and Gold Bond(R). Icy Hot recorded a 32% gain
in sales due primarily to the continuing successful introduction of
the Icy Hot Back Patch. Shipments of the revolutionary Icy Hot
Medicated Sleeve will begin in the second fiscal quarter, and should
continue to fuel strong sales growth for the Icy Hot brand. Three of
the Company's other topical analgesics, Aspercreme(R), Capzasin(R) and
Arthritis Hot(R), also experienced sales increases when compared to
the first quarter of fiscal 2003. Selsun blue achieved a 13% increase
in domestic net sales in the first quarter versus the comparable
year-ago period due to a strong marketing campaign and initial
shipments of Selsun blue Conditioner. Net sales of the Gold Bond
franchise increased 2%, led by double digit increases from the Lotion,
Cream and Foot segments of the business, which were somewhat offset by
declines in the first aid portion of the business which was being
launched a year ago.
Also enjoying year-over-year sales increases during the first
fiscal quarter were Pamprin(R), BullFrog(R), Herpecin(R), New Phase(R)
and Garlique(R).
Partially negating these sales increases was a 47% year-over-year
sales decline in Chattem's Dexatrim(R) diet pill business. This
weakness was countered in part by the introduction of the All In One
Bar, which experienced better-than-expected initial sell-in at retail
accounts. A comprehensive marketing campaign supporting the launch of
the Dexatrim All In One Bar will begin in Chattem's second fiscal
quarter.
International total revenues declined 2% for the first fiscal
quarter of 2004, principally due to the termination of a European
distributor.
For the quarter, gross margin based on total revenues was a strong
72.3%, while selling, general and administrative expense as a
percentage of total revenue was 17.7%. Advertising and promotion as a
percentage of total revenue was 30.3%. Finally, inventories declined
from $19.9 million in the first quarter of fiscal 2003 to $17.6
million in the same quarter of fiscal 2004 despite the year-over-year
increase in sales, demonstrating Chattem's continuing commitment to
working capital management.
Chattem's tax rate for the quarter was 35% compared to 38% in the
corresponding quarter of fiscal 2003, reflecting the implementation of
a number of foreign and state tax savings initiatives.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) excluding debt extinguishment charges for the first quarter
of fiscal 2004 were $16.2 million versus $13.6 million for the first
quarter of fiscal 2003, a 19% increase. EBITDA margin (EBITDA/total
revenues) was a strong 26.4% compared to 23.4% in the year-ago period
(see reconciliation of EBITDA to net (loss) income in Chattem's
unaudited income statement attached hereto).
As previously reported, during the quarter Chattem completed the
refinancing of approximately $210 million of long-term debt, resulting
in a loss net of taxes from the early extinguishment of debt of $7.4
million, or $.37 per share. The Company expects to record an
additional loss net of taxes from the early extinguishment of debt of
approximately $1.1 million, or $.06 per share, in its second fiscal
quarter. These charges do not affect on-going operating results. No
other charges related to the debt refinancing are expected thereafter.
Annual savings on interest expense from the debt refinancing will be
approximately $3.7 million after tax, or $.19 per share.
Also as previously reported, during the first fiscal quarter
Chattem announced that it had entered into a memorandum of
understanding with the plaintiffs' steering committee which
memorializes certain settlement terms concerning lawsuits relating to
Dexatrim with phenylpropanolamine (PPA), and the settlement of certain
related suits with its product liability insurance carriers. See the
Company's filings with the Securities and Exchange Commission for a
complete discussion of this litigation. If the settlement is
completed, based on the information currently known to the Company,
Chattem expects to record a one-time pre-tax charge of $20-25 million,
or $13-16 million net of taxes in the second half of fiscal 2004,
although the exact time and amount of this charge cannot yet be
determined.
During its first fiscal quarter, Chattem purchased 16,000 of its
shares at an average price of $19.87 per share. A total of $19.7
million remains available under the Company's previously announced $20
million board stock repurchase authorization.
For the balance of the 2004 fiscal year, Chattem currently expects
to record results in the following ranges:
($ in millions, except per share data)
Q1A Q2E Q3E Q4E FYE04
- --------------------- ------ --------- --------- --------- -----------
Total Revenues $61.2 $64-66 $63-65 $57-59 $245-251
- --------------------- ------ --------- --------- --------- -----------
EPS $0.33 $.42-.44 $.41-.43 $.33-.35 $1.48-1.54
- --------------------- ------ --------- --------- --------- -----------
All estimates are prior to any cumulative effects of adopting a
change in accounting principle which might be recorded during the
year, prior to any charges expected to be recorded relative to the
Dexatrim with PPA litigation and related insurance coverage litigation
discussed above, and before charges associated with the debt
refinancing, also discussed above. See the attached reconciliation of
estimated per share excluding debt extinguishment charges to estimated
earnings per share after giving effect to charges related to the
Company's recent debt financing. Full fiscal year results may not
equal the sum of quarterly projections due to rounding and, in the
case of EPS, variations in share count. These estimates constitute
forward-looking statements and are subject to a number of risks,
uncertainties and assumptions, including those described below and in
the Company's filings with the Securities and Exchange Commission.
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 that could
cause actual outcomes and results to differ materially from those
expressed or projected.
Chattem will provide an online Web simulcast and rebroadcast of
its first quarter 2004 conference call. The live broadcast of the call
will be available online at www.chattem.com and www.streetevents.com
on Friday, March 19 beginning at 8:30 a.m. EST. The online replay will
follow shortly after the call and be available through April 19, 2004.
Please note Webcast requires Windows Media Player.
CHATTEM, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
For the Three Months Ended
--------------------------
February 29, February 28,
2004 2003
------------- ------------
REVENUES:
Net sales $60,927 $58,125
Royalties 310 300
------------- ------------
Total revenues 61,237 58,425
COSTS AND EXPENSES:
Cost of sales 16,952 17,691
Advertising and promotion 18,532 18,405
Selling, general and administrative 10,829 9,814
------------- ------------
Total costs and expenses 46,313 45,910
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INCOME FROM OPERATIONS 14,924 12,515
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OTHER INCOME (EXPENSE):
Interest expense (4,755) (5,147)
Investment and other income, net 45 34
Loss on early extinguishment of debt (11,309) -
------------- ------------
Total other income (expense) (16,019) (5,113)
------------- ------------
(LOSS) INCOME BEFORE INCOME TAXES (1,095) 7,402
(BENEFIT FROM) PROVISION FOR INCOME TAXES (383) 2,813
------------- ------------
NET (LOSS) INCOME $(712) $4,589
============= ============
DILUTED SHARES OUTSTANDING 19,881 19,949
============= ============
NET (LOSS) INCOME PER COMMON SHARE (DILUTED) $(0.04) $0.23
============= ============
- ----------------------------------------------------------------------
NET INCOME (EXCLUDING DEBT EXTINGUISHMENT CHARGES) PER COMMON SHARE
(DILUTED):
Net loss $(712)
Add:
Loss on early extinguishment of debt 11,309
Benefit from income taxes (3,958)
-------------
Net income (excluding debt extinguishment
charges) $6,639
=============
Net income (excluding debt extinguishment
charges) per common share (diluted) $0.33
=============
- ----------------------------------------------------------------------
EBITDA RECONCILIATION:
Net (loss) income $(712) $4,589
Add:
(Benefit from) provision for income taxes (383) 2,813
Interest expense, net (includes loss on
early extinguishment of debt) 16,019 5,113
Depreciation and amortization less amounts
included in interest 1,268 1,134
------------- ------------
EBITDA $16,192 $13,649
------------- ------------
Depreciation & amortization $1,537 $1,499
Capital expenditures $491 $1,464
- ----------------------------------------------------------------------
MARGIN DATA:
EBITDA margin (EBITDA/total revenues) 26.4% 23.4%
Net (loss) income margin (net (loss)
income/total revenues) -1.2% 7.9%
Net income (excluding debt extinguishment
charges) margin (net income (excluding debt
extinguishment charges)/total revenues) 10.8% -
- ----------------------------------------------------------------------
February 29, February 28,
2004 2003
------------- ------------
BALANCE SHEET DATA:
Cash and cash equivalents $29,283 $20,726
Restricted cash $32,227 $ -
Accounts receivable, net $34,586 $32,443
Inventories $17,568 $19,885
Accounts payable $11,746 $12,477
Called subordinated debt $30,028 $ -
Senior bank debt 25,000 18,250
Subordinated debt 200,000 204,700
------------- ------------
Total debt $255,028 $222,950
============= ============
Shareholders' equity $97,613 $78,591
Total assets $409,041 $365,032
- ----------------------------------------------------------------------
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 that could
cause actual outcomes and results to differ materially from those
expressed or projected.
CONTACT: Chattem, Inc., Chattanooga
Earnings Release:
Alec Taylor, 423-821-2037, ext. 3281
or
Rick Moss, 423-821-2037, ext. 3278
or
Investor Relations:
Tammy Nichols, 423-821-2037, ext. 3209
www.chattem.com