-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N9C2MiK8a5ZKRcR0b0g4cIVyMfRagieLn0ILKCv6IoiXjA96uB89J+zpDC2orScR NWQ3AarSh127833lfStDfg== 0001047469-98-014827.txt : 19980415 0001047469-98-014827.hdr.sgml : 19980415 ACCESSION NUMBER: 0001047469-98-014827 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980414 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHATTEM INC CENTRAL INDEX KEY: 0000019520 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 620156300 STATE OF INCORPORATION: TN FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05905 FILM NUMBER: 98592829 BUSINESS ADDRESS: STREET 1: 1715 W 38TH ST CITY: CHATTANOOGA STATE: TN ZIP: 37409 BUSINESS PHONE: 4238214571 MAIL ADDRESS: STREET 1: 1715 W 38TH ST CITY: CHATTANOOGA STATE: TN ZIP: 37409 FORMER COMPANY: FORMER CONFORMED NAME: CHATTEM DRUG & CHEMICAL CO DATE OF NAME CHANGE: 19790111 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 28, 1998 Commission file number 0-5905 CHATTEM, INC. A TENNESSEE CORPORATION I.R.S. EMPLOYER IDENTIFICATION NO. 62-0156300 1715 WEST 38TH STREET CHATTANOOGA, TENNESSEE 37409 TELEPHONE: 423-821-4571 Registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and has been subject to such filing requirements for the past 90 days. As of April 10, 1998, 9,422,587 shares of the Company's common stock, without par value, were outstanding. CHATTEM, INC. INDEX
PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of February 28, 1998 and November 30, 1997 .................................................... 3 Consolidated Statements of Income for the Three Months Ended February 28, 1998 and 1997 .............................. 5 Consolidated Statements of Cash Flows for the Three Months Ended February 28, 1998 and 1997 ........................................... 6 Notes to Consolidated Financial Statements ............................. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .............................................. 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K ................................ 15 SIGNATURES ................................................................. 20 EXHIBIT 11 - Statement Regarding Computation of Per Share Earnings EXHIBIT 27 - Financial Data Schedule
2 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements CHATTEM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
FEBRUARY 28, NOVEMBER 30, ASSETS 1998 1997 - ------ ------------ ------------ (Unaudited) CURRENT ASSETS: Cash and cash equivalents ............... $ 1,398 $ 4,858 Accounts receivable, net ................ 30,596 28,078 Refundable and deferred income taxes .... 1,876 1,876 Inventories ............................. 16,737 14,493 Prepaid expenses and other current assets 748 667 -------- -------- Total current assets .................. 51,355 49,972 -------- -------- PROPERTY, PLANT AND EQUIPMENT, NET ........ 11,045 10,988 -------- -------- OTHER NONCURRENT ASSETS: Investment in Elcat, Inc. ............... 6,804 6,640 Patents, trademarks and other purchased product rights, net ........... 104,223 104,972 Debt issuance costs, net ................ 3,166 3,118 Other ................................... 2,158 3,054 -------- -------- Total other noncurrent assets ......... 116,351 117,784 -------- -------- TOTAL ASSETS ........................ $178,751 $178,744 -------- -------- -------- --------
See accompanying notes to consolidated financial statements. 3 CHATTEM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
FEBRUARY 28, NOVEMBER 30, LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997 - ------------------------------------ ------------ ------------ (Unaudited) CURRENT LIABILITIES: Current maturities of long-term debt .... $ 9,089 $ 8,919 Accounts payable ........................ 3,960 9,319 Payable to bank ......................... 5,368 2,618 Accrued liabilities ..................... 13,067 13,596 --------- --------- Total current liabilities ............. 31,484 34,452 --------- --------- LONG-TERM DEBT, less current maturities ... 136,034 133,475 --------- --------- DEFERRED INCOME TAXES ..................... 3,290 3,290 --------- --------- OTHER NONCURRENT LIABILITIES .............. 2,976 3,157 --------- --------- SHAREHOLDERS' EQUITY: Preferred shares, without par value, authorized 1,000, none issued .......... -- -- Common shares, without par value, authorized 20,000, issued 9,128 at February 28, 1998 and 9,082 at November 30, 1997 ..................... 1,955 1,945 Paid-in surplus ......................... 64,046 63,975 Accumulated deficit ..................... (59,620) (60,229) --------- --------- 6,381 5,691 Foreign currency translation adjustment (1,414) (1,321) --------- --------- Total shareholders' equity ............ 4,967 4,370 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .......................... $ 178,751 $ 178,744 --------- --------- --------- ---------
See accompanying notes to consolidated financial statements. 4 CHATTEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited and in thousands, except per share amounts)
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1998 1997 -------- -------- NET SALES .............................. $ 34,921 $ 27,946 -------- -------- COSTS AND EXPENSES: Cost of sales ........................ 9,682 8,394 Advertising and promotion ............ 15,180 11,267 Selling, general and administrative .. 5,159 4,657 -------- -------- Total costs and expenses ........... 30,021 24,318 -------- -------- INCOME FROM OPERATIONS ................. 4,900 3,628 -------- -------- OTHER INCOME (EXPENSE): Interest expense ..................... (4,180) (3,798) Investment and other income, net ..... 192 319 -------- -------- Total other income (expense) ....... (3,988) (3,479) -------- -------- INCOME BEFORE INCOME TAXES ............. 912 149 PROVISION FOR INCOME TAXES ............. 303 13 -------- -------- NET INCOME ............................. $ 609 $ 136 -------- -------- -------- -------- COMMON SHARES: Weighted average number outstanding 9,087 8,603 -------- -------- -------- -------- Weighted average number and equivalent number outstanding ................. 9,491 8,807 -------- -------- -------- -------- NET INCOME PER COMMON SHARE: Basic ................................ $ .07 $ .02 -------- -------- -------- -------- Diluted .............................. $ .06 $ .02 -------- -------- -------- --------
See accompanying notes to consolidated financial statements. 5 CHATTEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and in thousands)
FOR THE THREE MONTHS ENDED FEBRUARY 28, -------------------------- 1998 1997 -------- -------- OPERATING ACTIVITIES: Net income ..................................... $ 609 $ 136 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization .............. 1,691 1,467 Dividend receivable from Elcat, Inc. ....... (164) (164) Other, net ................................. (285) 282 Changes in operating assets and liabilities: Increase in accounts receivable .......... (2,518) (2,603) Increase in inventories .................. (2,244) (1,429) Decrease in prepaid expenses and other current assets ........................... 659 1,285 Decrease in refundable and deferred income taxes .................................... -- 2,386 Decrease in accounts payable ............. (5,359) (2,358) Decrease in other accrued liabilities .... (518) (1,819) -------- -------- Net cash used in operating activities (8,129) (2,817) -------- -------- INVESTING ACTIVITIES: Purchase of property, plant and equipment (566) (203) Additions to patents, trademarks and other product rights ............................ (96) -- Increase in other assets, net .............. -- (147) -------- -------- Net cash used in investing activities (662) (350) -------- -------- FINANCING ACTIVITIES: Repayment of long-term debt ................ (3,318) (1,363) Proceeds from long-term debt ............... 6,000 -- Proceeds from exercise of stock options and warrants ............................... 88 -- Change in payable to bank .................. 2,750 2,125 Other, net ................................. (169) (27) -------- -------- Net cash provided by financing activities ............................ 5,351 735 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS .......................... (20) (115) -------- -------- CASH AND CASH EQUIVALENTS: Decrease for the period .................... (3,460) (2,547) At beginning of period ..................... 4,858 16,040 -------- -------- At end of period ........................... $ 1,398 $ 13,493 -------- -------- -------- -------- PAYMENTS FOR: Interest ................................... $ 6,057 $ 5,287 Taxes ...................................... $ 221 $ 145
See accompanying notes to consolidated financial statements. 6 CHATTEM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note: All monetary amounts are expressed in thousands of dollars unless contrarily evident. 1. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company's Annual Report to Shareholders for the year ended November 30, 1997. The 1997 Annual Report has previously been filed with the Securities and Exchange Commission as an exhibit to the Company's Form 10-K. The accompanying unaudited consolidated financial statements, in the opinion of management, include all adjustments necessary for a fair presentation. All such adjustments are of a normal recurring nature. 2. The Company incurs significant expenditures on television, radio and print advertising to support its nationally branded over-the-counter pharmaceuticals, functional toiletries and cosmetics and dietary supplements. Customers purchase products from the Company with the understanding that the brands will be supported by the Company's extensive media advertising. This advertising supports the retailers' sales effort and maintains the important brand franchise with the consuming public. Accordingly, the Company considers its advertising program to be clearly implicit in its sales arrangements with its customers. Therefore, the Company believes it is appropriate to allocate a percentage of the necessary supporting advertising expenses to each dollar of sales by charging a percentage of sales on an interim basis based upon anticipated annual sales and advertising expenditures (in accordance with APB Opinion No. 28) and adjusting that accrual to the actual expenses incurred at the end of the year. 3. The results of operations for the three months ended February 28, 1998 and 1997 are not necessarily indicative of the results to be expected for the respective full years. Seasonality is a factor in the Company's overall business, with the first quarter sales and income traditionally trailing the other fiscal quarters. 7 4. Inventories consisted of the following at February 28, 1998 and November 30, 1997:
February 28, November 30, 1998 1997 -------- -------- Raw materials and work in process $ 10,369 $ 9,107 Finished goods .................. 8,832 7,850 Excess of current cost over LIFO values .......................... (2,464) (2,464) -------- -------- Total inventories ............... $ 16,737 $ 14,493 -------- -------- -------- --------
5. Accrued liabilities consisted of the following at February 28, 1998 and November 30, 1997:
February 28, November 30, 1998 1997 ------- ------- Income and other taxes ........ $ 148 $ -- Salaries, wages and commissions 651 1,696 Advertising and promotion ..... 5,495 2,840 Interest ...................... 2,063 4,119 Product acquisitions .......... 1,335 1,489 Other ......................... 3,375 3,452 ------- ------- Total accrued liabilities ..... $13,067 $13,596 ------- ------- ------- -------
8 6. Effective December 1, 1997, the Company adopted Statement of Financial Accounting Standards No. 128 (FAS 128), "Earnings per share". This new standard requires dual presentation of basic and diluted earnings per share (EPS) on the face of the income statement and requires a reconciliation of the numerators and denominators of the basic and diluted EPS calculations. The earnings per share for the three months ended February 28, 1997 have been restated to conform to FAS 128. 7. For purposes of reporting cash flows, the Company considers all short-term deposits and investments with original maturities of three months or less to be cash equivalents, including cash and cash equivalents available exclusively for the repayment of long-term debt. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Note: All monetary amounts are expressed in thousands of dollars unless contrarily evident. General On March 24, 1998, the Company announced the completion of the previously reported acquisition of the BAN line of anti-perspirant/deodorant products from Bristol-Myers Squibb Company for a purchase price of $165,000 (subject to an inventory adjustment), plus the assumption of up to $5,000 of liabilities. The Company acquired the BAN world-wide trademarks, formulae, certain patents pertaining to the anti-perspirant/deodorant products technology, technical information, inventory, manufacturing equipment and packaging related assets used in the manufacture of BAN, but not the right to sell BAN in Japan. Concurrently with the closing of the acquisition, the Company issued $200,000 of 8-7/8% Senior Subordinated Notes due 2008 and amended and restated its existing senior secured credit facilities. The proceeds from the Senior Subordinated Notes were used to fund the purchase of BAN, pay related acquisition and financing fees and expenses and repay certain bank indebtedness. For the three months ended February 28, 1998, the Company experienced a $6,975, or 25.0%, increase in sales to $34,921 from $27,946 in the first quarter of fiscal 1997. Operating income during the period likewise increased $1,272, or 35.1%, to $4,900 from $3,628. Net income of $609, or $.06 per share, was recorded during the period compared to net income of $136, or $.02 per share, during the same period last year. Seasonality is a factor in the Company's overall business with the first quarter sales and income traditionally trailing the other fiscal quarters. The SUNSOURCE product line, acquired in the third quarter of fiscal 1997, was largely responsible for the improvement in the Company's operating results for the three months ended February 28, 1998. The Company will continue to seek increases in sales through a combination of acquisitions and internal growth while maintaining high operating income. As previously high growth brands mature, sales increases will become even more dependent on acquisitions and the development of successful line extensions. During the first quarter of fiscal 1998, the Company introduced the following line extensions/new products: BENZODENT cream; HERPECIN-L cold sore lip balm in a jar; BULLFROG SPF45 for babies and SPF45 Superblock; CORNSILK (Weightless label) light liquid makeup in six shades; CORNSILK green concealer stick; and HARMONEX. Strategically, the Company continually evaluates its products and businesses as part of its sales growth strategy and, in instances where the Company's objectives are not realized, will dispose of these brands or businesses and redeploy the assets to products or businesses with greater growth potential or to reduce indebtedness. 9 Results of Operations The following table sets forth for the periods indicated certain items from the Company's Consolidated Statements of Income expressed as a percentage of net sales:
Three Months Ended February 28, 1998 1997 ----- ----- NET SALES ........................... 100.0% 100.0% ----- ----- COSTS AND EXPENSES: Cost of sales ..................... 27.7 30.0 Advertising and promotion ......... 43.5 40.3 Selling, general and administrative 14.8 16.7 ----- ----- Total costs and expenses ........ 86.0 87.0 ----- ----- INCOME FROM OPERATIONS .............. 14.0 13.0 ----- ----- OTHER INCOME (EXPENSE): Interest expense .................. (11.9) (13.6) Investment and other income, net .. .5 1.1 ----- ----- Total other income (expense) .... (11.4) (12.5) ----- ----- INCOME BEFORE INCOME TAXES .......... 2.6 .5 PROVISION FOR INCOME TAXES .......... .9 -- ----- ----- NET INCOME .......................... 1.7% .5% ----- ----- ----- -----
10 Comparison of Three Months Ended February 28, 1998 and 1997 Net sales for the three months ended February 28, 1998 increased $6,975, or 25.0%, to $34,921 from $27,946 for the same period last year. Domestic consumer products sales increased to $6,204, or 24.2%, to $31,818 from $25,614 for last year's comparative period. Net sales of international consumer products increased $771, or 33.1%, from $2,332 in the 1997 period to $3,103 in the current period. The increase in domestic consumer products sales in the 1998 period was primarily due to the SUNSOURCE brands, which were acquired in the third quarter of 1997. Sales increases were also registered for the PAMPRIN, BENZODENT and BULLFROG product lines, while decreases were experienced by the HERPECIN-L, NORWICH Aspirin, FLEXALL, CORNSILK and GOLD BOND baby powders. All sales variances were principally due to sales volume changes. The increase in sales of PAMPRIN and BENZODENT reflects the effect of extensions of these two product lines initiated in fiscal 1997 or the first quarter of fiscal 1998. The substantial increase in BULLFROG sales represents the introduction of two new SPF45 products in the current quarter, the addition of several new or former customers for the 1998 season and increased advertising and promotion support. The sales decline for CORNSILK reflects the reintroduction of that entire line in new packaging in the first quarter of fiscal 1997, resulting in abnormally high sales in the first quarter of fiscal 1997. The reduced GOLD BOND sales were almost entirely associated with the CORNSTARCH PLUS Medicated Baby Powder product which was introduced in the first quarter of fiscal 1997. The decline in sales of the remaining brands listed above reflects the maturation of these products, increased competition in their respective product categories and, in most instances, reduced marketing support. International consumer product sales for the first quarter of fiscal 1998 increased $66, or 7.8%, for the Canadian operation and $607, or 47.8%, for the United Kingdom business. The increase in Canadian sales was largely associated with the GOLD BOND product line, although sales increases were recorded for the PAMPRIN, FLEXALL, SUN-IN and ULTRASWIM brands. Sales increases were experienced for all of the United Kingdom brands. U.S. export sales increased $98, or 45.6%, for the 1998 quarter as compared to the same period in fiscal 1997, with practically all of the increase being associated with the ICY HOT product line. All sales variances were primarily due to sales volume changes. Cost of goods sold as a percentage of net sales improved to 27.7% from 30.0% in the 1997 period. The decline was primarily the result of increased sales of higher gross margin product lines in the current period and the SUNSOURCE brands acquired in mid 1997. Advertising and promotion expenses increased $3,913, or 34.7%, in the 1998 period and were 43.5% of net sales compared to 40.3% in the corresponding 1997 period. The majority of the increase in the 1998 period was related to the SUNSOURCE product line, although significant increases were recorded for the BULLFROG and GOLD BOND brands. Substantial declines were realized for the FLEXALL, MUDD, CORNSILK and PHISODERM product lines. The increase of $502, or 10.8%, in selling, general and administrative expenses in the 1998 period was largely associated with increased direct selling expenses resulting from increased sales. The selling, general and administrative expenses were 14.8% of net sales in the current period as compared to 16.7% in the same period of last fiscal year. 11 Interest expense increased $382, or 10.1%, in the 1998 period, reflecting primarily the additional debt incurred for the SUNSOURCE products acquisition in mid 1997. Investment and other income decreased by $127 in the 1998 period largely due to a decline in interest income and gains on sales of property items. The increase of $473 in net income in 1998 was largely the result of increased sales offset in part by increased interest charges, advertising and promotion expenses and selling, general and administrative expenditures. Liquidity and Capital Resources The Company has historically financed its operations with a combination of internally generated funds and borrowings. The Company's principal uses of cash are for operating expenses, acquisitions, working capital, capital expenditures and long-term debt servicing. Cash of $8,129 and $2,817 was used in operations for the three months ended February 28, 1998 and 1997, respectively. The decrease in cash flows from operations over the prior year period was primarily the result of changes in accounts receivable, inventories, accounts payable and accrued liabilities. The changes were due in part to the SUNSOURCE acquisition in mid 1997. Investing activities used cash of $662 and $350 in the three months ended February 28, 1998 and 1997, respectively. The increase of $312 in the current period was largely the result of increased property, plant and equipment additions. Financing activities provided cash of $5,351 in the three months ended February 28, 1998 compared to $735 for the comparable prior year period. The increase of $4,616 in the current period reflects additional bank borrowings required for working capital purposes. 12 The following table presents working capital data at February 28, 1998 and November 30, 1997 or for the respective periods then ended:
Item 1998 1997 -------- ----------- ----------- Working capital (current assets less current liabilities) ...... $ 19,871 $ 15,520 Current ratio (current assets divided by current liabilities) .. 1.63 1.45 Quick ratio (cash and cash equivalents and accounts receivable divided by current liabilities) ................... 1.02 .96 Average accounts receivable turnover ........................... 5.62 5.92 Average inventory turnover ..................................... 2.85 3.17 Working capital as a percentage of total assets ................ 11.12% 8.68%
The improvement in the current and quick ratio at February 28, 1998 as compared to November 30, 1997, reflect primarily increases in accounts receivable and inventories, which were largely associated with the seasonal products, e.g., BULLFROG and SUN-IN, and the reduction of accounts payable. Total loans outstanding were $145,123 at February 28, 1998 compared to $142,394 at November 30, 1997, an increase of $2,729 during the first quarter of 1998. The revolving line of credit is available to the Company up to $30,000 or such lesser amount as is determined to be available under the terms of the Company's bank credit agreement. The availability of credit under the revolver is determined based on the Company's accounts receivable and inventories. As of February 28, 1998, the Company had $17,000 outstanding on its $30,000 working capital line of credit. On March 24, 1998, the Company completed the previously reported acquisition of the BAN line of anti-perspirant/deodorant products. Concurrently with the closing of the acquisition, the Company issued $200,000 of 8-7/8% senior subordinated notes due 2008 and amended and restated its existing senior secured credit facilities. The proceeds from the senior subordinated notes were used to fund the purchase of BAN, pay related acquisition and financing fees and expenses and repay the outstanding balance on the working capital line of credit which was $19,000 as of March 24, 1998. Management of the Company believes that projected cash flows generated by operations along with funds available under its credit facilities will be sufficient to fund the Company's current commitments and proposed operations. Year 2000 The Company recognizes the need to ensure its operations will not be adversely impacted by year 2000 software failures. Software failures due to processing errors potentially arising from calculations using the year 2000 date are a known risk. The Company has developed a plan to ensure its systems are compliant with the requirements to process transactions in the year 2000. The majority of the Company's internal information systems will be replaced with fully compliant new systems. The total cost of the software and implementation is estimated to be $1,500 to $2,000 which will be capitalized as incurred. The majority of actual cash payments will be made in 1998 with the remainder to be paid in early 1999. This new system implementation is expected to be completed during 1999. The Company does not currently have any information concerning the year 2000 compliance status of its suppliers and customers. In the event that any of the Company's significant suppliers or customers does not successfully and timely achieve year 2000 compliance, the Company's business or operations could be adversely affected. Foreign Operations The Company's primary foreign operations are conducted through its Canadian and U.K. subsidiaries. The functional currencies of these subsidiaries are Canadian dollars and British pounds, respectively. Fluctuations in exchange rates can impact operating results, including total revenues and expenses, when translations of the subsidiary financial statements are made in accordance with SFAS No. 52, "Foreign Currency Translation." For the three months ended February 28, 1998 and 1997, these subsidiaries accounted for 8% and 8% of total revenues, respectively, and 4% and 5% of total assets, respectively. It has not been the Company's practice to hedge its assets and liabilities in Canada and the U.K. or its intercompany transactions due to the inherent risks associated with foreign currency hedging transactions and the timing of payments between the Company and its two foreign subsidiaries. Historically, gains or losses from foreign currency transactions have not had a material impact on the Company's operating results. Losses of $49 and $10 for the three months ended February 28, 1998 and 1997, respectively, resulted from foreign currency transactions. 13 Forward Looking Statements This Management's Discussion and Analysis of Financial Condition and Results of Operations contain forward looking statements that are based on management's current beliefs and assumptions about expectations, estimates, strategies and projections for the Company. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward looking statements. The Company undertakes no obligation to update publicly any forward looking statements whether as a result of new information, future events or otherwise. The risks, uncertainties and assumptions regarding forward looking statements include, but are not limited to, product demand and market acceptance risks; product development risks, such as delays or difficulties in developing, producing and marketing new products or line extensions; the impact of competitive products, pricing and advertising; constraints resulting from financial condition of the Company, including the degree to which the Company is leveraged, debt service requirements and restrictions under bank loan agreements and the indenture; and other risks described in the Company's Securities and Exchange Commission filings. 14 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: (1) Statement regarding computation of per share earnings (Exhibit 11). (2) Financial data schedule (Exhibit 27). (b) The following Form 8-K report was filed with the Securities and Exchange Commission during the three months ended February 28, 1998: Report, dated February 22, 1998, relating to signing by the Company of a definitive agreement to acquire the BAN anti-perspirant and deodorant brand from Bristol-Myers Squibb. 15 CHATTEM, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CHATTEM, INC. (Registrant) Dated: April 14, 1998 \s\ A. Alexander Taylor II -------------- -------------------------- A. Alexander Taylor II President and Director (Chief Operating Officer) \s\ Stephen M. Powell --------------------- Stephen M. Powell (Chief Accounting Officer) 16 EX-11 2 EXHIBIT 11 EXHIBIT 11 CHATTEM, INC. AND SUBSIDIARIES STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (In thousands, except per share amounts)
FOR THE THREE MONTHS ENDED FEBRUARY 28, -------------------------- 1998 1997 ------ ------ NET INCOME ..................................... $ 609 $ 136 ------ ------ ------ ------ COMMON SHARES: Weighted average number outstanding ........ 9,087 8,603 Number issued upon assumed exercise of outstanding stock options and stock warrants ................................. 404 204 ------ ------ Weighted average number of common and common equivalent shares outstanding ............ 9,491 8,807 ------ ------ ------ ------ NET INCOME PER COMMON SHARE: Basic ...................................... $ .07 $ .02 ------ ------ ------ ------ Diluted .................................... $ .06 $ .02 ------ ------ ------ ------
EX-27 3 EXHIBIT 27
5 This schedule contains summary financial information extracted from Chattem, Inc.'s unaudited financial statements and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS NOV-30-1998 DEC-01-1997 FEB-28-1998 1,398 0 31,096 500 16,737 51,355 29,345 18,300 178,751 31,495 136,034 0 0 1,955 3,001 178,751 34,921 34,921 9,682 30,021 0 0 4,180 912 303 609 0 0 0 609 .07 .06
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