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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): MAY 26, 1995
CHATTEM, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TENNESSEE 0-5905 62-0156300
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(STATE OF INCORPORATION) (COMMISSION FILE NO.) (IRS EMPLOYER
IDENTIFICATION NO.)
1715 WEST 38TH STREET, CHATTANOOGA, TENNESSEE 37409
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(615) 821-4571
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Exhibit Index at Page 9
Page 1 or 10 Pages
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 26, 1995, Chattem, Inc. (the "Company") completed the previously reported
sale of the Company's specialty chemicals division to Chattem Chemicals, Inc.,
a wholly-owned subsidiary of Elcat, Inc. (the "Parent"). The Company received
$25,000,000 from the sale of the specialty chemicals division, consisting of
$20,000,000 in cash and $5,000,000 of 13.125% convertible preferred stock of the
Parent. The cash proceeds plus an estimated net working capital adjustment of
$465,000 less transaction costs and fees of $575,000 will be used to repay
$8,000,000 of the Company's 12.75% Senior Subordinated Notes due 2004 and reduce
its bank term loan by $4,000,000. The Company will recognize a gain of
approximately $9,900,000 from the sale and an extraordinary charge (after taxes)
of approximately $370,000 relating to the early extinguishment of debt.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Not Applicable.
(b) Pro Forma Financial Information. See page 3 through 7 hereof.
(c) Exhibits. See the Exhibit Index on page 9 hereof.
Page 2 of 10 Pages
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CHATTEM, INC.
PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed statements of operations for the
year ended November 30, 1994 and for the three month period ended February
28, 1995, give effect to the sale of the Company's specialty chemical
division as if such transaction had taken place on December 1, 1993. The
following unaudited pro forma combined balance sheet as of February 28, 1995
gives effect to this sale as if such transaction had taken place on February
28, 1995. The sale of the Company's specialty chemical division was
consummated on May 26, 1995. The Company received $25,000,000 from the sale,
consisting of $20,000,000 in cash and $5,000,000 of 13.125% convertible
preferred stock of Elcat, Inc.
The pro forma information is not necessarily indicative of the results that
would have been reported had such events actually occurred on the dates
specified, nor, is it indicative of the Company's future results.
Page 3 of 10 Pages
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CHATTEM, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro forma As
Historical Adjustments Adjusted
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<S> <C> <C> <C>
NET SALES $107,956 $(13,586)(a) $94,370
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COSTS AND EXPENSES:
Cost of sales 37,175 (8,679)(a) 28,496
Advertising and promotion 33,346 (10)(a) 33,336
Selling, general and administrative 21,244 (1,804)(a) 19,440
Nonrecurring and unusual charges 559 -- 559
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Total costs and expenses 92,324 (10,493) 81,831
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INCOME FROM OPERATIONS 15,632 (3,093) 12,539
OTHER INCOME (EXPENSE):
Interest expense (10,112) 1,151 (b) (8,961)
Investment income (loss) 186 -- 186
Other income (expense), net (74) 656 (c) 582
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Total other income (expense) (10,000) 1,807 (8,193)
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INCOME BEFORE INCOME TAXES, EXTRAORDINARY LOSS 5,632 (1,286) 4,346
PROVISION FOR INCOME TAXES 2,022 (627)(d) 1,395
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INCOME BEFORE EXTRAORDINARY LOSS 3,610 (659) 2,951
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT
OF DEBT, NET (1,556) -- (1,556)
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NET INCOME $ 2,054 $ (659) $ 1,395 (e)
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NET INCOME PER COMMON SHARE:
Before extraordinary loss $ 0.50 $ 0.40
Extraordinary loss (0.21) (0.21)
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Net income per common share $ 0.29 $ 0.19 (e)
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WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 7,292 7,292
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<FN>
(a) Reflects the elimination of the historical revenues and expenses directly
attributable to the chemicals division which will be reported as a
discontinued operation.
(b) Reflects the approximate reduction in interest expense from the use of
proceeds from the sale to reduce outstanding debt.
(c) Reflects the dividend income from the $5,000 13.125% cumulative
convertible preferred stock received from the sale.
(d) Reflects the income tax effect related to the pro forma adjustments.
(e) Excludes gain on sale of the division of approximately $9,900 and
related loss on the early extinguishment of debt of $370 net of tax.
</TABLE>
Page 4 of 10 Pages
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CHATTEM, INC.
PRO FORMA CONDENSED BALANCE SHEET
FEBRUARY 28, 1995
(In thousands)
<TABLE>
<CAPTION>
Pro forma As
Historical Adjustments Adjusted
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<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,963 $ $ 1,963
Accounts receivable, net 18,875 (2,224)(a) 16,651
Refundable and deferred income taxes 853 -- 853
Inventories 7,443 (895)(a) 6,548
Prepaid expenses and other current assets 1,541 -- 1,541
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Total current assets 30,675 (3,119) 27,556
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PROPERTY, PLANT AND EQUIPMENT, NET 11,744 (3,223)(a) 8,521
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OTHER NONCURRENT ASSETS:
Patents, trademarks and other purchased product
rights, net 31,884 -- 31,884
Debt issuance costs, net 3,665 (481)(b) 3,184
Deferred income tax benefit 1,831 -- 1,831
Other 4,287 5,000 (c) 9,287
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Total other noncurrent assets 41,667 4,519 46,186
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TOTAL ASSETS $84,086 $(1,823) $82,263
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CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,500 $(1,200)(d) $ 1,300
Accounts payable 4,478 (391)(a) 4,087
Accrued advertising and promotion 1,717 -- 1,717
Other accrued liabilities 6,079 2,925 (e) 9,004
-- 6,000 (f) 5,000 (f)
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Total current liabilities 14,774 7,334 22,108
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LONG-TERM DEBT, LESS CURRENT MATURITIES 97,911 (19,887)(g) 78,024
-- 1,200 (d) 1,200
ACCRUED POSTRETIREMENT HEALTH CARE BENEFITS 1,324 -- 1,324
SHAREHOLDERS' DEFICIT:
Common stock, without par value, at
stated value 1,519 -- 1,519
Paid-in surplus 51,797 -- 51,797
Accumulated deficit (81,611) 9,530 (h) (72,081)
Foreign currency translation adjustment (1,628) -- (1,628)
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Total shareholders' deficit (29,923) 9,530 (20,393)
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TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $84,086 $(1,631) $82,763
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<FN>
(a) To reflect the elimination of receivables, inventory, equipment and payables
included in the sale of the chemicals division.
(b) To reflect the gross amount associated with the early extinguishment of debt.
Page 5 of 10 Pages
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(c) To reflect the preferred shares received by the Company.
(d) As a result of the transaction the Company received an amendment to its
bank loan agreement that adjusted the amortization schedule of the remaining
term debt.
(e) To reflect the costs associated with the transfer of assets, production
facilities and employees.
(f) To reflect the tax effect of the pro forma adjustments.
(g) To reflect the application of the net cash proceeds to reduce the
Company's term loan, revolver and senior subordinated notes by $4,000
$7,999 and $7,889, respectively.
(h) To reflect the approximate gain on the sale of the chemicals division and
the loss on the early extinguishment of debt.
</TABLE>
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CHATTEM, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED FEBRUARY 28, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro forma As
Historical Adjustments Adjusted
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<S> <C> <C> <C>
NET SALES............................... $ 22,719 $(3,347)(a) $19,372
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COSTS AND EXPENSES:
Cost of sales.......................... 8,376 (2,148)(a) 6,228
Advertising and promotion.............. 7,420 (4)(a) 7,416
Selling, general and administrative.... 4,304 (436)(a) 3,868
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Total costs and expenses............ 20,100 (2,588) 17,512
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INCOME FROM OPERATIONS.................. 2,619 (759) 1,860
OTHER INCOME (EXPENSE):
Interest expense....................... (3,060) 351 (b) (2,709)
Investment income (loss)............... 33 - 33
Other income (expense), net............ - 164 (c) 164
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Total other income (expense)........ (3,027) 515 (2,512)
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INCOME (LOSS) BEFORE INCOME TAXES....... (408) (244) (652)
PROVISION FOR (BENEFIT FROM) INCOME
TAXES.................................. (155) (136)(d) (291)
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NET INCOME (LOSS) $ (253) $ (108) $ (361)(e)
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NET INCOME (LOSS) PER COMMON SHARE:..... $(0.03) $(0.05)(e)
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WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING... 7,292 7,292
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<FN>
(a) Reflects the elimination of the historical revenues and expenses directly
attributable to the chemicals division which will be reported as a
discontinued operation.
(b) Reflects the approximate reduction in interest expense from the use of
proceeds from the sale to reduce outstanding debt.
(c) Reflects the dividend income from the $5,000 13.125% cumulative
convertible preferred stock received from the sale.
(d) Reflects the income tax effect related to the pro forma adjustments.
(e) Excludes gain or sale of the division of approximately $9,900 and
related loss on the early extinguishment of debt of $370 net of tax.
</TABLE>
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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 hereunto duly authorized.
June 12, 1995 CHATTEM, INC.
By: /s/ Robert E. Bosworth
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Robert E. Bosworth,
Executive Vice President
and Chief Financial Officer
Page 8 of 10 Pages
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
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<S> <C> <C>
28.1 Press Release dated May 30, 1995 10
</TABLE>
Page 9 of 10 Pages
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EXHIBIT 28.1
CHATTEM, INC.
May 30, 1995
FOR IMMEDIATE RELEASE
CHATTANOOGA, TENNESSEE, MAY 30, 1995....Chattem, Inc. (NASDAQ: CHTT)
announced today that it has completed the previously announced sale of its
Specialty Chemicals division to Elcat, Inc., a privately held company based
in Warren, New Jersey.
Terms of the agreement call for Elcat to pay Chattem $25 million for the
Chemicals unit, consisting of $20 million in cash and $5 million of 13.125%
convertible preferred stock. The cash proceeds will be used to reduce
indebtedness.
Elcat will maintain the operations of the acquired business in Chattanooga
and operate under the name Chattem Chemicals, Inc.
In commenting on today's announcement, Chattem Chairman and President Zan
Guerry said: "The sale of Chattem Chemicals enables us to focus on our
expanding consumer products business. The convertible preferred stock
transaction gives Chattem a substantial equity position in a growing company
with a unique technology and a global presence through its wholly owned
subsidiary, Electrocatalytic, Inc. The combination of earnings from the
preferred stock and lower interest expense associated with the repayment of
debt should offset to a large degree the loss of income from the Specialty
Chemicals division."
Chattem, Inc. is a manufacturer of nationally branded health and beauty aids.
Electrocatalytic, Inc. provides electrochemical process technology and custom
designed systems throughout the world.
Company Contacts: Joey B. Hogan, Director of Investor Relations
or
Robert E. Bosworth, Executive Vice President
& Chief Financial Officer
Chattem, Inc.
(615) 821-4571
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