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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): SEPTEMBER 15, 2000
CHATTEM, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
TENNESSEE 0-5905 62-0156300
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(STATE OF (COMMISSION FILE NO.) (IRS EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
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1715 WEST 38TH STREET, CHATTANOOGA, TENNESSEE 37409
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(423) 821-4571
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 15, 2000, Chattem, Inc. (the "Company") and Signal Investment
& Management Co., a wholly-owned subsidiary of the Company, sold the BAN line of
deodorant and anti-perspirant products to The Andrew Jergens Company, a
wholly-owned subsidiary of Kao Corporation, for a purchase price of $160 million
plus the right to receive up to an additional $6.5 million in future payments
based upon levels of BAN sales in 2001 and 2002.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
(b) Unaudited Pro Forma Financial Information
Unaudited Pro Forma Consolidated Balance Sheet With Notes
Unaudited Pro Forma Consolidated Statements of Income With Notes
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated balance sheet was prepared as if
the sale of the BAN product line described in Item 2 occurred on May 31, 2000.
The following unaudited pro forma consolidated statements of income for the year
ended November 30, 1999 and for the six months ended May 31, 2000 give effect to
the sale as if it had occurred at the beginning of the respective period.
The unaudited pro forma financial information is based on the historical
financial statements of the Company and the assumptions and the adjustments
described in the accompanying notes. The Company believes that such assumptions
are reasonable. The pro forma information does not purport to represent what the
Company's results of operations actually would have been if the sale had
occurred as of such dates or what such results will be for future periods.
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CHATTEM, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MAY 31, 2000
(In thousands)
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<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
ASSETS
------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............... $ 2,325 $ 92,161 (d) $ 94,486
Accounts receivable ..................... 61,462 -- 61,462
Inventories ............................. 25,129 (5,657)(a) 19,472
Other current assets .................... 8,169 -- 8,169
--------- --------- ---------
Total current assets .................. 97,085 86,504 183,589
--------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT,
NET.................................... 28,906 (1,148)(a) 27,758
--------- --------- ---------
OTHER NONCURRENT ASSETS:
Patents, trademarks and other purchased
product rights, net..................... 351,576 (156,377)(b) 195,199
Other ................................... 14,145 (1,248)(c) 12,897
--------- --------- ---------
Total other non-current assets ........ 365,721 (157,625) 208,096
--------- --------- ---------
TOTAL ASSETS ........................ $ 491,712 $ (72,269) $ 419,443
========= ========= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt .... $ 12,750 $ (12,750)(d) $ --
Accounts payable and other .............. 11,302 -- 11,302
Accrued liabilities ..................... 35,414 (539)(d) 34,875
--------- --------- ---------
Total current liabilities ............. 59,466 (13,289) 46,177
--------- --------- ---------
LONG-TERM DEBT ............................ 360,864 (53,850)(d) 307,014
--------- --------- ---------
OTHER NONCURRENT LIABILITIES .............. 17,375 -- 17,375
--------- --------- ---------
SHAREHOLDERS' EQUITY:
Common stock ............................ 1,977 -- 1,977
Paid-in surplus ......................... 69,291 -- 69,291
Accumulated deficit ..................... (15,629) (5,130)(e) (20,759)
Foreign currency translation adjustment . (1,632) -- (1,632)
--------- --------- ---------
Total shareholders' equity ............ 54,007 (5,130) 48,877
--------- --------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY.............. $ 491,712 $ (72,269) $ 419,443
========= ========= =========
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NOTES:
(a) Reflects the elimination of inventory and equipment included in the sale of
the BAN product line.
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(b) Reflects the elimination of intangible assets related to the BAN product
line.
(c) Reflects the write off of the debt issuance costs related to the
extinguishment of debt.
(d) Reflects the application of the net cash proceeds to entirely repay the
Company's senior indebtedness, with the remaining net proceeds reflected as
cash and cash equivalents. The remaining net proceeds will be available for
future brand acquisitions and to reduce the Company's subordinated
indebtedness.
(e) Reflects the resulting loss on the above pro forma adjustments.
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CHATTEM, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED MAY 31, 2000
(In thousands, except per share data)
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<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
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<S> <C> <C> <C>
NET SALES ........................................ $ 142,007 $ (36,855)(a) $ 105,152
--------- --------- ---------
COSTS AND EXPENSES:
Cost of sales .................................. 38,137 (10,684)(a) 27,453
Advertising and promotion ...................... 54,339 (13,696)(a) 40,643
Selling, general and administrative ............ 15,658 (1,373)(a) 14,285
--------- --------- ---------
Total costs and expenses ..................... 108,134 (25,753) 82,381
--------- --------- ---------
INCOME FROM OPERATIONS ........................... 33,873 (11,102) 22,771
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense ............................... (18,190) (2,986)(b) (15,204)
Investment and other income, net ............... 127 -- 127
--------- --------- ---------
Total other income (expense) ................ (18,063) (2,986) (15,077)
--------- --------- ---------
INCOME BEFORE INCOME TAXES,
EXTRAORDINARY LOSS AND CHANGE
IN ACCOUNTING PRINCIPLE ........................ 15,810 (8,116) 7,694
PROVISION FOR INCOME TAXES ....................... 5,983 (3,068)(c) 2,915
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY
LOSS AND CHANGE IN ACCOUNTING
PRINCIPLE ...................................... $ 9,827 $ (5,048) $ 4,779
========= ========= =========
COMMON SHARES:
Weighted average number outstanding (basic) ... 9,609 9,609
========= =========
Weighted average and dilutive number
outstanding .................................. 9,732 9,732
========= =========
INCOME PER COMMON SHARE:
Basic .......................................... $ 1.02 $ .50
========= =========
Diluted ........................................ $ 1.01 $ .49
========= =========
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NOTES:
(a) Reflects the elimination of the historical revenues and expenses directly
attributable to the sale of the BAN product line.
(b) Reflects the approximate reduction in interest expense from the use of the
net cash proceeds from the sale to entirely repay the Company's senior
indebtedness. If the Company were to utilize the remaining net proceeds to
reduce the Company's subordinated indebtedness, it would reduce the
Company's pro forma interest expense, net of related tax benefit, by
approximately $2,727, or $.28 per diluted share, net of the related tax
benefit.
(c) Reflects the income tax effect related to the pro forma adjustments.
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CHATTEM, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED NOVEMBER 30, 1999
(In thousands, except per share data)
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<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
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<S> <C> <C> <C>
NET SALES ....................................... $ 298,142 $ (86,686)(a) $ 211,456
--------- --------- ---------
COSTS AND EXPENSES:
Cost of sales ................................. 75,612 (25,384)(a) 50,228
Advertising and promotion ..................... 117,835 (28,718)(a) 89,117
Selling, general and administrative ........... 32,494 (3,356)(a) 29,138
--------- --------- ---------
Total costs and expenses .................... 225,941 (57,458) 168,483
--------- --------- ---------
INCOME FROM OPERATIONS .......................... 72,201 (29,228) 42,973
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense .............................. (36,572) (7,543)(b) (29,029)
Investment and other income, net .............. 579 -- 579
--------- --------- ---------
Total other income (expense) ............... (35,993) (7,543) (28,450)
--------- --------- ---------
INCOME BEFORE INCOME TAXES AND
EXTRORDINARY LOSS ............................ 36,208 (21,685) 14,523
PROVISION FOR INCOME TAXES ...................... 13,667 (8,186)(c) 5,481
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY
LOSS ......................................... $ 22,541 $ (13,499) $ 9,042
========= ========= =========
COMMON SHARES:
Weighted average number outstanding (basic) .. 9,747 9,747
========= =========
Weighted average and dilutive number
outstanding ................................. 10,024 10,024
========= =========
INCOME PER COMMON SHARE:
Basic ......................................... $ 2.31 $ .93
========= ---------
Diluted ....................................... $ 2.25 $ .90
========= =========
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NOTES:
(a) Reflects the elimination of the historical revenues and expenses directly
attributable to the sale of the BAN product line.
(b) Reflects the approximate reduction in interest expense from the use of the
net cash proceeds from the sale to entirely repay the Company's senior
indebtedness. If the Company were to utilize the remaining net proceeds to
reduce the Company's subordinated indebtedness, it would reduce the
Company's pro forma interest expense, net of related tax benefit, by
approximately $5,369, or $.54 per diluted share, net of the related tax
benefit.
(c) Reflects the income tax effect related to the pro forma adjustments.
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(c) Exhibits
2.1 Asset Sale Agreement dated as of August 24, 2000 by and
among The Andrew Jergens Company, Chattem, Inc. and Signal
Investment & Management Co.
99.1 Press Release dated September 15, 2000.
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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.
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October 2, 2000 CHATTEM, INC.
By: /s/ A. Alexander Taylor, II
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A. Alexander Taylor II,
President and Chief Operating Officer
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