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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, 1997
COMMISSION FILE NUMBER 33-80770
SIGNAL INVESTMENT & MANAGEMENT CO.
A DELAWARE CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NO. 62-1290284
1105 NORTH MARKET, SUITE 1300
WILMINGTON, DELAWARE 19890
TELEPHONE: 302-656-3950
This registrant meets the conditions set forth in General Instruction H(1) (a)
and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
Indicate by check whether the registrant (1) 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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No .
----- -----
As of April 11, 1997, 250 shares of the Company's common stock, without par
value, were outstanding.
Page 1 of 9
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SIGNAL INVESTMENT & MANAGEMENT CO.
INDEX
PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of February 28, 1997 and
November 30, 1996 .............................................. 3
Condensed Statements of Income for the Three Months
Ended February 28, 1997 and February 29, 1996 .................. 4
Statements of Cash Flows for the Three Months Ended
February 28, 1997 and February 29, 1996 ........................ 5
Notes to Condensed Financial Statements .......................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................ 7
PART II. OTHER INFORMATION
Item 6. Reports on Form 8-K ....................................... 8
SIGNATURES ........................................................... 9
2
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIGNAL INVESTMENT & MANAGEMENT CO.
CONDENSED BALANCE SHEETS
(In Thousands, Except Number of Shares)
February 28, November 30,
1997 1996
------------ ------------
(Unaudited)
ASSETS:
Cash and cash equivalents .................... $ 216 $ 2,911
Royalties receivable from Chattem, Inc. ...... 1,263 1,287
----------- -----------
Total current assets ...................... 1,479 4,198
Trademarks and other purchased product
rights, net ................................ 73,515 74,086
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Total assets ............................ $ 74,994 $ 78,284
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----------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY:
Liabilities:
Payable to Chattem, Inc. ................... $ 73,203 $ 75,713
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Deferred income taxes ...................... 1,556 1,556
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Shareholder's equity:
Common shares, without par value, 500 shares
authorized, 250 shares issued and
outstanding .............................. 2 2
Retained earnings .......................... 233 1,013
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235 1,015
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Total liabilities and shareholder's
equity ................................ $ 74,994 $ 78,284
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See accompanying notes to condensed financial statements.
3
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SIGNAL INVESTMENT & MANAGEMENT CO.
CONDENSED STATEMENTS OF INCOME
(Unaudited and in Thousands, Except Share Data)
For the Three Months Ended
---------------------------
February 28, February 29,
1997 1996
------------ ------------
REVENUES:
Royalties from Chattem, Inc. ..................$ 1,263 $ 803
Investment income ............................. 19 323
Interest from Chattem, Inc. ................... -- 45
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Total revenues ........................... 1,282 1,171
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EXPENSES:
Amortization of trademarks and other purchased
product rights .............................. 571 288
General and administrative expenses ........... 1 2
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Total expenses ........................... 572 290
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Income before provision for income taxes ........ 710 881
Provision for income taxes ...................... 240 300
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NET INCOME ...................................... $ 470 $ 581
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NET INCOME PER COMMON SHARE ..................... $ 1,880 $ 2,324
----------- -----------
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WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON SHARE EQUIVALENTS .................. 250 250
----------- -----------
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See accompanying notes to condensed financial statements.
4
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SIGNAL INVESTMENT & MANAGEMENT CO.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited and in Thousands)
For the Three Months Ended
---------------------------
February 28, February 29,
1997 1996
------------ ------------
OPERATING ACTIVITIES:
Net income .................................... $ 470 $ 581
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization ................................ 571 288
Unrealized holding gain ..................... -- (323)
Changes in operating assets and liabilities:
Decrease in royalties receivable from
Chattem, Inc. ............................. 24 218
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Net cash provided by operating
activities .............................. 1,065 764
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INVESTING ACTIVITIES:
Increase in note receivable from Chattem,
Inc. ......................................... -- (45)
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Net cash used in investing activities .... -- (45)
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FINANCING ACTIVITIES:
Net increase (decrease) in payable to
Chattem, Inc.................................. (2,510) 305
Dividends paid to Chattem, Inc. ($5 and $4 per
share, respectively) ......................... (1,250) (1,000)
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Net cash used in financing activities .... (3,760) (695)
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CASH AND CASH EQUIVALENTS:
Increase (decrease) for the period ............ (2,695) 24
At beginning of period ........................ 2,911 851
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At end of period .............................. $ 216 $ 875
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See accompanying notes to condensed financial statements.
5
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SIGNAL INVESTMENT & MANAGEMENT CO.
NOTES TO CONDENSED (UNAUDITED) FINANCIAL STATEMENTS
1. The accompanying unaudited condensed 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. The accompanying unaudited
condensed 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 results of operations for the three months ended February 28, 1997 and
February 29, 1996 are not necessarily indicative of the results to be
expected for the respective full years.
3. Certain amounts in the prior period financial information have been
reclassified to conform to the current presentation.
4. On June 17, 1994, the Company acquired a license to the PHISODERM trademark
in the United States, Canada and Puerto Rico from Sterling Winthrop Inc.
("Sterling"). If net sales of PHISODERM products in the United States, by
Chattem, Inc. only, exceed $11,000,000 for the 12-month period beginning
July 1, 1996 and ending June 30, 1997, the Company will pay Sterling an
additional $1,000,000.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following narrative represents management's comparative analysis of the
material changes in the year-to-date results of operations of the Company
pursuant to General Instruction H(2)(a) of Form 10-Q:
Royalty income from Chattem increased $460,000, or 57%, in the three months
ended February 28, 1997, from the corresponding period of the prior year. The
increase was primarily due to higher sales on the brands upon which royalties
are calculated. The prior year period did not include sales of GOLD BOND,
HERPECIN-L or PHISODERM Antibacterial Hand Cleanser. These products were
acquired or introduced to the market in the second and third quarters of fiscal
1996.
Investment income decreased $304,000, or 94%, in the three months ended February
28, 1997, from the corresponding period of the prior year primarily due to the
reduction of investments held by the Company.
Interest income from the Chattem note receivable decreased in the three months
ended February 28, 1997 from the corresponding period of the prior year. The
note was repaid in full by Chattem in the fourth quarter of fiscal 1996.
Amortization expense increased $283,000, or 98%, in the three months ended
February 28, 1997, from the corresponding period of the prior year. The
increase was due to the additions of the GOLD BOND and HERPECIN-L trademarks in
the second and third quarters of fiscal 1996.
7
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PART II. OTHER INFORMATION
ITEM 6. REPORTS ON FORM 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the three months ended February 28, 1997.
8
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SIGNAL INVESTMENT & MANAGEMENT CO.
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.
SIGNAL INVESTMENT & MANAGEMENT CO.
(Registrant)
Dated: April 14, 1997 /s/ Stephen M. Powell
---------------- ------------------------------
Stephen M. Powell
Vice-President and Treasurer
(principal financial officer)
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SIGNAL
INVESTMENT & MANAGEMENT CO.'S AUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 216
<SECURITIES> 0
<RECEIVABLES> 1,263
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,479
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 74,994
<CURRENT-LIABILITIES> 0
<BONDS> 73,203
0
0
<COMMON> 2
<OTHER-SE> 233
<TOTAL-LIABILITY-AND-EQUITY> 74,994
<SALES> 0
<TOTAL-REVENUES> 1,282
<CGS> 0
<TOTAL-COSTS> 572
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 710
<INCOME-TAX> 240
<INCOME-CONTINUING> 470
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 470
<EPS-PRIMARY> 1,880
<EPS-DILUTED> 1,880
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