<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1998
COMMISSION FILE NUMBER 33-80770-01
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 I (1)
(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
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 FEBRUARY 26, 1999, 250 SHARES OF THE COMPANY'S COMMON STOCK, WITHOUT
PAR VALUE, WERE OUTSTANDING.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL Signal Investment & Management Co. (the "Company") was incorporated
in 1986. The Company is a wholly-owned subsidiary of Chattem, Inc.
("Chattem") and is included in Chattem's consolidated financial statements
and tax returns. The Company was formed for the sole purpose of holding
certain of Chattem's trademarks and other purchased product rights and
certain investments. The Company owns or licenses substantially all of the
trademarks and intangibles associated with Chattem's consumer products
business and licenses Chattem's use thereof. In exchange for this license,
Chattem pays to the Company a royalty on net sales of licensed products. The
Company has no other active operations.
The Company is a guarantor of Chattem's $75,000,000 of 12.75% Series B Senior
Subordinated Notes due 2004 and $200,000,000 of 8.875% Series B Senior
Subordinated Notes due 2008, which guarantees and notes were registered under
the Securities Act of 1933. During 1995 and 1998 Chattem repurchased
a total of approximately $25,000,000 of the 12.75% notes.
The Company is also guarantor of Chattem's current bank credit facility which
consists of term loans and a working capital revolving loan maturing at various
dates from December 31, 1998 to June 14, 2004. The outstanding balances as of
November 30, 1998 were $40,513,750 for the term loans and $2,000,000 for the
working capital revolving loan.
TRADEMARKS
The Company's trademarks are of material importance to its business and are its
most important asset. In fiscal year 1998, substantially all of Chattem's sales
were from products bearing proprietary brand names, including BAN, GOLD BOND,
FLEXALL, ICY HOT, PAMPRIN, GARLIQUE, PHISODERM and BULLFROG. Accordingly, the
Company's future success may depend in part upon the goodwill associated with
the brand names. The Company owns or licenses substantially all of the
trademarks associated with Chattem's domestic consumer products business. The
Company's significant domestic trademarks have been registered on the principal
register of the United States Patent and Trademark Office. Federally registered
trademarks have a perpetual life as long as they are renewed in a timely manner
and used properly as trademarks, subject to the right of third parties to seek
cancellation of the marks.
EMPLOYEES
The Company has no employees.
ITEM 2. PROPERTIES
None.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not required pursuant to reduced disclosure conditions set forth in General
Instruction I(1) (a) and (b) of Form 10-K.
2
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
None.
ITEM 6. SELECTED FINANCIAL DATA
Not required pursuant to reduced disclosure conditions set forth in General
Instruction I(1) (a) and (b) of Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FISCAL 1998 COMPARED TO FISCAL 1997
The following narrative represents management's comparative analysis of the
results of the Company's operations for the fiscal year ended November 30, 1998
to the fiscal year ended November 30, 1997 pursuant to General Instruction I(1)
(a) and (b) of Form 10-K:
In exchange for the licensed use of the Company's trademarks, the Company
receives royalties from Chattem of 5% of net sales of certain defined domestic
consumer products. Royalty income increased by $3,710,000, or 60%, in fiscal
1998 from fiscal 1997 primarily due to a full year of sales for SUNSOURCE, which
was acquired in June 1997, and eight months of sales for BAN, which was
purchased in March 1998.
The Company recognized in 1998 a gain of $9,548,000 on the sale of the CORNSILK
product line.
Amortization expense increased by $3,232,000, or 123%, in fiscal 1998 from
fiscal 1997 primarily due to the acquisition of the SUNSOURCE and BAN trademarks
in June 1997 and in March 1998, respectively.
FISCAL 1997 COMPARED TO FISCAL 1996
The following narrative represents management's comparative analysis of the
results of the Company's operations for the fiscal year ended November 30, 1997
to the fiscal year ended November 30, 1996 pursuant to General Instruction I(1)
(a) and (b) of Form 10-K:
Royalty income increased by $1,137,000, or 23%, in fiscal 1997 from fiscal 1996
primarily due to the acquisition of SUNSOURCE in June 1997 and a full year of
sales for GOLD BOND and HERPECIN-L, which were acquired in April 1996 and June
1996, respectively.
Interest income from the note receivable from Chattem decreased by $136,000, or
100%, in fiscal 1997 from fiscal 1996 as a result of Chattem's repayment of the
note in the fourth quarter of fiscal 1996.
The Company recognized in 1996 a gain of $875,000 on the sale of two brands,
SOLTICE and BLIS-TO-SOL.
The Company recognized in 1996 a gain of $323,000 on the sale of an investment.
Amortization expense increased by $848,000, or 48%, in fiscal 1997 from fiscal
1996 primarily due to the acquisition of the trademarks for SUNSOURCE in June
1997 and a full year of amortization for GOLD BOND and HERPECIN-L, which were
acquired in April 1996 and June 1996, respectively.
3
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Page 5 for the Company's index to its financial statements.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE
None.
4
<PAGE>
SIGNAL INVESTMENT & MANAGEMENT CO.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . 6
BALANCE SHEETS AS OF NOVEMBER 30, 1998 AND 1997 . . . . . . . . . . . . . . 7
STATEMENTS OF INCOME FOR THE THREE YEARS ENDED NOVEMBER 30, 1998 . . . . . . 8
STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT) FOR THE THREE YEARS
ENDED NOVEMBER 30, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . 9
STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED NOVEMBER 30, 1998 . . . . 10
NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Signal Investment & Management Co.:
We have audited the accompanying balance sheets of Signal Investment &
(Management Co. (a Delaware corporation and wholly-owned subsidiary of Chattem,
Inc.) as of November 30, 1998 and 1997 and the related statements of income,
shareholder's equity (deficit) and cash flows for each of the three years in the
period ended November 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Signal Investment & Management
Co. as of November 30, 1998 and 1997 and the results of its operations and its
cash flows for each of the three years in the period ended November 30, 1998 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee
January 22, 1999
6
<PAGE>
SIGNAL INVESTMENT & MANAGEMENT CO.
BALANCE SHEETS
NOVEMBER 30, 1998 AND 1997
(In thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 11 $ 55
Available-for-sale security - at market value . . . . . . . . . . . 415 -
Royalties receivable from Chattem, Inc. . . . . . . . . . . . . . . . 2,669 1,588
-------- --------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 3,095 1,643
Trademarks and Other Purchased Product Rights, Net . . . . . . . . . . . 267,817 101,426
-------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $270,912 $103,069
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Liabilities:
Payable to Chattem, Inc . . . . . . . . . . . . . . . . . . . . . . . $262,330 $102,573
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 5,741 2,628
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 268,071 105,201
-------- --------
Shareholder's Equity (Deficit):
Common shares, without par value, 500 shares authorized,
250 shares issued and outstanding . . . . . . . . . . . . . . . . 2 2
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . 2,819 (2,134)
Unrealized gain on investment . . . . . . . . . . . . . . . . . . . . 20 -
-------- --------
Total shareholder's equity (deficit) . . . . . . . . . . . . 2,841 (2,132)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDER'S
EQUITY (DEFICIT) . . . . . . . . . .. . . . . . . . . . $270,912 $103,069
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
SIGNAL INVESTMENT & MANAGEMENT CO.
STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED NOVEMBER 30, 1998
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C>
REVENUES AND GAINS:
Royalties from Chattem, Inc. . . . . . . . . . . . . . $ 9,891 $ 6,181 $ 5,044
Investment income:
Interest . . . . . . . . . . . . . . . . . . . . 3 31 33
Interest from Chattem, Inc. note receivable . . . -- -- 136
Gain on sale of investment. . . . . . . . . . . . . . . -- -- 323
Gain on sale of trademarks and other product rights . . 9,548 -- 875
--------- --------- ----------
Total revenues and gains . . . . . . . . . . 19,442 6,212 6,411
--------- --------- ----------
EXPENSES:
Amortization of trademarks and other purchased
product rights . . . . . . . . . . . . . . . . . . . 5,859 2,627 1,779
Other . . . . . . . . . . . . . . . . . . . . . . . . . 18 27 18
--------- --------- ----------
Total expenses . . . . . . . . . . . . . . 5,877 2,654 1,797
--------- --------- ----------
INCOME BEFORE PROVISION FOR INCOME
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 13,565 3,558 4,614
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . . . . 4,612 1,205 1,575
--------- --------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,953 $ 2,353 $ 3,039
--------- --------- ----------
--------- --------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING . . . . . . . . . . . . . . . . . . 250 250 250
--------- --------- ----------
--------- --------- ----------
NET INCOME PER COMMON SHARE . . . . . . . . . . $ 35,812 $ 9,412 $ 12,156
--------- --------- ----------
--------- --------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
SIGNAL INVESTMENT & MANAGEMENT CO.
STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED NOVEMBER 30, 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Retained Unrealized
Common Earnings Gain on
Shares (Deficit) Investment Total
------- --------- ---------- -------
<S> <C> <C> <C> <C>
BALANCE, NOVEMBER 30, 1995 $ 2 $ 3,827 $ -- $ 3,829
Net income . . . . . . . . . . . -- 3,039 -- 3,039
Dividends . . . . . . . . . . . -- (5,853) -- (5,853)
------- --------- ---------- -------
BALANCE, NOVEMBER 30, 1996 2 1,013 -- 1,015
Net income . . . . . . . . . . . -- 2,353 -- 2,353
Dividends . . . . . . . . . . . . -- (5,500) -- (5,500)
------- --------- ---------- -------
BALANCE, NOVEMBER 30, 1997 2 (2,134) -- (2,132)
Net income . . . . . . . . . . . -- 8,953 -- 8,953
Dividends . . . . . . . . . . . . -- (4,000) -- (4,000)
Unrealized gain on
investment . . . . . . . . . . -- -- 20 20
------- --------- ---------- -------
BALANCE, NOVEMBER 30, 1998 $ 2 $ 2,819 $ 20 $ 2,841
------- --------- ---------- -------
------- --------- ---------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
SIGNAL INVESTMENT & MANAGEMENT CO.
STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED NOVEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------ -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 8,953 $ 2,353 $ 3,039
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization . . . . . . . . . . . . . . . . . . . . . 5,859 2,627 1,779
Income tax provision . . . . . . . . . . . . . . . . 4,612 1,205 1,575
Gain on sale of investment . . . . . . . . . . . . . . -- -- (323)
Gain on sale of trademarks and other product rights . (9,548) -- (875)
Other . . . . . . . . . . . . . . . . . . . . . . . . -- 10 35
Changes in operating assets and liabilities:
Increase in royalties receivable from Chattem, Inc. (1,081) (301) (266)
Decrease in interest receivable from Chattem, Inc. -- -- 121
------------- ------------ -------------
Net cash provided by operating activities 8,795 5,894 5,085
------------- ------------ -------------
INVESTING ACTIVITIES:
Payment of note receivable from Chattem, Inc. . . . . . . -- -- 2,500
Proceeds from sale of investment. . . . . . . . . . . . . -- -- 323
Purchase of investment . . . . . . . . . . . . . . . . . (395) -- --
------------- ------------ -------------
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . (395) -- 2,823
------------- ------------ -------------
FINANCING ACTIVITIES:
Receipts from (payments to) Chattem, Inc. . . . . . . . . (4,444) (3,250) 5
Dividends paid to Chattem, Inc. . . . . . . . . . . . . . (4,000) (5,500) (5,853)
------------- ------------ -------------
Net cash used in financing activities . . . (8,444) (8,750) (5,848)
------------- ------------ -------------
CASH AND CASH EQUIVALENTS:
Increase (decrease) for the year . . . . . . . . . . . . (44) (2,856) 2,060
At beginning of year . . . . . . . . . . . . . . . . . . 55 2,911 851
------------- ------------ -------------
At end of year . . . . . . . . . . . . . . . . . . . . . $ 11 $ 55 $ 2,911
------------- ------------ -------------
------------- ------------ -------------
SUPPLEMENTAL SCHEDULE OF NON-CASH
TRANSACTIONS :
INCREASE (DECREASE) IN PAYABLE TO CHATTEM, INC. IN CONNECTION
WITH-
Gain on sale of trademarks and other product rights . . $ (9,548) $ -- $ (875)
Purchase of trademarks and other product rights . . . . 172,250 29,967 45,810
Provision for income taxes . . . . . . . . . . . . . . 1,499 133 893
Payment of certain items on behalf of the Company . . . -- 10 35
DIVIDENDS PER SHARE $ 16 $ 22 $ 23
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
SIGNAL INVESTMENT & MANAGEMENT CO.
NOTES TO FINANCIAL STATEMENTS
(All monetary amounts are expressed in
thousands of dollars unless contrarily evident)
1. GENERAL
Signal Investment & Management Co. is a wholly-owned subsidiary of
Chattem, Inc. and is included in Chattem's consolidated financial
statements and tax returns. The Company was formed for the sole purpose
of holding certain of Chattem's trademarks and other purchased product
rights and certain investments. The Company owns or licenses
substantially all of the trademarks and intangibles associated with
Chattem's domestic consumer products business and licenses Chattem's use
thereof. Signal has no other active operations.
The Company is a guarantor of Chattem's $75,000 of 12.75% Senior
Subordinated Notes due 2004 and $200,000 of 8.875% Series B Senior
Subordinated Notes due 2008, which guarantees and notes were registered
under the Securities Act of 1933. During 1995 and 1998 Chattem repurchased
a total of approximately $25,000 of the 12.75% Notes.
The Company is also guarantor of Chattem's current bank credit facility
which consists of term loans and a working capital revolving loan
maturing at various dates from December 31, 1998 to June 14, 2004. The
outstanding balances as of November 30, 1998 were $40,514 for the term
loans and $2,000 for the working capital revolving loan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
TRADEMARKS AND OTHER PURCHASED PRODUCT RIGHTS
The costs of acquired trademarks and other purchased product rights are
capitalized and amortized over periods ranging from 20 to 40 years. Total
accumulated amortization of these assets at November 30, 1998 and 1997 was
$13,545 and $7,687, respectively. Amortization expense for 1998, 1997 and
1996 was $5,859, $2,627 and $1,779, respectively.
INVESTMENTS
In fiscal 1998, the Company purchased $395 of available-for-sale equity
securities, which were sold in December 1998.
In March 1996, the Company sold for $323 an investment which had been
written down to a carrying value of zero in 1993 due to uncertainty
concerning future realization.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
11
<PAGE>
CASH AND CASH EQUIVALENTS
The Company considers all short-term deposits and investments with original
maturities of three months or less to be cash equivalents.
3. INCOME TAXES
The provision for income taxes includes the following components for the
years ended November 30:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current . . . . $ 1,499 $ 133 $ 893
Deferred . . . 3,113 1,072 682
------- ------ ------
$ 4,612 $1,205 $1,575
------- ------ ------
------- ------ ------
</TABLE>
The temporary difference which gives rise to the deferred tax liability at
November 30, 1998, 1997 and 1996, respectively, consists primarily of the
differences between carrying values of trademarks and other purchased
product rights for income tax and financial statement reporting purposes.
The difference between the provision for income taxes and the amount
computed by multiplying income before income taxes by the U.S. statutory
rate is summarized as follows for the years ended November 30:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Expected tax provision .......... $ 4,612 $ 1,210 $ 1,584
Nontaxable interest income ...... -- (5) (9)
------- ------- -------
$ 4,612 $ 1,205 $ 1,575
------- ------- -------
------- ------- -------
</TABLE>
4. ACQUISITION AND SALE OF TRADEMARKS
On March 24, 1998, Chattem and the Company acquired the BAN line of
antiperspirant and deodorant products from Bristol-Myers Squibb Company for
a purchase price of approximately $165,000, plus assumed liabilities. The
Company acquired the BAN trademarks, formulae, certain patents pertaining to
antiperspirant/deodorant technology and technical information. Chattem
purchased the inventory, manufacturing equipment and packaging related
assets used in the manufacture of BAN, but not the right to sell BAN in
Japan.
On May 12, 1998, Chattem and the Company sold the CORNSILK oil control
makeup brand for $10,750, plus inventories and the assumption of certain
liabilities. The Company sold the CORNSILK trademarks, formulae and
technical information for which a gain of $9,548 was recognized. Chattem
sold the inventory and other related assets but will continue to operate the
CORNSILK business in the United Kingdom pursuant to a license agreement.
Chattem used the net proceeds from the sale to reduce bank indebtedness.
12
<PAGE>
On June 26, 1997 the Company purchased the rights for the SUNSOURCE line of
dietary supplements and homeopathic medicines, and subsequently licensed the
use of the trademark to Chattem. The purchase price of the trademark was
$26,650 which was financed with borrowings from Chattem. Additional payments
may be earned by SUNSOURCE over a six year period from the date of closing
if sales exceed certain levels as defined in the purchase agreement. In 1998
Chattem paid the former owners of SUNSOURCE $2,500 and forgave $5,625 of
amounts due Chattem, in exchange for a 50% reduction in any future
additional payments under the purchase agreement. This total of $8,125 was
added to the cost of the SUNSOURCE trademark and will be amortized over its
remaining life. Under the amended agreement, future additional payments may
not exceed $7,875 in the aggregate.
5. RELATED PARTY TRANSACTIONS
In exchange for the licensed use of the Company's trademarks, the Company
receives royalties from Chattem of 5% of net sales of certain defined
domestic consumer products.
Payable to Chattem represents net advances received from Chattem used to
fund the acquisitions of trademarks as discussed in Note 4. Such advances
are noninterest bearing and are not expected to be paid prior to November
30, 1999.
Certain general and administrative expenses of the Company are occasionally
paid by Chattem on behalf of the Company. Such amounts are not significant.
A summary analysis of the activity between the Company and Chattem for the
two years ended November 30, 1998 is as follows:
<TABLE>
<S> <C> <C>
Balance- November 30, 1996 . . . . . . . . . . . . . . . . . . . $ 75,713
Repayments . . . . . . . . . . . . . . . . . . . . . . . (3,250)
Income tax provision . . . . . . . . . . . . . . . . . . 133
Expenses paid by Chattem . . . . . . . . . . . . . . . . 10
Purchase of trademarks and other product rights . . . . 29,967
---------
Balance- November 30, 1997 . . . . . . . . . . . . . . . . . . . 102,573
Repayments . . . . . . . . . . . . . . . . . . . . . . . (4,444)
Income tax provision . . . . . . . . . . . . . . . . . . 1,499
Purchase of trademarks and other product rights . . . . 172,250
Gain on sale of trademarks and other product rights . . (9,548)
---------
Balance- November 30, 1998 . . . . . . . . . . . . . . . . . . . $ 262,330
---------
---------
</TABLE>
The weighted average balance due Chattem during the year ended November 30,
1998 was $ 197,055.
6. YEAR 2000
The Company is a wholly-owned subsidiary of Chattem which provides the
Company with the use of all of its information technology (IT) systems.
Chattem is currently in the process of replacing most of its current
information technology systems which are approximately 20 years old;
consequently, the new IT system will be year 2000 compliant. As a result,
the year 2000 compliance requirements are considered only a portion of the
Chattem's systems replacement effort. This replacement is expected to be
completed on or before December 1, 1999 at a total cost of $1,500 to $2,000.
Such costs are being capitalized as incurred.
13
<PAGE>
Chattem is also reviewing the possible impact of the year 2000 problem on
its customers and suppliers and has requested and received from a majority
of its principal customers and suppliers written statements regarding their
knowledge of and plans for meeting the year 2000 compliance requirements.
Chattem's business could be adversely affected should Chattem or other
entities with whom Chattem does business be unsuccessful in completing
critical modifications in a timely manner.
7. SUBSEQUENT EVENT
On December 21, 1998 the Company and Chattem acquired the DEXATRIM,
SPORTSCREME, ASPERCREME, CAPZASIN-P, CAPZASIN-HP and ARTHRITIS HOT brands
from Thompson Medical Company, Inc. ("Thompson") for $95,000. The purchase
price consisted of $90,000 cash and 125,500 shares of Chattem's common
stock. The cash portion of the purchase price was financed with a new senior
credit facility. The Company is the guarantor of the new $165,000 credit
facility, which consists of a $115,000 term loan and a $50,000 working
capital revolving loan of which $21,500 was initially outstanding. The
proceeds of the new credit facility were used to fund the Thompson
acquisition and related fees and expenses and refinance existing bank
indebtedness for which the Company was guarantor.
14
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Not required pursuant to reduced disclosure conditions set forth in General
Instruction I(1) (a) and (b) of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Not required pursuant to reduced disclosure conditions set forth in General
Instruction I(1) (a) and (b) of Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Not required pursuant to reduced disclosure conditions set forth in General
Instruction I(1) (a) and (b) of Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not required pursuant to reduced disclosure conditions set forth in General
Instruction I(1) (a) and (b) of Form 10-K.
15
<PAGE>
PART IV
ITEM 14. EXHIBITS AND REPORT ON FORM 8-K
(a) 2. The following documents are filed or incorporated by reference as
exhibits to this report:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT REFERENCE
-------------- ---------------------- ---------
<S> <C> <C>
3 Certificate of Incorporation (5)
By-Laws (5)
4 Form of Indenture dated August 3,
1994 between Chattem, Inc., Signal
Investment & Management Co., as
guarantor, and SouthTrust Bank, of
Alabama, N.A. relating to the
12.75% Senior Subordinated Notes
due 2004. (1)
Form of Indenture dated March 24,
1998 between Chattem, Inc. and
Southtrust Bank of Alabama, N.A.
relating to the 8.875% Senior
Subordinated Notes due 2008. (9)
10 Asset Purchase and Sale Agreement
dated June 17, 1994 between
Sterling Winthrop Inc. and Signal
Investment & Management Co. for
the PHISODERM business. (2)
Asset Purchase Agreement dated
April 10, 1996 between Martin
Himmel Inc., seller, and Chattem,
Inc., and Signal Investment &
Management Co., as purchasers,
for the GOLD BOND business. (3)
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT REFERENCE
-------------- ---------------------- ---------
<S> <C> <C>
10 Credit Agreement dated April 29,
1996 (Secondary Working Capital
Facility) among Chattem, Inc., as
borrower, Signal Investment &
Management Co., as guarantor,
Nationsbank, N.A., as agent, and
the Lenders named therein. (4)
Asset Purchase Agreement dated
June 6, 1996 between Campbell
Laboratories, Inc., seller, and
Chattem, Inc. and Signal Investment
& Management Co., purchasers, for
the HERPECIN-L business. (4)
Amendment to the Credit Agreement
(HERPECIN-L Acquisition) dated
June 6, 1996 among Chattem, Inc.,
as borrower, Signal Investment &
Management Co., as guarantor,
NationsBank, N.A., as agent, and
the Lenders named therein. (4)
Asset Purchase and Sale Agreement
dated May 23, 1997 by and among
Chattem, Inc., Signal Investment &
Management Co. and Sunsource
International, Inc. and Mindbody,
Inc. (without schedules and exhibits)
for the SUNSOURCE business. (6)
Amended and Restated Credit Agree-
ment dated June 26, 1997 by and
among Chattem, Inc., Signal
Investment & Management Co. and
the Lenders named therein (6)
Amended and Restated Credit Agree-
ment (Supplemental Credit Agree-
ment) dated June 26, 1997 by and
among Chattem, Inc., Signal Invest-
ment & Management Co. and the
Lenders named therein (6)
First Amended and Restated Master
Trademark License Agreement be-
tween Signal Investment & Manage-
ment Co. and Chattem, Inc.,
effective June 30, 1992 (6)
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT REFERENCE
-------------- ---------------------- ---------
<S> <C> <C>
10 Asset Purchase Agreement dated
February 22, 1998 by and among
Bristol-Myers Squibb Company,
Chattem, Inc. and Signal Invest-
ment & Management Co. for the
BAN business. (7)
Asset Purchase and Sale Agreement
dated May 12, 1998 by and among
Chattem, Inc., Signal Investment
& Management Co. and Del
Laboratories, Inc. for the sale of
the CORNSILK business. (8)
Purchase and Sale Agreement dated
November 16, 1998 by and among
Thompson Medical Company, Inc.,
Chattem, Inc. and Signal Investment
& Management Co. for certain products (10)
Amended and Restated Credit Agree-
ment (New Credit Agreement) dated
December 21, 1998 among
Chattem, Inc., its domestic sub-
sidiaries, identified Lenders and
NationsBank, N.A., as agent. (10)
Amended and Restated Credit Agreement
(Supplemental Credit Agreement) dated
December 21, 1998 among Chattem, Inc., its
domestic subsidiaries, identified Lenders
and NationsBank, N.A., as agent. (10)
24 Consent of Independent Public
Accountants (11)
</TABLE>
18
<PAGE>
REFERENCES:
Previously filed as an exhibit to and incorporated by reference from:
(1) Form S-2 Registration Statement (No.33-80770) of Chattem, Inc.
(2) Form 10-K for Chattem, Inc. for the year ended November 30, 1994.
(3) Form 8-K for Chattem, Inc. dated April 29, 1996.
(4) Form 10-K for Chattem, Inc. for the year ended November 30, 1996.
(5) Form 10-K for Signal Investment & Management Co. for the year ended
November 30, 1996.
(6) Form 8-K for Chattem, Inc. dated June 26, 1997.
(7) Form 8-K for Chattem, Inc. dated March 24, 1998.
(8) Form 8-K for Chattem, Inc. dated May 12, 1998.
(9) Form S-4 Registration Statement (No. 333-53627) effective June 4,
1998 of Chattem, Inc.
(10) Form 8-K for Chattem, Inc. dated December 21, 1998.
(11) Form 10-K for Signal Investment & Management Co. for year ended
November 30, 1998
(b) No reports on Form 8-K were filed with the Securities and Exchange
Commission during the three months ended November 30, 1998.
19
<PAGE>
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: FEBRUARY 21, 1999 /S/ A. ALEXANDER TAYLOR II
----------------- --------------------------
A. Alexander Taylor II
President
(principal executive officer)
/S/ STEPHEN M. POWELL
--------------------------
Stephen M. Powell
Vice-President and Treasurer
(principal accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the date indicated:
Dated: FEBRUARY 21, 1999 /S/ A. ALEXANDER TAYLOR II
----------------- --------------------------
A. Alexander Taylor II,
President and Director
(principal executive officer)
Dated: FEBRUARY 21, 1999 /S/ STEPHEN M. POWELL
----------------- ---------------------
Vice President, Treasurer and Director
(principal financial officer)
Dated: FEBRUARY 21, 1999 /S/ MARGARET PULGINI
--------------------
Margaret Pulgini
Assistant Vice President and Director
Dated: FEBRUARY 21, 1999 /S/ HUGH F. SHARBER
----------------- -------------------
Hugh F. Sharber
Secretary and Director
20
<PAGE>
SIGNAL INVESTMENT AND MANAGEMENT CO.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
24 Consent of Independent Public Accountants
27 Financial Data Schedule
</TABLE>
21
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in the Form 10-K into the Company's previously filed
Registration Statements on Form S-3 (File No. 33-69397) and Form S-4 (File
No. 33-53627).
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee
February 26, 1999
22
<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> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<CASH> 11
<SECURITIES> 415
<RECEIVABLES> 2,669
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,095
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 270,912
<CURRENT-LIABILITIES> 0
<BONDS> 262,330
0
0
<COMMON> 2
<OTHER-SE> 2,839
<TOTAL-LIABILITY-AND-EQUITY> 270,912
<SALES> 0
<TOTAL-REVENUES> 19,442
<CGS> 0
<TOTAL-COSTS> 5,877
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,565
<INCOME-TAX> 4,612
<INCOME-CONTINUING> 8,953
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,953
<EPS-PRIMARY> 35,812
<EPS-DILUTED> 35,812
</TABLE>
