Sept 2009 Chattem CHTT Presentation
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Transcript of Sept 2009 Chattem CHTT Presentation
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Barclays Capital Back-To-School
Consumer Conference
September 10, 2009
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Forward Looking Statements
Non-GAAP Financial Measures
Statements concerning the Companys business outlook, anticipated profitability,sales or expenses and sales growth, together with other statements made in thispresentation that are not historical facts, including managements beliefs andexpectations, are forward-looking statements
as that term is defined under federalsecurities law. It is possible that actual results might differ
materially from thestatements made in the presentation. All forward-looking statements are subject torisks and uncertainties which could cause actual results to differ materially fromthose projected, including those risk factors described in the Companys filings withthe Securities and Exchange Commission. Further, forward-looking statements
speak only as of the date they are made, and we undertake no obligation to updatepublicly any of these in light of new information or future events A reconciliation ofthe non-GAAP financial measures contained in this presentation to the most
comparable GAAP financial measures is contained in the earnings release for oursecond quarter and first six months of fiscal 2009 which can be found on the investorrelations section of the Companys website at www.chattem.com.
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Corporate Mission
Achieve outstanding shareholder value through superior growthin sales and profits
Develop innovative products and passionate marketing programsto create enthusiastically satisfied customers
Provide a work environment that fosters teamwork, collaborationand mutual respect
Make a difference in our community
The following principles guide us in this endeavor:
To be the best mid-sized company in the Health Beauty
Care market in America.
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The Chattem Difference
Diverse portfolio of leading OTC brands
Proven record of acquiring, integrating and organically growing brands
Focused consumer driven product development function
Effective and efficient advertising and promotion strategy
Dedicated sales force
Internal manufacturing and purchasing operations
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Leading Positionsin Appropriate Categories
Oral Care
15%
Medicated
Dandruff
Shampoos
8%
Dietary
Supplements
4%OtherOTC &
Toiletries
6%
International
5%
Internal OTC
10%
Medicated Skin Care
Products
33%
Topical Pain Care
19%
% of Total Revenues1st
Half 2009Big 6 Brands are 72%
of Total Revenues
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Disciplined Growth Strategy
Proven Organic Growth
Focused Acquisitions
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Acquisition Criteria
OTC brands with these characteristics:
Small to medium sized OTC categories
Leadership position, with growth opportunity
High gross margins
Advertising (vs. promotion) sensitive
F,D&M channels
Financially conservative:
Immediately accretive to earnings
Reasonable purchase price
Appropriate capital structure
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Financial Review
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*Excludes where applicable, debt extinguishment, product recall, impairment, loss on product divestitures, litigation
settlement, executive severance and SFAS 123R expense.
Revenues & EPS
Revenues EPS*
$234 $258
$279 $301
$423 $455
$0
$100
$200
$300
$400
$500
2003 2004 2005 2006 2007 2008
($s in millions)
$1.19
$2.09 $1.95
$3.36
$4.25
$1.69
$4.80
$4.90
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
2003 2004 2005 2006 2007 2008 2009E
CAGR=
14%
CAGR=
29%
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Reconciliation of Total Revenues
($ in 000s)
2009Q2 YTD
Revenues, as reported 237,922$
Impact of International division 6,600
Promotion programs focused as price reduction 6,800
Discontinued businesses (Heat Therapy and Pro Therapy) 2,500Revenues reconciled 253,822$
Revenues, as reported for YAGO periods of FY 2008 237,489$
% change 6.9%
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Strong Financial Metrics
(as a % of total revenues)(as a % of total revenues)Gross Margin A P
SG A
30.2%29.0%
27.5%
32.0%
26.5% 26.0%23.4%
0.0%
15.0%
30.0%
2003 2004 2005 2006 2007 2008 2009
Q2
YTD
71.6% 71.6% 71.4%
68.7%
69.5%
71.1%
69.6%
65%
70%
2003 2004 2005 2006 2007 2008 2009
Q2 YTD
17.5% 17.1% 16.9%15.6%
13.6% 13.7%12.4%
0.0%
10.0%
20.0%
2003 2004 2005 2006 2007 2008 2009
Q2 YTD
(as a % of total revenues)
26.0% 27.5%28.9%
24.4%
31.6%33.9%
36.3%
0%
10%
20%
30%
40%
2003 2004 2005 2006 2007 2008 2009
Q2
YTD
EBITDA Margin*
(as a % of total revenues)
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Benefits of the Cash Tax Shield
Schedule estimates amortization expense for tax purposes (cash tax savings) that is not required to be recorded as amortization orinterest expense for book/EPS purposes.
Summary Cash Tax Savings
Amortization Period
Remaining
Estimated Annual
Tax Benefit Present Value
Various Brands Approx. 5 years $6 $24
Brands Acquired January 2007 13 years 10 77
Purchased Call for Convertibles 5 years 3 12
$19 $113
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As of
8/31/2009
Cash 59,400$
Revolver ($100 million) 0Term Loan B 105,250
Senior Secured Debt 105,250
2.0% Convertible Notes 96,300
1.625% Convertible Notes 100,000Total Senior Debt 301,550
7.0% Senior Subordinated Notes 98,370
Total Debt 399,920$
Net Debt 340,520$
Capital Structure
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Capital Structure
Share repurchases total 491,392 shares for $26.1 million oran average price of $53.13 per share
Repurchased $9.1 million of our 7% Senior Sub Notes at anaverage price of par
Convertible debt accounting change effective Q1 of FY 2010
Recent/Near Term Dynamics
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Current Environment
Retail trade: Private label SKU rationalization/Inventory reduction
Focus on retail price
Media
Input Costs
Regulatory environment
Acquisition opportunities
Capital markets
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Fiscal 2009 Key Factors
Revenues to rise at or below the low end of our mid-to-high single digit long termtarget for organic growth
Earnings $4.80-$4.90* per share
Continued strong advertising and promotion support for North Americanbusiness
Alterations in trade promotion strategy impact treatment of such
expenses forGAAP purposes and YOY comparison of operating metrics
International revenues estimated to decline $8-$10 million, with no negativeearnings impact
Strong cash flow will reduce Net Debt/EBITDA to below 2.0x assuming no
further share repurchase or acquisitions
Capital structure and acquisition opportunities will be explored
*Excludes non-cash stock option expense under SFAS 123R of $0.26 per share, any asset value impairment
charge and any loss on debt extinguishment.
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