Chattem Inc. (CHTT, Financial) filed Quarterly Report for the period ended 2009-08-31.
Chattem Inc. is a leading marketer and manufacturer of a variety of branded consumer products including over-the-counter health care and toiletries and skin care products. The company's high quality brandedproducts target niche market segments and are among the market leaders in their respective categories. Through creative and cost effective marketing techniques these brands on a national level across all major distributionchannels including food drug and mass merchandisers. Chattem Inc. has a market cap of $1.2 billion; its shares were traded at around $63.06 with a P/E ratio of 15 and P/S ratio of 2.6. Chattem Inc. had an annual average earning growth of 8.9% over the past 10 years. GuruFocus rated Chattem Inc. the business predictability rank of 2.5-star.
During the first nine months of fiscal 2009, we repurchased 491,392 shares of our common stock under our stock repurchase program for $26.1 million at an average price per share of $53.13. Effective September 30, 2009, our board of directors increased the authorization back to a total of $100.0 million of our common stock under the terms of our existing stock repurchase program.
During the third quarter of fiscal 2009, we repurchased $9.1 million of our 7.0% Senior Subordinated Notes (“7.0% Subordinated Notes) in open market transactions at an average premium of 0.2% above the face amount of the 7.0% Subordinated Notes. In connection with the repurchase of the $9.1 million of 7.0% Subordinated Notes, we retired a proportional share of the related debt issuance costs. The premium paid for the $9.1 million of 7.0% Subordinated Notes combined with the early extinguishment of the proportional debt issuance costs resulted in a loss on extinguishment of debt of $0.4 million in our third quarter of fiscal 2009.
Subsequent to August 31, we repurchased an additional $7.0 million of our 7.0% Subordinated Notes in open market transactions at a premium of 1.5% above the face amount of the 7.0% Subordinated Notes. In connection with the repurchase of $7.0 million of the 7.0% Subordinated Notes, we retired a proportional share of the related debt issuance costs. The premium paid for the $7.0 million of 7.0% Subordinated Notes combined with the early extinguishment of the proportional debt issuance costs resulted in a loss on extinguishment of debt of $0.4 million that will be recorded in our fourth quarter of fiscal 2009.
Our estimate of product returns for seasonal and non-seasonal products as of August 31, 2009 was $2.8 million and $1.0 million, respectively, and $1.4 million and $1.3 million, respectively, as of November 30, 2008. For the nine months ended August 31, 2009, we increased our estimate of returns for seasonal products by approximately $1.4 million, which resulted in a decrease to net sales in our consolidated financial statements, and decreased our estimate for non-seasonal returns by approximately $0.3 million, which resulted in an increase to net sales in our consolidated financial statements. During the nine months ended August 31, 2008, we increased our estimate of returns for seasonal products by approximately $1.9 million, which resulted in a decrease to net sales in our consolidated financial statements, and decreased our estimate of returns for non-seasonal products by approximately $0.3 million, which resulted in an increase to net sales in our consolidated financial statements. Each percentage point change in the seasonal and non-seasonal return rate would impact net sales by approximately $0.2 million and $0.6 million, respectively, for the nine months ended August 31, 2009.
We analyze promotional programs in two primary categories -- coupons and vendor allowances. Customers normally utilize vendor allowances in the form of temporary price reductions, scan downs, display activity and participations in in-store programs provided uniquely by the customer. We estimate the accrual for outstanding coupons by utilizing a third-party clearinghouse to track coupons issued, coupon value, distribution and expiration dates, quantity distributed and estimated redemption rates that are provided by us. We estimate the redemption rates of issued coupons based on internal analysis of historical coupon redemption rates and expected future retail sales by considering recent point of sale data. The estimate for vendor allowances is based on estimated unit sales of a product under a program and amounts committed for such programs in each fiscal year. Estimated unit sales are determined by considering customer forecasted sales, point of sale data and the nature of the program being offered. The three most recent years of expected program payments versus actual payments made and current year retail point of sale trends are analyzed to determine future expected payments. Customer delays in requesting promotional program payments due to their audit of program participation and resulting request for reimbursement is also considered to evaluate the accrual for vendor allowances. The costs of these programs are often variable based on the number of units actually sold. As of August 31, 2009, the accrued liability related to coupon redemption and reserve for vendor allowances was $2.0 million and $5.6 million, respectively, and $1.8 million and $5.1 million, respectively, as of August 31, 2008. Each percentage point change in promotional program participation and advertising and promotion expense would impact net sales by $0.2 million and an insignificant amount, respectively, for the nine months ended August 31, 2009.
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Chattem Inc. is a leading marketer and manufacturer of a variety of branded consumer products including over-the-counter health care and toiletries and skin care products. The company's high quality brandedproducts target niche market segments and are among the market leaders in their respective categories. Through creative and cost effective marketing techniques these brands on a national level across all major distributionchannels including food drug and mass merchandisers. Chattem Inc. has a market cap of $1.2 billion; its shares were traded at around $63.06 with a P/E ratio of 15 and P/S ratio of 2.6. Chattem Inc. had an annual average earning growth of 8.9% over the past 10 years. GuruFocus rated Chattem Inc. the business predictability rank of 2.5-star.
Highlight of Business Operations:
In December 2008 we issued an aggregate of 487,123 shares of our common stock in exchange for $28.7 million in aggregate principal amount of our outstanding 2.0% Convertible Senior Notes due 2013 (“2.0% Convertible Notes”). Upon completion of the transaction, the balance of the remaining 2.0% Convertible Notes was reduced to $96.3 million outstanding. In connection with this transaction, we retired a proportional share of the 2.0% Convertible Notes debt issuance costs and recorded the resulting loss on early extinguishment of debt of $0.7 million in the first quarter of fiscal 2009.During the first nine months of fiscal 2009, we repurchased 491,392 shares of our common stock under our stock repurchase program for $26.1 million at an average price per share of $53.13. Effective September 30, 2009, our board of directors increased the authorization back to a total of $100.0 million of our common stock under the terms of our existing stock repurchase program.
During the third quarter of fiscal 2009, we repurchased $9.1 million of our 7.0% Senior Subordinated Notes (“7.0% Subordinated Notes) in open market transactions at an average premium of 0.2% above the face amount of the 7.0% Subordinated Notes. In connection with the repurchase of the $9.1 million of 7.0% Subordinated Notes, we retired a proportional share of the related debt issuance costs. The premium paid for the $9.1 million of 7.0% Subordinated Notes combined with the early extinguishment of the proportional debt issuance costs resulted in a loss on extinguishment of debt of $0.4 million in our third quarter of fiscal 2009.
Subsequent to August 31, we repurchased an additional $7.0 million of our 7.0% Subordinated Notes in open market transactions at a premium of 1.5% above the face amount of the 7.0% Subordinated Notes. In connection with the repurchase of $7.0 million of the 7.0% Subordinated Notes, we retired a proportional share of the related debt issuance costs. The premium paid for the $7.0 million of 7.0% Subordinated Notes combined with the early extinguishment of the proportional debt issuance costs resulted in a loss on extinguishment of debt of $0.4 million that will be recorded in our fourth quarter of fiscal 2009.
Our estimate of product returns for seasonal and non-seasonal products as of August 31, 2009 was $2.8 million and $1.0 million, respectively, and $1.4 million and $1.3 million, respectively, as of November 30, 2008. For the nine months ended August 31, 2009, we increased our estimate of returns for seasonal products by approximately $1.4 million, which resulted in a decrease to net sales in our consolidated financial statements, and decreased our estimate for non-seasonal returns by approximately $0.3 million, which resulted in an increase to net sales in our consolidated financial statements. During the nine months ended August 31, 2008, we increased our estimate of returns for seasonal products by approximately $1.9 million, which resulted in a decrease to net sales in our consolidated financial statements, and decreased our estimate of returns for non-seasonal products by approximately $0.3 million, which resulted in an increase to net sales in our consolidated financial statements. Each percentage point change in the seasonal and non-seasonal return rate would impact net sales by approximately $0.2 million and $0.6 million, respectively, for the nine months ended August 31, 2009.
We analyze promotional programs in two primary categories -- coupons and vendor allowances. Customers normally utilize vendor allowances in the form of temporary price reductions, scan downs, display activity and participations in in-store programs provided uniquely by the customer. We estimate the accrual for outstanding coupons by utilizing a third-party clearinghouse to track coupons issued, coupon value, distribution and expiration dates, quantity distributed and estimated redemption rates that are provided by us. We estimate the redemption rates of issued coupons based on internal analysis of historical coupon redemption rates and expected future retail sales by considering recent point of sale data. The estimate for vendor allowances is based on estimated unit sales of a product under a program and amounts committed for such programs in each fiscal year. Estimated unit sales are determined by considering customer forecasted sales, point of sale data and the nature of the program being offered. The three most recent years of expected program payments versus actual payments made and current year retail point of sale trends are analyzed to determine future expected payments. Customer delays in requesting promotional program payments due to their audit of program participation and resulting request for reimbursement is also considered to evaluate the accrual for vendor allowances. The costs of these programs are often variable based on the number of units actually sold. As of August 31, 2009, the accrued liability related to coupon redemption and reserve for vendor allowances was $2.0 million and $5.6 million, respectively, and $1.8 million and $5.1 million, respectively, as of August 31, 2008. Each percentage point change in promotional program participation and advertising and promotion expense would impact net sales by $0.2 million and an insignificant amount, respectively, for the nine months ended August 31, 2009.
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