Sept 2009 Chattem CHTT Presentation

8/14/2019 Sept 2009 Chattem CHTT Presentation

1/19

Barclays Capital Back-To-School

Consumer Conference

September 10, 2009


2/19

2

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.


3/19

3

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.


4/19

4

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


5/19

5

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


6/19

6

Disciplined Growth Strategy

Proven Organic Growth

Focused Acquisitions


7/19


8/19

8

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


9/19

9

Financial Review


10/19

10

*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%


11/19

11

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%


12/19

12

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)


13/19


14/19

14

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


15/19

15

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


16/19

16

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


17/19

17

Current Environment

Retail trade: Private label SKU rationalization/Inventory reduction

Focus on retail price

Media

Input Costs

Regulatory environment

Acquisition opportunities

Capital markets


18/19

18

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.


19/19

Documents

Sept 2009 Chattem CHTT Presentation