published Wednesday, April 8th, 2009

Chattanooga: Cost cuts put profits in Chattem pockets


by Brian Lazenby
Audio clip

Amy Greene

The health-care product manufacturer Chattem announced Tuesday it experienced a 4 percent drop in revenue yet bolstered profit 32 percent in the first quarter due to lower costs.

“While total revenues in the first quarter were lower than expected, we remain confident about the strength of our brands and our prospects for the balance of fiscal 2009,” said Zan Guerry, chairman and chief executive.

According to Chattanooga-based Chattem’s earnings report, the company generated $116 million in revenue in the three months ending Feb. 28, compared to $120.8 million for the same period a year ago.

Net income for the first quarter of 2009 was $19.6 million or 99 cents a share compared to $14.9 million or 75 cents a share a year ago, the company said.

According to Reuters, the company earned $1.02 a share, excluding a debt extinguishment, missing analysts' average estimate of $1.13 a share.

CHATTEM GUIDANCE

Chattem has adjusted its 2009 earnings guidance from a range of $4.80 to $5.20 a share to $4.80 to $4.90.

“We were surprised and disappointed with our net sales,” Mr. Guerry said. “We clearly would have rather started the year a little stronger than we did.”

Chattem President Bob Bosworth said Chattem has adjusted its 2009 guidance from a range of $4.80 to $5.20 a share to $4.80 to $4.90.

“The first three months have been challenging as we address the economic environment that affects our business,” Mr. Bosworth said.

Chattem officials attribute the drop in revenue to a 45 percent, or $4.3 million, plunge in international revenues compared to a strong first quarter in international business last year.

Mr. Bosworth blamed the elimination of English language packaging in Latin America, adverse foreign exchange rates and general weak sales in European markets.

Chattem officials said point-of-sale reports show sales are picking up particularly with new products such as Gold Bond lotions and Icy Hot with the “no-mess” applicator.

It appears the sale of Chattem’s products have improved, particularly at Wal-Mart, said Amy Greene, an analyst with Nashville-based Avondale Partners.

“It sounds like things have picked up as we have moved into the spring,” she said. “Sales seem to be accelerating now that the new products are on the shelves. I think we will see this continue as the ads for the new products continue to be seen in April and May.”

Chattem manufactures a wide array of health care products, toiletries and dietary supplements. The company’s key brands include Gold Bond, ACT, Icy Hot and Cortizone-10.

On Tuesday, Chattem’s stock price closed at $52.37 per share, a decline of 43 cents from Monday’s close.

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