Chattem sets profit record

Jan 30, 2008 (Chattanooga Times/Free Press - McClatchy-Tribune Information Services via COMTEX) -- CHTT | news | PowerRating | PR Charts -- Chattem Inc. shares surged Tuesday after the Chattanooga-based consumer products maker reported its highest annual revenue in its 128-year history and raised its 2008 guidance.

Revenues in 2007 rose to a record $423.4 million, a 40.9 percent gain from $300.5 million revenues the previous year, according to the company. Fourth-quarter revenues were $100.6 million versus $65.1 million in the period a year ago, the company said.

"Fiscal 2007 was clearly the best year in the 128-year history of Chattem with revenues and earnings growing extremely rapidly and us having completed the integration of the acquisition of five major brands," President Bob Bosworth said.

Chattem's stock closed 12.5 percent Tuesday to $76.40, up $8.49 from Monday's closing price.

Net income for the fourth quarter hit $14.8 million, or 76 cents per share, versus $4.9 million, or 26 cents, a year ago. Fiscal year 2007 net income was a record $59.7 million, or $3.08 per share, compared to $45.1 million, or $2.34 per share, in fiscal year 2006.

The company raised 2008 guidance to a range of $4 to $4.20 per share compared to the previous guidance of $3.90 to $4.10 per share. Also, Stanford Research on Tuesday upgraded Chattem's stocks to buy from hold.

Chattem posted record results on the back of its newly acquired brands from Johnson & Johnson and the company's premier Gold Bond lotions and powders and topical analgesic Icy Hot, Zan Guerry, chairman and chief executive officer, told analysts in a conference call.

"We intend to keep that momentum going into 2008 and beyond," Mr. Guerry said.

Early this year, Chattem paid $410 million in cash to Johnson & Johnson for the United States and Caribbean rights for anti-cavity mouthwash Act, sleep aid Unisom, anti-itch creme Cortizone, anti-diarrhea product Kaopectate and diaper rash reliever Balmex.

In May, Chattem paid $4.1 million for the worldwide rights, Mr. Bosworth said. Chattem integrated the new brands more quickly than expected and was able to produce them more effectively, officials said.

The company will roll out extensions of several top lines starting this spring, Mr. Guerry said. The new products include Selsun Blue Naturals, Cortizone Intensive Healing Formula, Icy Hot Medicated PM Lotion and Gold Bond Ultimate Restoring Lotion.

The new products have been received well in consumer testing, Mr. Guerry said, and Chattem will conduct heavy advertising campaigns.

Two products dragged on Chattem's earnings for the year: therapeutic insert Icy Hot Pro-Therapy and diet aid Dexatrim, according to the company. Fifteen-second ads didn't totally convey Pro-Therapy's concept, Mr. Bosworth said, nor did consumers tolerate the product's high price. Most of Chattem's customers dropped the product, he said.

"It's probably the only time in history we've taken on a high-risk, high-reward new product launch," he said.

Dexatrim lost ground because of competition in the weight-loss market, officials said.

Fourth-quarter gross margin rose to 70 percent versus 68.2 percent in the fourth quarter of 2006. Strong 2007 cash flow helped Chattem reduce its debt by $62.5 million to $508 million.

Chattem's cash flow is expected to improve in 2008, Mr. Bosworth said, and could be used either to buy brands that become available or to pay down debt.

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