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Chattanooga: Chattem profit slips in quarter

By: Brian Lazenby
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Robert Long

Chattanooga-based Chattem Inc. on Thursday posted a 14 percent drop in profit during the third quarter of 2008 due in part to a $13.25 million legal settlement involving Dexatrim.

Officials at Chattem, which markets and manufactures a wide array of healthcare products, toiletries and dietary supplements, announced that net income dropped during the three months ending August 31 to about $13.9 million or 73 cents a share compared to $16.3 million or 84 cents a share for the third quarter 2009.

Revenue, however, increased to $111.9 million during the third quarter of this year from $109 million last year, officials said.

Bob Bosworth, the company’s president, said the results of the third quarter “provide a platform for continued growth.”

“We have a very strong outlook for 2009 coming off our 2008 performance,” he said.

Chattem’s shares closed Thursday at $79.84, up $1.64, or 2.1 percent.

Jim Barrett, an analyst with C.L. King & Associates, said he has the company rated “neutral” and believes the shares are fairly valued.

“When compared to others in its peer group, they are similarly valued,” he said, referring to companies such as Procter & Gamble and Colgate. “In some instances, I feel like the other companies may be a little more attractive.”

Chairman and Chief Executive Officer Zan Guerry touted a product lineup that he said will be well received in the marketplace.

“Our exciting lineup of new products is expected to continue our revenue growth into fiscal 2009, fuel our earnings momentum and continue to generate strong cash flow,” he said.

Mr. Guerry announced several new versions of its Gold Bond products including a soothing cream for people with sensitive skin and a foot protection line geared to ease foot pain.

There are two new versions of Icy Hot products and a third planned.

Mr. Guerry also said that Act brand mouth care products recently hired Christie Brinkley as its spokeswoman.

The new products have been market tested and have scored well, he said.

litigation costs avoided

Company executives said an agreement to settle the legal dispute over claims that some Dexatrim products, which have been removed from the market, caused pulmonary arterial hypertension sliced into profits.

Mr. Bosworth said the decision to settle 26 claims is not an admission that the products caused health problems. All claims were filed by a single attorney and have no science to support them, he said.

“We believe there are very good defenses against these claims,” he said. “Our decision to settle this is based on our desire to avoid the expensive legal cost of defending against them.”

He said the settlement should put the issue to rest and that the company doesn’t face any future liability.

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