----

----

| Large accelerated filer  þ                                               | Accelerated filer          |
|-----------------------------------------------------------------------------------------|------------------------------------|
| Non-accelerated filer   (Do not check if a smaller reporting company) | Smaller reporting company  |

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|                                                                                 | PAGE NO. |
|--------------------------------------------------------------------------------------|----------|
| PART I.  FINANCIAL INFORMATION                                             |     |
|                                                                                 |     |
| Item 1.  Financial Statements                                              |     |
|                                                                                 |     |
|     Consolidated Balance Sheets as of August 31, 2009 and        |     |
|       November 30, 2008                                | 3        |
|                                                                                 |     |
|     Consolidated Statements of Income for the Three and Nine     |     |
|       Months Ended August 31, 2009 and August 31, 2008 | 5        |
|                                                                                 |     |
|     Consolidated Statements of Cash Flows for the Nine Months    |     |
|       Ended August 31, 2009 and August 31, 2008        | 6        |
|                                                                                 |     |
|     Notes to Consolidated Financial Statements                   | 7        |
|                                                                                 |     |
| Item 2.  Management's Discussion and Analysis of Financial Condition       |     |
| and Results of Operations                                                            | 28       |
|                                                                                 |     |
| Item 3.  Quantitative and Qualitative Disclosures About Market Risk        | 41       |
|                                                                                 |     |
| Item 4.  Controls and Procedures                                           | 41       |
|                                                                                 |     |
|                                                                                 |     |
|                                                                                 |     |
| PART II.  OTHER INFORMATION                                                |     |
|                                                                                 |     |
| Item 1.  Legal Proceedings                                                      | 42       |
|                                                                                 |     |
| Item 1A. Risk Factors                                                                | 42       |
|                                                                                 |     |
| Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds            | 42       |
|                                                                                 |     |
| Item 3.  Defaults Upon Senior Securities                                        | 42       |
|                                                                                 |     |
| Item 4.  Submission of Matters to a Vote of Security Holders                    | 42       |
|                                                                                 |     |
| Item 5.  Other Information                                                      | 42       |
|                                                                                 |     |
| Item 6.  Exhibits                                                               | 43       |
|                                                                                 |     |
| SIGNATURES                                                                           | 44       |
|                                                                                 |     |
|                                                                                 |     |

----

| ASSETS                                                                                                                                |    |        | AUGUST 31,   2009  |   |   | NOVEMBER 30, 2008  |          |
|---------------------------------------------------------------------------------------------------------------------------------------|--------------|-------------|-----------------------------------|--------|--------|------------------------------|---------------|
|                                                                                                                                  |         | (Unaudited) |                              |   |   |                         |
|                                                                                                                                  |         |        |                              |   |   |                         |
| CURRENT ASSETS:                                                                                                                       |         |        |                              |   |   |                         |
|   Cash and cash equivalents                                                                                                 |         | $           | 59,400                            |   |   | $                            | 32,310        |   |
|   Accounts receivable, less allowances of $11,126 at    August 31, 2009 and $9,718 at November 30, 2008 |         |        | 48,589                            |   |   |                         | 49,417        |   |
|   Inventories                                                                                                               |         |        | 42,336                            |   |   |                         | 40,933        |   |
|   Deferred income taxes                                                                                                     |         |        | 4,009                             |   |   |                         | 3,968         |   |
|   Prepaid expenses and other current assets                                                                                 |         |        |  7,625                       |   |   |                         |  2,451   |   |
|     Total current assets                                                                                          |         |        |  161,959                     |   |   |                         | 129,079       |   |
|                                                                                                                                  |         |        |                              |   |   |                         |          |   |
| PROPERTY, PLANT AND EQUIPMENT, NET                                                                                                    |         |        | 32,893                            |   |   |                         | 32,243        |   |
|                                                                                                                                  |         |        |                              |   |   |                         |          |   |
| OTHER NONCURRENT ASSETS:                                                                                                              |         |        |                              |   |   |                         |          |   |
|   Patents, trademarks and other purchased product rights, net                                                               |         |        | 615,956                           |   |   |                         | 616,670       |   |
|   Debt issuance costs, net                                                                                                  |         |        | 9,340                             |   |   |                         | 12,253        |   |
|   Other                                                                                                                     |         |        |  2,609                       |   |   |                         |  2,727   |   |
|     Total other noncurrent assets                                                                                 |         |        |  627,905                     |   |   |                         |  631,650 |   |
|                                                                                                                                  |         |        |                              |   |   |                         |          |   |
|       TOTAL ASSETS                                                                                      |         | $           | 822,757                           |   |   | $                            | 792,972       |   |
|                                                                                                                                  |         |        |                              |   |   |                         |          |   |

----

| LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                            |    |        | AUGUST 31, 2009  |    |   | NOVEMBER 30, 2008 |          |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|-------------|----------------------------|---------|--------|------------------------|---------------|
|                                                                                                                                                                                                  |         | (Unaudited) |                       |    |   |                   |
|                                                                                                                                                                                                  |         |        |                       |    |   |                   |
| CURRENT LIABILITIES:                                                                                                                                                                                  |         |        |                       |    |   |                   |
|    Current maturities of long-term debt                                                                                                                                                |         | $           | 3,000                      |    |   | $                      | 3,000         |   |
|    Accounts payable and other                                                                                                                                                          |         |        | 14,746                     |    |   |                   | 18,116        |   |
|    Bank overdraft                                                                                                                                                                      |         |        | —                    |    |   |                   | 1,184         |   |
|    Accrued liabilities                                                                                                                                                                 |         |        | 23,435                     |    |   |                   | 21,293        |   |
|      Total current liabilities                                                                                                                                               |         |        | 41,181                     |    |   |                   | 43,593        |   |
|                                                                                                                                                                                                  |         |        |                       |    |   |                   |          |   |
| LONG-TERM DEBT, less current maturities                                                                                                                                                               |         |        | 396,920                    |    |   |                   | 456,500       |   |
|                                                                                                                                                                                                  |         |        |                       |    |   |                   |          |   |
| DEFERRED INCOME TAXES                                                                                                                                                                                 |         |        | 50,206                     |    |   |                   | 35,412        |   |
|                                                                                                                                                                                                  |         |        |                       |    |   |                   |          |   |
| OTHER NONCURRENT LIABILITIES                                                                                                                                                                          |         |        | 1,346                      |    |   |                   | 1,609         |   |
|                                                                                                                                                                                                  |         |        |                       |    |   |                   |          |   |
| COMMITMENTS AND CONTINGENCIES (Note 18)                                                                                                                                                               |         |        |                       |    |   |                   |          |   |
|                                                                                                                                                                                                  |         |        |                       |    |   |                   |          |   |
| SHAREHOLDERS’ EQUITY:                                                                                                                                                                           |         |        |                       |    |   |                   |          |   |
|   Preferred shares, without par value, authorized 1,000,    none issued                                                                                                 |         |        | —                    |    |   |                   | —       |   |
|   Common shares, without par value, authorized 100,000,    issued and outstanding 19,043 at August 31, 2009 and    18,978 at November 30, 2008 |         |        |   36,749              |    |   |                   |   28,926 |   |
|   Retained earnings                                                                                                                                                                         |         |        | 298,454                    |    |   |                   | 231,230       |   |
|                                                                                                                                                                                                  |         |        | 335,203                    |    |   |                   | 260,156       |   |
|   Cumulative other comprehensive income (loss), net of tax:                                                                                                                                 |         |        |                       |    |   |                   |          |   |
|    Interest rate hedge adjustment                                                                                                                                                      |         |        | (800                       | )  |   |                   | (1,787        | )  |
|    Foreign currency translation adjustment                                                                                                                                             |         |        | 244                        |    |   |                   | (968          | )  |
|    Unrealized actuarial gains and losses                                                                                                                                               |         |        | (1,543                     | )  |   |                   | (1,543        | )  |
|     Total shareholders’ equity                                                                                                                                              |         |        |  333,104              |    |   |                   | 255,858       |   |
|                                                                                                                                                                                                  |         |        |                       |    |   |                   |          |   |
|         TOTAL LIABILITIES AND SHAREHOLDERS’          EQUITY                                           |         | $           | 822,757                    |    |   | $                      | 792,972       |   |
|                                                                                                                                                                                                  |         |        |                       |    |   |                   |          |   |

----

|                                                            |   | FOR THE THREE MONTHS  ENDED AUGUST 31, |         |   | FOR THE NINE MONTHS  ENDED AUGUST 31, |   |
|-----------------------------------------------------------------|--------|--------------------------------------------------|--------------|--------|-------------------------------------------------|--------|
|                                                            |   |                                             |         |   |                                            |   |   |   |   |   |   |   |
|                                                            |   | 2009                                             |         |   | 2008                                            |   |   |  2009 |   |   | 2008 |   |
|                                                            |   |                                             |         |   |                                            |   |   |   |   |   |   |   |
| TOTAL REVENUES                                                  |   | $                                                | 115,171      |   |                                            | $      | 111,929 |   |   | $ | 353,093 |   |   | $ | 349,418 |   |
|                                                            |   |                                             |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| COSTS AND EXPENSES:                                             |   |                                             |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
|   Cost of sales                                       |   |                                             | 34,765       |   |                                            |   | 31,753 |   |   |   | 107,153 |   |   |   | 99,127 |   |
|   Advertising and promotion                           |   |                                             | 22,866       |   |                                            |   | 26,789 |   |   |   | 78,424 |   |   |   | 91,532 |   |
|   Selling, general and administrative                 |   |                                             | 15,275       |   |                                            |   | 15,024 |   |   |   | 45,031 |   |   |   | 45,676 |   |
|   Litigation settlement                               |   |                                             | —      |   |                                            |   | 11,196 |   |   |   | — |   |   |   | 11,196 |   |
|   Product recall (income) expenses                    |   |                                             | —      |   |                                            |   | (112 | ) |   |   | — |   |   |   | 5,931 |   |
|     Total costs and expenses                |   |                                             | 72,906       |   |                                            |   | 84,650 |   |   |   |   230,608 |   |   |   |   253,462 |   |
|                                                            |   |                                             |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| INCOME FROM OPERATIONS                                          |   |                                             | 42,265       |   |                                            |   | 27,279 |   |   |   | 122,485 |   |   |   | 95,956 |   |
|                                                            |   |                                             |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSE):                                         |   |                                             |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
|   Interest expense                                    |   |                                             | (5,126       | )      |                                            |   | (6,176 | ) |   |   | (16,075 | ) |   |   | (19,293 | ) |
|   Investment and other income, net                    |   |                                             | 45           |   |                                            |   | 109 |   |   |   | 223 |   |   |   | 362 |   |
|   Loss on early extinguishment of debt                |   |                                             | (405         | )      |                                            |   | — |   |   |   | (1,101 | ) |   |   |  (526 | ) |
|     Total other income (expense)            |   |                                             |  (5,486 | )      |                                            |   | (6,067 | ) |   |   | (16,953 | ) |   |   |  (19,457 | ) |
|                                                            |   |                                             |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAXES                                      |   |                                             | 36,779       |   |                                            |   | 21,212 |   |   |   | 105,532 |   |   |   | 76,499 |   |
|                                                            |   |                                             |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| PROVISION FOR INCOME TAXES                                      |   |                                             | 13,351       |   |                                            |   | 7,246 |   |   |   | 38,308 |   |   |   | 26,928 |   |
|                                                            |   |                                             |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME                                                      |   | $                                                | 23,428       |   |                                            | $      | 13,966 |   |   | $ | 67,224 |   |   | $ | 49,571 |   |
|                                                            |   |                                             |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| NUMBER OF COMMON SHARES:                                        |   |                                             |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
|   Weighted average outstanding-basic                  |   |                                             | 19,026       |   |                                            |   | 18,784 |   |   |   | 19,236 |   |   |   | 19,002 |   |
|   Weighted average and potential dilutive outstanding |   |                                             | 19,161       |   |                                            |   | 19,004 |   |   |   | 19,323 |   |   |   | 19,385 |   |
|                                                            |   |                                             |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME PER COMMON SHARE:                                    |   |                                             |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
|     Basic                                   |   | $                                                | 1.23         |   |                                            | $      | .74 |   |   | $ | 3.49 |   |   | $ | 2.61 |   |
|     Diluted                                 |   | $                                                | 1.22         |   |                                            | $      | .73 |   |   | $ | 3.48 |   |   | $ | 2.56 |   |

----

|                                                                                                                 |   | FOR THE NINE MONTHS ENDED AUGUST 31, |         |
|----------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------------|
|                                                                                                                 |   | 2009                                      |         |   |  2008 |   |
| OPERATING ACTIVITIES:                                                                                                |   |                                      |         |   |   |   |
|   Net income                                                                                               |   | $                                         | 67,224       |   |   | $ | 49,571 |   |
|   Adjustments to reconcile net income to net cash provided by    operating activities: |   |                                      |         |   |   |   |   |   |
|       Depreciation and amortization                                                    |   |                                      | 5,671        |   |   |   | 6,316 |   |
|       Deferred income taxes                                                            |   |                                      | 12,635       |   |   |   | 12,404 |   |
|       Tax benefit realized from stock options exercised                                |   |                                      | (325         | ) |   |   | (2,342 | ) |
|       Stock-based compensation                                                         |   |                                      | 5,667        |   |   |   | 4,281 |   |
|       Loss on early extinguishment of debt                                             |   |                                      | 1,101        |   |   |   | 526 |   |
|       Other, net                                                                       |   |                                      | (1           | ) |   |   | 137 |   |
|       Changes in operating assets and liabilities:                                     |   |                                      |         |   |   |   |   |   |
|         Accounts receivable                                                  |   |                                      | 828          |   |   |   | (7,567 | ) |
|         Inventories                                                          |   |                                      | (1,363       | ) |   |   | 2,611 |   |
|         Prepaid expenses and other current assets                            |   |                                      | (5,174       | ) |   |   | (5,885 | ) |
|         Accounts payable and accrued liabilities                             |   |                                      | (2,376       | ) |   |   | 17,248 |   |
|            Net cash provided by operating activities          |   |                                      |  83,887 |   |   |   |  77,300 |   |
|                                                                                                                 |   |                                      |         |   |   |   |   |   |
| INVESTING ACTIVITIES:                                                                                                |   |                                      |         |   |   |   |   |   |
|   Purchases of property, plant and equipment                                                               |   |                                      | (3,623       | ) |   |   | (3,567 | ) |
|   Decrease (increase) in other assets, net                                                                      |   |                                      | 1,986        |   |   |   | (1,255 | ) |
|            Net cash used in investing activities              |   |                                      | (1,637       | ) |   |   | (4,822 | ) |
|                                                                                                                 |   |                                      |         |   |   |   |   |   |
| FINANCING ACTIVITIES:                                                                                                |   |                                      |         |   |   |   |   |   |
|   Repayment of long-term debt                                                                              |   |                                      | (11,380      | ) |   |   | (37,250 | ) |
|   Proceeds from borrowings under revolving credit facility                                                 |   |                                      | 1,000        |   |   |   | 148,000 |   |
|   Repayments of revolving credit facility                                                                  |   |                                      | (20,500      | ) |   |   | (158,500 | ) |
|   Change in bank overdraft                                                                                 |   |                                      | (1,184       | ) |   |   | (7,584 | ) |
|   Repurchase of common shares                                                                              |   |                                      | (26,107      | ) |   |   | (26,327 | ) |
|   Proceeds from exercise of stock options                                                                  |   |                                      | 2,587        |   |   |   | 4,487 |   |
|   Tax benefit realized from stock options exercised                                                        |   |                                      | 325          |   |   |   | 2,342 |   |
|   Debt retirement costs                                                                                    |   |                                      | (18          | ) |   |   | — |   |
|           Net cash used in financing activities                    |   |                                      | (55,277      | ) |   |   | (74,832 | ) |
|                                                                                                                 |   |                                      |         |   |   |   |   |   |
| EFFECT OF EXCHANGE RATE CHANGESON CASH AND CASH EQUIVALENTS                                                          |   |                                      |   117   |   |   |   | (22 | ) |
|                                                                                                                 |   |                                      |         |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS:                                                                                           |   |                                      |         |   |   |   |   |   |
|   Increase (decrease) for the period                                                                       |   |                                      | 27,090       |   |   |   | (2,376 | ) |
|   At beginning of period                                                                                   |   |                                      |  32,310 |   |   |   |  15,407 |   |
|   At end of period                                                                                         |   | $                                         | 59,400       |   |   | $ |  13,031 |   |
|                                                                                                                 |   |                                      |         |   |   |   |   |   |
| PAYMENTS FOR:                                                                                                        |   |                                      |         |   |   |   |   |   |
|   Interest                                                                                                 |   | $                                         | 10,743       |   |   | $ | 14,129 |   |
|   Taxes                                                                                                    |   | $                                         | 23,412       |   |   | $ | 10,733 |   |

----

----

----

|                         |   | Three Months Ended August 31, |   |   | Nine Months Ended August 31, |   |
|------------------------------|--------|-------------------------------|--------|--------|------------------------------|--------|
|                         |   | 2009                          |   |   | 2008                         |   |   | 2009 |   |   | 2008 |   |
| Income from operations       |   | $                             | 2,124  |   |                         | $      | 1,701 |   |   | $ | 5,667 |   |   | $ | 4,281 |   |
| Provision for income taxes   |   |                          | 771    |   |                         |   | 581 |   |   |   | 2,057 |   |   |   | 1,507 |   |
| Net income                   |   | $                             | 1,353  |   |                         | $      | 1,120 |   |   | $ | 3,610 |   |   | $ | 2,774 |   |
|                         |   |                          |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Basic net income per share   |   | $                             | 0.07   |   |                         | $      | 0.06 |   |   | $ | 0.19 |   |   | $ | 0.15 |   |
| Diluted net income per share |   | $                             | 0.07   |   |                         | $      | 0.06 |   |   | $ | 0.19 |   |   | $ | 0.14 |   |

|                    |   | Nine Months Ended  August 31,  |   |
|-------------------------|--------|-----------------------------------------------|--------|
|                    |   | 2009                                          |   |   | 2008 |   |
| Expected life           |   | 6.0 years                                     |   |   | 6.0 years |   |
| Volatility              |   |                                          | 37     | %     |   |   | 36 | %     |
| Risk-free interest rate |   |                                          | 2.61   | %     |   |   | 3.84 | %     |
| Dividend yield          |   |                                          | 0      | %     |   |   | 0 | %     |
| Forfeitures             |   |                                          | 0.3    | %     |   |   | 0.3 | %     |

|                                |   |  Shares Under  Option |    |   | Weighted Average  Exercise  Price |   | WeightedAverageRemainingContractual       Life       |      |  AggregateIntrinsic  Value |   |
|-------------------------------------|--------|---------------------------------|---------|--------|---------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------|-----------|--------------------------------------|--------|
| Outstanding at December 1, 2008     |   | 1,510                           |    |   | $                                           | 50.23  |                                                                                                                  |      |                                 |   |   |
|     Granted     |   | 386                             |    |   |                                        | 55.53  |                                                                                                                  |      |                                 |   |   |
|     Exercised   |   | (68                             | )  |   |                                        | 38.07  |                                                                                                                  |      |                                 |   |   |
|     Cancelled   |   | (13                             | )  |   |                                        | 61.26  |                                                                                                                  |      |                                 |   |   |
|                                |   |                            |    |   |                                        |   |                                                                                                                  |      |                                 |   |   |
| Outstanding at August 31, 2009 |   | 1,815                           |    |   | $                                           | 51.74  |                                                                                                                  | 4.2 years |                                 | $      | 21,426 |   |
|                                |   |                            |    |   |                                        |   |                                                                                                                  |      |                                 |   |   |   |
| Exercisable at August 31, 2009 |   | 875                             |    |   | $                                           | 43.94  |                                                                                                                  | 3.4 years |                                 | $      | 16,393 |   |

----

|                          |   |  Number of   Shares |    |   | Weighted Average Grant Date Fair  Value |   |
|-------------------------------|--------|------------------------------------|---------|--------|----------------------------------------------|--------|
| Nonvested at December 1, 2008 |   |                               | 1       |   |                                         | $      | 35.37 |   |
|    Granted     |   |                               | – |   |                                         |   | – |   |
|    Vested      |   |                               | 1       |   |                                         |   | 35.37 |   |
|    Forfeited   |   |                               | – |   |                                         |   | – |   |
| Nonvested at August 31, 2009  |   |                               | – |   |                                         |   | – |   |

|                                                                                |   | For the Three Months    Ended August 31, |         |   | For the Nine Months Ended August 31, |   |
|-------------------------------------------------------------------------------------|--------|---------------------------------------------------------|--------------|--------|-------------------------------------------|--------|
|                                                                                |   | 2009                                                    |         |   | 2008                                      |   |   | 2009 |   |   | 2008 |   |
|                                                                                |   |                                                    |         |   |                                      |   |   |   |   |   |   |   |
| NET INCOME                                                                          |   | $                                                       | 23,428       |   |                                      | $      | 13,966 |   |   | $ | 67,224 |   |   | $ | 49,571 |   |
|                                                                                |   |                                                    |         |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
| NUMBER OF COMMON SHARES:                                                            |   |                                                    |         |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|    Weighted average outstanding                                      |   |                                                    | 19,026       |   |                                      |   | 18,784 |   |   |   | 19,236 |   |   |   | 19,002 |   |
|    Issued upon assumed exercise of outstanding stock options(1) |   |                                                    | –      |   |                                      |   |  50 |   |   |   | – |   |   |   |  70 |   |
|    Issued upon assumed conversion of convertible notes          |   |                                                    |  135    |   |                                      |   |  167 |   |   |   |   87 |   |   |   |   310 |   |
|    Effect of issuance of restricted common shares               |   |                                                    | –      |   |                                      |   |     3 |   |   |   | – |   |   |   |   3 |   |
|    Weighted average and potential dilutive outstanding     |   |                                                    |  19,161 |   |                                      |   |  19,004 |   |   |   | 19,323 |   |   |   | 19,385 |   |
| NET INCOME PER COMMON   SHARE:                                       |   |                                                    |         |   |                                      |   |   |   |   |   |   |   |   |   |   |   |
|     Basic                                                       |   | $                                                       | 1.23         |   |                                      | $      | .74 |   |   | $ | 3.49 |   |   | $ | 2.61 |   |
|     Diluted                                                     |   | $                                                       | 1.22         |   |                                      | $      | .73 |   |   | $ | 3.48 |   |   | $ | 2.56 |   |

----

|                                                                                                                         |   | 2009   |          |   | 2008   |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------|--------|--------|--------|
| Revolving Credit Facility due 2010 at a variable rate of 6.07% as of November   30, 2008                 |   | $      |  – |   |   | $      |  19,500 |   |   |   |   |
| 2.0% Convertible Senior Notes due 2013                                                                                       |   |   | 96,300        |   |   |   | 125,000 |   |   |   |   |
| 1.625% Convertible Senior Notes due 2014                                                                                     |   |   | 100,000       |   |   |   | 100,000 |   |   |   |   |
| Term Loan due 2013 at a variable rate of 5.93% and 6.57% as of August 31, 2009 and November 30, 2008, respectively |   |   | 105,250       |   |   |   | 107,500 |   |   |   |   |
| 7.0% Senior Subordinated Notes due 2014                                                                                      |   |   | 98,370        |   |   |   | 107,500 |   |   |   |   |
| Total long-term debt                                                                                                         |   |   |          |   |   |   | 399,920 |   |   |   | 459,500 |   |
| Less:  current maturities                                                                                          |   |   |          |   |   |   | (3,000 | ) |   |   | (3,000 | ) |
| Total long-term debt, net of current maturities                                                                              |   |   |          |   |   | $      | 396,920 |   |   | $ | 456,500 |   |

----

----

----

| 2009       |   | $      | 750     |   |
|------------|--------|--------|---------|--------|
| 2010       |   |   | 3,000   |   |
| 2011       |   |   | 3,000   |   |
| 2012       |   |   | 3,000   |   |
| 2013       |   |   | 191,800 |   |
| Thereafter |   |   | 198,370 |   |
|       |   | $      | 399,920 |   |

|                               |   | Fair Value Measurements as of  August 31, 2009 |    |
|------------------------------------|--------|----------------------------------------------------------|---------|
|                               |   | Level 1                                                  |    |   | Level 2 |   |   | Level 3 |   |   | Total |   |
|                               |   |                                                     |    |   |   |   |   |   |   |   |   |   |
| Liabilities                        |   |                                                     |    |   |   |   |   |   |   |   |   |   |
|   Interest rate swap (1) |   | $                                                        | – |   |   | $ | 1,743 |   |   | $ | – |   |   | $ | 1,743 |   |
|                               |   |                                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)   | The total fair value of the interest rate swap is classified as a current liability as of August 31, 2009 and matures on January 15, 2010.  We value this financial instrument using the “Income Approach” valuation technique.  This method uses valuation techniques to convert future amounts to a single present value amount.  Themeasurement is based on the value indicated by current market expectations about those future amounts. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 2009       |   | $      | 231   |   |
|------------|--------|--------|-------|--------|
| 2010       |   |   | 925   |   |
| 2011       |   |   | 925   |   |
| 2012       |   |   | 208   |   |
| 2013       |   |   | 75    |   |
| Thereafter |   |   | 263   |   |
|       |   | $      | 2,627 |   |

|                                      |   | 2009   |   |   | 2008   |   |
|-------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                      |   |   |   |   |   |   |
| Raw materials and work in process         |   | $      | 18,640 |   |   | $      | 16,753 |   |
| Finished goods                            |   |   | 23,696 |   |   |   | 24,180 |   |
|     Total inventories |   | $      | 42,336 |   |   | $      | 40,933 |   |

|                                              |   | 2009   |      |   | 2008   |   |
|---------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                              |   |   |      |   |   |   |
| Interest                                          |   | $      | 4,874     |   |   | $      | 3,216 |   |
| Salaries, wages and commissions              |   |   | 3,813     |   |   |   | 5,333 |   |
| Product advertising and promotion                 |   |   | 2,934     |   |   |   | 2,611 |   |
| Litigation settlement and legal fees              |   |   | 1,069     |   |   |   | 799 |   |
| Income taxes payable                              |   |   | 8,293     |   |   |   | 4,636 |   |
| Interest rate swap                                |   |   | 1,743     |   |   |   | 2,602 |   |
| Other                                             |   |   |  709 |   |   |   | 2,096 |   |
|     Total accrued liabilities |   | $      | 23,435    |   |   | $      | 21,293 |   |

----

|                                                                                                                 |   | For the Three Months Ended August 31, |   |   | For the Nine Months Ended August 31, |   |
|----------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|--------|--------|--------------------------------------|--------|
|                                                                                                                 |   | 2009                                            |   |   | 2008                                 |   |   | 2009 |   |   | 2008 |   |
|                                                                                                                 |   |                                            |   |   |                                 |   |   |   |   |   |   |   |
|   Net income                                                                                               |   | $                                               | 23,428 |   |                                 | $      | 13,966 |   |   | $ | 67,224 |   |   | $ | 49,571 |   |
|   Other – interest rate hedge adjustment, net of tax of $312, $145, $607 and $(38),respectively |   |                                            | 508    |   |                                 |   | 235 |   |   |   | 987 |   |   |   | 23 |   |
|   Other – foreign currency translation adjustment                                                    |   |                                            | 71     |   |                                 |   | (651 | ) |   |   | 1,212 |   |   |   | (491 | ) |
|      Total                                                                                  |   | $                                               | 24,007 |   |                                 | $      | 13,550 |   |   | $ | 69,423 |   |   | $ | 49,103 |   |

|                                |   | For the Three Months Ended August 31, |      |   | For the Nine Months Ended August 31, |   |
|-------------------------------------|--------|---------------------------------------|-----------|--------|--------------------------------------|--------|
|                                |   | 2009                                  |      |   | 2008                                 |   |   | 2009 |   |   | 2008 |   |
|                                |   |                                  |      |   |                                 |   |   |   |   |   |   |   |
| Interest cost                       |   | $                                     |  146 |   |                                 | $      | 152 |   |   | $ | 437 |   |   | $ | 457 |   |
| Amortization of loss                |   |                                  | 46        |   |                                 |   | – |   |   |   | 139 |   |   |   | – |   |
| Expected return on plan assets      |   |                                  | (170      | )      |                                 |   | (234 | ) |   |   | (510 | ) |   |   | (703 | ) |
| Net periodic pension cost (benefit) |   | $                                     |  22  |   |                                 | $      | (82 | ) |   | $ | 66 |   |   | $ | (246 | ) |

----

|                                              |   | For the Three Months Ended August 31, |    |   | For the Nine Months Ended August 31, |   |
|---------------------------------------------------|--------|--------------------------------------------|---------|--------|-------------------------------------------|--------|
|                                              |   | 2009                                       |    |   | 2008                                      |   |   | 2009 |   |   | 2008 |   |
| Service cost                                      |   | $                                          | 2       |   |                                      | $      | 5 |   |   | $ |  5 |   |   | $ |  16 |   |
| Interest cost                                     |   |                                       | 14      |   |                                      |   | 14 |   |   |   | 42 |   |   |   | 42 |   |
| Recognized net actuarial gain                     |   |                                       | – |   |                                      |   | (24 | ) |   |   | – |   |   |   |  (72 | ) |
| Net periodic postretirement health cost (benefit) |   | $                                          | 16      |   |                                      | $      | (5 | ) |   | $ | 47 |   |   | $ | (14 | ) |

|                                 |   | For the Three Months Ended August 31, |    |   | For the Nine Months Ended August 31, |   |
|--------------------------------------|--------|--------------------------------------------|---------|--------|-------------------------------------------|--------|
|                                 |   | 2009                                       |    |   | 2008                                      |   |   | 2009 |   |   | 2008 |   |
| Medicated skin care                  |   | $                                          | 38,429  |   |                                      | $      | 35,806 |   |   | $ | 117,856 |   |   | $ | 107,931 |   |
| Topical pain care                    |   |                                       | 26,023  |   |                                      |   | 24,192 |   |   |   | 72,380 |   |   |   | 74,279 |   |
| Oral care                            |   |                                       | 17,089  |   |                                      |   | 15,859 |   |   |   | 53,839 |   |   |   | 47,045 |   |
| Internal OTC                         |   |                                       | 11,307  |   |                                      |   | 12,149 |   |   |   | 34,357 |   |   |   | 36,633 |   |
| Medicated dandruff shampoos          |   |                                       | 7,216   |   |                                      |   | 7,654 |   |   |   | 26,304 |   |   |   | 26,940 |   |
| Dietary supplements                  |   |                                       | 5,141   |   |                                      |   | 4,939 |   |   |   | 14,982 |   |   |   | 15,446 |   |
| Other OTC and toiletry products      |   |                                       | 3,391   |   |                                      |   | 4,364 |   |   |   | 15,884 |   |   |   | 16,695 |   |
|   Total domestic net sales |   |                                       | 108,596 |   |                                      |   | 104,963 |   |   |   | 335,602 |   |   |   | 324,969 |   |
| International revenues               |   |                                       | 6,575   |   |                                      |   | 6,966 |   |   |   | 17,491 |   |   |   | 24,449 |   |
|   Total revenues           |   | $                                          | 115,171 |   |                                      | $      | 111,929 |   |   | $ | 353,093 |   |   | $ | 349,418 |   |

----

----

----

----

----

| AUGUST 31, 2009 |
|-----------------|

| (Unaudited and in thousands) |
|------------------------------|

|                                                                                     |   | CHATTEM |    |   | GUARANTORSUBSIDIARYCOMPANIES |   |    | NON-GUARANTORSUBSIDIARYCOMPANIES |   |   | ELIMINATIONS |   |   | CONSOLIDATED |     |
|------------------------------------------------------------------------------------------|--------|---------|---------|--------|------------------------------|--------|---------|----------------------------------|--------|--------|--------------|--------|--------|--------------|----------|
| ASSETS                                                                                   |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |
|                                                                                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |
| CURRENT ASSETS:                                                                          |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |
| Cash and cash equivalents                                                                |   | $       | 47,751  |   |                         | $      | 501     |                             |   | $      | 11,148       |   |   | $            | —  |   |   | $ | 59,400 |   |
| Accounts receivable, less allowances of $11,126                                     |   |    | 42,857  |   |                         |   | 18,045  |                             |   |   | 5,732        |   |   |         | (18,045  | ) |   |   | 48,589 |   |
| Interest receivable                                                                      |   |    | 107     |   |                         |   | 718     |                             |   |   | (90          | )      |   |         | (735     | ) |   |   | — |   |
| Inventories                                                                              |   |    | 36,883  |   |                         |   | 1,506   |                             |   |   | 3,947        |   |   |         | —  |   |   |   | 42,336 |   |
| Deferred income taxes                                                                    |   |    | 3,969   |   |                         |   | — |                             |   |   | 40           |   |   |         | —  |   |   |   | 4,009 |   |
| Prepaid expenses and other current assets                                                |   |    | 7,522   |   |                         |   | — |                             |   |   | 103          |   |   |         | —  |   |   |   | 7,625 |   |
| Total current assets                                                                     |   |    | 139,089 |   |                         |   | 20,770  |                             |   |   | 20,880       |   |   |         | (18,780  | ) |   |   | 161,959 |   |
|                                                                                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT, NET                                                       |   |    | 31,492  |   |                         |   | 775     |                             |   |   | 626          |   |   |         | —  |   |   |   | 32,893 |   |
|                                                                                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| OTHER NONCURRENT ASSETS:                                                                 |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| Patents, trademarks and other purchased product rights, net                         |   |    | 2,628   |   |                         |   | 674,057 |                             |   |   | 1,561        |   |   |         | (62,290  | ) |   |   | 615,956 |   |
| Debt issuance costs, net                                                                 |   |    | 9,340   |   |                         |   | — |                             |   |   | —      |   |   |         | —  |   |   |   | 9,340 |   |
| Investment in subsidiaries                                                               |   |    | 608,230 |   |                         |   | 64,682  |                             |   |   | 97,690       |   |   |         | (770,602 | ) |   |   | — |   |
| Note receivable                                                                          |   |    | — |   |                         |   | 34,694  |                             |   |   | —      |   |   |         | (34,694  | ) |   |   | — |   |
| Other                                                                                    |   |    | 2,609   |   |                         |   | — |                             |   |   | —      |   |   |         | —  |   |   |   | 2,609 |   |
| Total other noncurrent assets                                                            |   |    | 622,807 |   |                         |   | 773,433 |                             |   |   | 99,251       |   |   |         | (867,586 | ) |   |   | 627,905 |   |
|                                                                                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| TOTAL ASSETS                                                                             |   | $       | 793,388 |   |                         | $      | 794,978 |                             |   | $      | 120,757      |   |   | $            | (886,366 | ) |   | $ | 822,757 |   |
|                                                                                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                                               |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
|                                                                                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| CURRENT LIABILITIES:                                                                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| Current maturities of long-term debt                                                     |   | $       | 3,000   |   |                         | $      | — |                             |   | $      | —      |   |   | $            | —  |   |   | $ | 3,000 |   |
| Accounts payable and other                                                               |   |    | 13,359  |   |                         |   | — |                             |   |   | 1,387        |   |   |         | —  |   |   |   | 14,746 |   |
| Accrued liabilities                                                                      |   |    | 38,336  |   |                         |   | 251     |                             |   |   | 3,630        |   |   |         | (18,782  | ) |   |   | 23,435 |   |
| Total current liabilities                                                                |   |    | 54,695  |   |                         |   | 251     |                             |   |   | 5,017        |   |   |         | (18,782  | ) |   |   | 41,181 |   |
|                                                                                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| LONG-TERM DEBT, less current maturities                                                  |   |    | 412,323 |   |                         |   | (17,203 | )                                |   |   | 36,494       |   |   |         | (34,694  | ) |   |   | 396,920 |   |
|                                                                                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| DEFERRED INCOME TAXES                                                                    |   |    | (21,119 | )      |                         |   | 72,567  |                             |   |   | (1,242       | )      |   |         | —  |   |   |   | 50,206 |   |
|                                                                                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| OTHER NONCURRENT LIABILITIES                                                             |   |    | 1,346   |   |                         |   | — |                             |   |   | —      |   |   |         | —  |   |   |   | 1,346 |   |
|                                                                                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| INTERCOMPANY ACCOUNTS                                                                    |   |    | 13,046  |   |                         |   | (20,528 | )                                |   |   | 7,482        |   |   |         | —  |   |   |   | — |   |
|                                                                                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| SHAREHOLDERS’ EQUITY:                                                              |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| Preferred shares, without par value, authorized 1,000, none issued                  |   |    | — |   |                         |   | — |                             |   |   | —      |   |   |         | —  |   |   |   | — |   |
| Common shares, without par value, authorized 100,000, issued and outstanding 19,043 |   |    | 36,749  |   |                         |   | — |                             |   |   | —      |   |   |         | —  |   |   |   | 36,749 |   |
| Shares of subsidiaries                                                                   |   |    | — |   |                         |   | 641,659 |                             |   |   | 78,999       |   |   |         | (720,658 | ) |   |   | — |   |
| Dividends                                                                                |   |    | — |   |                         |   | (31,197 | )                                |   |   | —      |   |   |         | 31,197   |   |   |   | — |   |
| Retained earnings                                                                        |   |    | 298,454 |   |                         |   | 147,735 |                             |   |   | (5,013       | )      |   |         | (142,722 | ) |   |   | 298,454 |   |
|                                                                                     |   |    | 335,203 |   |                         |   | 758,197 |                             |   |   |  73,986 |   |   |         | (832,183 | ) |   |   | 335,203 |   |
| Cumulative other comprehensive income (loss) net of tax                             |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| Interest rate hedge adjustment                                                           |   |    | (800    | )      |                         |   | — |                             |   |   | —      |   |   |         | —  |   |   |   | (800 | ) |
| Foreign currency translation adjustment                                                  |   |    | 237     |   |                         |   | 1,694   |                             |   |   |  (980   | )      |   |         | (707     | ) |   |   | 244 |   |
| Unrealized actuarial gains and losses                                                    |   |    | (1,543  | )      |                         |   | — |                             |   |   | —      |   |   |         | —  |   |   |   | (1,543 | )  |
| Total shareholders’ equity                                                         |   |    | 333,097 |   |                         |   | 759,891 |                             |   |   | 73,006       |   |   |         | (832,890 | ) |   |   | 333,104 |   |
|                                                                                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |     |   |   |   |   |   |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY                                         |   | $       | 793,388 |   |                         | $      | 794,978 |                             |   | $      | 120,757      |   |   | $            | (886,366 | ) |   | $ | 822,757 |   |

----

| NOVEMBER 30, 2008 |
|-------------------|

| (In thousands) |
|----------------|

|                                                                                |   |  CHATTEM |    |   | GUARANTORSUBSIDIARYCOMPANIES |   |    | NON-GUARANTORSUBSIDIARYCOMPANIES |   |   |  ELIMINATIONS  |   |   |  CONSOLIDATED |     |
|-------------------------------------------------------------------------------------|--------|---------------|---------|--------|------------------------------|--------|---------|----------------------------------|--------|--------|---------------------|--------|--------|--------------------|----------|
| ASSETS                                                                              |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |
|                                                                                |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |
| CURRENT ASSETS:                                                                     |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |
| Cash and cash equivalents                                                           |   | $             | 22,055  |   |                         | $      | 1,570   |                             |   | $      | 8,685               |   |   | $                  | —  |   |   | $ | 32,310 |   |
| Accounts receivable, less allowances of $9,718                                      |   |          | 44,175  |   |                         |   | 16,226  |                             |   |   | 5,242               |   |   |               | (16,226  | ) |   |   | 49,417 |   |
| Interest receivable                                                                 |   |          | 108     |   |                         |   | 641     |                             |   |   | (91                 | )      |   |               | (658     | ) |   |   | — |   |
| Inventories, net                                                                    |   |          | 35,795  |   |                         |   | 1,811   |                             |   |   | 3,327               |   |   |               | —  |   |   |   | 40,933 |   |
| Deferred income taxes                                                               |   |          | 3,932   |   |                         |   | — |                             |   |   | 36                  |   |   |               | —  |   |   |   | 3,968 |   |
| Prepaid expenses and other current assets                                           |   |          | 4,024   |   |                         |   | — |                             |   |   | 332                 |   |   |               | (1,905   | ) |   |   | 2,451 |   |
| Total current assets                                                                |   |          | 110,089 |   |                         |   | 20,248  |                             |   |   | 17,531              |   |   |               | (18,789  | ) |   |   | 129,079 |   |
|                                                                                |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT, NET                                                  |   |          | 30,792  |   |                         |   | 775     |                             |   |   | 676                 |   |   |               | —  |   |   |   | 32,243 |   |
|                                                                                |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| OTHER NONCURRENT ASSETS:                                                            |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| Patents, trademarks and other purchased product rights, net                         |   |          | 3,341   |   |                         |   | 674,057 |                             |   |   | 1,561               |   |   |               | (62,289  | ) |   |   | 616,670 |   |
| Debt issuance costs, net                                                            |   |          | 12,253  |   |                         |   | — |                             |   |   | —             |   |   |               | —  |   |   |   | 12,253 |   |
| Investment in subsidiaries                                                          |   |          | 597,821 |   |                         |   | 64,682  |                             |   |   | 97,690              |   |   |               | (760,193 | ) |   |   | — |   |
| Note receivable                                                                     |   |          | — |   |                         |   | 34,694  |                             |   |   | —             |   |   |               | (34,694  | ) |   |   | — |   |
| Other                                                                               |   |          | 2,727   |   |                         |   | — |                             |   |   | —             |   |   |               | —  |   |   |   | 2,727 |   |
| Total other noncurrent assets                                                       |   |          | 616,142 |   |                         |   | 773,433 |                             |   |   | 99,251              |   |   |               | (857,176 | ) |   |   | 631,650 |   |
|                                                                                |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| TOTAL ASSETS                                                                        |   | $             | 757,023 |   |                         | $      | 794,456 |                             |   | $      | 117,458             |   |   | $                  | (875,965 | ) |   | $ | 792,972 |   |
|                                                                                |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                                          |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
|                                                                                |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| CURRENT LIABILITIES:                                                                |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| Current maturities of long-term debt                                                |   | $             | 3,000   |   |                         | $      | — |                             |   | $      |  —       |   |   | $                  | —  |   |   | $ | 3,000 |   |
| Accounts payable                                                                    |   |          | 16,463  |   |                         |   | — |                             |   |   | 1,736               |   |   |               | (83      | ) |   |   | 18,116 |   |
| Bank overdrafts                                                                     |   |          | 1,184   |   |                         |   | — |                             |   |   | —             |   |   |               | —  |   |   |   | 1,184 |   |
| Accrued liabilities                                                                 |   |          | 34,594  |   |                         |   | 699     |                             |   |   | 4,708               |   |   |               | (18,708  | ) |   |   | 21,293 |   |
| Total current liabilities                                                           |   |          | 55,241  |   |                         |   | 699     |                             |   |   | 6,444               |   |   |               | (18,791  | ) |   |   | 43,593 |   |
|                                                                                |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| LONG-TERM DEBT, less current maturities                                             |   |          | 455,900 |   |                         |   | (1,200  | )                                |   |   | 36,494              |   |   |               | (34,694  | ) |   |   |  456,500 |   |
|                                                                                |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| DEFERRED INCOME TAXES                                                               |   |          | (24,111 | )      |                         |   | 60,766  |                             |   |   |    (1,243 | )      |   |               | —  |   |   |   |  35,412 |   |
|                                                                                |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| OTHER NONCURRENT LIABILITIES                                                        |   |          | 1,609   |   |                         |   | — |                             |   |   |  —       |   |   |               | —  |   |   |   | 1,609 |   |
|                                                                                |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| INTERCOMPANY ACCOUNTS                                                               |   |          | 12,526  |   |                         |   | (18,962 | )                                |   |   | 6,436               |   |   |               | —  |   |   |   |    — |   |
|                                                                                |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| SHAREHOLDERS’ EQUITY                                                          |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| Preferred shares, without par value, authorized 1,000, none issued                  |   |          | — |   |                         |   | — |                             |   |   | —             |   |   |               | —  |   |   |   | — |   |
| Common shares, without par value, authorized 100,000, issued and outstanding 18,978 |   |          | 28,926  |   |                         |   | — |                             |   |   | —             |   |   |               | —  |   |   |   | 28,926 |   |
| Share capital of subsidiaries                                                       |   |          | — |   |                         |   | 641,659 |                             |   |   | 77,935              |   |   |               | (719,594 | ) |   |   | — |   |
| Dividends                                                                           |   |          | — |   |                         |   | (69,628 | )                                |   |   | —             |   |   |               | 69,628   |   |   |   | — |   |
| Retained earnings                                                                   |   |          | 231,230 |   |                         |   | 179,428 |                             |   |   | (6,416              | )      |   |               | (173,012 | ) |   |   | 231,230 |   |
|                                                                                |   |          | 260,156 |   |                         |   | 751,459 |                             |   |   | 71,519              |   |   |               | (822,978 | ) |   |   | 260,156 |   |
| Cumulative other comprehensive income (loss), net of tax:                      |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| Interest rate hedge adjustment                                                      |   |          | (1,787  | )      |                         |   | — |                             |   |   | —             |   |   |               | —  |   |   |   | (1,787 | ) |
| Foreign currency translation adjustment                                             |   |          | (968    | )      |                         |   | 1,694   |                             |   |   | (2,192              | )      |   |               | 498      |   |   |   | (968 | ) |
| Unrealized actuarial gains and losses                                               |   |          | (1,543  | )      |                         |   | — |                             |   |   | —             |   |   |               | —  |   |   |   | (1,543 | ) |
| Total shareholders’ equity                                                    |   |          | 255,858 |   |                         |   | 753,153 |                             |   |   |   69,327       |   |   |               | (822,480 | ) |   |   | 255,858 |   |
|                                                                                |   |          |    |   |                         |   |    |                             |   |   |                |   |   |               |     |   |   |   |   |   |
| TOTAL LIABILITIES ANDSHAREHOLDERS’ EQUITY                                     |   | $             | 757,023 |   |                         | $      | 794,456 |                             |   | $      | 117,458             |   |   | $                  | (875,965 | ) |   | $ | 792,972 |   |

----

|                                 |   | CHATTEM |    |   | GUARANTORSUBSIDIARYCOMPANIES |   |    | NON-GUARANTORSUBSIDIARYCOMPANIES |   |   | ELIMINATIONS       |   |   | CONSOLIDATED |    |
|--------------------------------------|--------|---------|---------|--------|------------------------------|--------|---------|----------------------------------|--------|--------|--------------------|--------|--------|--------------|---------|
|                                 |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |    |
| TOTAL REVENUES                       |   | $       | 325,295 |   |                         | $      | 70,647  |                             |   | $      | 15,297             |   |   | $            | (58,146 | ) |   | $ | 353,093 |   |
|                                 |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |    |   |   |   |   |   |
| COSTS AND EXPENSES:                  |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |    |   |   |   |   |   |
| Cost of sales                        |   |    | 98,174  |   |                         |   | 3,956   |                             |   |   | 7,579              |   |   |         | (2,556  | )  |   |   | 107,153 |   |
| Advertising and promotion            |   |    | 71,746  |   |                         |   | 3,203   |                             |   |   | 3,475              |   |   |         | — |   |   |   | 78,424 |   |
| Selling, general and administrative  |   |    | 42,800  |   |                         |   | 929     |                             |   |   | 1,302              |   |   |         | — |   |   |   | 45,031 |   |
| Product recall expenses              |   |    | (509    | )      |                         |   | — |                             |   |   | 509                |   |   |         | — |   |   |   | — |   |
| Equity in subsidiary income          |   |    | (37,381 | )      |                         |   | — |                             |   |   | —            |   |   |         | 37,381  |   |   |   | — |   |
| Total costs and expenses             |   |    | 174,830 |   |                         |   | 8,088   |                             |   |   | 12,865             |   |   |         | 34,825  |   |   |   | 230,608 |   |
|                                 |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |    |   |   |   |   |   |
| INCOME (LOSS) FROM OPERATIONS        |   |    | 150,465 |   |                         |   | 62,559  |                             |   |   |    2,432 |   |   |         | (92,971 | ) |   |   | 122,485 |   |
|                                 |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |    |   |   |   |   |   |
| OTHER INCOME (EXPENSE):              |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |    |   |   |   |   |   |
| Interest expense                     |   |    | (16,109 | )      |                         |   | — |                             |   |   | (2,028             | )      |   |         | 2,062   |   |   |   | (16,075 | ) |
| Investment and other income, net     |   |    | 173     |   |                         |   | 2,063   |                             |   |   | 2,006              |   |   |         | (4,019  | ) |   |   | 223 |   |
| Loss on early extinguishment of debt |   |    | (1,101  | )      |                         |   | — |                             |   |   | —            |   |   |         | — |   |   |   | (1,101 | ) |
| Royalties                            |   |    | (53,197 | )      |                         |   | (2,384  | )                                |   |   | (9                 | )      |   |         | 55,590  |   |   |   | — |   |
| Corporate allocations                |   |    | 1,583   |   |                         |   | (1,431  | )                                |   |   | (152               | )      |   |         | — |   |   |   | — |   |
| Intercompany R&D expense         |   |    | 2,727   |   |                         |   | (2,727  | )                                |   |   | —            |   |   |         | — |   |   |   | — |   |
| Total other income (expense)         |   |    | (65,924 | )      |                         |   | (4,479  | )                                |   |   |  (183         | )      |   |         | 53,633  |   |   |   | (16,953 | ) |
|                                 |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |    |   |   |   |   |   |
| INCOME (LOSS) BEFORE INCOME TAXES    |   |    | 84,541  |   |                         |   | 58,080  |                             |   |   | 2,249              |   |   |         | (39,338 | ) |   |   | 105,532 |   |
|                                 |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |    |   |   |   |   |   |
| PROVISION FOR INCOME TAXES      |   |    | 17,317  |   |                         |   | 20,145  |                             |   |   | 846                |   |   |         | — |   |   |   | 38,308 |   |
|                                 |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |    |   |   |   |   |   |
| NET INCOME (LOSS)                    |   | $       | 67,224  |   |                         | $      | 37,935  |                             |   | $      | 1,403              |   |   | $            | (39,338 | ) |   | $ | 67,224 |   |

----

|                                    |   | CHATTEM |    |   | GUARANTORSUBSIDIARYCOMPANIES |   |    | NON-GUARANTORSUBSIDIARYCOMPANIES |   |   | ELIMINATIONS |   |   | CONSOLIDATED |    |
|-----------------------------------------|--------|---------|---------|--------|------------------------------|--------|---------|----------------------------------|--------|--------|--------------|--------|--------|--------------|---------|
|                                    |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |    |
| TOTAL REVENUES                          |   | $       | 317,818 |   |                         | $      | 68,598  |                             |   | $      | 18,342       |   |   | $            | (55,340 | ) |   | $ | 349,418 |   |
|                                    |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |    |   |   |   |   |   |
| COSTS AND EXPENSES:                     |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |    |   |   |   |   |   |
| Cost of sales                           |   |    | 89,316  |   |                         |   | 3,745   |                             |   |   | 8,369        |   |   |         | (2,303  | )  |   |   | 99,127 |   |
| Advertising and promotion               |   |    | 82,308  |   |                         |   | 4,560   |                             |   |   | 4,664        |   |   |         | — |   |   |   | 91,532 |   |
| Selling, general and administrative     |   |    | 43,392  |   |                         |   | 430     |                             |   |   | 1,854        |   |   |         | — |   |   |   | 45,676 |   |
| Litigation settlement                   |   |    | 491     |   |                         |   | — |                             |   |   | 10,705       |   |   |         | — |   |   |   | 11,196 |   |
| Product recall expenses                 |   |    | 5,129   |   |                         |   | — |                             |   |   | 802          |   |   |         | — |   |   |   | 5,931 |   |
| Equity in subsidiary income             |   |    | (30,498 | )      |                         |   | — |                             |   |   | —      |   |   |         | 30,498  |   |   |   | — |   |
| Total costs and expenses                |   |    | 190,138 |   |                         |   | 8,735   |                             |   |   | 26,394       |   |   |         | 28,195  |   |   |   | 253,462 |   |
|                                    |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |    |   |   |   |   |   |
| INCOME (LOSS) FROM OPERATIONS           |   |    | 127,680 |   |                         |   | 59,863  |                             |   |   | (8,052       | )      |   |         | (83,535 | ) |   |   | 95,956 |   |
|                                    |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |    |   |   |   |   |   |
| OTHER INCOME (EXPENSE):                 |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |    |   |   |   |   |   |
| Interest expense                        |   |    | (19,279 | )      |                         |   | — |                             |   |   | (1,927       | )      |   |         | 1,913   |   |   |   | (19,293 | ) |
| Investment and other income, net        |   |    | 87      |   |                         |   | 1,922   |                             |   |   | 2,141        |   |   |         | (3,788  | ) |   |   | 362 |   |
| Loss on early extinguishment of debt    |   |    | (526    | )      |                         |   | — |                             |   |   | —      |   |   |         | — |   |   |   | (526 | ) |
| Royalties                               |   |    | (50,592 | )      |                         |   | (2,444  | )                                |   |   | —      |   |   |         | 53,036  |   |   |   | — |   |
| Corporate allocations                   |   |    | 1,543   |   |                         |   | (1,423  | )                                |   |   | (120         | )      |   |         | — |   |   |   | — |   |
| Total other income (expense)            |   |    | (68,767 | )      |                         |   | (1,945  | )                                |   |   | 94           |   |   |         | 51,161  |   |   |   | (19,457 | ) |
|                                    |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |    |   |   |   |   |   |
| INCOME (LOSS) BEFORE INCOME TAXES  |   |    | 58,913  |   |                         |   | 57,918  |                             |   |   | (7,958       | )      |   |         | (32,374 | ) |   |   | 76,499 |   |
|                                    |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |    |   |   |   |   |   |
| PROVISION FOR INCOME TAXES         |   |    | 9,342   |   |                         |   | 20,388  |                             |   |   | (2,802       | )      |   |         | — |   |   |   | 26,928 |   |
|                                    |   |    |    |   |                         |   |    |                             |   |   |         |   |   |         |    |   |   |   |   |   |
| NET INCOME (LOSS)                       |   | $       | 49,571  |   |                         | $      | 37,530  |                             |   | $      | (5,156       | )      |   | $            | (32,374 | ) |   | $ | 49,571 |   |

----

|                                                                                              |   | CHATTEM |    |   | GUARANTORSUBSIDIARYCOMPANIES |   |    | NON-GUARANTORSUBSIDIARYCOMPANIES |   |   |  ELIMINATIONS |   |   | CONSOLIDATED |          |
|---------------------------------------------------------------------------------------------------|--------|---------|---------|--------|------------------------------|--------|---------|----------------------------------|--------|--------|--------------------|--------|--------|--------------|---------------|
|                                                                                              |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |          |
| OPERATING ACTIVITIES:                                                                             |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |          |
| Net income (loss)                                                                                 |   | $       | 67,224  |   |                         | $      | 37,935  |                             |   | $      | 1,403              |   |   | $            | (39,338       | ) |   | $ | 67,224 |   |
| Adjustments to reconcile net income (loss) to net cash provided by (used in)operating activities: |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |          |   |   |   |   |   |
| Depreciation and amortization                                                                     |   |    | 5,559   |   |                         |   | — |                             |   |   | 112                |   |   |         | —       |   |   |   | 5,671 |   |
| Deferred income taxes                                                                             |   |    | 838     |   |                         |   | 11,800  |                             |   |   | (3                 | )      |   |         | —       |   |   |   | 12,635 |   |
| Tax benefit realized from stock options exercised                                                 |   |    | (325    | )      |                         |   | — |                             |   |   | —            |   |   |         | —       |   |   |   | (325 | ) |
| Stock-based compensation                                                                          |   |    | 5,667   |   |                         |   | — |                             |   |   | —            |   |   |         | —       |   |   |   | 5,667 |   |
| Loss on early extinguishment of debt                                                              |   |    | 1,101   |   |                         |   | — |                             |   |   | —            |   |   |         | —       |   |   |   | 1,101 |   |
| Other, net                                                                                        |   |    | 116     |   |                         |   | — |                             |   |   | (117               | )      |   |         | —       |   |   |   | (1 | ) |
| Equity in subsidiary income                                                                       |   |    | (39,338 | )      |                         |   | — |                             |   |   | —            |   |   |         | 39,338        |   |   |   | — |   |
| Changes in operating assets and liabilities:                                                      |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |          |   |   |   |   |   |
| Accounts receivable                                                                               |   |    | 1,318   |   |                         |   | (1,819  | )                                |   |   | (490               | )      |   |         | 1,819         |   |   |   | 828 |   |
| Interest receivable                                                                               |   |    | 1       |   |                         |   | (77     | )                                |   |   | (1                 | )      |   |         | 77            |   |   |   | — |   |
| Inventories                                                                                       |   |    | (1,049  | )      |                         |   | 305     |                             |   |   | (619               | )      |   |         | —       |   |   |   | (1,363 | ) |
| Prepaid expenses and other current assets                                                         |   |    | (3,498  | )      |                         |   | — |                             |   |   | 229                |   |   |         | (1,905        | )  |   |   | (5,174 | ) |
| Accounts payable and accrued liabilities                                                          |   |    | (509    | )      |                         |   | (448    | )                                |   |   | (1,428             | )      |   |         | 9             |   |   |   | (2,376 | ) |
| Net cash provided by (used in) operating activities                                               |   |    | 37,105  |   |                         |   | 47,696  |                             |   |   | (914               | )      |   |         | —       |   |   |   |   83,887 |   |
|                                                                                              |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |          |   |   |   |   |   |
| INVESTING ACTIVITIES:                                                                             |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |          |   |   |   |   |   |
| Purchases of property, plant and equipment                                                        |   |    | (3,645  | )      |                         |   | — |                             |   |   | 22                 |   |   |         | —       |   |   |   | (3,623 | ) |
| Decrease in other assets, net                                                                     |   |    | 843     |   |                         |   | — |                             |   |   | 1,143              |   |   |         | —       |   |   |   |  1,986 |   |
| Net cash (used in) provided by investing activities                                          |   |    | (2,802  | )      |                         |   | — |                             |   |   | 1,165              |   |   |         | —       |   |   |   | (1,637 | ) |
|                                                                                              |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |          |   |   |   |   |   |
| FINANCING ACTIVITIES:                                                                             |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |          |   |   |   |   |   |
| Repayment of long-term debt                                                                       |   |    | (11,380 | )      |                         |   | — |                             |   |   | —            |   |   |         | —       |   |   |   | (11,380 | ) |
| Proceeds from borrowings under revolving credit facility                                          |   |    | 1,000   |   |                         |   | — |                             |   |   | —            |   |   |         | —       |   |   |   | 1,000 |   |
| Repayments of revolving credit facility                                                           |   |    | (20,500 | )      |                         |   | — |                             |   |   | —            |   |   |         | —       |   |   |   | (20,500 | ) |
| Change in bank overdraft                                                                          |   |    | (1,184  | )      |                         |   | — |                             |   |   | —            |   |   |         | —       |   |   |   | (1,184 | ) |
| Repurchase of common shares                                                                       |   |    | (26,107 | )      |                         |   | — |                             |   |   | —            |   |   |         | —       |   |   |   | (26,107 | ) |
| Proceeds from exercise of stock options                                                           |   |    | 2,587   |   |                         |   | — |                             |   |   | —            |   |   |         | —       |   |   |   | 2,587 |   |
| Tax benefit realized from stock options exercised                                                 |   |    | 325     |   |                         |   | — |                             |   |   | —            |   |   |         | —       |   |   |   | 325 |   |
| Debt retirement costs                                                                             |   |    | (18     | )      |                         |   | — |                             |   |   | —            |   |   |         | —       |   |   |   | (18 | ) |
| Intercompany debt proceeds (payments)                                                             |   |    | 16,003  |   |                         |   | (16,003 | )                                |   |   | —            |   |   |         | —       |   |   |   | — |   |
| Changes in intercompany accounts                                                                  |   |    | 1,427   |   |                         |   | (1,565  | )                                |   |   | 138                |   |   |         | —       |   |   |   | — |   |
| Dividends paid                                                                                    |   |    | 29,240  |   |                         |   | (31,197 | )                                |   |   | 1,957              |   |   |         |  — |   |   |   | — |   |
| Net cash (used in) provided by financing activities                                               |   |    | (8,607  | )      |                         |   | (48,765 | )                                |   |   | 2,095              |   |   |         | —       |   |   |   | (55,277 | ) |
|                                                                                              |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |          |   |   |   |   |   |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                 |   |    | — |   |                         |   | — |                             |   |   | 117                |   |   |         | —       |   |   |   | 117 |   |
|                                                                                              |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |          |   |   |   |   |   |
| CASH AND CASH  EQUIVALENTS:                                                                  |   |    |    |   |                         |   |    |                             |   |   |               |   |   |         |          |   |   |   |   |   |
| Increase (decrease) for the period                                                                |   |    | 25,696  |   |                         |   | (1,069  | )                                |   |   | 2,463              |   |   |         | —       |   |   |   | 27,090 |   |
| At beginning of period                                                                            |   |    | 22,055  |   |                         |   | 1,570   |                             |   |   | 8,685              |   |   |         | —       |   |   |   | 32,310 |   |
| At end of period                                                                                  |   | $       | 47,751  |   |                         | $      | 501     |                             |   | $      | 11,148             |   |   | $            | —       |   |   | $ | 59,400 |   |

----

|                                                                                          |   | CHATTEM |     |    | GUARANTORSUBSIDIARYCOMPANIES |   |      | NON-GUARANTORSUBSIDIARYCOMPANIES |   |   | ELIMINATIONS |   |   | CONSOLIDATED |          |
|-----------------------------------------------------------------------------------------------|--------|---------|----------|---------|------------------------------|--------|-----------|----------------------------------|--------|--------|--------------|--------|--------|--------------|---------------|
|                                                                                          |   |    |     |    |                         |   |      |                             |   |   |         |   |   |         |          |
| OPERATING ACTIVITIES:                                                                         |   |    |     |    |                         |   |      |                             |   |   |         |   |   |         |          |
| Net income (loss)                                                                             |   | $       | 49,571   |    |                         | $      | 37,530    |                             |   | $      | (5,156       | )      |   | $            | (32,374       | ) |   | $ | 49,571 |   |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |   |    |     |    |                         |   |      |                             |   |   |         |   |   |         |          |   |   |   |   |   |
| Depreciation and amortization                                                                 |   |    | 6,208    |    |                         |   | —   |                             |   |   | 108          |   |   |         | —       |   |   |   | 6,316 |   |
| Deferred income taxes                                                                         |   |    | 603      |    |                         |   | 11,801    |                             |   |   | —      |   |   |         | —       |   |   |   | 12,404 |   |
| Tax benefit realized from stock options exercised                                             |   |    | (2,342   | )       |                         |   | —   |                             |   |   | —      |   |   |         | —       |   |   |   | (2,342 | ) |
| Stock-based compensation                                                                      |   |    | 4,281    |    |                         |   | —   |                             |   |   | —      |   |   |         | —       |   |   |   | 4,281 |   |
| Loss on early extinguishment of debt                                                          |   |    | 526      |    |                         |   | —   |                             |   |   | —      |   |   |         | —       |   |   |   | 526 |   |
| Other, net                                                                                    |   |    | 115      |    |                         |   | —   |                             |   |   | 22           |   |   |         | —       |   |   |   | 137 |   |
| Equity in subsidiary income                                                                   |   |    | (32,374  | )       |                         |   | —   |                             |   |   | —      |   |   |         | 32,374        |   |   |   | — |   |
| Changes in operating assets and liabilities:                                                  |   |    |     |    |                         |   |      |                             |   |   |         |   |   |         |          |   |   |   |   |   |
| Accounts receivable                                                                           |   |    | (5,444   | )       |                         |   | (442      | )                                |   |   | (2,123       | )      |   |         | 442           |   |   |   | (7,567 | ) |
| Interest receivable                                                                           |   |    | —  |    |                         |   | (15       | )                                |   |   | —      |   |   |         | 15            |   |   |   | — |   |
| Inventories                                                                                   |   |    | 1,009    |    |                         |   | 1,378     |                             |   |   | 224          |   |   |         | —       |   |   |   | 2,611 |   |
| Prepaid expenses and other current assets                                                     |   |    | (5,843   | )  |                         |   | —   |                             |   |   | 108          |   |   |         | (150          | ) |   |   | (5,885 | ) |
| Accounts payable and accrued liabilities                                                      |   |    | 5,497    |    |                         |   |  101 |                             |   |   | 11,957       |   |   |         | (307          | ) |   |   | 17,248 |   |
| Net cash provided by operating activities                                                     |   |    | 21,807   |    |                         |   | 50,353    |                             |   |   | 5,140        |   |   |         | —       |   |   |   |   77,300 |   |
|                                                                                          |   |    |     |    |                         |   |      |                             |   |   |         |   |   |         |          |   |   |   |   |   |
| INVESTING ACTIVITIES:                                                                         |   |    |     |    |                         |   |      |                             |   |   |         |   |   |         |          |   |   |   |   |   |
| Purchases of property, plant and equipment                                                    |   |    | (3,326   | )       |                         |   | —   |                             |   |   | (241         | )      |   |         | —       |   |   |   | (3,567 | ) |
| Decrease (increase) in other assets, net                                                      |   |    | (1,333   | )       |                         |   | —   |                             |   |   | 78           |   |   |         | —       |   |   |   | (1,255 | ) |
| Net cash used in investing activities                                                    |   |    | (4,659   | )       |                         |   | —   |                             |   |   | (163         | )      |   |         | —       |   |   |   | (4,822 | ) |
|                                                                                          |   |    |     |    |                         |   |      |                             |   |   |         |   |   |         |          |   |   |   |   |   |
| FINANCING ACTIVITIES:                                                                         |   |    |     |    |                         |   |      |                             |   |   |         |   |   |         |          |   |   |   |   |   |
| Repayment of long-term debt                                                                   |   |    | (37,250  | )       |                         |   | —   |                             |   |   | —      |   |   |         | —       |   |   |   | (37,250 | ) |
| Proceeds from borrowings under revolving credit facility                                      |   |    | 148,000  |    |                         |   | —   |                             |   |   | —      |   |   |         | —       |   |   |   | 148,000 |   |
| Repayments of revolving credit facility                                                       |   |    | (158,500 | )       |                         |   | —   |                             |   |   | —      |   |   |         | —       |   |   |   | (158,500 | ) |
| Change in bank overdraft                                                                      |   |    | (7,584   | )       |                         |   | —   |                             |   |   | —      |   |   |         | —       |   |   |   | (7,584 | ) |
| Repurchase of common shares                                                                   |   |    | (26,327  | )       |                         |   | —   |                             |   |   | —      |   |   |         | —       |   |   |   | (26,327 | ) |
| Proceeds from exercise of stock options                                                       |   |    | 4,487    |    |                         |   | —   |                             |   |   | —      |   |   |         | —       |   |   |   | 4,487 |   |
| Tax benefit realized from stock options exercised                                             |   |    | 2,342    |    |                         |   | —   |                             |   |   | —      |   |   |         | —       |   |   |   | 2,342 |   |
| Changes in intercompany accounts                                                              |   |    | 2,977    |    |                         |   | 1,903     |                             |   |   | (4,880       | )      |   |         | —       |   |   |   | — |   |
| Dividends paid                                                                                |   |    | 50,623   |    |                         |   | (52,498   | )                                |   |   | 1,875        |   |   |         |  — |   |   |   | — |   |
| Net cash used in financing activities                                                         |   |    | (21,232  | )       |                         |   | (50,595   | )                                |   |   | (3,005       | )      |   |         | —       |   |   |   | (74,832 | ) |
|                                                                                          |   |    |     |    |                         |   |      |                             |   |   |         |   |   |         |          |   |   |   |   |   |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                             |   |    | —  |    |                         |   | —   |                             |   |   | (22          | )      |   |         | —       |   |   |   | (22 | ) |
|                                                                                          |   |    |     |    |                         |   |      |                             |   |   |         |   |   |         |          |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS:                                                                    |   |    |     |    |                         |   |      |                             |   |   |         |   |   |         |          |   |   |   |   |   |
| (Decrease) increase for the period                                                            |   |    | (4,084   | )       |                         |   | (242      | )                                |   |   | 1,950        |   |   |         | —       |   |   |   | (2,376 | ) |
| At beginning of period                                                                        |   |    | 4,685    |    |                         |   | 590       |                             |   |   | 10,132       |   |   |         | —       |   |   |   | 15,407 |   |
| At end of period                                                                              |   | $       | 601      |    |                         | $      | 348       |                             |   | $      | 12,082       |   |   | $            | —       |   |   | $ | 13,031 |   |

----

|   | • | Gold Bond, Cortizone-10 and Balmex – medicated skin care; |
|--------|---------|-----------------------------------------------------------------|

|   | • | Icy Hot, Aspercreme and Capzasin – topical pain care; |
|--------|---------|-------------------------------------------------------------|

|   | • | ACT and Herpecin-L – oral care; |
|--------|---------|---------------------------------------|

|   | • | Unisom,Pamprin and Kaopectate – internal OTC; |
|--------|---------|-----------------------------------------------------|

|   | • | Selsun Blue – medicated dandruff shampoos; |
|--------|---------|--------------------------------------------------|

|   | • | Dexatrim, Garlique and New Phase – dietary supplements; and |
|--------|---------|-------------------------------------------------------------------|

|   | • | Bullfrog, Ultraswim and Sun-In – other OTC and toiletry products. |
|--------|---------|-------------------------------------------------------------------------|

----

----

|                                                       |   | For the Three MonthsEnded August 31, |    |          | For the Nine MonthsEnded August 31, |   |
|------------------------------------------------------------|--------|--------------------------------------|---------|---------------|-------------------------------------|--------|
|                                                       |   | 2009                                 |    |          | 2008                                |   |   | 2009 |   |   | 2008 |   |
|                                                       |   |                                 |    |          |                                |   |   |   |   |   |   |   |
| TOTAL REVENUES                                             |   |                                 | 100.0   | %             |                                |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |
|                                                       |   |                                 |    |          |                                |   |   |   |   |   |   |   |   |   |   |   |
| COSTS AND EXPENSES:                                        |   |                                 |    |          |                                |   |   |   |   |   |   |   |   |   |   |   |
|   Cost of sales                                  |   |                                 | 30.2    |          |                                |   | 28.4 |   |   |   | 30.3 |   |   |   | 28.4 |   |
|   Advertising and promotion                      |   |                                 | 19.8    |          |                                |   | 23.9 |   |   |   | 22.2 |   |   |   | 26.2 |   |
|   Selling, general and administrative            |   |                                 | 13.3    |          |                                |   | 13.4 |   |   |   | 12.8 |   |   |   | 13.0 |   |
|   Litigation settlement                          |   |                                 | – |          |                                |   | 10.0 |   |   |   | – |   |   |   | 3.2 |   |
|   Product recall (income) expenses               |   |                                 | – |          |                                |   | (0.1 | )   |   |   | – |   |   |   | 1.7 |   |
|     Total costs and expenses           |   |                                 | 63.3    |          |                                |   | 75.6 |   |   |   | 65.3 |   |   |   | 72.5 |   |
|                                                       |   |                                 |    |          |                                |   |   |   |   |   |   |   |   |   |   |   |
| INCOME FROM OPERATIONS                                     |   |                                 | 36.7    |          |                                |   | 24.4 |   |   |   | 34.7 |   |   |   | 27.5 |   |
|                                                       |   |                                 |    |          |                                |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSE):                                    |   |                                 |    |          |                                |   |   |   |   |   |   |   |   |   |   |   |
|   Interest expense                               |   |                                 | (4.4    | )   |                                |   | (5.5 | )   |   |   | (4.6 | )   |   |   | (5.5 | )   |
|   Investment and other income, net               |   |                                 | – |          |                                |   | 0.1 |   |   |   | 0.1 |   |   |   | 0.1 |   |
|   Loss on early extinguishment of debt           |   |                                 | (0.4    | )   |                                |   | – |   |   |   | (0.3 | )   |   |   | (0.2 | )   |
|      Total other income (expense) |   |                                 | (4.8    | )   |                                |   | (5.4 | )   |   |   | (4.8 | )   |   |   | (5.6 | )   |
|                                                       |   |                                 |    |          |                                |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAXES                                 |   |                                 | 31.9    |          |                                |   | 19.0 |   |   |   | 29.9 |   |   |   | 21.9 |   |
|                                                       |   |                                 |    |          |                                |   |   |   |   |   |   |   |   |   |   |   |
| PROVISION FOR INCOME TAXES                                 |   |                                 | 11.6    |          |                                |   | 6.5 |   |   |   | 10.9 |   |   |   | 7.7 |   |
|                                                       |   |                                 |    |          |                                |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME                                                 |   |                                 | 20.3    | %             |                                |   | 12.5 | % |   |   | 19.0 | % |   |   | 14.2 | % |

----

----

----

|                                         |   |                   |    |   |   |   |    |  Increase (Decrease) |   |
|----------------------------------------------|--------|------------------------|---------|--------|--------|--------|---------|---------------------------|--------|
|                                         |   |  2009             |    |   | 2008   |   |    | Amount                    |   |   | Percentage |   |
|                                         |   | (dollars in thousands) |    |
| Domestic net sales                           |   | $                      | 108,596 |   |   | $      | 104,963 |                      |   | $ | 3,633 |   |   |   | 3.5 | % |
| International revenues (including royalties) |   |                   | 6,575   |   |   |   | 6,966   |                      |   |   | (391 | ) |   |   | (5.6 | )   |
| Total revenues                               |   |                   | 115,171 |   |   |   | 111,929 |                      |   |   | 3,242 |   |   |   | 2.9 |   |
| Cost of sales                                |   |                   | 34,765  |   |   |   | 31,753  |                      |   |   | 3,012 |   |   |   | 9.5 |   |
| Advertising and promotion expense            |   |                   | 22,866  |   |   |   | 26,789  |                      |   |   | (3,923 | ) |   |   | (14.6 | )   |
| Selling, general and administrative expense  |   |                   | 15,275  |   |   |   | 15,024  |                      |   |   | 251 |   |   |   | 1.7 |   |
| Litigation settlement                        |   |                   | – |   |   |   | 11,196  |                      |   |   | (11,196 | ) |   |   | (100.0 | )   |
| Product recall income                        |   |                   | – |   |   |   | 112     |                      |   |   | (112 | ) |   |   | (100.0 | )   |
| Interest expense                             |   |                   | 5,126   |   |   |   | 6,176   |                      |   |   | (1,050 | ) |   |   | (17.0 | )   |
| Loss on early extinguishment of debt         |   |                   | 405     |   |   |   | – |                      |   |   | 405 |   |   |   | 100.0 |   |
| Net  income                        |   |                   | 23,428  |   |   |   | 13,966  |                      |   |   | 9,462 |   |   |   | 67.8 |   |

|                            |   |                   |    |
|---------------------------------|--------|------------------------|---------|
|                            |   |                   |    |   |   |   |   |  Increase (Decrease) |   |
|                            |   | 2009                   |    |   | 2008 |   |   | Amount |   |   | Percentage |   |
|                            |   | (dollars in thousands) |    |
| Medicated skin care             |   | $                      | 38,429  |   |   | $ | 35,806 |   |   | $ | 2,623 |   |   |   | 7.3 | % |
| Topical pain care               |   |                   | 26,023  |   |   |   | 24,192 |   |   |   | 1,831 |   |   |   | 7.6 |   |
| Oral care                       |   |                   | 17,089  |   |   |   | 15,859 |   |   |   | 1,230 |   |   |   | 7.8 |   |
| Internal OTC                    |   |                   | 11,307  |   |   |   | 12,149 |   |   |   | (842 | ) |   |   | (6.9 | )   |
| Medicated dandruff shampoos     |   |                   | 7,216   |   |   |   | 7,654 |   |   |   | (438 | ) |   |   | (5.7 | )   |
| Dietary supplements             |   |                   | 5,141   |   |   |   | 4,939 |   |   |   | 202 |   |   |   | 4.1 |   |
| Other OTC and toiletry products |   |                   | 3,391   |   |   |   | 4,364 |   |   |   | (973 | ) |   |   | (22.3 | )   |
|   Total               |   | $                      | 108,596 |   |   | $ | 104,963 |   |   | $ | 3,633 |   |   |   | 3.5 |   |

----

----

|                                         |   |                   |    |   |   |   |    | Increase (Decrease) |   |
|----------------------------------------------|--------|------------------------|---------|--------|--------|--------|---------|---------------------|--------|
|                                         |   | 2009                   |    |   | 2008   |   |    | Amount              |   |   | Percentage |   |
|                                         |   | (dollars in thousands) |    |
| Domestic net sales                           |   | $                      | 335,602 |   |   | $      | 324,969 |                |   | $ | 10,633 |   |   |   | 3.3 | % |
| International revenues (including royalties) |   |                   | 17,491  |   |   |   | 24,449  |                |   |   | (6,958 | ) |   |   | (28.5 | )   |
| Total revenues                               |   |                   | 353,093 |   |   |   | 349,418 |                |   |   | 3,675 |   |   |   | 1.1 |   |
| Cost of sales                                |   |                   | 107,153 |   |   |   | 99,127  |                |   |   | 8,026 |   |   |   | 8.1 |   |
| Advertising and promotion expense            |   |                   | 78,424  |   |   |   | 91,532  |                |   |   | (13,108 | ) |   |   | (14.3 | )   |
| Selling, general and administrative expense  |   |                   | 45,031  |   |   |   | 45,676  |                |   |   | (645 | ) |   |   | (1.4 | )   |
| Litigation settlement                        |   |                   | – |   |   |   | 11,196  |                |   |   | (11,196 | ) |   |   | (100.0 | )   |
| Product recall expenses                      |   |                   | – |   |   |   | 5,931   |                |   |   | (5,931 | ) |   |   | (100.0 | )   |
| Interest expense                             |   |                   | 16,075  |   |   |   | 19,293  |                |   |   | (3,218 | ) |   |   | (16.7 | )   |
| Loss on early extinguishment of debt         |   |                   | 1,101   |   |   |   | 526     |                |   |   | 575 |   |   |   | 109.3 |   |
| Net income                                   |   |                   | 67,224  |   |   |   | 49,571  |                |   |   | 17,653 |   |   |   | 35.6 |   |

|                            |   |                   |    |
|---------------------------------|--------|------------------------|---------|
|                            |   |                   |    |   |   |   |   |  Increase (Decrease) |   |
|                            |   | 2009                   |    |   | 2008 |   |   |  Amount |   |   | Percentage |   |
|                            |   | (dollars in thousands) |    |
| Medicated skin care             |   | $                      | 117,856 |   |   | $ | 107,931 |   |   | $ | 9,925 |   |   |   | 9.2 | % |
| Topical pain care               |   |                   | 72,380  |   |   |   | 74,279 |   |   |   | (1,899 | ) |   |   | (2.6 | )   |
| Oral care                       |   |                   | 53,839  |   |   |   | 47,045 |   |   |   | 6,794 |   |   |   | 14.4 |   |
| Internal OTC                    |   |                   | 34,357  |   |   |   | 36,633 |   |   |   | (2,276 | ) |   |   | (6.2 | )   |
| Medicated dandruff shampoos     |   |                   | 26,304  |   |   |   | 26,940 |   |   |   | (636 | ) |   |   | (2.4 | )   |
| Dietary supplements             |   |                   | 14,982  |   |   |   | 15,446 |   |   |   | (464 | ) |   |   | (3.0 | )   |
| Other OTC and toiletry products |   |                   | 15,884  |   |   |   | 16,695 |   |   |   | (811 | ) |   |   | (4.9 | )   |
|   Total               |   | $                      | 335,602 |   |   | $ | 324,969 |   |   | $ | 10,633 |   |   |   | 3.3 |   |

----

----

----

----

----

|   | • | we face significant competition in the OTC healthcare, toiletries and dietary supplements markets; |
|--------|---------|----------------------------------------------------------------------------------------------------|

|   | • | our business could be adversely affected by a prolonged downturn or recession in the United States and/or the other countries in which we conduct significant business; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | we may be adversely effected by factors affecting our customer’s businesses; |
|--------|---------|------------------------------------------------------------------------------------|

|   | • | we rely on a few large customers, particularly Wal-Mart Stores, Inc., for a significant portion of our sales; |
|--------|---------|---------------------------------------------------------------------------------------------------------------|

|   | • | our acquisition strategy is subject to risk and may not be successful; |
|--------|---------|------------------------------------------------------------------------|

|   | • | our initiation of a voluntary recall of our Icy Hot Heat Therapy products could expose us to additional product liability claims; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | • | we may receive additional claims that allege personal injury from ingestion of Dexatrim; |
|--------|---------|------------------------------------------------------------------------------------------|

|   | • | litigation may adversely affect our business, financial condition and results of operations; |
|--------|---------|----------------------------------------------------------------------------------------------|

|   | • | we have a significant amount of debt that could adversely affect our business and growth prospects; |
|--------|---------|-----------------------------------------------------------------------------------------------------|

|   | • | we may discontinue products or product lines, which could result in returns and asset write-offs, and/or engage in product recalls, any of which would reduce our cash flow and earnings; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | our product liability insurance coverage may be insufficient to cover existing or future liability claims; |
|--------|---------|------------------------------------------------------------------------------------------------------------|

|   | • | our business is regulated by numerous federal, state and foreign governmental authorities, which subjects us to elevated compliance costs, risks of non-compliance and the potential adverse effect of new or changing regulations; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | our success depends on our ability to anticipate and respond in a timely manner to changing consumer preferences; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------|

|   | • | our projections of earnings are highly subjective and our future earnings could vary in a material amount from our projections; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------|

|   | • | we may be adversely affected by fluctuations in buying decisions of mass merchandise, drug and food trade buyers and the trend toward retail trade consolidation; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | we rely on third party manufacturers for a portion of our product portfolio, including products under our Gold Bond, Icy Hot, Selsun, Dexatrim, ACT, Unisom and Cortizone-10 brands; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | our dietary supplement business could suffer as a result of injuries caused by dietary supplements in general, unfavorable scientific studies or negative press; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | our business could be adversely affected if we are unable to successfully protect our intellectual property or defend claims of infringement by others; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | because most of our operations are located in Chattanooga, Tennessee, we are subject to regional and local risks; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------|

|   | • | we depend on sole or limited source suppliers for ingredients in certain of our products, and our inability to buy these ingredients would prevent us from manufacturing these products; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | we are subject to the risk of doing business internationally; |
|--------|---------|---------------------------------------------------------------|

|   | • | the terms of our outstanding debt obligations limit certain of our activities; |
|--------|---------|--------------------------------------------------------------------------------|

|   | • | to service our indebtedness, we will require a significant amount of cash; |
|--------|---------|----------------------------------------------------------------------------|

|   | • | our operations are subject to significant environmental laws and regulations; |
|--------|---------|-------------------------------------------------------------------------------|

|   | • | we are dependent on certain key executives, the loss of whom could have a material adverse effect on our business; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------|

|   | • | our shareholder rights plan and charter contain provisions that may delay or prevent a merger, tender offer or other change of control of us; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | the trading price of our common stock may be volatile; |
|--------|---------|--------------------------------------------------------|

|   | • | we have no current intentions of paying dividends to holders of our common stock; |
|--------|---------|-----------------------------------------------------------------------------------|

----

|   | • | we can be affected adversely and unexpectedly by the implementation of new, or changes in the interpretation of existing, accounting principles generally accepted in the United States of America (“GAAP”); |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | identification of a material weakness in our internal controls over financial reporting may adversely affect our financial results; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------|

|   | • | the convertible note hedge and warrant transactions may affect the value of our common stock and our convertible notes; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------|

|   | • | conversion of our convertible notes may dilute the ownership interest of existing shareholders, including holders who had previously converted their convertible notes; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | virtually all of our assets consist of intangibles; and |
|--------|---------|---------------------------------------------------------|

|   | • | other risks described in our Securities and Exchange Commission filings. |
|--------|---------|--------------------------------------------------------------------------|

----

|                     Period                       |   |  Total Number of Shares Purchased |    |   |   Average Price Paid Per Share (1) |   |    | Total Number of Shares Purchased as Part of Publicly Announced Plans or  Programs (2) |   |   | Approximate Dollar Value that may yet be Purchased under the Plans or  Programs (2) |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|---------|--------|----------------------------------------------|--------|---------|--------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                               |   |                                   |    |   |                                         |   |    |                                                                                       |   |   |                                                                                          |   |
| June 1– June 30                                                                                                                                                                                                                                              |   |                                   | – |   |                                         | $      | – |                                                                                       |   |   | –                                                                                       |   |   | $ | 47,806,121 |   |
| July 1 – July 31                                                                                                                                                                                                                                             |   |                                   | – |   |                                         |   | – |                                                                                       |   |   | –                                                                                       |   |   |   | 47,806,121 |   |
| August 1 – August 31                                                                                                                                                                                                                                         |   |                                   | – |   |                                         |   | – |                                                                                       |   |   | –                                                                                       |   |   |   | 47,806,121 |   |
|   Total Third Quarter                                                                                                                                                                                                                                    |   |                                   | – |   |                                         | $      | – |                                                                                       |   |   | –                                                                                       |   |   | $ | 47,806,121 |   |

| (1)   | Average price paid per share includes broker commissions. |
|-----------------|-----------------------------------------------------------|

| (2)   | On September 30, 2009, our Board of Directors increased the authorization to a total of $100.0 million of our common stock under the terms of our existing stock repurchase program.  There is no expiration date specified for our stock buyback program. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Exhibit Number | Description                                                                                                                                                                         |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |                                                                                                                                                                                |
| 10.1           | Seventh Amendment to Credit Agreement, dated as of September 30, 2009, among Chattem, Inc., its domestic subsidiaries, identified lenders and Bank of America, N.A., as agent  |
| 31.1           | Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934                                                                                             |
| 31.2           | Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934                                                                                             |
| 32             | Certification required by Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350                                                                  |

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|                   | CHATTEM, INC.      |                                       |
|------------------------|--------------------|--------------------------------------------|
|                   | (Registrant)  |                                       |
|                   |               |                                       |   |
| Dated: October 6, 2009 | By:                | /s/ Zan Guerry                        |   |
|                   |               | Zan Guerry                            |   |
|                   |               | Chairman and Chief Executive Officer  |   |
|                   |               |                                       |   |

|                   |   |                                             |   |
|------------------------|--------|--------------------------------------------------|--------|
| Dated: October 6, 2009 | By:    | /s/ Robert B. Long                          |   |
|                   |   | Robert B. Long                              |   |
|                   |   | Vice President and Chief Financial Officer  |   |
|                   |   |                                             |   |

----

| Exhibit Number | Description                                                                                                                                                                   |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |                                                                                                                                                                          |
| 10.1           | Seventh Amendment to Credit Agreement, dated as of September 30, 2009, among Chattem, Inc., its domestic subsidiaries, identified lenders and Bank of America, N.A., as agent |
|           |                                                                                                                                                                          |
| 31.1           | Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934                                                                                            |
|           |                                                                                                                                                                          |
| 31.2           | Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934                                                                                            |
|           |                                                                                                                                                                          |
| 32             | Certification required by Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350                                                                 |

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