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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K


                                  ANNUAL REPORT
                       PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


  FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1999    COMMISSION FILE NUMBER 0-5905


                                  CHATTEM, INC.
                             A TENNESSEE CORPORATION
                   IRS EMPLOYER IDENTIFICATION NO. 62-0156300
                              1715 WEST 38TH STREET
                          CHATTANOOGA, TENNESSEE 37409
                             TELEPHONE: 423-821-4571


           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                                      NAME OF EACH EXCHANGE ON
 TITLE OF EACH CLASS                                      WHICH REGISTERED
---------------------                                 ------------------------

         NONE                                                    NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                         COMMON STOCK, WITHOUT PAR VALUE


REGISTRANT HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS AND HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.

DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K WILL
NOT BE CONTAINED IN THE DEFINITIVE PROXY STATEMENT INCORPORATED BY REFERENCE
IN PART III OF THIS FORM 10-K.

AS OF FEBRUARY 25, 2000 THE AGGREGATE MARKET VALUE OF VOTING SHARES HELD BY
NON-AFFILIATES WAS $162,123,124
AS OF FEBRUARY 25, 2000 9,628,464 COMMON SHARES WERE OUTSTANDING.

                      DOCUMENTS INCORPORATED BY REFERENCE:

PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR FISCAL YEAR ENDED
NOVEMBER 30, 1999 (THE "1999 ANNUAL REPORT TO STOCKHOLDERS") ARE INCORPORATED BY
REFERENCE IN PARTS I, II AND IV OF THIS REPORT. PORTIONS OF THE REGISTRANT'S
DEFINITIVE PROXY STATEMENT DATED MARCH 10, 2000 (THE "PROXY STATEMENT") ARE
INCORPORATED BY REFERENCE IN PART III OF THIS REPORT.






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                                     PART I

ITEM 1.  BUSINESS

GENERAL

Chattem, Inc. (the "Company") is a leading marketer and manufacturer of a
variety of branded consumer products, including over-the-counter ("OTC") health
care and toiletries and skin care products. The Company's high quality branded
products target niche market segments and are among the market leaders in their
respective categories. Through creative and cost effective marketing techniques,
we support these brands on a national level across all major distribution
channels, including food, drug and mass merchandisers.

         Our portfolio of branded products includes:

             -        OTC health care products, including the GOLD BOND line of
                      medicated powder, cream and lotion products; topical
                      analgesics such as FLEXALL, SPORTSCREME, ASPERCREME,
                      CAPZASIN and ICY HOT; an appetite suppressant, DEXATRIM;
                      premenstrual internal analgesics including PAMPRIN;
                      dietary supplements under the SUNSOURCE label, including
                      GARLIQUE, HARMONEX and REJUVEX; and other branded OTC
                      health care products.

             -        Toiletries and skin care products, including BAN
                      antiperspirants and deodorants, PHISODERM skin cleansers
                      and BULLFROG sunblock.

Several of these brands have the number one market share in their categories,
including GOLD BOND (medicated powders) and BAN (roll-on antiperspirant/
deodorant).

The Company conducts a portion of its business through three wholly-owned
subsidiaries. One subsidiary owns or licenses substantially all of the
trademarks and intangibles associated with the Company's domestic consumer
products business and licenses the Company's use thereof. Certain foreign sales
operations are conducted through Canadian and United Kingdom subsidiaries.

For purposes of this report, the "Company" or "we" refers to Chattem, Inc. and
its wholly-owned subsidiaries. Trademarks of the Company appear in this report
in all capitalized letters.


                                     2


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DEVELOPMENTS DURING FISCAL 1999

On December 21, 1998 the Company acquired the DEXATRIM, SPORTSCREME, ASPERCREME,
CAPZASIN-P, CAPZASIN-HP and ARTHRITIS HOT brands from Thompson Medical Company,
Inc. (the "Thompson Medical brands") for $95,000,000. The purchase price
consisted of $90,000,000 cash and 125,500 shares of the Company's common stock.
The cash portion of the purchase price was financed by borrowings under a senior
credit facility. The purchase price of $95,000,000 was allocated $3,493,000 to
inventory and $91,507,000 to the trademarks.

On December 21, 1998 the Company also announced the filing of a shelf
registration with the Securities and Exchange Commission for $250,000,000 of
debt and equity securities. This shelf filing will allow the Company to access
the capital markets on a more immediate basis to fund internal growth and
acquisitions and strengthen its balance sheet.

On May 7, 1999 the Company issued an additional $75,000,000 of 8.875% (priced to
yield 8.8125%) senior subordinated notes under the indenture relating to the
issuance of its $200,000,000 of 8.875% notes on March 24, 1998. The additional
notes mature on April 1, 2008 and were issued under the Company's $250,000,000
shelf registration statement filed on December 21, 1998 with the Securities and
Exchange Commission. The net proceeds from the issuance of the additional notes
were used to retire long-term bank debt.

In fiscal 1999 the Company redeemed 172,500 shares of its common stock, without
par value, for $3,912,000 in accordance with the Company's announced stock
buyback program.

During fiscal 1999 the Company retired $15,106,000 face amount of its 12.75%
senior subordinated notes due 2004.

The Company will continue to seek sales increases through a combination of
acquisitions and internal growth while maintaining high operating income levels.
As previously high-growth brands mature, sales increases will become even more
dependent on acquisitions and the development of successful line extensions of
existing products. During fiscal 1999 the Company introduced the following line
extensions/new products: BAN Ultra Dry Roll-On, BAN Ultra Dry Solid Stick, GOLD
BOND Triple Antibiotic Ointment, REPOSE Stress Relief Formula, BULLFROG MAGIC
BLOCK, SUN-IN Super Streaks, FLEXALL QUIK GEL, MUDD Self-Heating Skin Cleanser
and PHISODERM 4-Way Daily Acne Cleanser. Also, new packaging for the entire BAN
brand was introduced in the second quarter of fiscal 1999.


GROWTH STRATEGY

The Company seeks to expand its business through:

ACQUISITIONS. Brand acquisitions afford the Company the opportunity to leverage
its advertising and promotional capabilities and utilize existing distribution
channels to attain incremental sales increases accompanied by higher operating
margins. The Company seeks to acquire brands with unrealized potential that have
been under-marketed by larger firms or have achieved success in limited
geographic regions. The Company focuses its acquisition efforts on niche markets
in the consumer products sector where it is able to gain a significant market
position. As many of the Company's competitors rationalize their product lines
or businesses, we anticipate an increase in the number and size of attractive
brand acquisition opportunities.

Three recent examples of the execution of this strategy are the Company's
acquisitions of:

The Thompson Medical brands in December 1998. With the topical analgesic
products acquired in this purchase, the Company currently is the leading
marketer in the U.S. of brands in this category. Also acquired in this purchase
was DEXATRIM, an appetite suppressant, which is a leading product in its market
group.

                                     3


<PAGE>

BAN in March 1998. BAN, introduced in 1955, is a leading
antiperspirant/deodorant market brand with the number one U.S. market share in
the roll-on brand segment. The Company introduced two new line extensions and
new packaging for BAN in fiscal 1999.

GOLD BOND in April 1996. GOLD BOND is the leading medicated powder with a
rapidly growing presence in the anti-itch cream and lotion markets. Annual sales
of GOLD BOND have increased by approximately 50% from less than $30 million at
the time of the acquisition, while operating margins have increased during the
same period.

INTERNAL GROWTH. The Company seeks to increase its market share for its existing
brands by focusing on increased market penetration and brand awareness and
introducing product line extensions. Product line extensions allow the Company
to maximize the value of the base brand through an increased market presence and
new market entry. Recent examples of product line extensions include GOLD BOND
Triple Antibiotic Ointment, GOLD BOND Medicated Lotion, BULLFROG MAGIC BLOCK,
BAN Ultra Dry Roll-On, BAN Ultra Dry Solid Stick, PHISODERM 4-Way Daily Acne
Cleaner, MUDD Self-Heating Skin Cleanser and REPOSE Stress Relief Formula from
SUNSOURCE.

                                     4

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PRODUCTS

The objective of the Company is to offer high quality brand name products in
niche market segments in which its products can be among the market leaders in
their respective categories. The Company strives to achieve its objective by
identifying brands with favorable demographic appeal, quickly modifying products
and promotions in response to changing consumer demands, and developing creative
and cost-effective marketing and advertising programs. The Company competes in
the following product categories: OTC health care and toiletries and skin care.
The Company manufactures products accounting for approximately one-half of its
sales volume at its facility in Chattanooga, Tennessee, with BAN, GOLD BOND
medicated powders, the SUNSOURCE products, the Thompson Medical brands and
NORWICH Aspirin being manufactured by contract manufacturers.

The Company's product brands are:
                                             OTC HEALTH CARE

                   GOLD BOND - medicated powders and lotion, antibiotic
                     ointment and anti-itch cream
                   FLEXALL - topical analgesic
                   ICY HOT- topical analgesic
                   SPORTSCREME - topical analgesic
                   ASPERCREME - topical analgesic
                   CAPZASIN -P - topical analgesic
                   CAPZASIN -HP - topical analgesic
                   ARTHRITIS HOT -topical analgesic
                   PAMPRIN - menstrual internal analgesic
                   PREMSYN PMS - premenstrual internal analgesic
                   HERPECIN-L - cold sore and fever blister balm
                   BENZODENT - topical oral analgesic
                   NORWICH Aspirin - internal analgesic
                   DEXATRIM - appetite suppressant
                   GARLIQUE - garlic extract
                   REJUVEX - menopausal supplement
                   HARMONEX - emotional and physical well-being
                   PROPALMEX - prostate health
                   MELATONEX - sleep aid
                   ECHINEX - resistance to infections
                   REPOSE - stress relief

                                        TOILETRIES AND SKIN CARE

                   BAN - antiperspirant/deodorant
                   PHISODERM - facial and hand cleanser
                   MUDD - facial mask and cleanser
                   BULLFROG - sunscreen and sunblock
                   ULTRASWIM - chlorine removing shampoo
                   SUN-IN - spray-on hair lightener


                                     5


<PAGE>

The following table sets forth the Company's net sales attributable to domestic
and international OTC health care, toiletries and skin care, other products and
total products during the past three fiscal years (in thousands of dollars):

<TABLE>
<CAPTION>
                                                           FISCAL YEAR ENDED NOVEMBER 30,
                                   ----------------------------------------------------------------------------
                                         1999                       1998                      1997
                                   ---------------------      ---------------------      ----------------------
                                   SALES      PERCENTAGE      SALES      PERCENTAGE      SALES      PERCENTAGE
                                   -----      ----------      -----      ----------      -----      ----------
<S>                              <C>          <C>             <C>        <C>             <C>        <C>
Domestic:
   OTC Health Care...........    $ 167,718        56.2%     $ 114,060        51.8%     $  92,223        64.4%
   Toiletries and Skin Care..      108,718        36.5         84,850        38.6         33,887        23.7
International:
   OTC Health Care...........        4,538         1.5          3,249         2.7          3,053         2.1
   Toiletries and Skin Care..       16,932         5.7         17,004         6.5         12,154         8.5
Other Products...............          236         0.1            901         0.4          1,918         1.3
                                 ---------     -------      ---------     -------      ---------     -------

      Total Products.........    $ 298,142       100.0%     $ 220,064       100.0%     $ 143,235        100.0%
                                 =========     =======      =========     =======      =========     ========
</TABLE>


                                     6


<PAGE>


OTC HEALTH CARE

The Company markets a diversified portfolio of brand name OTC health care
products, many of which are among the market leaders in the U.S. in their
respective categories.

The GOLD BOND brand, which is approximately 100 years old, competes in the adult
and baby medicated powder, foot powder, therapeutic lotion, anti-itch cream and
antibiotic ointment markets. GOLD BOND is the leading brand in the medicated
powder category and is a rapidly growing presence in the anti-itch cream market.
Total retail sales for the brand have grown from less than $28 million when the
brand was acquired in fiscal 1996 to over $48 million in fiscal 1999. In 1997
the Company added two line extensions, GOLD BOND foot powder and GOLD BOND
medicated body lotion. GOLD BOND antibiotic ointment was introduced during the
first quarter of 1999. The product line is heavily supported by national
television and radio advertising throughout the year, as well as with consumer
promotions. As evidenced by the success of the lotion, foot powder and ointment
extensions, GOLD BOND continues to represent a significant growth opportunity
both through growth among the existing products as well as with the introduction
of line extensions.

With the acquisition of the Thompson Medical brands in late 1998, Chattem has
become the market leader in topical analgesics. The Company's strong market
position as well as the advancing age of the U.S. population and the increasing
interest in fitness and physical fitness combine to provide solid growth
prospects within the topical analgesic category. FLEXALL is an aloe vera based
topical analgesic used primarily by chronic pain sufferers to alleviate pain and
irritation in joints and secondarily by sufferers of muscle strain. The launch
of FLEXALL QUIK GEL, which provides fast relief without any mess, was
accompanied by an advertising campaign featuring NFL Hall of Famer Joe Montana.

Uniquely positioned as the brand that goes on "icy to dull the pain and gets hot
to relax it away", ICY HOT is available in a cream, balm and stick. This dual
action extra strength product appeals to younger users just entering the
category as well as older consumers who want to remain active.

The addition of the Thompson Medical brands rounds out the Company's topical
analgesic portfolio. ASPERCREME provides odor free relief of arthritis and other
chronic pain while SPORTSCREME is targeted at serious athletes as well as
"weekend warriors". CAPZASIN, which contains capsaicin, the active ingredient
that doctors recommend most, is focused on the arthritis sufferer looking for
clinically proven relief. ARTHRITIS HOT provides relief at a value price. The
Company supports the topical analgesic brands with extensive national television
and radio advertising as well as targeted consumer promotions.

The Company competes in the menstrual analgesic segment with two brands:
PAMPRIN, a combination drug targeted towards relief of menstrual symptoms, and
PREMSYN PMS, targeted towards the symptoms of premenstrual syndrome. The Company
uses a mix of television and radio advertising as well as point of entry
sampling to support these brands.

HERPECIN-L, Chattem's entry in the lip care category, is uniquely formulated to
treat and protect cold sores by moisturizing lips to help prevent cracking and
promote healing. Available in a stick and a jar, HERPECIN-L contains a sunblock
to help protect lips from the harmful rays of the sun. The Company uses radio
advertising to generate trial use during the peak winter and summer cold sore
seasons.

BENZODENT is a dental analgesic cream in an adhesive base for use as an oral
topical analgesic for pain related to dentures. Acquired in 1994, BENZODENT is
principally supported by sampling consumers at the time they are fitted with
dentures as well as other professional marketing targeted toward dentists.

NORWICH is a pharmaceutical-quality aspirin-based analgesic which complements
the Company's other OTC health care products by offering consumers another
choice in the analgesic market segment. The Company positions the brand as a
reasonably priced alternative between private label generic aspirin and
high-priced, heavily-advertised brands.


                                     7

<PAGE>


DEXATRIM is a line of appetite suppressants which was acquired from Thompson
Medical Company, Inc. in December of 1998. DEXATRIM is available in four
different formulas including gelcaps, which were introduced in early 1999. The
brand is supported through strong television advertising focusing on the safety
and efficacy of DEXATRIM as a diet aid. In 2000 DEXATRIM will enter the herbal
diet aid category with DEXATRIM Natural. DEXATRIM Natural is a drug-free, all
natural diet aid with special dual action that curbs your appetite and helps
your body burn fat and calories. DEXATRIM and DEXATRIM Natural will be supported
through high levels of television advertising in 2000.

GARLIQUE garlic tablets support cardiovascular health and are uniquely
positioned in the marketplace as a "one per day" high potency garlic supplement.
Most major GARLIQUE competitors require multiple daily dosages. Consumers have a
high level of interest in this odorless, drug-free, all natural approach to
maintaining normal cholesterol levels.

REJUVEX is a dietary supplement for women in the pre and post-menopausal age
group. REJUVEX helps women to maintain comfort during a phase of life that is
often fraught with numerous discomforts. Additionally, REJUVEX, high in
magnesium, helps promote strong healthy bones in a population that is at risk
for development of osteoporosis. REJUVEX provides an estrogen-free avenue of
natural support.

HARMONEX is a combination of St. John's Wort, proven to help emotional balance,
and Siberian ginseng, an herb providing a boost to physical well-being. In
clinical trials, the scientifically standardized St. John's Wort extract used in
HARMONEX helped maintain a healthy emotional balance in study subjects.

PROPALMEX is an herbal supplement for men over forty. PROPALMEX supports
prostate health and promotes free urinary flow. As men age, natural changes in
hormone balance result in conditions which tend to cause a swelling of the
prostate. This benign condition plagues most men past middle age and PROPALMEX
is the all natural, drug-free approach to maintenance of a healthy prostate.

MELATONEX is formulated to support a natural sleep cycle by supplementing the
body's production of melatonin, a hormone necessary for a good night's sleep. As
individuals age, they produce less melatonin, tend to sleep less and have more
difficulty falling asleep and staying asleep.

ECHINEX is a standardized herbal complex of echinacea, ginger and Siberian
ginseng. This effective combination supports one's natural resistance against
infection. ECHINEX is a seasonal product that provides adults with added
protection during times of high risk for cold and flu.

REPOSE Stress Relief Formula was launched during the summer of 1999. A
combination of standardized kava and Siberian ginseng as well as essential
vitamins and minerals, REPOSE promotes quick relaxation while replenishing lost
nutrients and helping the body adapt to stress.


                                     8


<PAGE>


TOILETRIES AND SKIN CARE

The Company markets a portfolio of brand name toiletries and skin care products,
many of which are among the market leaders in the U.S. in their respective
categories.

BAN antiperspirant and deodorant products provide advanced protection from odor
and wetness. Originally introduced in 1955, BAN is the number one roll-on brand
in the U.S. The proven maximum strength protection of BAN is available in five
advanced forms, Original Roll-On, Clear Roll-On, Solid Stick, Clear Stick, and
the revolutionary Clear Soft Solid. The product line is supported with
significant national television and radio advertising and consumer promotions.
Two new line extensions, BAN Ultra Dry Roll-on and BAN Ultra Dry Stick, and new
packaging were introduced in the 1999 fiscal year.

PHISODERM is a line of facial cleansers developed by dermatologists which
retains an ethical, skin smart halo. The line includes several formulas of
liquid cleansers including one for infants and a bar soap. In 1999 PHISODERM
added a 4-Way Daily Acne Cleanser to the line which has generated significant
incremental new business to the brand. Marketing support of the brand has been
in the form of radio advertising for the base products and print advertising in
teen magazines for the acne product in addition to extensive sampling of all
formulas. In 2000 the Company anticipates further expanding the acne portion of
the business with unique new line extensions.

MUDD is a line of deep cleaning clay-based products for the face. Target
consumers for MUDD are women between the ages of 18 and 49. MUDD Masque is
available in four formulas and is a strong market leader in the masque category.
In 1999 the Company introduced MUDD Self-Heating Skin Cleanser which is a deep
cleaning scrub product. The MUDD Self-Heating Skin Cleanser is unique because it
generates heat upon contact with water to open pores for maximum deep cleansing.

BULLFROG is the line of ultimate waterproof sunblocks for outdoor active
consumers. The Company will continue to support the brand with a comprehensive
brand plan which includes an active new product program, increased consumer
advertising, strong promotions and targeted sampling programs. In 1999 two new
products were added to the line: BULLFROG MAGIC BLOCK, a disappearing color
sunblock, and BULLFROG QUIK STICK, the highest sun protection stick with aloe
and vitamin E. In 2000, BULLFROG will add three new products to the line:
BULLFROG QUIK GEL Sport Spray, an active sport spray version of the most popular
selling BULLFROG QUIK GEL formula; BULLFROG AgeProof, a high SPF daily wear
sunblock with Parsol 1789; and BULLFROG SparkleBlock, a disappearing color
sunblock with sparkles.

ULTRASWIM is a line of chlorine removing shampoos, conditioners, and soaps.
ULTRASWIM has a unique formula that performs chlorine removal better than any
comparable haircare or skincare product on the market. The Company supports this
brand through targeted print advertising to competitive, recreational and
exercise swimmers and through event sponsorship with targeted sampling programs.


                                     9


<PAGE>


SUN-IN is a dominant spray-in hair lightener in the haircare market. In 1999
SUN-IN introduced Super Streaks, a hair lightener in a gel form similar to a
styling gel. This item, which offers the SUN-IN teen user a hair lightener with
added control, has provided incremental volume to the base business. The brand
is supported through strong consumer promotions executed on shelf and a seasonal
radio campaign on teen radio stations.


INTERNATIONAL

Certain of the Company's products are sold in foreign countries. The
international business is concentrated in Canada, Europe and Central and South
America.

Sales in Canada and Europe are conducted by subsidiary companies located and
locally staffed in Canada and the United Kingdom, respectively. General export
sales are handled by the Company from its offices in Chattanooga. Most of the
products sold in international markets are manufactured by the Company at its
Chattanooga and United Kingdom facilities and are packaged by subsidiary
companies in small facilities in Canada and the United Kingdom with the
assistance, from time to time, of outside contract packagers.

The BAN, GOLD BOND, FLEXALL, PAMPRIN, BULLFROG, PHISODERM, ULTRASWIM, SUN-IN,
MUDD, ASPERCREME and DEXATRIM brands are sold in Canada. Consumer product sales
in the United Kingdom and on the continent of Western Europe are currently
limited to toiletry and skin care products. The Company's hair lightener is sold
on the continent under the SPRAY BLOND trademark and in the United Kingdom as
SUN-IN. BAN, MUDD, CORNSILK and ULTRASWIM are the other products sold by the
Company's U.K. subsidiary in Europe.

The Company's export division services various distributors primarily located in
Central and South America and the Caribbean. The Company sells various products
into these markets including BAN, GOLD BOND, ICY HOT, DEXATRIM and PHISODERM.


MANUFACTURING AND QUALITY CONTROL

The Company manufactures approximately one-half of the sales volume of its
products at its Chattanooga plant. BAN, GOLD BOND medicated powders, the
SUNSOURCE brands, the Thompson Medical brands and NORWICH Aspirin are
manufactured by third party contract manufacturers. With the addition of a newly
purchased facility and through third party manufacturers, the Company has
adequate capacity to meet anticipated demand for its products. New products that
are consistent with currently manufactured products can generally be
manufactured with the adaptation of existing equipment and facilities, the
addition of new equipment at relatively small cost or through readily available
contract manufacturers. For additional information about the extent of
utilization of the Company's manufacturing facilities, see "Properties", Item 2,
in this report.

The Company's third party manufacturers produce certain products including GOLD
BOND powders, the Thompson Medical brands and the SUNSOURCE line. Additionally,
we have a manufacturing agreement with Bristol-Myers Squibb Company ("BMS"),
where BMS will manufacture BAN for us until March 2001. In most cases, other
than with BAN, the manufacturer is not obligated under a contract that fixes
the term of its commitment. Manufacturers may experience problems with product
quality or timeliness of product delivery. Manufacturers may also discontinue
production of brands for us upon little or no advance notice. In each case, we
believe that other contract manufacturers could be quickly secured if any of our
current contractors cease to perform adequately. However, if this occurs and we
cannot find other contract manufacturers, we may be forced to shift production
to in-house facilities. This may cause manufacturing delays, which would cause
disruption in our ability to fill orders. This could adversely affect our
business.

To monitor the quality of its products, the Company maintains an internal
quality control system supported by an on-site microbiology laboratory. We have
quality control inspectors who regularly test our products and processes and
shepherd the products through the manufacturing cycle. Outside consultants also

                                     10


<PAGE>


are employed from time to time to monitor product development and the
effectiveness of the Company's operations.

The Company has not experienced any material adverse effect on its business as a
result of shortages of energy, raw materials or packaging materials used in the
manufacture of its products. Certain of our products contain specialized
ingredients that we obtain from international and domestic third party
suppliers. Additionally, we currently source one of our material ingredients for
DEXATRIM, PPA, through a single supplier. An unexpected interruption or a
shortage in supply could adversely affect our business derived from these
products. We may not be able to raise prices quickly enough to immediately
offset the effects of any increase in the costs of these specialized ingredients
or fill customer orders in the event of a supply shortage. At present, we do not
foresee any significant problems in obtaining our ingredients requirements at
reasonable prices, but an unexpected interruption or a shortage in supply could
adversely affect our business in the future.


PRODUCT DEVELOPMENT

The Company's product development expenditures were $1,839,000, $1,369,000 and
$1,207,000 in the fiscal years ended November 30, 1999, 1998 and 1997,
respectively. No material customer-sponsored product development activities were
undertaken during these periods. The Company expects product development
expenditures to increase in fiscal 2000 due to greater emphasis on developing
line extension opportunities.

The product development effort focuses on developing improved formulations for
existing products and on the creation of formulations for product line
extensions. The preservation and improvement of the quality of the Company's
products are also integral parts of its overall strategy.


DISTRIBUTION

The Company's domestic products are sold primarily through food, drug and mass
merchandiser accounts. Internationally, the products are sold by a national
broker in Canada and the Company's own sales force in the United Kingdom and by
exclusive distributors in Western Europe, Central and South America and the
Caribbean.

Wal-Mart Stores, Inc. accounts for more than 10% of the Company's consolidated
net sales. No other customer accounts for more than 10% of consolidated net
sales. Boots Plc, a U.K. retailer, accounts for more than 10% of the
international consumer products segment's sales.

The Company generally maintains sufficient inventories to meet customer orders
as received absent unusual and infrequent situations. At present, the Company
has no significant backlog of customer orders and is promptly meeting customer
requirements.

The Company does not generally experience wide variances in the amount of
inventory it maintains. Inventory levels were increased during fiscals 1996-1999
largely as a result of product acquisitions and line extensions in those years.
In certain circumstances, the Company allows its customers to return unsold
merchandise and, for seasonal products, provides extended payment terms to its
customers.

                                    11


<PAGE>


MARKETING

The Company allocates a significant portion of its revenues to the advertising
and promotion of its products. Expenditures for these purposes were 39.5%, 39.3%
and 39.2%, respectively, as a percentage of net sales during each of the fiscal
years ended November 30, 1999, 1998 and 1997.

The Company's marketing objective is to develop and execute professionally
designed, creative and cost-effective advertising and promotional programs. The
manner in which the Company executes promotional programs and purchases
advertising time creates more flexibility in terms of adjusting spending levels.
The Company believes that balancing advertising, trade promotion and consumer
promotion expenditures on a cost-effective basis is essential to its ability to
compete successfully.

The Company develops for each of its major brands advertising strategies and
executions that sell the product by focusing on the particular strengths and
market position of the product rather than just entertaining the viewer. The
Company achieves cost-effective advertising by minimizing certain expenses, such
as production of commercials and payments to advertising agencies. New product
launches are supported with a substantial level of advertising and promotional
spending. We often use celebrity endorsements to increase awareness of our
products, such as Larry King's endorsement of GARLIQUE and Joe Montana's
endorsement of FLEXALL. Where appropriate, we use radio advertising and
15-second television advertisements. In our advertisements, we have successfully
used personal testimonials from individuals attesting to the effectiveness of
our products.

The Company works directly with retailers to develop promotional calendars and
campaigns for each brand that are customized to the particular requirements of
the individual retailer. The programs, which include cooperative advertising,
temporary price reductions, in-store displays and special events, are designed
to obtain or enhance distribution at the retail level and to reach the ultimate
consumers of the product. The Company also utilizes consumer promotions such as
coupons, samples and trial sizes to increase the trial and consumption of the
products.


SEASONALITY

During recent fiscal years, the Company's first quarter net sales and gross
profit have trailed the other fiscal quarters on average from 25% to 35% because
of slower sales of domestic and international consumer products and the relative
absence of promotional campaigns during this quarter. As a result of the
Company's acquisitions of BAN and the Thompson Medical brands, seasonality
should not be as pronounced as in years past; however, net sales and gross
profit during the first quarter will continue to trail the other fiscal
quarters.

COMPETITION

The Company competes in the OTC health care and toiletries and skin care
markets. These markets are highly competitive and are characterized by the
frequent introduction of new products, including the movement of prescription
drugs to the OTC market, often accompanied by major advertising and promotional
programs. We compete primarily on the basis of product quality, price, brand
loyalty and consumer acceptance. Our competitors include other OTC
pharmaceutical companies and large consumer products companies, many of which
have considerably greater financial and marketing resources than us. In
addition, our competitors have often been willing to use aggressive spending on
trade promotions and advertising as a strategy for building market share at the
expense of their competitors, including us. The private label or generic
category has also become increasingly competitive in certain of the Company's
product markets. Our products continue to compete for shelf space among
retailers who are increasingly consolidating.

                                    12


<PAGE>


TRADEMARKS AND PATENTS

Our trademarks are of material importance to our business and are among our most
important assets. In fiscal year 1999, substantially all of our net sales were
from products bearing proprietary brands names, including BAN, GOLD BOND,
FLEXALL, ICY HOT, PAMPRIN, GARLIQUE, PHISODERM, DEXATRIM and BULLFROG.
Accordingly, our future success may depend in part upon the goodwill associated
with our brand names, particularly BAN, GOLD BOND and DEXATRIM.

Our principal brand names are registered in the United States and certain
foreign countries. However, we cannot assure you that the steps we take to
protect our proprietary rights in our brand names will be adequate to prevent
the misappropriation of these registered brand names in the United States or
abroad. In addition, the laws of some foreign countries do not protect
proprietary rights in brand names to the same extent as do the laws of the
United States.

Through our subsidiary, Signal Investment & Management Co., we maintain and have
applied for patent, trademark and copyright protection in the United States
relating to certain of our existing and proposed products and processes. We
cannot assure you that we will be able to successfully protect our intellectual
property, and the loss of our intellectual property protection could adversely
affect our business. Additionally, we license certain intellectual property from
third parties, and we cannot assure you that these third parties can
successfully maintain their intellectual property rights. The sales of certain
of our products rely on our ability to maintain and extend our licensing
agreements with third parties, and we cannot assure you that we will be
successful in maintaining these licensing agreements. If we lose the right to
use these licenses, our business could be adversely affected.

The Company also owns patents related to the ICY HOT stick topical analgesics,
which expire in 2007, and numerous patents related to the BAN antiperspirant and
deodorant products. After expiration of the patents, the Company expects that
these products will continue to compete in the market primarily on the basis of
the goodwill associated with the brands.


GOVERNMENT REGULATION

The manufacturing, processing, formulation, packaging, labeling and advertising
of the Company's products are subject to regulation by federal agencies,
including:

      -  the United States Food and Drug Administration ("FDA");
      -  the Federal Trade Commission ("FTC");
      -  the Consumer Product Safety Commission;
      -  the United States Department of Agriculture;
      -  the United States Postal Service;
      -  the United States Environmental Protection Agency ("EPA"); and
      -  the Occupational Safety and Health Administration ("OSHA").


These activities are also regulated by various agencies of the states,
localities and foreign countries in which our products are sold. In particular,
the FDA regulates the safety, manufacturing, labeling and distribution of
dietary supplements, including vitamins, minerals and herbs, food additives, OTC
and prescription drugs and cosmetics. The regulations that are promulgated by
the FDA relating to the manufacturing process are known as GMP's. In addition,
the FTC has overlapping jurisdiction with the FDA to regulate the promotion and
advertising of OTC pharmaceutical, antiperspirant and deodorant, dietary
supplement and functional toiletry and skin care products.

                                     13


<PAGE>

All of the Company's OTC drug products are regulated pursuant to the FDA's
monograph system for OTC drugs. The monographs set out the active ingredients
and labeling indications that are permitted for certain broad categories of OTC
drug products, such as topical analgesics. Compliance with the monograph
provisions means that the product is generally recognized as safe and effective
and is not misbranded. Future changes in the monographs could result in the
Company having to revise product labeling and formulations. The Company
responded to certain questions with respect to efficacy received from the FDA in
connection with clinical studies for pyrilamine maleate, one of the active
ingredients used in certain of the PAMPRIN and PREMSYN PMS products. While the
Company addressed all of the FDA questions in detail, the final monograph for
menstrual drug products will determine if the FDA considers pyrilamine maleate
safe and effective for menstrual relief products. The Company has been actively
monitoring the process and does not believe that either PAMPRIN or PREMSYN PMS
will be materially adversely affected by the FDA review. The Company believes
that any adverse finding by the FDA would likewise affect the Company's
principal competitor in the menstrual product category.

The Dietary Supplement Health and Education Act of 1994 ("DSHEA") was enacted on
October 25, 1994. DSHEA amends the Federal Food, Drug and Cosmetic Act by
defining dietary supplements, which include vitamins, mineral, nutritional
supplements, herbs and botanicals, as a new category of food separate from
conventional food. DSHEA provides a regulatory framework to ensure safe, quality
dietary supplements and to foster the dissemination of accurate information
about such products. Under DSHEA, the FDA is generally prohibited from
regulating dietary supplements as food additives or as drugs unless product
claims, such as claims that a product may diagnose, mitigate, cure or prevent an
illness, disease or malady, permit the FDA to attach drug status to a product.

DSHEA provides for specific nutritional labeling requirements for dietary
supplements effective January 1, 1997, and the FDA's final regulations
require that all dietary supplements must be labeled in compliance with the
regulations no later than March 23, 1999. DSHEA permits substantiated,
truthful and non-misleading statements of nutritional support to be made in
labeling, such as statements describing general well-being resulting from
consumption of a dietary ingredient or the role of a nutrient or dietary
ingredient in affecting or maintaining a structure or function of the body.
The FDA has adopted a final regulation, effective February 7, 2000,
distinguishing between permitted claims and impermissible disease-related
claims. The Company anticipates that the FDA will promulgate GMPs which are
specific to dietary supplements and require at least some of the quality
control provisions contained in the GMPs for drugs, which are more rigorous
than the GMPs for foods.

The FDA has finalized some if its regulations to implement DSHEA, including
those relating to nutritional labeling requirements and nutritional support
claims. The FDA also has under development additional regulations and
guidelines to implement DSHEA. Newly adopted and future regulations may
require expanded or different labeling for our vitamin and nutritional
products. We cannot determine what effect these regulations, when fully
implemented, will have on our business in the future. These regulations could
require the recall, reformulation or discontinuance of certain products,
additional record keeping, warnings, notification procedures and expanded
documentation of the properties of certain products and scientific
substantiation regarding ingredients, product claims, safety or efficacy.
Failure to comply with applicable FDA requirements can result in sanctions
being imposed on the Company or the manufacture of our products, including
warning letters, product recalls and seizures, injunctions or criminal
prosecution.

As part of its regulatory authority, the FDA may periodically conduct audits of
the physical facilities, machinery, processes and procedures that we and our
competitors use to manufacture products. The FDA may perform these audits at any
time without advanced notice. As a result of these audits, the FDA may order us
to make certain changes in our manufacturing facilities and processes. We may be
required to make additional expenditures to comply with these orders or possibly
discontinue selling certain products until we comply with these orders. As a
result, our business could be adversely affected. In December 1998, the FDA
conducted an audit of our manufacturing facility in Chattanooga, Tennessee. In
connection with that audit, the FDA issued a report citing certain processes and
procedures it required us to change or improve. The Company has responded to the
FDA's report and believes that it has complied with the requirements of the
report. No further contact by the FDA has been made to date, but the Company
expects a follow-up visit by FDA personnel in the future.

                                    14


<PAGE>

In 1994 the Nonprescription Drug Manufacturers Association (now the Consumer
Healthcare Products Association) initiated a large scale study in conjunction
with the Yale University School of Medicine to investigate a possible
association, if any, of stroke in women aged 18 to 49 using
phenylpropanolamine ("PPA"), the active ingredient in DEXATRIM, for weight
loss (the "Yale Study"). PPA is also used in other over-the-counter
medications which are also part of the study. The Yale Study was designed in
collaboration with the FDA. Analysis of the study is currently in progress
and results are scheduled to be issued in mid-2000. Following a review of the
results by the FDA there is the possibility that the product would have to be
reformulated or discontinued. As a result, the DEXATRIM business would suffer,
which would adversely affect our business. The Company has launched DEXATRIM
Natural which does not include PPA.

Certain states and localities have enacted, or are considering enacting,
restrictions on the sale of products that contain PPA, synthetic ephedrine or
naturally-occurring sources of ephedrine. These restrictions include the
prohibition of over-the-counter (OTC) sales, required warnings or labeling
statements, recordkeeping and reporting requirements, the prohibition of
sales to minors, per transaction limits on the quantity of product that may
be purchased, and limitations on advertising and promotion. These
restrictions could adversely affect the sale of DEXATRIM, which contains PPA,
and the sale of DEXATRIM Natural, which contains naturally-occurring sources
of ephedrine, in such states or localities. Failure to comply with these
restrictions could also lead to regulatory enforcement action, including the
seizure of violative products, product recalls, and civil or criminal fines
or other penalties.

ENVIRONMENTAL

The Company continuously assesses compliance of its operations with applicable
federal, state and local environmental laws and regulations. The Company's
policy is to record liabilities for environmental matters when loss amounts are
probable and reasonably determinable. The Company's manufacturing site utilizes
chemicals and other potentially hazardous materials and generates both hazardous
and non-hazardous waste, the transportation, treatment, storage and disposal of
which are regulated by various government agencies, and has engaged
environmental consultants on a regular basis to assist its compliance efforts.
The Company is currently in compliance with all applicable environmental permits
and is aware of its responsibilities under applicable environmental laws. Any
expenditures necessitated by changes in law and permitting requirements cannot
be predicted at this time, although such costs are not expected to be material
to the Company's financial position or results of operations.

Since the early 1980's, the U.S. Environmental Protection Agency ("EPA") has
been investigating the extent of, and the health effects resulting from,
contamination of Chattanooga Creek, which runs through a major manufacturing
area of Chattanooga in the vicinity of the Company's manufacturing facilities.
The contamination primarily stems from the dumping of coal tar into the creek
during World War II when the federal government was leasing and operating a coke
and chemical plant adjacent to the creek. However, the EPA has been
investigating virtually all businesses that have discharged any wastewater into
the creek. A 2 1/2 mile stretch of Chattanooga Creek was placed on the National
Priorities List as a Superfund site under the Comprehensive Environmental
Response, Compensation and Recovery Act in September of 1995 and remediation of
the creek bed commenced in mid-1997. The Company could be named as a potentially
responsible party in connection with such site due to the Company's historical
discharge of wastewater into the creek. However, considering the nature of the
Company's wastewater, as well as the fact that the Company's discharge point is
downstream from the old coke and chemical plant that was operated by the
government, and the availability of legal defenses and expected cost sharing,
the Company does not believe that any liability associated with such site will
be material to its financial position or results of operations.

In December 1998, the Company was named in a lawsuit with 37 other companies as
potentially responsible parties for the disposal of waste materials found at a
site in Birmingham, Alabama. Although the facts surrounding this case are
unclear, the Company believes a company it used periodically during 1986 and
1987 to treat, store and dispose of waste materials from its manufacturing
processes improperly disposed of these waste materials. The Company cannot
currently assess its potential liability resulting from this lawsuit, but if the
Company is found liable its business could be adversely affected.


                                   15


<PAGE>

PRODUCT LIABILITY AND INSURANCE

An inherent risk of the Company's business is exposure to product liability
claims brought by users of the Company's products or by others. Except as set
forth in Item 3, "Legal Proceedings", of this Form 10-K, the Company has not
had any material claims in the past and is not aware of any material claims
pending or threatened against the Company or its products that if adversely
decided would negatively affect us. While the Company will continue to
attempt to take what it considers to be appropriate precautions, there can be
no assurance that it will avoid significant product liability exposure. The
Company maintains product liability insurance, principally through third
party insurers, that it believes to be adequate; however, there can be no
assurance that it will be able to retain its existing coverage or that such
coverage will be cost-justified or sufficient to satisfy future claims, if
any.

EMPLOYEES

The Company employs approximately 366 persons on a full-time basis in the U.S.
and 34 persons at its foreign subsidiaries' offices. The Company's employees are
not represented by any organized labor union, and management considers its labor
relations to be good.

<PAGE>

RISK FACTORS

The Company's business is subject to a number of risks.  Some of those risks are
described in "Competition,""Governmental Regulation" and "Manufacturing and
Quality Control" included in this Form 10-K.  In addition to the other
information contained in this Form 10-K, the following risk factors should be
carefully considered.

RISKS RELATED TO POTENTIAL FUTURE ACQUISITIONS

Future acquisitions by the Company could result in the incurrence of substantial
additional indebtedness, which could adversely affect the Company's business,
financial condition and results of operations.  Acquisitions involve numerous
risks, including difficulties in integrating the operations, technologies,
services and products of the acquired companies and the diversion of
management's attention from other business concerns.  If the Company makes any
acquisitions, there can be no assurance that those acquisitions will be
successful or that its business will not be adversely affected.

Much of the Company's future growth depends on its ability to complete
additional acquisitions.  There can be no assurance that the Company will be
able either to identify qualified acquisition candidates or successfully
integrate any of its future acquisitions into its operations.  There can be no
assurance that the Company will complete any future acquisitions or that
acquisitions will contribute favorably to the Company's operations and financial
condition.

PRODUCT DEVELOPMENT RISKS

The Company's future growth is also dependent on new product development.
New product initiatives may not be successfully implemented because of
difficulty in assimilation, development costs and diversion of management
time. The Company evaluates opportunities to develop new products through
product line extensions and product modifications in the ordinary course of
its business.  Product line extensions and product modifications involve
numerous risks, including difficulties in the assimilation of the developed
products, the expenses incurred in connection with the product development
and the diversion of management's attention from other business concerns.
There can be no assurance that the Company will successfully develop product
line extensions or integrate newly developed products into the Company's
business.  In addition, there can be no assurance that newly developed
products will contribute favorably to the Company's operations and financial
condition.


                                   16

<PAGE>

RELIANCE ON BRANDS; INTELLECTUAL PROPERTY CONCERNS

If the Company is unable to successfully protect its intellectual property,
the Company's business could be adversely affected. The Company's trademarks
are of material importance to its business and are among its most important
assets. In fiscal year 1999, substantially all of the Company's net sales
were from products bearing proprietary brand names, including BAN, GOLD BOND,
FLEXALL, ICY HOT, PAMPRIN, GARLIQUE, PHISODERM and DEXATRIM. Accordingly,
the Company's future success may depend in part upon the goodwill associated
with its brand names, particularly BAN, GOLD BOND and DEXATRIM.

The Company's principal brand names are registered in the United States and
certain foreign countries.  However, there can be no assurance that the steps
the Company takes to protect its proprietary rights in its brand names will
be adequate to prevent the misappropriation of these registered brand names
in the United States or abroad.  In addition, the laws of some foreign
countries do not protect proprietary rights in its brand names to the same
extent as do the laws of the United States.

Through its subsidiary, Signal Investment & Management Co., the Company
maintains or has applied for patent, trademark and copyright protection in
the United States relating to certain of its existing and proposed products
and processes.  There can be no assurance that the Company will be able to
successfully protect its intellectual property or that patents, trademarks or
copyrights will be granted with respect to intellectual property that the
Company believes is proprietary, and the loss of its intellectual property
protection could adversely affect the Company's business.  Additionally, the
Company licenses certain intellectual property from third parties, and there
can be no assurance that these third parties can successfully maintain their
intellectual property rights.  The sale of certain of the Company's products
rely on its ability to maintain and extend its licensing agreements with
third parties, and there can be no assurance that we will be successful in
maintaining these licensing agreements.  If the Company loses the right to
use these licenses, its business could be adversely affected.

RISK OF LOSS OF MATERIAL CUSTOMER

For the year ended November 30, 1999, sales to Wal-Mart Stores, Inc.
("Wal-Mart") accounted for approximately 19% of the Company's total sales.
Consistent with industry practice, the Company does not operate under a
long-term written supply contract with Wal-Mart or any of its other
customers.  The Company's business would be adversely affected by the loss of
Wal-Mart as a continuing major customer.  No other customer accounted for
more than 10% of the Company's sales in fiscal 1999.

PUBLIC PERCEPTION

The Company's dietary supplement and appetite suppressant business could be
adversely affected if any of its products or similar products distributed by
other companies prove to be harmful to consumers or if scientific studies
provide unfavorable findings regarding the safety or effectiveness of its
products or any similar products.

The Company's dietary supplements products contain vitamins, minerals, herbs
and other ingredients that the Company regards as safe when taken as directed
by the Company and that various scientific studies have suggested may offer
health benefits.  While the Company conducts extensive quality control
testing on its products, the Company generally does not conduct or sponsor

                                   17


<PAGE>

clinical studies relating to the benefits of its products, although the
Company did conduct a limited number of clinical studies in 1999.  The
Company is highly dependent upon consumers' perception of the overall
integrity of the dietary supplements business, as well as the safety and
quality of products in that industry and similar products distributed by
other companies which may not adhere to the same quality standards as the
Company.

In the past, appetite suppressants, including DEXATRIM, have been the subject
of negative press that has affected the public's perception of these
products. The Company will market and advertise DEXATRIM as safe and
effective to offset its past negative perception, but there can be no
assurance that DEXATRIM or any of the Company's products will not suffer from
negative public perception.

YALE STUDY

In 1994 the Nonprescription Drug Manufacturers Association (now the Consumer
Healthcare Products Association) initiated a large scale study in conjunction
with the Yale University School of Medicine to investigate a possible
association, if any, of stroke in women aged 18 to 49 using
phenylpropanolamine ("PPA"), the active ingredient in DEXATRIM, for weight
loss (the "Yale Study"). PPA is also used in other over-the-counter
medications which are also part of the study. The Yale Study was designed in
collaboration with the FDA. Analysis of the study is currently in progress
and results are scheduled to be issued in mid-2000. Following a review of the
results by the FDA there is the possibility that the product would have to be
reformulated or discontinued. As a result, the DEXATRIM business would suffer,
which would adversely affect our business. The Company has launched DEXATRIM
Natural which does not include PPA.

DEPENDENCE ON THIRD PARTY MANUFACTURERS

The Company's business could be adversely affected if its third party
manufacturers cease to perform adequately.  The Company uses third party
manufacturers to make products representing approximately one-half of its
sales volume, including GOLD BOND powders, the SUNSOURCE line and DEXATRIM.
Additionally, the Company has entered into a manufacturing agreement with
Bristol-Myers Squibb Company ("BMS"), whereby BMS will manufacture BAN for
the Company until March 2001.  In most other cases, the manufacturer is not
obligated under a contract that fixes that term of its commitment.
Manufacturers may experience problems with product quality or timeliness of
product delivery.  Manufacturers may also discontinue production of products
for the  Company or increase their manufacturing costs upon little or no
advance notice.  In any case, the Company believes that it could find other
contract manufacturers quickly if any of its current contractors cease to
perform adequately.  However, if this occurs and the Company cannot find
other contract manufacturers, the Company may be forced to shift production
to in-house facilities.  This may cause manufacturing delays, which would
cause disruption in the Company's ability to fill orders.  This could
adversely affect the Company's business.


                                   18
<PAGE>

PRODUCT LIABILITY AND INSURANCE

The Company is constantly at risk that consumers and users of its products
will bring lawsuits alleging product liability. Except as disclosed in "Legal
Proceedings", Item 3 in this Report, the Company is not aware of any claims
pending against it or its products that if adversely decided would adversely
affect its business. While the Company will continue to attempt to take what
it considers to be appropriate precautions, there can be no assurance that
these precautions will enable the Company to avoid significant product
liability exposure in the future. The Company maintains product liability
insurance through third party providers. The Company believes its insurance
coverage is adequate; however, there can be no assurance that the Company will
be able to retain its existing coverage or that this coverage will be
cost-justified or sufficient to satisfy any future claims.

LEVERAGE

As of November 30, 1999, the Company's long-term debt was $358,950,000. The
degree to which the Company is leveraged could have important consequences,
including, but not limited to, the following: (i) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may
be limited or become impaired; (ii) a portion of the Company's borrowings are
and will continue to be at variable rates of interest, which could result in
higher interest expenses in the event of increases in interest rates; and
(iii) such indebtedness contains and will contain financial and restrictive
covenants, the failure to comply with which may result in an event of default
which, if not cured or waived, could have a material adverse effect on the
Company.

DEPENDENCE ON SENIOR MANAGEMENT

The Company's future performance will depend to a significant degree upon the
efforts and abilities of certain members of senior management, in particular
those of Zan Guerry, Chairman of the Board and Chief Executive Officer, and
A. Alexander Taylor, II, President and Chief Operating Officer. The loss of
the services of either Messrs. Guerry or Taylor, neither of whom has an
employment agreement with the Company, could have an adverse effect on the
Company's business.

RISKS OF FOREIGN OPERATIONS

For the year ended November 30, 1999, 7.3% of the Company's net sales were
attributable to its international business. The Company is subject to the
risk of doing business internationally, including unexpected changes in, or
impositions of, legislative or regulatory requirements, fluctuations in the
United States dollar against foreign currencies, which could increase the
price of the Company's products in foreign markets or increase the cost of
certain raw materials purchased by the Company, delays resulting from
difficulty in obtaining export licenses, tariffs and other barriers and
restrictions, potentially longer payment cycles, greater difficulty in
accounts receivable collecting, potentially adverse tax treatment and the
burden of complying with a variety of foreign laws. In addition, the Company
is subject to general geopolitical risks, such as political and economic
instability and changes in diplomatic and trade relationships, which could

                                   19
<PAGE>

affect, among other things, customers' inventory levels and consumer
purchasing. Although the Company has not to date experienced any material
adverse effect as a result of such factors, there can be no assurance that
such factors will not adversely affect the Company in the future.  In
addition, the laws of certain foreign countries may not protect the Company's
intellectual property rights to the same extent as the laws of the United
States.

VOLATILITY OF STOCK PRICE

The trading price of the common stock could be subject to significant
fluctuations in response to variations in the results of the Company's
operations, its leveraged financial position, general trends in the consumer
products industry, the relative illiquidity of the Company's common stock and
stock market conditions generally.

DIVIDEND POLICY

The Company intends to retain its earnings, if any, for use in its operations
and repayment of outstanding indebtedness and has no current intention of
paying dividends to the holders of common stock.

                                   20

<PAGE>

ITEM 2.  PROPERTIES

The Company's headquarters and administrative offices are located at 1715 West
38th Street, Chattanooga, Tennessee. The Company's primary production facilities
are adjacent to the Company's headquarters on land owned by the Company. The
Company leases its primary warehouse and distribution centers in Chattanooga,
Tennessee for its domestic consumer products. The following table describes in
detail the principal properties owned and leased by the Company:

<TABLE>
<CAPTION>
                                              TOTAL AREA    TOTAL BUILDINGS                                 SQUARE
                                               (ACRES)       (SQUARE FEET)               USE                 FEET
                                              -----------   ---------------          ----------            ---------
<S>                                           <C>           <C>               <C>                             <C>
Owned Properties:
    Chattanooga, Tennessee                       10.0             120,700     Manufacturing                    80,000
                                                                              Office & Administration          40,700
   *Chattanooga, Tennessee                        8.5              68,300     Manufacturing
                                                                                & Warehousing                  50,600
                                                                              Office                           17,700
Leased Properties:
    Chattanooga, Tennessee (1)                    3.1             135,200     Warehousing                     103,800
    Chattanooga, Tennessee (2)                    0.1               3,800     Warehousing &
                                                                                Manufacturing                  35,200
    Chattanooga, Tennessee (3)                    3.1             135,000     Warehousing                     125,000
                                                                              Office                           10,000
    Mississauga, Ontario, Canada (4)              0.3              20,015     Warehousing                      15,515
                                                                              Office & Administration           3,000
                                                                              Packaging                         1,500
    Basingstoke, Hampshire, England(5)            0.5              21,900     Warehousing                      13,900
                                                                              Office & Administration           6,500
                                                                              Packaging                         1,500
</TABLE>

         *Acquired in October 1998 and currently being renovated for production
          to begin in early 2000.

NOTES:

 (1) Leased under a five year lease ending January 31, 2001 for a monthly rental
     of $34,547.
 (2) Leased on a month-to-month basis for a monthly rental of  $1,575.
 (3) Leased under a two year lease ending January 31, 2001 for a monthly
     rental of $33,750.
 (4) Leased under a lease ending November 30, 2004 at a monthly rental,
     including property taxes and other incidentals, of approximately $5,532.
 (5) Leased under leases ending in 2014 and 2015 at a monthly rental,
     including property taxes and other incidentals, of approximately
     $23,106.

                                    21


<PAGE>


The Company is currently operating its facilities at approximately 70% of total
capacity. These facilities are FDA registered and are capable of further
utilization through the use of full-time second and the addition of a third
shift.

ITEM 3. LEGAL PROCEEDINGS

Note 10 of the Notes to Consolidated Financial Statements on page 43 of the
Company's 1999 Annual Report to Stockholders is incorporated herein by
reference.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                                     22


<PAGE>





                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS

The information found on pages 26 and 41 to 43 of the Company's 1999 Annual
Report to Stockholders is incorporated herein by reference.

ITEM 6.  SELECTED FINANCIAL DATA

The information found on page 26 of the Company's 1999 Annual Report to
Stockholders is incorporated herein by reference.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

The information found on pages 16 to 25 of the Company's 1999 Annual Report
to Stockholders is incorporated herein by reference.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information found on pages 27 to 56 of the Company's 1999 Annual Report
to Stockholders is incorporated herein by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.

                                    23


<PAGE>


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


         (a) DIRECTORS

         The information found in the Company's 2000 Proxy Statement under the
         heading "Information about Nominees and Continuing Directors" is hereby
         incorporated by reference.


         (b)  EXECUTIVE OFFICERS

         The following table lists the names of the executive officers and other
key employees of the Company as of February, 2000, their ages, their positions
and offices with the Company and the year in which they were first elected or
appointed to these positions:

<TABLE>
<CAPTION>

       NAME                             AGE         POSITION WITH REGISTRANT                        FIRST ELECTED
    ---------                           ---       ----------------------------                      -------------
<S>                                     <C>       <C>                                               <C>
Zan Guerry                               51        Chairman of the Board and                             1990
                                                    Chief Executive Officer; Director
A. Alexander Taylor II                   46        President and Chief Operating Officer;                1998
                                                     Director
Andrea M. Crouch                         41        Vice-President - Toiletries Marketing                 1995

Gary M. Galante                          52        Vice-President - Research and Development             1995

Ron Galante                              55        Vice-President - New Business Development             1993

Robert S. Marshall                       34        Vice-President - OTC Marketing                        1996

B. Derrill Pitts                         56        Vice-President - Operations                           1984

Charles M. Stafford                      49        Vice-President - Sales                                1994

Stephen M. Powell                        38        Controller                                            1995
</TABLE>

Mr. Guerry has served as Chairman of the Board since June 1990 and as Chief
Executive Officer since January 1998. Previously he served as Vice President
and Chief Financial Officer from 1980 until 1983, as Executive Vice President
from 1983 to 1990, as President of Chattem Consumer Products from 1989 to
1994, as Chief Operating Officer from 1989 to 1990 and as President of the
Company from 1990 to 1998. Mr. Guerry was first elected as a director of the
Company in 1981.

Mr. Taylor was elected to his present  positions  with the Company in January
1998.  Previously he was a partner from 1983 to 1998 with the law firm Miller
& Martin, general counsel to the Company. Mr. Taylor was first elected as a
director of the Company in 1993.

Ms. Crouch joined the company in 1985 as an Assistant  Brand Manager.  In
1995, she was named to her current  position.  Previously she worked with
Hayes Microcomputer Products and Arthur Andersen LLP. She was denoted an
executive officer of the Company in January 1999.

Mr. G. Galante was appointed to his present  position in September  1995.
Previously he was Director of Research and  Development.  He joined the
Company in 1983 as Manager of New Product Development and was denoted an
executive officer in January 1999.


                                     24


<PAGE>

Mr. R.  Galante  was  appointed  to his present  position  with the Company
in June 1993.  Previously  he served as General  Manager of Chattem  (Canada)
Inc. from June 1990 until May 1993 and as Director of Marketing for many of
the Company's  domestic  brands from 1980 until 1993.  He was denoted an
executive officer of the Company in January 1999.

Mr. Marshall joined the Company in 1994 as a Brand Manager. In 1995, he was
promoted to Group Marketing Manager in Toiletries and in 1996 he was named to
his current position. Previously he worked in brand management at Procter &
Gamble. He was denoted an executive officer of the Company in January 1999.

Mr. Pitts is a long-term employee and has served in all manufacturing operation
disciplines since joining Chattem in 1966. He was promoted to Vice President in
1984 and was denoted an executive officer in January 1999.

Mr. Stafford was appointed to his present position in June 1994. Previously
he served as Director of Field Sales and Zone Sales Manager. Prior to joining
the Company in 1983, Mr. Stafford held sales management  positions with
Johnson & Johnson and Schering Plough. He was denoted an executive officer of
the Company in January 1999.

Mr. Powell, a Certified Public  Accountant, was appointed to his present
position with the Company in June 1995. Previously he was the Financial
Reporting Manager for Brock Candy Company. He worked for Joseph Decosimo and
Co., CPA's, from 1985 to 1993 where he was a manager in the audit department.

         (c) COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The information found in the Company's 2000 Proxy Statement under the heading
"Section 16(a) Beneficial Reporting Compliance" is hereby incorporated by
reference.

ITEM 11.  EXECUTIVE COMPENSATION

The information found in the Company's 2000 Proxy Statement under the heading
"Executive Compensation and Other Information" is hereby incorporated by
reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information found in the Company's 2000 Proxy Statement under the heading
"Voting Securities and Principal Holders Thereof" is hereby incorporated by
reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Louis H. Barnett and Robert E. Bosworth, directors of the Company, received
$33,000 and $33,667, respectively, in consulting fees during fiscal 1999 for
services rendered to the Company in a capacity other than as a director.

                                    25


<PAGE>



                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         (a) 1.  The consolidated financial statements and the related report
         of independent public accountants required to be filed with this
         Report are incorporated by reference from pages 27 to 56 of the
         Company's 1999 Annual Report to Stockholders.

             2. The following documents are filed or incorporated by reference
         as exhibits to this report:

<TABLE>
<CAPTION>
                 EXHIBIT
                 NUMBER                    DESCRIPTION OF EXHIBIT           REFERENCES
                 -------                ---------------------------         ----------
                  <S>         <C>                                           <C>
                    3         Restated Charter of Chattem, Inc., as
                               amended

                              Amended and Restated By-Laws of
                               Chattem, Inc.                                      (1)

                    4         Rights Agreement dated January 27, 2000
                               between Chattem, Inc. and SunTrust Bank,
                               Atlanta, N.A.                                      (2)

                              Form of Indenture dated August 3, 1994
                               Between Chattem, Inc. and SouthTrust
                               Bank of Alabama, N.A. relating to the
                               12.75% Series B Senior Subordinated
                               Notes due 2004                                     (3)

                              Form of Indenture dated March 24, 1998
                               between Chattem, Inc. and SouthTrust Bank
                               of Alabama, N.A. relating to the  8.875%
                               Senior Subordinated Notes due  2008                (4)

                   10         Material Contracts -

                              Lease Agreements, as amended, dated
                               February 1, 1996 between Tammy
                               Development Company and Chattem,
                               Inc. for warehouse space at 3100
                               Williams Street, Chattanooga, Tennessee      (5) and (6)

                              Credit Agreement dated April 29, 1996
                               among Chattem, Inc., as borrower, Signal
                               Investment & Management Co., as
                               Guarantor, NationsBank, N.A., as agent,
                               and the Lenders named therein                     (6)
</TABLE>

                                    26


<PAGE>

<TABLE>
<CAPTION>
                 EXHIBIT
                 NUMBER                    DESCRIPTION OF EXHIBIT           REFERENCES
                 -------                ---------------------------         ----------
                 <S>          <C>                                           <C>
                   10         Credit Agreement dated April 29, 1996
                               (Secondary Working Capital Facility)
                               among Chattem, Inc., as borrower, Signal
                               Investment & Management Co., as
                               guarantor, NationsBank, N.A., as agent,
                               and the Lenders named therein                      (6)

                              Asset Purchase Agreement dated June 6,
                               1996 between Campbell Laboratories,
                               Inc., seller, and Chattem, Inc. and Signal
                               Investment & Management Co.,
                               purchasers, for the HERPECIN-L
                               business                                           (6)

                              Amendment to the Credit Agreement (HERPECIN-L
                               Acquisition) dated June 6, 1996 among Chattem,
                               Inc., as borrower, Signal Investment & Management
                               Co., as guarantor, Nationsbank, N.A., as agent,
                               and the Lenders named therein                      (6)

                              Asset Purchase and Sale Agreement dated
                               May 23, 1997 by and among Chattem,
                               Inc., Signal Investment & Management
                               Co., and Sunsource International, Inc.
                               and Mindbody, Inc. (without schedules
                               and exhibits) for the SUNSOURCE
                               business                                           (7)

                              Amended and Restated Credit Agreement
                               dated June 26, 1997 by and among Chattem,
                               Inc., Signal Investment & Management Co.
                               and the Lenders named therein
                                                                                  (7)
                              Amended and Restated Credit Agreement
                               (Supplemental Credit Agreement) dated
                               June 26, 1997 by and among Chattem,
                               Inc., Signal Investment & Management
                               Co. and the Lenders named therein                 (7)

                              First Amended and Restated Master
                               Trademark License Agreement between
                               Signal Investment & Management Co.
                               and Chattem, Inc., effective
                               June 30, 1992                                     (8)

                              Chattem, Inc. Non-Statutory Stock
                               Option Plan- 1998                                 (8)
</TABLE>

                                    27


<PAGE>

<TABLE>
<CAPTION>
                 EXHIBIT
                 NUMBER                    DESCRIPTION OF EXHIBIT           REFERENCES
                 -------                ---------------------------         ----------
                  <S>         <C>                                           <C>
                    10        Asset Purchase Agreement dated
                              February 22, 1998  by and among
                              Bristol-Myers Squibb Company, Chattem,
                              Inc. and Signal Investment &
                              Management Co. for the BAN business                (9)

                              Amended and Restated Credit Agreement
                               (New Credit Agreement) dated March 24,
                               1998 by and among Chattem, Inc., Signal
                               Investment & Management Co. and
                               NationsBank of Tennessee, N.A.                   (10)

                              Amended and Restated Credit Agreement
                               (Supplemental Credit Agreement) dated
                               March 24, 1998 by and among Chattem,
                               Inc., Signal Investment & Management  Co.
                               and NationsBank of Tennessee, N.A.               (10)

                              Asset Purchase and Sale Agreement dated
                               May 12, 1998 by and among Chattem,
                               Inc., Signal Investment & Management
                               Co. and Del Laboratories, Inc for the
                               sale of the CORNSILK business                    (11)

                              Commercial Lease dated April 1, 1998
                               between Chattem, Inc., lessee, and
                               Kenco Group, Inc., lessor, for warehouse
                               space Located at 4309 Distribution Avenue,
                               Chattanooga,Tennessee.                            (12)

                              Purchase and Sale Agreement dated
                               November 16, 1998 by and among  Thompson
                               Medical Company, Inc.,  Chattem, Inc.  and
                               Signal Investment &  Management Co. for
                               certain products                                  (13)

                              Amended and Restated Credit Agreement (New Credit
                               Agreement) dated December 21, 1998 among Chattem,
                               Inc., its domestic subsidiaries, identified
                               Lenders and NationsBank, N.A. as agent            (13)

                              Amended and Restated Credit Agreement
                               (Supplemental Credit Agreement) dated December
                               21, 1998 among Chattem, Inc., its domestic
                               subsidiaries, identified Lenders and NationsBank,
                               N.A., as agent                                    (13)
</TABLE>

                                    28



<PAGE>

<TABLE>
<CAPTION>
                 EXHIBIT
                 NUMBER                    DESCRIPTION OF EXHIBIT                REFERENCES
                 -------                ---------------------------              ----------
                 <S>        <C>                                                  <C>
                   10       First Amendment dated May 7, 1999 to Amended and
                            Restated Credit Agreement (New Credit Agreement)
                            dated December 21, 1998 among Chattem, Inc., its
                            domestic subsidiaries, identified Lenders and
                            NationsBank, N.A., as agent

                            First Amendment dated May 7, 1999 to Amended and
                            Restated Credit Agreement (Supplemental Credit
                            Agreement) dated December 21, 1998 among Chattem,
                            Inc., its domestic subsidiaries, identified
                            Lenders and NationsBank, N.A., as agent

                            Termination Agreement dated November 30, 1999 to
                            SUNSOURCE Asset Purchase and Sale Agreement dated
                            May 23, 1997

                            Chattem, Inc. Non-Statutory Stock Option
                              Plan - 2000

                            Non-Competition and Severance
                              Agreements as amended -
                                 Zan Guerry
                                 A. Alexander Taylor II
                                 Robert E. Bosworth

                            Non-Competition and Severance
                              Agreements as amended -
                                 Andrea M. Crouch
                                 Gary M. Galante
                                 Ron Galante
                                 Christopher S. Keller
                                 Robert S. Marshall
                                 B. Derrill Pitts
                                 Stephen M. Powell
                                 Charles M. Stafford

                    11      Computation of Per Share Earnings

                    13      1999 Annual Report to Stockholders of
                             Chattem, Inc.

                    22      Subsidiaries of the Company

                    23      Consent of Independent Public
                             Accountants

                    27      Financial Data Schedule
</TABLE>

                                     29


<PAGE>


REFERENCES:

Previously filed as an exhibit to and incorporated by reference from:

     (1)      Form 8-K dated February 1, 2000.

     (2)      Form 8-A dated February 1, 2000.

     (3)      Form S-2 Registration Statement (No. 33-80770).

     (4)      Form S-4/A Registration Statement (No. 333-53627)

     (5)      Form 10-K for the year ended November 30, 1995.

     (6)      Form 10-K for the year ended November 30, 1996.

     (7)      Form 8-K dated June 26, 1997.

     (8)      Form 10-K for the year ended November 30, 1997.

     (9)      Form 8-K dated March 24, 1998.

    (10)      Form S-4 Registration Statement (No. 333-53627)

    (11)      Form 8-K dated May 12, 1998.

    (12)      Form 10-K for the year ended November 30, 1998.

    (13)      Form 8-K dated December 21, 1998.



(b) No reports on Form 8-K were filed with the Securities and Exchange
    Commission during the three months  ended November 30, 1999.


(c) The Financial Statements and related report of independent public
    accountants required to be filed with this report pursuant to Rule
    3-10(a) of Article 3 of Regulation S-X are incorporated by reference from
    pages 5 to 12 of Signal Investment & Management Co.'s Form 10-K for the
    fiscal year ended November 30, 1999.

                                  30


<PAGE>



                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:  February  24, 2000                CHATTEM, INC.
                                          By:  /s/ ZAN GUERRY
                                          ---------------------------------
                                               Zan Guerry
                                                   Title: Chairman and Chief
                                                          Executive Officer

                                          By: /s/ STEPHEN M. POWELL
                                          ---------------------------------
                                              Stephen M. Powell
                                                   Title:  Controller (Chief
                                                           Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated:

<TABLE>
<CAPTION>

       SIGNATURE                              TITLE                                   DATE
--------------------------            -------------------------                     ---------
<S>                                   <C>                                            <C>
/s/ ZAN GUERRY                        Chairman of the Board                          2-24-00
--------------------------            and Director                                  ----------
Zan Guerry                            (Chief Executive Officer)

/s/ A. ALEXANDER TAYLOR II            President and Director                         2-24-00
--------------------------            (Chief Operating Officer)                     ----------
A. Alexander Taylor II

/s/ SAMUEL E. ALLEN                   Director                                       2-24-00
--------------------------                                                          ----------
Samuel E. Allen

/s/ LOUIS H. BARNETT                  Director                                       2-24-00
--------------------------                                                          ----------
Louis H. Barnett

/s/ ROBERT E. BOSWORTH                Director                                       2-24-00
--------------------------                                                          ----------
Robert E. Bosworth

/s/ RICHARD E. CHENEY                 Director                                       2-24-00
--------------------------                                                          ----------
Richard E. Cheney

/s/ SCOTT L. PROBASCO, JR.            Director                                       2-24-00
--------------------------                                                          ----------
Scott L. Probasco, Jr.

/s/ PHILIP H. SANFORD                 Director                                       2-24-00
--------------------------                                                          ----------
Philip H. Sanford
</TABLE>
                                    31


<PAGE>




                         CHATTEM, INC. AND SUBSIDIARIES
                                  EXHIBIT INDEX


          EXHIBIT
          NUMBER                    DESCRIPTION OF EXHIBIT
         ---------        -------------------------------------------------

             3            Restated Charter of Chattem, Inc., as amended

            10.1          First Amendment dated May 7, 1999 to Amended and
                          Restated Credit Agreement (New-Credit Agreement)
                          dated December 21, 1998 among Chattem, Inc., its
                          domestic subsidiaries, identified Lenders and
                          NationsBank, N.A., as agent

            10.2          First Amendment dated May 7, 1999 to Amended and
                          Restated Credit Agreement (Supplemental Credit
                          Agreement) dated December 21, 1998 among Chattem,
                          Inc., its domestic subsidiaries, identified Lenders
                          and NationsBank, N.A., as agent

            10.3          Termination Agreement dated November 30,1999 to
                          SUNSOURCE Asset Purchase and Sale Agreement dated
                          May 23, 1997

            10.4          Chattem, Inc. Non-Statutory Stock Option Plan - 2000

            10.5          Non-Competition and Severance Agreements as amended

            10.6          Non-Competition and Severance Agreements as amended

            11            Computation of per share earnings

            13            1999 Annual Report to Stockholders of Chattem, Inc.

            22            Subsidiaries of the Company

            23            Consent of Independent Public Accountants

            27            Financial Data Schedule


                                     32