<PAGE>


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


                                    FORM 10-Q


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


                   FOR THE QUARTERLY PERIOD ENDED MAY 31, 1999
                       COMMISSION FILE NUMBER 33-80770-01


                       SIGNAL INVESTMENT & MANAGEMENT CO.
                             A DELAWARE CORPORATION
                  I.R.S. EMPLOYER IDENTIFICATION NO. 62-1290284
                      1105 NORTH MARKET STREET, SUITE 1300
                           WILMINGTON, DELAWARE 19890
                             TELEPHONE: 302-656-3950


THIS REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.

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.

AS OF JULY 14, 1999, 250 SHARES OF THE COMPANY'S COMMON STOCK, WITHOUT PAR
VALUE, WERE OUTSTANDING.


<PAGE>


                       SIGNAL INVESTMENT & MANAGEMENT CO.

                                      INDEX


<TABLE>
<CAPTION>


                                                                                  PAGE NO.

<S>                                                                               <C>

PART I.  FINANCIAL INFORMATION

 Item 1.  Financial Statements

  Balance Sheets as of May 31, 1999
   and November 30, 1998 ........................................................      3

  Statements of Income for the Three and Six Months
   Ended May 31, 1999 and 1998 ...................................................     4

  Statements of Cash Flows for the Six Months Ended
   May 31, 1999 and 1998 .........................................................     5

  Notes to Financial Statements .................................................      6

 Item 2.  Management's Discussion and Analysis of Financial Condition
 and Results of Operations .....................................................       8

PART II.  OTHER INFORMATION

 Item 6.  Exhibits and Reports on Form 8-K .....................................       9

SIGNATURES .....................................................................      10

EXHIBIT 27--Financial Data Schedule

</TABLE>


                                       2


<PAGE>


                          PART 1. FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


                       SIGNAL INVESTMENT & MANAGEMENT CO.

                                 BALANCE SHEETS
                   (In thousands, except for number of shares)


<TABLE>
<CAPTION>
                                                                                 May 31,  November 30,
                                                                                   1999       1998
                                                                                 --------   --------
                                 ASSETS                                        (Unaudited)

<S>                                                                              <C>        <C>
Current Assets:
  Cash and cash equivalents ...................................................  $     19   $     11
  Available-for-sale security--at market value ................................        --        415
  Royalties receivable from Chattem, Inc. .....................................     3,840      2,669
                                                                                 --------   --------
      Total current assets ....................................................     3,859      3,095

Trademarks and Other Purchased Product Rights, Net ............................   354,448    267,817
                                                                                 --------   --------

            TOTAL ASSETS ......................................................  $358,307   $270,912
                                                                                 --------   --------
                                                                                 --------   --------

                  LIABILITIES AND STOCKHOLDER'S EQUITY

Liabilities:
  Payable to Chattem, Inc. ....................................................  $350,325   $262,330
  Deferred income taxes .......................................................     5,741      5,741
  Other .......................................................................        --         20
                                                                                 --------   --------
      Total liabilities .......................................................   356,066    268,091
                                                                                 --------   --------


Stockholder's Equity:
  Common shares, without par value, 500 shares authorized,
      250 shares issued and outstanding .......................................         2          2
  Retained earnings ...........................................................     2,239      2,819
                                                                                 --------   --------
      Total stockholder's equity ..............................................     2,241      2,821
                                                                                 --------   --------

            TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ........................  $358,307   $270,912
                                                                                 --------   --------
                                                                                 --------   --------
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       3


<PAGE>


                       SIGNAL INVESTMENT & MANAGEMENT CO.

                              STATEMENTS OF INCOME
                 (Unaudited and in thousands, except share data)


<TABLE>
<CAPTION>
                                                For the Three                        For the Six
                                             Months Ended May 31,                Months Ended May 31,
                                        ------------------------------       ----------------------------
                                               1999               1998             1999              1998
                                        -----------        -----------       ----------       -----------
<S>                                    <C>                <C>               <C>               <C>
REVENUES AND GAINS:
  Royalties from Chattem, Inc. ..      $      3,841       $      2,692      $     6,802       $     4,251
  Investment income .............                --                  1                1                 1
  Gain on sale of trademarks
   and other product rights .....                --             10,442               --            10,442
                                        -----------        -----------       ----------       -----------
    Total revenues and gains ....             3,841             13,135            6,803            14,694
                                        -----------        -----------       ----------       -----------

EXPENSES AND LOSSES:
  Amortization of trademarks
   and other product rights .....             2,419              1,406            4,644             2,176
  General and administrative ....                --                 11               --                13
  Loss on sale of investment ....                --                 --                8                --
                                        -----------        -----------       ----------       -----------
    Total expenses and losses ...             2,419              1,417            4,652             2,189
                                        -----------        -----------       ----------       -----------

INCOME BEFORE
 PROVISION FOR INCOME
  TAXES .........................             1,422             11,718            2,151            12,505

PROVISION FOR INCOME
 TAXES ..........................               483              4,220              731             4,500
                                        -----------        -----------       ----------       -----------
NET INCOME ......................       $       939        $     7,498       $    1,420       $     8,005
                                        -----------        -----------       ----------       -----------
                                        -----------        -----------       ----------       -----------
OUTSTANDING COMMON
 SHARES .........................               250                250              250               250
                                        -----------        -----------       ----------       -----------
                                        -----------        -----------       ----------       -----------
NET INCOME PER
 COMMON SHARE ...................       $     3,756        $    29,992       $    5,680       $    32,020
                                        -----------        -----------       ----------       -----------
                                        -----------        -----------       ----------       -----------

</TABLE>


    The accompanying notes are an integral part of these financial statements


                                       4


<PAGE>


                       SIGNAL INVESTMENT & MANAGEMENT CO.

                            STATEMENTS OF CASH FLOWS
                          (Unaudited and in thousands)


<TABLE>
<CAPTION>
                                                                            For the Six Months
                                                                               Ended May 31,
                                                                          ----------------------
                                                                               1999         1998
                                                                          ---------    ---------
<S>                                                                       <C>          <C>
OPERATING ACTIVITIES:
  Net income ..........................................................   $   1,420    $   8,005
  Adjustments to reconcile net income to net cash
     provided by operating activities:
      Amortization ....................................................       4,644        2,176
      Income tax provision ............................................         731        4,500
      Gain on sale of trademarks and other product rights .............          --      (10,442)
      Loss on sale of investment ......................................           8           --
      Changes in operating assets and liabilities:
         Increase in royalties receivable from
          Chattem, Inc. ...............................................      (1,171)      (1,105)
                                                                          ---------    ---------
            Net cash provided by operating activities .................       5,632        3,134
                                                                          ---------    ---------
INVESTING ACTIVITIES:
   Proceeds from sale of investment ...................................         387           --
                                                                          ---------    ---------
            Net cash provided by investing activities .................         387           --
                                                                          ---------    ---------
FINANCING ACTIVITIES:
   Payments to Chattem, Inc. ..........................................      (4,011)      (1,100)
   Dividends paid to Chattem, Inc. ....................................      (2,000)      (2,000)
                                                                          ---------    ---------
            Net cash used in financing activities .....................      (6,011)      (3,100)
                                                                          ---------    ---------
CASH AND CASH EQUIVALENTS:
   Increase for the period ............................................           8           34
   At beginning of period .............................................          11           55
                                                                          ---------    ---------
   At end of period ...................................................   $      19    $      89
                                                                          ---------    ---------
                                                                          ---------    ---------
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS:
INCREASE IN PAYABLE TO CHATTEM, INC. IN CONNECTION WITH--
   Purchase of trademarks and other product rights ....................   $  91,275    $ 155,999
   Provision for income taxes .........................................   $     731    $   4,500
   Gain on sale of trademarks and other product rights ................          --    $ (10,442)

DIVIDENDS PER SHARE ...................................................   $       8    $       8

</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       5


<PAGE>


                       SIGNAL INVESTMENT & MANAGEMENT CO.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


1.    The Company is a wholly-owned subsidiary of Chattem, Inc. ("Chattem") and
      is included in Chattem's consolidated financial statements and tax
      returns.

2.    The accompanying unaudited financial statements have been prepared in
      accordance with generally accepted accounting principles for interim
      financial information and the instructions to Form 10-Q and Rule 10-01 of
      Regulation S-X. Accordingly, they do not include all of the information
      and footnotes required by generally accepted accounting principles for
      complete financial statements. These financial statements should be read
      in conjunction with the audited financial statements and related notes
      thereto included in the Company's Form 10-K for the year ended November
      30, 1998 and with the audited consolidated financial statements and
      related notes thereto included in Chattem's Annual Report to Shareholders
      for the year ended November 30, 1998. The accompanying unaudited financial
      statements, in the opinion of management, include all adjustments
      necessary for a fair presentation. All such adjustments are of a normal
      recurring nature.

3.    The results of operations for the interim periods presented are not
      necessarily indicative of the results to be expected for the respective
      full years.

4.    The Company had no outstanding debt as of the periods presented and
      therefore incurred no interest expense.

5.    A summary analysis of the activity between the Company and Chattem is as
      follows:

      <TABLE>

           <S>                                                   <C>

           Payable balance--November 30, 1998 ...........        $ 262,330,000
               Repayments ...............................           (4,011,000)
               Income tax provision .....................              731,000
               Purchase of trademarks and other
                   product rights .......................           91,275,000
                                                                 --------------
           Payable balance--May 31, 1999 ................        $ 350,325,000
                                                                 --------------
                                                                 --------------

      </TABLE>

      The weighted average balance due Chattem during the six months ended
      May 31, 1999 was $321,482,000.

6.    The Company is a wholly-owned subsidiary of Chattem which provides the
      Company with the use of all of its information technology ("IT") systems.
      Chattem is currently in the process of replacing most of its current IT
      systems which are approximately 20 years old; consequently, the new IT
      system will be year 2000 compliant. As a result, the year 2000 compliance
      requirements are considered only a portion of Chattem's systems
      replacement effort. This replacement is expected to be completed on or
      before December 1, 1999 at a total cost to Chattem of approximately
      $2,000,000. Such costs are being capitalized as incurred.


                                       6


<PAGE>

      Chattem is also reviewing the possible impact of the year 2000 problem on
      its customers and suppliers and has requested and received from a majority
      of its principal customers and suppliers written statements regarding
      their knowledge of and plans for meeting the year 2000 compliance
      requirements.

      The Company's business could be adversely affected should Chattem or other
      entities with whom Chattem does business be unsuccessful in completing
      critical modifications in a timely manner.

7.    On December 21, 1998 the Company and Chattem 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 Chattem's common stock. The cash portion of the purchase price
      was financed with a new senior credit facility.

8.    On December 21, 1998, Chattem, with the Company as guarantor, refinanced
      its existing credit facilities with $165,000,000 in senior secured credit
      facilities (the "Credit Facilities"). The Credit Facilities were provided
      by a syndicate of commercial banks, led by Bank of America as agent. The
      Credit Facilities include a $50,000,000 revolving credit facility and a
      $115,000,000 term loan. The Credit Facilities were used to refinance
      existing senior debt, to finance the acquisition of the Thompson Medical
      brands and related fees and expenses and to finance working capital and
      other general corporate needs. The $50,000,000 revolving credit facility
      matures on the earlier of (i) December 21, 2003 and (ii) the date on which
      the term loan is repaid in full. The $115,000,000 term loan matures on
      December 21, 2003. The Credit Facilities contain covenants,
      representations, warranties and other agreements by Chattem that are
      customary in loan agreements and securities instruments relating to
      financing of this type.

9.    On May 7, 1999 Chattem, with the Company as guarantor, issued an
      additional $75,000,000 of 8.875% (priced to yield 8.8125%) senior
      subordinated notes under its 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 Chattem's $250,000,000 shelf
      registration statement filed on December 21, 1998 with the Securities and
      Exchange Commission. The proceeds from the issuance of the additional
      notes were used to retire $41,500,000 of the then outstanding balance of
      Chattem's $115,000,000 term bank loan and the outstanding balance of
      $25,500,000 of its revolving bank loan dated December 21, 1998.

      Concurrent with the closing of the $75,000,000 note issue, Chattem amended
      its senior credit facility. The new facility, provided by a syndicate of
      banks, consists of a $70,000,000 term loan and a $50,000,000 revolving
      credit facility. The revolving credit facility and the term loan both
      mature on December 21, 2003. The credit facility contains covenants,
      representations, warranties and other agreements by Chattem that are
      customary in loan agreements relating to financing of this type.

10.   In May 1999 Chattem retired $6,750,000 face amount of its 12.75% Senior
      Subordinated Notes, due 2004, for which notes the Company is guarantor.
      The remaining principal amount outstanding is $42,901,000.


                                       7


<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

GENERAL

On December 21, 1998 the Company and Chattem acquired the DEXATRIM, SPORTSCREME,
ASPERCREME, CAPZASIN-P, CAPZASIN-HP and ARTHRITIS HOT brands from Thompson
Medical Company, Inc. for $95,000,000. The purchase price consisted of
$90,000,000 cash and 125,500 shares of Chattem's common stock. The cash portion
of the purchase price was financed with a new senior credit facility.

On May 7, 1999 Chattem, with the Company as guarantor, issued an additional
$75,000,000 of 8.875% (priced to yield 8.8125%) senior subordinated notes under
its 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 Chattem's $250,000,000 shelf registration statement filed on December 21,
1998 with the Securities and Exchange Commission. The proceeds from the issuance
of the additional notes were used to retire $41,500,000 of the then outstanding
balance of Chattem's $115,000,000 term bank loan and the outstanding balance of
$25,500,000 of its revolving bank loan dated December 21, 1998.

Concurrent with the closing of the $75,000,000 note issue, Chattem amended its
senior credit facility. The new facility, provided by a syndicate of banks,
consists of a $70,000,000 term loan and a $50,000,000 revolving credit facility.
The revolving credit facility and the term loan both mature on December 21,
2003. The credit facility contains covenants, representations, warranties and
other agreements by Chattem that are customary in loan agreements relating to
financing of this type.

In May 1999 Chattem retired $6,750,000 face amount of its 12.75% Senior
Subordinated Notes, due 2004, for which notes the Company is guarantor. The
remaining principal amount outstanding is $42,901,000.

COMPARISON OF SIX MONTHS ENDED MAY 31, 1999 AND 1998

The following narrative represents management's comparative analysis of the
material changes in the year-to-date results of operations of the Company
pursuant to General Instruction H(2)(a) of Form 10-Q:

Royalty income increased $2,551,000, or 60.0%, for the six months ended May 31,
1999 from the corresponding period of the prior year. The increase was primarily
due to the acquisition of the BAN and Thompson Medical brands' trademarks in
March and December 1998, respectively.

Amortization expense increased $2,468,000, or 113.4%, for the six months ended
May 31, 1999, from the corresponding period of the prior year. The increase was
primarily due to the purchase of the BAN and Thompson Medical brands' trademarks
in March and December 1998, respectively.

A gain of $10,442,000 on the sale of trademarks and other product rights
associated with the CORNSILK product line divestiture was recognized during the
second quarter of fiscal 1998.


                                       8


<PAGE>


                           PART II.  OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         a.  Exhibits:

             Financial data schedule (Exhibit 27)

         b.  No reports on Form 8-K were filed with the Securities and Exchange
             Commission during the three months ended May 31, 1999.


                                       9


<PAGE>


                       SIGNAL INVESTMENT & MANAGEMENT CO.
                                   SIGNATURES


Pursuant to the requirements 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.


                                         SIGNAL INVESTMENT & MANAGEMENT CO.
                                                    (Registrant)


Dated:     July 14, 1999                        /s/ A. ALEXANDER TAYLOR II
                                         ---------------------------------------
                                                 A. Alexander Taylor II
                                                 President and Director
                                              (principal executive officer)


                                                 /s/ STEPHEN M. POWELL
                                         ---------------------------------------
                                                    Stephen M. Powell
                                                     Vice-President,
                                                 Treasurer and Director
                                              (principal accounting officer)


                                       10