Chattem reports second quarter fiscal 1996 operating results.

CHATTANOOGA, Tenn.--(BUSINESS WIRE)--April 1, 1996--Chattem, Inc. (NASDAQ: CHTT), a Chattanooga, Tennessee, based manufacturer of health and beauty aids announced today operating results for the quarter ended February 29, 1996.

In the recent quarter, Chattem registered a loss from continuing operations of $38,000, or $0.01 per share, down from a loss of $614,000, or $0.08 per share in 1995. Net sales decreased 4% to $18,697,000 from $19,372,000, while operating income fell 7% to $1,724,000 from $1,860,000 in the first quarter of 1995. The decrease in operating income was more than offset by a reduction in interest expense and an increase in investment income due to the application of proceeds from the sale of the Company's Chemical division in May of 1995. The Company also recognized a gain of $452,000 on the sale of a noncash producing security in the February 1996 period.

The first quarter is typically the Company's weakest, representing less than 20% of annual sales and operating income. The second quarter is traditionally stronger due to the preponderance of the seasonal brands sales for the year occurring during this period. This year's third quarter should be particularly important due to the launch of the new line extensions, referred to below.

From a divisional perspective, domestic sales were led by strong performances by MUDD, PHISODERM, ICY HOT and BULLFROG while FLEX-ALL and CORNSILK experienced declines. PAMPRIN and PREMSYN PMS were flat versus year ago. Overall, total domestic sales and profit were down slightly. International sales increased 10% being led by significant growth in the European markets with division profit also up significantly.

For 1996, the Company continues to be excited about several opportunities that will address long-term growth for both sales and profit. This summer a new product, FLEX-ALL ULTRA PLUS, will be introduced and the existing FLEX-ALL line will be relaunched with new packaging and a completely new advertising message. In an effort to expand the PHISODERM facial cleanser business and to appeal to users of original PHISODERM, an unfragranced product for sensitive skin will be launched in May. Responding to overwhelming consumer response and recognizing the medical heritage of the brand, the most exciting event of the year is expected to be the launch of PHISODERM Antibacterial Hand Soap in May. This new product launch will be supported by heavy advertising and promotional expenditures. The Company's overall goal, given the need to support product relaunches and introductions as well as to continue the growth of ICY HOT, BULLFROG and MUDD, is to grow sales by 5% to 10% and achieve earnings per share in the $0.30 to $0.35 range. -0-

                                  CHATTEM, INC.
                          Consolidated Income Statement
                     (in thousands, except per share amounts)

                              For the Three Months Ended
                                    February 29

                          1996              1995            % Change

NET SALES              $ 18,697          $ 19,372              -3.5%
COSTS AND EXPENSES:
  Cost of sales           5,749             6,228              -7.7%
  Advertising and
    promotion             7,001             7,416              -5.6%
  Selling, general and
    administrative        4,223             3,868               9.2%
    Total costs and
     expenses            16,973            17,512              -3.1%

INCOME FROM OPERATIONS    1,724             1,860              -7.3%

OTHER INCOME (EXPENSE):
  Interest expense       (2,618)           (2,883)             -9.2%
  Investment income         201                33             509.1%
  Other, net                452
    Total other income
     (expense)           (1,965)           (2,850)            -31.1%

LOSS FROM CONTINUING
 OPERATIONS BEFORE
 INCOME TAXES              (241)             (990)            -75.7%
BENEFIT FROM INCOME
 TAXES                      203               376             -46.0%
LOSS FROM
 CONTINUING OPERATIONS      (38)             (614)            -93.8%

DISCONTINUED OPERATIONS (A):
  Income from operations,
   less provisions
   for taxes of $223,000     __               361
    Total discontinued
     operations              __               361

NET LOSS               $    (38)         $   (253)

WEIGHTED AVERAGE
 NUMBER OF COMMON AND
 COMMON EQUIVALENT
 SHARES OUTSTANDING       7,292             7,292

NET LOSS
 PER COMMON SHARE:
 Continuing operations $  (0.01)         $  (0.08)
  Discontinued
   operations (A)            __              0.05
    Net loss per
     common share      $  (0.01)         $  (0.03)

Depreciation &
 amortization               997             1,038
Capital expenditures        275               905
Cash and cash
 equivalents              3,746             3,597
Total debt               88,336           100,411

(A) Reflects the previously disclosed sale of the Company's Specialty
    Chemicals division on May 26, 1995.

CONTACT: Joey B. Hogan, Director of Finance, ext. 221

Robert E. Bosworth, Executive Vice President &

Chief Financial Officer, ext. 287

Chattem, Inc., Telephone: [phone]