Barclays Capital Back-To-School

Consumer Conference
September 10, 2009
 Forward Looking Statements
Non-GAAP Financial Measures

Statements concerning the Company’s business outlook, anticipated profitability,

sales or expenses and sales growth, together with other statements made in this
presentation that are not historical facts, including management’s beliefs and
expectations, are “forward-looking statements” as that term is defined under federal
securities law. It is possible that actual results might differ materially from the
statements made in the presentation. All forward-looking statements are subject to
risks and uncertainties which could cause actual results to differ materially from
those projected, including those risk factors described in the Company’s filings with
the Securities and Exchange Commission. Further, forward-looking statements
speak only as of the date they are made, and we undertake no obligation to update
publicly any of these in light of new information or future events A reconciliation of
the non-GAAP financial measures contained in this presentation to the most
comparable GAAP financial measures is contained in the earnings release for our
second quarter and first six months of fiscal 2009 which can be found on the investor
relations section of the Company’s website at www.chattem.com.

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 Corporate Mission
To be the best mid-sized company in the Health & Beauty
Care market in America.
The following principles guide us in this endeavor:

• Achieve outstanding shareholder value through superior growth

in sales and profits
• Develop innovative products and passionate marketing programs
to create enthusiastically satisfied customers
• Provide a work environment that fosters teamwork, collaboration
and mutual respect
• Make a difference in our community

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 The Chattem Difference

• Diverse portfolio of leading OTC brands

• Proven record of acquiring, integrating and organically growing brands
• Focused consumer driven product development function
• Effective and efficient advertising and promotion strategy
• Dedicated sales force
• Internal manufacturing and purchasing operations

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 Leading Positions
in Appropriate Categories
% of Total Revenues Big 6 Brands are 72%
1st Half 2009 of Total Revenues

Topical Pain Care

Oral Care
19%
15%

Medicated
Medicated Skin Care
Dandruff
Products
Shampoos
33%
8%

Dietary
Supplements
Other
4%
OTC &
Toiletries
6%
Internal OTC
10% International
5%

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Disciplined Growth Strategy

Proven Organic Growth

Focused Acquisitions

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 2009 New Products

1. Focused on current or adjacent

categories
2. Innovative products with a unique point
of difference
3. Significant revenue opportunity through
share gain and category growth
4. High gross margins
5. Researched extensively with both the
consumer and the trade
6. Significant A&P expenditure

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 Acquisition Criteria

OTC brands with these characteristics:

• Small to medium sized OTC categories
• Leadership position, with growth opportunity
• High gross margins
• Advertising (vs. promotion) sensitive
• F,D&M channels

Financially conservative:
• Immediately accretive to earnings
• Reasonable purchase price
• Appropriate capital structure

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Financial Review

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 Revenues & EPS

Revenues
($’s in millions) EPS*

14%
R= 29%
CAG R=
$500 $455 CAG $4.80‐
$423 $4.90
$5.00 $4.25
$400
$301 $4.00 $3.36
$258 $279
$300 $234 $3.00 $2.09 $1.95
$1.69
$200 $2.00 $1.19

$100 $1.00

$0 $0.00
2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 2009E

*Excludes where applicable, debt extinguishment, product recall, impairment, loss on product divestitures, litigation
settlement, executive severance and SFAS 123R expense.

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 Reconciliation of Total Revenues
($ in 000’s)

2009
Q2 YTD
Revenues, as reported $ 237,922
Impact of International division 6,600
Promotion programs focused as price reduction 6,800
Discontinued businesses (Heat Therapy and Pro Therapy) 2,500
Revenues reconciled $ 253,822
Revenues, as reported for YAGO periods of FY 2008 $ 237,489
% change 6.9%

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 Strong Financial Metrics
Gross Margin A&P
(as a % of total revenues) (as a % of total revenues)

32.0%
71.6% 71.6% 71.4% 30.2% 29.0% 27.5%
71.1% 30.0% 26.5% 26.0%
23.4%
69.5% 69.6%
70% 68.7%
15.0%

65%
0.0%
2003 2004 2005 2006 2007 2008 2009
Q2 YTD
2003 2004 2005 2006 2007 2008 2009
Q2 YTD
SG&A EBITDA Margin*
(as a % of total revenues) (as a % of total revenues)
40% 36.3%
33.9%
20.0% 17.5% 17.1% 16.9% 31.6%
28.9%
15.6% 30% 26.0% 27.5%
13.6% 13.7% 24.4%
12.4%
20%
10.0%
10%

0.0% 0%
2003 2004 2005 2006 2007 2008 2009 2003 2004 2005 2006 2007 2008 2009
Q2 YTD Q2 YTD

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 Current Financial Perspective

Leverage (LTM) Free Cash Flow

(Net Debt to EBITDA)
($’s in millions)

FY ‘08 Target
Under 3.0x $100
$87.5
$80.4
4 3.7x 3.7x

3.0x
3 2.8x
$50.7 $49.7
2.3x $50
1.9x 2.0x $41.0
2 1.7x $31.5
$25.9

0 $0
2002 2003 2004 2005 2006 2007 2008 2009E 2002 2003 2004 2005 2006 2007 2008

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 Benefits of the Cash Tax Shield

Summary Cash Tax Savings

Amortization Period Estimated Annual

Remaining Tax Benefit Present Value
Various Brands Approx. 5 years $6 $24

Brands Acquired January 2007 13 years 10 77

Purchased Call for Convertibles 5 years 3 12

$19 $113

Schedule estimates amortization expense for tax purposes (cash tax savings) that is not required to be recorded as amortization or
interest expense for book/EPS purposes.

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 Capital Structure
As of
8/31/2009
Cash $ 59,400

Revolver ($100 million) 0

Term Loan B 105,250
Senior Secured Debt 105,250

2.0% Convertible Notes 96,300

1.625% Convertible Notes 100,000
Total Senior Debt 301,550

7.0% Senior Subordinated Notes 98,370

Total Debt $ 399,920

Net Debt $ 340,520

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 Capital Structure
Recent/Near Term Dynamics
• Share repurchases total 491,392 shares for $26.1 million or
an average price of $53.13 per share

• Repurchased $9.1 million of our 7% Senior Sub Notes at an

average price of par

• Convertible debt accounting change effective Q1 of FY 2010

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 Current Environment
• Retail trade:
¾ Private label
¾ SKU rationalization/Inventory reduction
¾ Focus on retail price

• Media

• Input Costs

• Regulatory environment

• Acquisition opportunities

• Capital markets

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 Fiscal 2009 Key Factors
• Revenues to rise at or below the low end of our mid-to-high single digit long term
target for organic growth

• Earnings $4.80-$4.90* per share

• Continued strong advertising and promotion support for North American

business

• Alterations in trade promotion strategy impact treatment of such expenses for

GAAP purposes and YOY comparison of operating metrics

• International revenues estimated to decline $8-$10 million, with no negative

earnings impact

• Strong cash flow will reduce Net Debt/EBITDA to below 2.0x assuming no
further share repurchase or acquisitions

• Capital structure and acquisition opportunities will be explored

*Excludes non-cash stock option expense under SFAS 123R of $0.26 per share, any asset value impairment
charge and any loss on debt extinguishment.

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