10-K405 1 s15-2144_10k.txt FORM 10-K405 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended MARCH 31, 2001 Commission File Number 1-5910 CARTER-WALLACE, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-4986583 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1345 AVENUE OF THE AMERICAS, NEW YORK, NY 10105 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 212-339-5000 Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common Stock Par value $1.00 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Class B Common Stock, par value $1.00 per share (Title of Class) Indicate by check mark whether the registrant (1) 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K of any amendment to this Form 10-K. (X) The number of shares of the registrant's Common Stock and Class B Common Stock outstanding at June 4, 2001 was 33,468,339 and 12,222,207 respectively. The aggregate market value of voting stock held by non-affiliates of the registrant as of June 4, 2001 was approximately $416,599,000. DOCUMENTS INCORPORATED BY REFERENCE Annual Report to Stockholders for the fiscal year ended March 31, 2001 Parts I & II Proxy Statement for the Annual Meeting of Stockholders to be held July 17, 2001 Parts III & IV PART I ITEM 1. BUSINESS Carter-Wallace, Inc. (the "Company") is engaged in the manufacture and sale of a diversified line of products. Additional information is presented on page 11 "Description of Business" of the 2001 Annual Report to Stockholders and is herein expressly incorporated by reference. PENDING SALE OF THE COMPANY In May 2001 the Company announced that it had entered into agreements for the sale of the Company in a two-step transaction in which stockholders will receive $20.30 per share, subject to certain closing adjustments. This transaction is pending at this time and subject to approval by stockholders and other conditions. Full details will be included in a proxy statement regarding this transaction which will be sent to all stockholders. In this two-step transaction, the consumer business, consisting of the Carter, Lambert Kay and International Divisions will be sold by the Company immediately prior to the merger of the remainder of the Company. Accordingly, the consumer business is included as a discontinued operation for all periods presented in the March 31, 2001 financial statements. BUSINESS SEGMENTS The Company's continuing operations are accounted for as one business segment, health care. As a result of the pending sale of the consumer business, the consumer business is included as a discontinued operation for all periods presented in the March 31, 2001 financial statements. Financial information about the Company's continuing and discontinued operations for the three years ended March 31, 2001 is presented on pages 8 and 9 under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition" and also on pages 28 and 29, note 15, "Discontinued Consumer Operations Held for Sale" of the Notes to Consolidated Financial Statements, both included in the 2001 Annual Report to Stockholders and herein expressly incorporated by reference. FOREIGN OPERATIONS Foreign operations (which are included in discontinued operations) are generally subject to certain political and economic risks that are not present in domestic operations. Such risks may include expropriation of assets, restrictions on earnings remittances and fluctuating exchange rates. Changes in foreign exchange rates had the effect of decreasing sales in discontinued operations by approximately $22,000,000 in the fiscal year ended March 31, 2001 in comparison to the prior year. COMPETITION The markets in which the Company operates are extremely competitive and include larger corporations with greater resources for research, product development and promotion. The Company competes on the basis of price, advertising, promotion, quality of product and other methods relevant to the business. In fiscal 2001, the 1 Company's Arrid line of anti-perspirants and deodorants is believed to have accounted for an estimated 5.8% share of the domestic anti-perspirant and deodorant market. The Company's worldwide anti-perspirant and deodorant sales were approximately $100,400,000, $105,900,000, and $101,600,000 in the fiscal years ended March 31, 2001, 2000 and 1999, respectively. The Trojan, Class Act and Naturalamb condom brands are estimated to have accounted for over 68% of total domestic retail condom sales. The Company's worldwide condom sales were approximately $135,900,000, $123,600,000 and $114,100,000 in the fiscal years ended March 31, 2001, 2000 and 1999, respectively. Anti-perspirant and deodorant and condom sales are included in discontinued operations for all periods presented. Additional information is presented on page 8 under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the 2001 Annual Report to Stockholders and is herein expressly incorporated by reference. RAW MATERIALS The Company's major raw materials are chemicals, plastics, latex, steel cans and packaging materials. These materials are generally available from several sources and the Company has had no significant supply problems to date. The Company generally has two or more approved suppliers for production materials and issues purchase commitments to provide its suppliers with adequate lead time. PATENTS AND LICENSES The Company owns or is licensed under a number of patents and patent applications covering certain of its products. The expiration or any other change in any of these patents or patent applications will not materially affect the Company's business. Royalty income does not constitute a material portion of total revenue. FELBATOL (FELBAMATE) Information regarding the effect of Felbatol matters on the Company's business is presented on page 10 under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition - Felbatol (felbamate), and on page 28 in note 14 Felbatol (felbamate) of the Notes to Consolidated Financial Statements, both included in the 2001 Annual Report to Stockholders and herein expressly incorporated by reference. ENVIRONMENTAL MATTERS Information regarding environmental matters is presented on page 26 in note 11, "Litigation Including Environmental Matters" of the Notes to Consolidated Financial Statements, included in the 2001 Annual Report to Stockholders and herein expressly incorporated by reference. RESEARCH AND DEVELOPMENT Research and development expenses for continuing health care operations in fiscal 2001 increased by $2,445,000 or 14.6% due to higher spending in the Wallace pharmaceutical division, including spending for taurolidine, a compound being tested to determine if it has clinically important antineoplastic activity. In fiscal 2000, research and development expenses increased by $2,006,000 or 13.6%, also due in part to spending for taurolidine. Research and development expenses 2 for discontinued consumer operations in fiscal 2001 decreased by $340,000 or 2.9% due to lower spending in the International Division. In fiscal 2000, research and development expenses increased by $656,000 or 5.9%. Research at independent facilities determined that taurolidine induced cell death in numerous human cancer cells in vitro. These developments prompted the Company to initiate an R&D program directed at multiple cancer cell lines to determine if taurolidine has clinically important antineoplastic activity. An Investigational New Drug Application (IND) was filed with and accepted by the FDA. Clinical trials in patients with brain, ovarian and mesothelioma cancer are in progress. Two multicenter clinical studies showed that Astelin Nasal Spray is effective for treating vasomotor (nonallergic) rhinitis. A Supplemental New Drug Application was approved by the FDA for use in vasomotor rhinitis in September, 2000. Astelin Nasal Spray is now indicated for both allergic and nonallergic vasomotor rhinitis in adults and for use in children five years of age and older for seasonal allergic rhinitis. The Astelin tablet NDA for allergic rhinitis is pending at the FDA. The Company has not decided whether to seek final approval for this NDA. Approximately 120 employees are employed in research and development activities. EMPLOYEES The Company, together with its subsidiaries, employed approximately 3,340 people worldwide at March 31, 2001. ITEM 2. PROPERTIES The executive offices of the Company are located at 1345 Avenue of the Americas, New York, New York, in space leased until May, 2011. A portion of this space has been subleased. The following are the other principal facilities of the Company, all of which, except for Decatur, Illinois are accounted for as part of discontinued consumer operations. AREA LOCATION PRODUCTS MANUFACTURED (SQ. FEET) OWNED IN FEE: MANUFACTURING FACILITIES AND OFFICES: Cranbury, New Jersey Pharmaceuticals, toiletries and pet products 734,000 Colonial Heights, Virginia Condoms 220,000 Decatur, Illinois Pharmaceuticals and pet products 108,000 Winsted, Connecticut Pet products 45,000 Montreal, Canada OTC pharmaceuticals and toiletries 157,000 Folkestone, England Toiletries 76,000 Milan, Italy OTC pharmaceuticals and toiletries 60,000 Mexico City, Mexico Pharmaceuticals 94,400 New Plymouth, New Zealand Condom processing 31,000 3 WAREHOUSE AND OFFICES: Toronto, Canada 52,000 LEASED: MANUFACTURING FACILITIES AND OFFICES: Barcelona, Spain Toiletries 58,400 Milan, Italy Diagnostics and toiletries 49,100 Folkestone, England Toiletries 21,500 WAREHOUSE AND OFFICES: Dayton, New Jersey 200,000 Momence, Illinois 43,000 Plainsboro, New Jersey * 23,300 Mexico City, Mexico 27,500 Sydney, Australia 24,900 Folkestone, England 37,500 Levallois, France * 22,500 Revel, France 35,500 * OFFICES ONLY The Company has agreements with several companies throughout the world for the manufacture of certain products to its specifications. The Company has several other short-term leases for manufacturing plants, warehousing space and sales offices. With minor exceptions, all facilities are operating at normal capacity. In June 2000, Carter-Wallace, Inc. entered into an agreement to sell two parcels of vacant land adjacent to its Cranbury, New Jersey facility totaling approximately 210 acres. The closings of these transactions are contingent upon certain approvals being obtained and the satisfactory resolution of other conditions. No assurance can be given that the closings will take place. The total proceeds from these land sales would be approximately $22,050,000, less commissions and other expenses. The cost basis for the land subject to sale is approximately $1,000,000. ITEM 3. LEGAL PROCEEDINGS Information regarding Legal Proceedings involving the Company is presented on pages 26 and 27 in note 11, "Litigation Including Environmental Matters" of the Notes to Consolidated Financial Statements included in the 2001 Annual Report to Stockholders and herein expressly incorporated by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 4 EXECUTIVE OFFICERS OF THE REGISTRANT * Executive Officers of the Registrant are as follows: HELD PRESENT NAME AGE OFFICE OFFICE SINCE ---- --- ------ ------------ Ralph Levine 65 Chairman of the Board and Chief Executive Officer 2001 Paul A. Veteri 59 President and Chief Operating Officer 2001 Peter J. Griffin 58 Vice President, Finance and Controller Chief Financial Officer 2001 T. Rosie Albright 54 Vice President, Consumer Products, U.S. 1995 John Bridgen, Ph.D. 54 Vice President, Diagnostics, U.S. 1984 James C. Costin, M.D. 57 Vice President, Medical and Scientific Affairs 1999 Donald R. Daoust, Ph.D. 65 Vice President, Quality Control 1978 Thomas G. Gerstmyer 58 Vice President, Pharmaceuticals, U.S. 1999 Adrian J. L. Huns 53 Vice President, International 1996 Michael J. Kopec 61 Vice President, Manufacturing 1978 Stephen R. Lang 66 Vice President, Secretary and General Counsel 1997 Thomas B. Moorhead 67 Vice President, Human Resources 1987 C. Richard Stafford 65 Vice President, Corporate Development 1977 James L. Wagar 66 Vice President and Treasurer 1981 Mark Wertlieb 45 Vice President, Taxes 1996 Each officer holds office until the first meeting of the Board of Directors following each Annual Meeting of the Stockholders and until his successor has been duly elected and qualified (except that the Board of Directors may at any meeting elect additional officers), unless his term is earlier terminated through death, resignation, removal or otherwise. The next Annual Meeting of the Stockholders is scheduled to be held July 17, 2001. 5 All executive officers have held their present office for the last five years except those noted below: Ralph Levine was appointed Chairman of the Board and Chief Executive Officer in January, 2001. Mr. Levine was previously President and Chief Operating Officer since April 1997. Prior to April 1997, Mr. Levine was Vice President, Secretary and General Counsel since prior to 1996. Paul A. Veteri was appointed President and Chief Operating Officer in January, 2001. Mr. Veteri was previously Executive Vice President and Chief Financial Officer since April 1997. Prior to April 1997, Mr. Veteri was Vice President and Chief Financial Officer since prior to 1996. Peter J. Griffin was appointed Vice President, Finance and Controller and Chief Financial Officer in January, 2001. Mr. Griffin was previously Vice President and Controller since prior to 1996. Thomas G. Gerstmyer was appointed Corporate Vice President, Pharmaceuticals, U.S. in January, 1999. He was appointed President, Wallace Laboratories Division in August, 1998. Mr. Gerstmyer was previously Vice President of Marketing, Wallace Laboratories since prior to 1996. James C. Costin, M.D., was appointed Corporate Vice President, Medical and Scientific Affairs in January, 1999. Dr. Costin continues to be responsible for the Wallace Laboratories' Research and Development department, where he was previously Vice President, Research and Development, a position he held since prior to 1996. Stephen R. Lang was appointed Corporate Vice President in March, 1997 and Secretary and General Counsel in April, 1997. Mr. Lang was previously a Partner and Chairman of the Litigation Department of Whitman Breed Abbott & Morgan LLP since prior to 1996. Mark Wertlieb was appointed Corporate Vice President, Taxes in August, 1996. Mr. Wertlieb was previously a Tax Partner at KPMG LLP since prior to 1996. Adrian J. L. Huns was appointed Corporate Vice President, International and President, International Division in May, 1996. Mr. Huns was Managing Director of Carter-Wallace Ltd., a subsidiary of Carter-Wallace, Inc., since prior to 1996. 6 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information required by this item is presented on pages 1 and 7 of the 2001 Annual Report to Stockholders and is herein expressly incorporated by reference. ITEM 6. SELECTED FINANCIAL DATA Information required by this item is incorporated herein by reference to page 7 of the 2001 Annual Report to Stockholders. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Information required by this item is incorporated herein by reference to pages 8 through 10 of the 2001 Annual Report to Stockholders. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT FINANCIAL MARKET RISK A portion of the Company's discontinued revenues and earnings are exposed to changes in foreign exchange rates. Where practical, the Company seeks to relate expected local currency revenues with local currency costs and local currency assets with local currency liabilities. The Company's interest bearing investments and a portion of its debt in discontinued operations are subject to interest rate risk. Changes in interest rates could affect interest income and expense in future periods. The Company invests on a short-term basis. There has been no material impact on operations from financial market risk exposure during the year ended March 31, 2001. PART III ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information required by this item is incorporated herein by reference to pages 12 through 31 of the 2001 Annual Report to Stockholders. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to Directors of the Company is incorporated by reference to the Company's Proxy Statement, dated June 20, 2001, for the Annual Meeting of Stockholders to be held July 17, 2001, under the captions "Stock Ownership", "Election of Directors" and "Board of Directors and Committees". Information with respect to Executive Officers of the Registrant is set forth under the heading "Executive Officers of the Registrant" in Part I on pages 5 and 6 of this Form 10-K. 7 ITEM 11. EXECUTIVE COMPENSATION Information required by this item is incorporated herein by reference to the Company's Proxy Statement, dated June 20, 2001, for the Annual Meeting of Stockholders to be held July 17, 2001, under the caption "Executive Compensation and Other Information". ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information pertaining to the security ownership of certain beneficial owners and management is incorporated herein by reference to the Company's Proxy Statement, dated June 20, 2001, for the Annual Meeting of Stockholders to be held July 17, 2001, under the captions "Voting Rights" and "Stock Ownership". ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by this item is incorporated herein by reference to the Company's Proxy Statement, dated June 20, 2001, for the Annual Meeting of Stockholders to be held July 17, 2001, under the caption "Election of Directors". PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K (A)(1),(A)(2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE The financial statements and financial statement schedule filed as part of this report are listed or incorporated by reference in the "Index of Financial Statements and Financial Statement Schedule" on page 15 of this Form. (A)(3) EXHIBITS 2.1 Asset Purchase Agreement, dated as of May 7, 2001, by and between Armkel,LLC and Carter-Wallace, Inc. (incorporated herein by reference to Item 7 of the Company's Form 8-K dated May 7, 2001). 2.2 Agreement and Plan of Merger, dated as of May 7, 2001, among the Company, CPI Development Corporation, MCC Acquisition Holdings Corporation, MCC Merger Sub Corporation and MCC Acquisition Sub Corporation. (incorporated herein by reference to Item 7 of the Company's Form 8-K dated May 7, 2001). 3.1 Certificate of Incorporation, as amended, of the Company (incorporated herein by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1992). 3.2 By-Laws of the Company, as amended through 5/15/97 (incorporated herein by reference to Exhibit 3.2 of the Company's Annual Report on Form 10K for the fiscal year ended March 31, 1998). (CONTINUED) 8 (A) 3) EXHIBITS (CONT'D) 4.1 Instruments defining the rights of security holders, including indentures -- The Company agrees to furnish to the Commission upon request a copy of each instrument pursuant to which long- term debt of the Company and its subsidiaries not exceeding 10% of total assets of the Company and its consolidated subsidiaries is authorized. 10.2 1977 Restricted Stock Award Plan, as amended (incorporated herein by reference to Exhibit 10.2 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1990). 10.3 Employees' Retirement Plan, as amended (incorporated herein by reference to Exhibit 10.3 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993). 10.4 Description of Profit Sharing Plan (incorporated herein by reference to Exhibit 10.4 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.5 Executives' Additional Compensation Plan (incorporated herein by reference to the description of such plan set forth in the Company's Proxy Statement dated June 18, 1993, for the Annual Meeting of Stockholders to be held July 20, 1993, under the caption "Executive Compensation and Other Information"). 10.6 Employment Agreement, dated June 4, 1998, between the Company and Ralph Levine (incorporated herein by reference to Exhibit 10.6 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998). 10.6(A) Amendment, dated January 27, 2000, to the Employment Agreement dated June 4, 1998 between the Company and Ralph Levine (incorporated herein by reference to Exhibit 10.6(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.6(B) Amendment, dated January 25, 2001, to the Employment Agreement dated June 4, 1998 between the Company and Ralph Levine. 10.7 Employment Agreement, dated June 4, 1998, between the Company and Paul A. Veteri (incorporated herein by reference to Exhibit 10.7 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998). 10.7(A) Amendment, dated January 27, 2000, to the Employment Agreement dated June 4, 1998 between the Company and Paul A. Veteri (incorporated herein by reference to Exhibit 10.7(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). (CONTINUED) 9 (A)(3) EXHIBITS (CONT'D) 10.7(B) Amendment, dated January 25, 2001, to the Employment Agreement dated June 4, 1998 between the Company and Paul A. Veteri. 10.10 Supplemental Death Benefit Agreement, as amended (incorporated herein by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993). 10.11 Lease Agreement, dated December 2, 1988, between the Company and Fisher - Sixth Avenue Company and Hawaiian Sixth Avenue Corporation (incorporated herein by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1989). 10.12 Corporate Officer Medical Expense Reimbursement Plan (incorporated herein by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993). 10.13 Executive Medical Expense Reimbursement Plan, as amended (incorporated herein by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993). 10.14 Executive Pension Benefits Plan, as amended (incorporated herein by reference to Exhibit 10.14 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1995). 10.15 Executive Savings Plan (incorporated herein by reference to Exhibit 10.15 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1995). 10.18 1996 Long-Term Incentive Plan, as amended (incorporated herein by reference to Exhibit 10.18 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999) 10.19 Employment Agreement, dated October 2, 2000 between the Company and T. Rosie Albright. 10.21 Letter Agreement, dated September 14, 1998, between the Company and T. Rosie Albright (incorporated herein by reference to Exhibit 10.21 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 10.21(A) Amendment, dated January 27, 2000, to the Letter Agreement, dated September 14, 1998, between the Company and T. Rosie Albright (incorporated herein by reference to Exhibit 10.21(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). (CONTINUED) 10 (A)(3) EXHIBITS (CONT'D) 10.22 Letter Agreement, dated June 4, 1998, between the Company and Stephen R. Lang (incorporated herein by reference to Exhibit 10.22 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 10.22(A) Amendment, dated January 27, 2000, to the Letter Agreement, dated June 4, 1998 between the Company and Stephen R. Lang. (incorporated herein by reference to Exhibit 10.22(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.23 Consulting Agreement dated July 21, 1999 between the Company and Henry H. Hoyt, Jr.(incorporated herein by reference to Exhibit 10.23 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.23(A) Amendment, dated January 27, 2000, to the Consulting Agreement dated July 21, 1999 between the Company and Henry H. Hoyt, Jr. (incorporated herein by reference to Exhibit 10.23(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.24 Letter Agreement, dated January 1, 1999 between the Company and Thomas G. Gerstmyer (incorporated herein by reference to Exhibit 10.24 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.24(A) Amendment, dated January 27, 2000, to the Letter Agreement dated January 1, 1999, between the Company and Thomas G. Gerstmyer (incorporated herein by reference to Exhibit 10.24(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 13 Annual Report to Stockholders for the fiscal year ended March 31, 2001 21 Subsidiaries. 23 KPMG LLP Independent Auditors' Consent 11 (A) REPORTS ON FORM 8-K On May 7, 2001, the Company filed a report on Form 8-K stating that it had entered into definitive agreements for the sale of the Company in a two-step transaction in which stockholders will receive $20.30 per share on a fully diluted basis, subject to certain tax adjustments. Pursuant to the Asset Purchase Agreement, dated as of May 7, 2001, by and between Armkel, LLC and the Company, the Company proposes to sell for $739 million in cash, less certain debt outstanding at closing, the Company's consumer products business. Pursuant to the Agreement and Plan of Merger, dated as of May 7, 2001, among the Company, CPI Development Corporation, MCC Acquisition Holdings Corporation, MCC Merger Sub Corporation and MCC Acquisition Sub Corporation, the Company proposes to sell for $408 million in cash its remaining healthcare business, by means of a merger. Upon consummation of the merger, the aggregate consideration estimated to be $1.121 billion, less the corporate taxes to be paid on the sale of the consumer products business and the cash-out of options, would be received by the holders of the Company's outstanding Common Stock and Class B Common Stock. Each transaction is conditioned on the other, so one transaction will not be consummated without the other. 12 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. CARTER-WALLACE, INC. (Registrant) DATED: June 21, 2001 BY: /s/ Paul A. Veteri Paul A. Veteri President and Chief Operating 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 and in the capacities and on the respective dates indicated: SIGNATURE TITLE DATE --------- ----- ---- /s/ Ralph Levine Chairman of the Board and June 21, 2001 Ralph Levine Chief Executive Officer, Director (Principal Execu- tive Officer) /s/ David M. Baldwin Director June 21, 2001 David M. Baldwin /s/ Dr.Richard L. Cruess Director June 21, 2001 Dr. Richard L. Cruess /s/Suzanne H. Garcia Director June 21, 2001 Suzanne H. Garcia 13 SIGNATURE TITLE DATE --------- ----- ---- /s/ Henry H. Hoyt, Jr. Director June 21, 2001 Henry H. Hoyt, Jr. /s/ Scott C. Hoyt Director June 21, 2001 Scott C. Hoyt /s/ Herbert M. Rinaldi Director June 21, 2001 Herbert M. Rinaldi /s/ Donald J. Stack Director June 21, 2001 Donald J. Stack /s/ Paul A. Veteri President and Chief June 21, 2001 Paul A. Veteri Operating Officer, Director /s/ Peter J. Griffin Vice President, Finance and June 21, 2001 Peter J. Griffin Controller, Chief Financial Officer 14 CARTER-WALLACE, INC. AND SUBSIDIARIES INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE The consolidated financial statements and the related report of KPMG LLP dated May 18, 2001 appearing on pages 12 through 31 of the 2001 Annual Report to Stockholders are incorporated herein by reference in this Form 10-K Annual Report. The following are set forth in this Annual Report on Form 10-K: PAGE INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE 16 SCHEDULE II - Valuation and qualifying accounts for each of the three years ended March 31, 2001 17 All other financial statement schedules are omitted because they are not applicable or not required or because the information is included in the consolidated financial statements or related notes. 15 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Carter-Wallace, Inc.: Under date of May 18, 2001, we reported on the consolidated balance sheets of Carter-Wallace, Inc. and subsidiaries as of March 31, 2001 and 2000, and the related consolidated statements of earnings, retained earnings and comprehensive earnings, and cash flows, for each of the years in the three-year period ended March 31, 2001, as contained in the 2001 Annual Report to Stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the year ended March 31, 2001. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG LLP New York, New York May 18, 2001 16 SCHEDULE II CARTER-WALLACE, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts Three Years Ended March 31, 2001 (in thousands of dollars) Charged to Balance at costs and Charged Balance beginning expenses or to other at end Description of period revenues accounts Deductions of period ------------ --------- ------------ -------- ---------- --------- YEAR ENDED MARCH 31, 2001 Deducted from assets to which they apply: Allowance for doubtful accounts: Continuing Oper. $1,044 $ 48 $ - $ 147 $ 945 Discontinued Oper. 5,628 1,267 - 673 6,222 ------ ------- ----- ------- ------- 6,672 1,315 - 820(a) 7,167 ------ ------- ----- ------- ------- Allowance for cash discounts: Continuing Oper. 619 4,339 - 4,418 540 Discontinued Oper. 739 6,479 - 6,533 685 ------ ------- ----- ------- ------- 1,358 10,818 - 10,951(b) 1,225 ------ ------- ----- ------- ------- Total Cont. Oper. 1,663 4,387 - 4,565 1,485 Total Discont. Oper. 6,367 7,746 - 7,206 6,907 ------ ------- ----- ------- ------- $8,030 $12,133 $ - $11,771 $ 8,392 ------ ------- ----- ------- ------- YEAR ENDED MARCH 31, 2000 Deducted from assets to which they apply: Allowance for doubtful accounts: Continuing Oper. $1,069 $ 87 $ - $ 112` $ 1,044 Discontinued Oper. 4,894 976 - 242 5,628 ------ ------- ----- ------- ------- 5,963 1,063 $ - 354(a) 6,672 ------ ------- ----- ------- ------- Allowance for cash discounts: Continuing Oper. 805 3,960 - 4,146 619 Discontinued Oper. 647 6,023 - 5,931 739 ------ ------- ----- ------- ------- 1,452 9,983 - 10,077(b) 1,358 ------ ------- ----- ------- ------- Total Cont. Oper. 1,874 4,047 - 4,258 1,663 Total Discont. Oper. 5,541 6,999 - 6,173 6,367 ------ ------- ----- ------- ------- $7,415 $11,046 $ - $10,431 $ 8,030 ------ ------- ----- ------- ------- (CONTINUED) 17 SCHEDULE II (CONTINUED) YEAR ENDED MARCH 31, 1999: Deducted from assets to which they apply: Allowance for doubtful accounts: Continuing Oper. $1,053 $ 189 $ - $ 173 $ 1,069 Discontinued Oper. 4,663 563 - 332 4,894 ------ ------- ----- ------- ------- 5,716 752 - 505(a) 5,963 ------ ------- ----- ------- ------- Allowance for cash discounts: Continuing Oper. 784 3,178 - 3,157 805 Discontinued Oper. 806 5,559 - 5,718 647 ------ ------- ----- ------- ------- 1,590 8,737 - 8,875(b) 1,452 ------ ------- ----- ------- ------- Total Cont. Oper. 1,837 3,367 - 3,330 1,874 Total Discont. Oper. 5,469 6,122 - 6,050 5,541 ------ ------- ----- ------- ------- $7,306 $9,489 $ - $9,380 $ 7,415 ------ ------- ----- ------- ------- NOTES: (A) Accounts written off net of recoveries. (B) Net discounts allowed to customers. 18 INDEX TO EXHIBITS 14 (A)(3) EXHIBITS 2.1 Asset Purchase Agreement, dated as of May 7, 2001, by and between Armkel,LLC and Carter-Wallace, Inc.(incorporated herein by reference to Item 7 of the Company's Form 8-K dated May 7, 2001). 2.2 Agreement and Plan of Merger, dated as of May 7, 2001, among the Company, CPI Development Corporation, MCC Acquisition Holdings Corporation, MCC Merger Sub Corporation and MCC Acquisition Sub Corporation. (incorporated herein by reference to Item 7 of the Company's Form 8-K dated May 7, 2001). 3.1 Certificate of Incorporation, as amended, of the Company (incorporated herein by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1992). 3.2 By-Laws of the Company, as amended through 5/15/97 (incorporated herein by reference to Exhibit 3.2 of the Company's Annual Report on Form 10K for the fiscal year ended March 31, 1998). 4.1 Instruments defining the rights of security holders, including indentures -- The Company agrees to furnish to the Commission upon request a copy of each instrument pursuant to which long- term debt of the Company and its subsidiaries not exceeding 10% of total assets of the Company and its consolidated subsidiaries is authorized. 10.2 1977 Restricted Stock Award Plan, as amended (incorporated herein by reference to Exhibit 10.2 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1990). 10.3 Employees' Retirement Plan, as amended (incorporated herein by reference to Exhibit 10.3 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993). 10.4 Description of Profit Sharing Plan (incorporated herein by reference to Exhibit 10.4 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.5 Executives' Additional Compensation Plan (incorporated herein by reference to the description of such plan set forth in the Company's Proxy Statement dated June 18, 1993, for the Annual Meeting of Stockholders to be held July 20, 1993, under the caption "Executive Compensation and Other Information"). 10.6 Employment Agreement, dated June 4, 1998, between the Company and Ralph Levine (incorporated herein by reference to Exhibit 10.6 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998). (CONTINUED) 19 (A)(3) EXHIBITS (CONT'D) 10.6(A) Amendment, dated January 27, 2000, to the Employment Agreement dated June 4, 1998 between the Company and Ralph Levine (incorporated herein by reference to Exhibit 10.6(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.6(B) Amendment, dated January 25, 2001, to the Employment Agreement dated June 4, 1998 between the Company and Ralph Levine. 10.7 Employment Agreement, dated June 4, 1998, between the Company and Paul A. Veteri (incorporated herein by reference to Exhibit 10.7 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998). 10.7(A) Amendment, dated January 27, 2000, to the Employment Agreement dated June 4, 1998 between the Company and Paul A. Veteri (incorporated herein by reference to Exhibit 10.7(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.7(B) Amendment, dated January 25, 2001, to the Employment Agreement dated June 4, 1998 between the Company and Paul A. Veteri. 10.10 Supplemental Death Benefit Agreement, as amended (incorporated herein by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993). 10.11 Lease Agreement, dated December 2, 1988, between the Company and Fisher - Sixth Avenue Company and Hawaiian Sixth Avenue Corporation (incorporated herein by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1989). 10.12 Corporate Officer Medical Expense Reimbursement Plan (incorporated herein by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993). 10.13 Executive Medical Expense Reimbursement Plan, as amended (incorporated herein by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993). 10.14 Executive Pension Benefits Plan, as amended (incorporated herein by reference to Exhibit 10.14 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1995). 10.15 Executive Savings Plan (incorporated herein by reference to Exhibit 10.15 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1995). (CONTINUED) 20 (A)(3) EXHIBITS (CONT'D) 10.18 1996 Long-Term Incentive Plan, as amended (incorporated herein by reference to Exhibit 10.18 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999) 10.19 Employment Agreement, dated October 2, 2000 between the Company and T. Rosie Albright. 10.21 Letter Agreement, dated September 14, 1998, between the Company and T. Rosie Albright (incorporated herein by reference to Exhibit 10.21 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 10.21(A) Amendment, dated January 27, 2000, to the Letter Agreement, dated September 14, 1998, between the Company and T. Rosie Albright (incorporated herein by reference to Exhibit 10.21(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.22 Letter Agreement, dated June 4, 1998, between the Company and Stephen R. Lang (incorporated herein by reference to Exhibit 10.22 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 10.22(A) Amendment, dated January 27, 2000, to the Letter Agreement, dated June 4, 1998 between the Company and Stephen R. Lang. (incorporated herein by reference to Exhibit 10.22(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.23 Consulting Agreement dated July 21, 1999 between the Company and Henry H. Hoyt, Jr.(incorporated herein by reference to Exhibit 10.23 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.23(A) Amendment, dated January 27, 2000, to the Consulting Agreement dated July 21, 1999 between the Company and Henry H. Hoyt, Jr. (incorporated herein by reference to Exhibit 10.23(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.24 Letter Agreement, dated January 1, 1999 between the Company and Thomas G. Gerstmyer (incorporated herein by reference to Exhibit 10.24 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). (CONTINUED) 21 (A)(3) EXHIBITS (CONT'D) 10.24(A) Amendment, dated January 27, 2000, to the Letter Agreement dated January 1,1999, between the Company and Thomas G. Gerstmyer (incorporated herein by reference to Exhibit 10.24(a) of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 13 Annual Report to Stockholders for the fiscal year ended March 31, 2001 21 Subsidiaries. 23 KPMG LLP Independent Auditors' Consent 22