<PAGE>
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, 1994
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 (IRS Employer
incorporation or organization) Identification No.)
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. ( )
The number of shares of the registrant's Common Stock and Class B Common Stock
outstanding at May 20, 1994 was 33,475,144 and 12,594,314, respectively.
The aggregate market value of voting stock held by non-affiliates of the
registrant as of May 20, 1994 was approximately $501,847,000.
Documents Incorporated by Reference
Annual Report to Stockholders for the fiscal
year ended March 31, 1994 Parts I & II
Proxy Statement for the Annual Meeting of
Stockholders, to be held July 19, 1994 Parts III & IV
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Part I
Item 1. Business
Carter-Wallace, Inc. (the "Company") is engaged in the manufacture and sale
of a diversified line of products in the Consumer Products and Health Care
segments. Additional information is presented on page 11 "Description of
Business Segments" of the 1994 Annual Report to Stockholders and is herein
expressly incorporated by reference.
Business Segments and Geographic Data
Financial information about the Company's business segments and geographic
areas for the three years ended March 31, 1994 is presented on pages 23 and
24, note 12, "Business Segments" of the Notes to Consolidated Financial
Statements of the 1994 Annual Report to Stockholders and is herein
expressly incorporated by reference.
Foreign Operations
Foreign 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 by $16,300,000 in the fiscal year ended March
31, 1994 in comparison to the prior year. Additional information is
presented on page 18, note 4, "Foreign Operations" of the Notes to
Consolidated Financial Statements of the 1994 Annual Report to Stockholders
and is herein expressly incorporated by reference.
Competition
Both business segments 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 1994, the Company's "Arrid" line of
anti-perspirants and deodorants is believed to account for an estimated
8.4% share of the domestic anti-perspirant and deodorant market. The
"Trojan" condom line is estimated to account for almost 60% of total
domestic retail condom sales. The Company's worldwide condom sales were
approximately $88,300,000, $88,600,000 and $87,400,000 in the fiscal years
ended March 31, 1994, 1993 and 1992, respectively. The "Organidin" line of
expectorant/mucolytics has a leading position in prescriptions written for
cough/cold products. Sales of the "Organidin" product line were
approximately $74,400,000, $43,400,000 and $59,900,000 in the fiscal years
ended March 31, 1994, 1993 and 1992, respectively. Additional information
is presented on page 8 under "Management's Discussion and Analysis of
Results of Operations and Financial Condition - Net Sales and Earnings" of
the 1994 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 has two or more approved suppliers for
production materials and issues purchase commitments to provide its
suppliers with adequate lead time.
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Patents and Licenses
The Company owns or is licensed under a number of patents and patent
applications covering several of its products. Except for the patents
related to "Felbatol" (felbamate), the expiration or any other change in
any of these patents or patent applications will not materially affect the
Company's business. "Felbatol" is covered by patents which expire during
the period from 2006 to 2011. Royalty income does not constitute a
material portion of total revenue.
In April, 1992, Carter-Wallace entered into a licensing agreement with
Schering-Plough Corporation. Additional information is presented on page 9
under "Management's Discussion and Analysis of Results of Operations and
Financial Condition - Licensing Arrangement" in the 1994 Annual Report to
Stockholders and is herein expressly incorporated by reference.
Environmental Matters
Information regarding environmental matters is presented on page 5 under
the caption "Litigation" and on page 25 under note 16, "Litigation and
Environmental Matters" of the Notes to Consolidated Financial Statements,
both included in the 1994 Annual Report to Stockholders and are herein
expressly incorporated by reference.
Research and Development
Expenditures for research and development totaled $52,278,000 in 1994,
$49,903,000 in 1993 and $51,955,000 in 1992. Research and development
expenses increased 5% in 1994 and decreased 4% in 1993. Research spending,
most of which was in the Health Care segment was principally related to
"Felbatol" for the treatment of seizures associated with epilepsy and
"Astelin" (azelastine) for rhinitis and asthma. The decline in 1993 was
due primarily to the reorganization of the Consumer Products research
program as well as the completion of clinical studies necessary for the
submission of the New Drug Application ("NDA") for "Felbatol".
The NDA for "Felbatol", the trademark for felbamate, was approved by the
Food and Drug Administration ("FDA") on July 29, 1993. Studies have been
initiated in generalized epileptic seizures in adults and partial onset
seizures in children to support expanded claims and an NDA for the
"Felbatol" Chewable Tablet will be submitted to the FDA during spring,
1994.
"Astelin" (azelastine) and "Astelin" Nasal Spray NDA's for rhinitis were
submitted to the FDA in March, 1991 and an NDA for asthma was submitted in
December, 1992. In the spring of 1994, the Company received "non-
approvable" letters from the FDA for "Astelin" nasal spray for allergic
rhinitis and "Astelin" tablets for asthma. The Company is aware that it
will receive a similar letter with respect to "Astelin" tablets for
rhinitis. The Company is responding to these letters in writing. A
meeting has been scheduled in July with the FDA to resolve any remaining
issues after the Company's written responses. The Company is confident
that these issues raised by the FDA are resolvable. Until the July meeting
has occurred, the Company is unable to project when approval of these NDA's
will occur.
During the fiscal year, development continued on taurolidine, an antitoxin
for the treatment of sepsis.
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<PAGE>
D-23129 was accepted by Carter-Wallace as a development compound licensed
from ASTA Pharma AG for the treatment of epilepsy. Discussions are
underway for a joint development program leading to an Investigational New
Drug (IND) application.
Approximately 270 employees are employed in research and development
activities.
Employees
The Company has been in existence since 1880 and together with its
subsidiaries employed approximately 4,060 people worldwide at March 31,
1994.
Regulatory Matters
Information regarding the effect of Regulatory Matters on the Company's
business is presented on page 5 under the caption "Regulatory Matters" and
on page 25 in note 15, "Regulatory Matters" of the Notes to Consolidated
Financial Statements, both are included in the 1994 Annual Report to
Stockholders and are herein expressly incorporated by reference.
Acquisition
Information regarding acquisitions is presented on page 22 in note 11,
"Acquisition" of the Notes to Consolidated Financial Statements, is
included in the 1994 Annual Report to Stockholders and is herein expressly
incorporated by reference.
Item 2. Properties
The executive offices of the Company and a divisional headquarters are
located at 1345 Avenue of the Americas, New York, New York, in space leased
until May, 2011. The following are principal facilities of the Company:
Area
Location Products Manufactured (Sq. Feet)
Owned in Fee:
Manufacturing Facilities
and Offices:
Cranbury, New Jersey Pharmaceuticals, toiletries
and pet products 734,000
Decatur, Illinois Pharmaceuticals 108,000
East Windsor, New Jersey Diagnostics 156,000
Trenton, New Jersey Condoms, pediculicide, lubricating
jelly and pet products 169,500
Winsted, Connecticut Pet products 45,000
Montreal, Canada Pharmaceuticals 162,000
Humacao, Puerto Rico Pharmaceuticals 34,000
Toronto, Canada Toiletries 52,000
Folkestone, England Toiletries 55,000
Milan, Italy Pharmaceuticals and diagnostics 52,000
Pisa, Italy Toiletries, adhesive tapes
and bandages 49,000
Mexico City, Mexico Pharmaceuticals and diagnostics 63,000
New Plymouth, New
Zealand (1) Condom processing 31,000
(1) The land on which the building is located is leased under a long-term
agreement.
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Properties (Cont'd)
Area
Location Products Manufactured (Sq. Feet)
Leased:
Manufacturing Facilities
and Offices:
Santa Ana, California Toiletries 10,400
Rincon, Puerto Rico Toiletries and condoms 67,000
Mexico City, Mexico Toiletries 56,000
Barcelona, Spain Toiletries 58,600
Warehouse and Offices:
Dayton, New Jersey 200,000
Momence, Illinois 43,000
Plainsboro, New Jersey * 45,000
Twin Rivers, New Jersey* 14,500
Sydney, Australia 19,000
Folkestone, England 40,000
Clichy, France * 11,800
* Offices only
The Company has agreements with several agents 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. Maintenance and Repairs were $7,950,000 in 1994,
$7,550,000 in 1993 and $6,960,000 in 1992.
Item 3. Legal Proceedings
Information regarding Legal Proceedings involving the Company is presented
on page 5 under the caption "Litigation" and on page 25 in note 16,
"Litigation and Environmental Matters" of the Notes to Consolidated
Financial Statements, both included in the 1994 Annual Report to
Stockholders and are herein expressly incorporated by reference.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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Executive Officers of the Registrant
Executive Officers of the Registrant are as follows:
Held Present
Name Age Office Office Since
Henry H. Hoyt, Jr. 66 Chairman of the Board and
Chief Executive Officer 1974
Daniel J. Black 62 President and Chief Operating
Officer 1979
John Bridgen, Ph.D. 47 Vice President, Diagnostics, U.S. 1984
Robert A. Cuthbert 67 Vice President, Pet Products, U.S. 1983
Donald R. Daoust,Ph.D. 58 Vice President, Quality Control 1978
Miguel Fernandez 63 Vice President, International 1980
Peter J. Griffin 51 Vice President and Controller 1983
John R. Hughes 56 Vice President, Consumer
Products, U.S. 1991
Michael J. Kopec 54 Vice President, Manufacturing 1978
Ralph Levine 57 Vice President, Secretary and
General Counsel 1976
Thomas B. Moorhead 60 Vice President, Human Resources 1987
George H. Ohye 58 Vice President, Compliance and
Regulatory 1994
Herbert Sosman 61 Vice President, Pharmaceuticals,
U.S. 1984
Donald J. Stack 56 Vice President, Taxes 1989
C. Richard Stafford 58 Vice President, Corporate
Development 1977
Paul A. Veteri 52 Vice President, Finance and
Chief Financial Officer 1983
James L. Wagar 59 Vice President and Treasurer 1981
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<PAGE>
Executive Officers of the Registrant (Cont'd)
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 19, 1994.
Mr. John R. Hughes was appointed Vice President, Consumer Products, U.S.,
in June, 1991 and President, Carter Products Division in April, 1991. He
was employed by Vermont Castings, Inc. from April, 1990 to April, 1991 as
Chief Executive Officer. He was employed as President of Mennen, USA, a
division of the Mennen Company prior to August, 1989.
Mr. George H. Ohye was appointed Vice President, Compliance and Regulatory
in April, 1994. Mr. Ohye was previously Senior Vice President, Regulatory
Affairs with Johnson & Johnson's R.W. Johnson Pharmaceutical Research
Institute since 1989. He held the concomitant position of Member, Board of
Directors of the Ortho-McNeil Pharmaceutical Division of Johnson & Johnson.
Part II
Item 5. Market for Registrant's Common Equity and Related Stock-
Holder Matters
Information required by this item is presented on pages 1 and 7 of the 1994
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 1994 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, 9 and 10 of the 1994 Annual Report to Stockholders.
Item 8. Financial Statements and Supplementary Data
Information required by this item is incorporated herein by reference to
pages 12 through 27 of the 1994 Annual Report to Stockholders.
Item 9. Disagreements on Accounting and Financial Disclosure
Not applicable.
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<PAGE>
Part III
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 for the Annual Meeting of
Stockholders to be held July 19, 1994, to be filed with the Securities and
Exchange Commission under the captions "Election of Directors" and "Board
of Directors and Committees" and Note 7 to "Principal Stockholders".
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.
Item 11. Executive Compensation
Information required by this item is incorporated herein by reference to
the Company's Proxy Statement for the Annual Meeting of Stockholders to be
held July 19, 1994, to be filed with the Securities and Exchange Commission
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 for the Annual Meeting of Stockholders to be held July 19,
1994, to be filed with the Securities and Exchange Commission under the
captions "Voting Rights", "Principal Stockholders" and "Election of
Directors".
Item 13. Certain Relationships and Related Transactions
Information required by this item is incorporated herein by reference to
the Company's Proxy Statement for the Annual Meeting of Stockholders to be
held July 19, 1994, to be filed with the Securities and Exchange Commission
under the captions "Principal Stockholders" and "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 12 of this
Form.
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(a) (3) Exhibits
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 (incorporated herein by
reference to Exhibit 3.2 of the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1993).
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 Profit Sharing Plan (incorporated herein by reference to
the description of such plan set forth in the Company's
Proxy Statement for the Annual Meeting of Stockholders to
be held July 19, 1994, to be filed with the Securities and
Exchange Commission under the caption "Executive
Compensation and Other Information").
10.5 Executives' Additional Compensation Plan (incorporated
herein by reference to the description of such plan set
forth in the Company's Proxy Statement for the Annual
Meeting of Stockholders to be held July 19, 1994, to be
filed with the Securities and Exchange Commission under
the caption "Executive Compensation and Other
Information").
10.6 Employment Agreement dated April 24, 1992, as amended,
between the Company and Daniel J. Black (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, 1992).
10.7 Employment Agreement dated April 10, 1992 between the
Company and Ralph Levine (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, 1992).
10.8 Employment Agreement dated April 10, 1992 between the
Company and Paul A. Veteri (incorporated herein by
reference to Exhibit 10.8 of the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1992).
(Continued)
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(a) (3) Exhibits (cont'd)
10.9 Employment Agreement dated November 14, 1991 between the
Company and Herbert Sosman (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, 1992).
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.
10.15 Executive Savings Plan
13 Annual Report to Stockholders for the fiscal year ended
March 31, 1994.
21 Subsidiaries.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended
March 31, 1994.
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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 6, 1994 BY: s/Daniel J. Black
Daniel J. Black
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/Henry H. Hoyt, Jr. Chairman of the Board and June 6, 1994
Henry H. Hoyt, Jr. Chief Executive Officer,
Director (Principal Execu-
tive Officer)
s/Daniel J. Black President and Chief Opera- June 6, 1994
Daniel J. Black ting Officer, Director
s/David M. Baldwin Director June 6, 1994
David M. Baldwin
s/Dr. Richard L. Cruess Director June 6, 1994
Dr. Richard L. Cruess
s/Scott C. Hoyt Director June 6, 1994
Scott C. Hoyt
s/Ralph Levine Vice President, Secretary June 6, 1994
Ralph Levine and General Counsel,
Director
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Signature Title Date
s/Herbert M. Rinaldi Director June 6, 1994
Herbert M. Rinaldi
s/Paul A. Veteri Vice President, Finance, June 6, 1994
Paul A. Veteri Director (Principal
Financial Officer)
s/Peter J. Griffin Vice President and June 6, 1994
Peter J. Griffin Controller (Principal
Accounting Officer)
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CARTER-WALLACE, INC. AND SUBSIDIARIES
INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The consolidated financial statements and the related report of KPMG Peat
Marwick dated June 6, 1994 appearing on pages 12 through 27 of the 1994
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 Supporting Financial
Statement Schedule 13
Schedule VIII - Valuation and qualifying accounts for each
of the three years ended March 31, 1994 14
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.
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Carter-Wallace, Inc.:
Under date of June 6, 1994, we reported on the consolidated balance sheets
of Carter-Wallace, Inc. and subsidiaries as of March 31, 1994 and 1993, and
the related consolidated statements of earnings and retained earnings and
cash flows for each of the years in the three-year period ended March 31,
1994, as contained in the 1994 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 1994. In
connection with our audits of the aforementioned consolidated financial
statements, we also have 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.
As discussed in notes 3 and 8 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards
Board's Statements No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions", No. 109 "Accounting for Income Taxes" and
No. 112 "Employers' Accounting for Postemployment Benefits" in 1994.
The audit report on the consolidated financial statements of
Carter-Wallace, Inc. and subsidiaries referred to above contains an
explanatory paragraph that states that the Company received a letter from
the Food and Drug Administration (FDA) requesting the discontinuance of the
marketing of its Organidin products. The Company met with the FDA, has
replied to the letter and is awaiting further response from the FDA. The
ultimate outcome of this matter cannot presently be determined.
Accordingly, no provision for any liability that may result upon the
resolution has been recognized in the financial statement schedule.
KPMG PEAT MARWICK
New York, New York
June 6, 1994
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SCHEDULE VIII
CARTER-WALLACE, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Three Years Ended March 31, 1994
(in thousands of dollars)
Balance at Charged to Charged Balance
beginning costs and to other at end
Description of period expenses accounts Deductions of period
Year ended March 1994:
Deducted from assets
to which they apply:
Allowance for
doubtful accounts $3,589 $ 1,121 $ - $ 426 (a) $4,284
Allowance for cash
discounts 2,050 8,200 - 8,579 (b) 1,671
$5,639 $ 9,321 $ - $9,005 $5,955
Year ended March 31, 1993:
Deducted from assets
to which they apply:
Allowance for
doubtful accounts $4,860 $ 1,606 (c) $ - $ 2,877 (a)(c) $3,589
Allowance for cash
discounts 1,995 7,719 - 7,664 (b) 2,050
$6,855 $ 9,325 $ - $10,541 $5,639
Year ended March 31, 1992:
Deducted from assets
to which they apply:
Allowance for
doubtful accounts $4,501 $ 628 $ - $ 269 (a) $4,860
Allowance for cash
discounts 2,041 7,713 - 7,759 (b) 1,995
$6,542 $ 8,341 $ - $ 8,028 $6,855
Notes:
(a) Accounts written off and recovered.
(b) Net discounts allowed to customers.
(c) Includes $1,200 related to trade receivables from Phar-Mor, Inc., a
drugstore chain which has filed for bankruptcy.
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CARTER-WALLACE
[LOGO]
ANNUAL REPORT FOR THE YEAR ENDED MARCH 31 1994
<PAGE>
<PAGE>
EXECUTIVE OFFICES
1345 Avenue of the Americas, New York, NY 10105
212-339-5000
RESEARCH LABORATORIES
Cranbury, New Jersey
East Windsor, New Jersey
Montreal, Canada
MANUFACTURING PLANTS
Cranbury, New Jersey
Decatur, Illinois
East Windsor, New Jersey
Santa Ana, California
Trenton, New Jersey
Winsted, Connecticut
Humacao, Puerto Rico
Rincon, Puerto Rico
Montreal, Canada
Toronto, Canada
Folkestone, England
Milan, Italy
Pisa, Italy
Mexico City, Mexico
New Plymouth, New Zealand
Barcelona, Spain
TRANSFER AND DISBURSING AGENTS
The Bank of New York
101 Barclay Street
New York, N.Y. 10286
800-524-4458
Midlantic National Bank
499 Thornall Street
Edison, N.J. 08818
908-321-8000
REGISTRAR OF STOCK
The Bank of New York
101 Barclay Street
New York, N.Y. 10286
SHAREHOLDER RELATIONS CONTACT
Ruder Finn, Inc.
800-984-1777
<PAGE>
<PAGE>
CARTER-WALLACE, INC.
ANNUAL REPORT
For the year ended March 31, 1994
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS 1994 1993
<S> <C> <C>
Net sales $664,789,000 $653,511,000
Earnings before taxes 37,382,000 68,406,000(a)
Net earnings before the cumulative
effect
of accounting changes 26,609,000 47,200,000(a)
Net earnings (loss) (20,030,000) 47,200,000(a)
Earnings per share before the
cumulative
effect of accounting changes .58 1.03(a)
Earnings (loss) per share ($.44) $1.03(a)
Dividends 15,292,000 15,256,000
Dividends per share $.33 $.33
Average shares outstanding 45,900,000 45,786,000
Number of stockholders of record
Common 3,305 3,184
Class B common 1,919 2,046
<FN>
(a) Includes income of $10,000,000 before taxes or
$6,000,000 after taxes ($.13 per share) related to a
licensing agreement with Schering-Plough Corporation
granting exclusive marketing rights in all markets
except the United States and its territories and
possessions, Canada and Mexico, to Felbatol
(felbamate).
</TABLE>
[LOGO]
The Company markets
toiletries, pharmaceuticals,
diagnostic specialties,
proprietary drugs and pet products
CONTENTS
Report to Stockholders 2
Summary of Selected Financial Data 7
Management's Discussion and
Analysis of Results of Operations
and Financial Condition 8
Description of Business Segments 11
Consolidated Balance Sheets 12
Consolidated Statements of Earnings
and Retained Earnings 14
Consolidated Statements of Cash Flows 15
Notes to Consolidated Financial Statements 16
Independent Auditors' Report 27
Directors and Officers 28
<PAGE>
<PAGE>
REPORT TO STOCKHOLDERS
In the fiscal year ended March 31, 1994 the Company's sales increased over the
prior year. Consolidated sales for the year were $664,789,000 compared to
$653,511,000 a year ago for a gain of 2%.
Earnings before the cumulative effect of accounting changes decreased to
$26,609,000 or $.58 a share compared with $47,200,000 or $1.03 a share in the
prior year. Included in the current year are increases in advertising and
marketing to support the introduction of Felbatol (felbamate), as well as to
support various line extensions of Arrid anti-perspirant and deodorant products.
In addition, cost of goods sold as a percentage of sales increased because of
unfavorable changes in product mix.
In the prior year, earnings included income of $10,000,000 before taxes or
$6,000,000 after taxes ($.13 per share) related to a licensing agreement for
certain international rights to Felbatol.
SALES
Sales in the Company's two business segments were Consumer Products $368,168,000
and Health Care Products $296,621,000. Consumer Products were 55% and Health
Care Products were 45% of total sales. These sales compare to a year ago of
$372,475,000 and $281,036,000, respectively.
Foreign sales by subsidiaries and branches operating outside the United States
were $159,454,000 compared with $169,032,000 the previous year. This represents
24% and 26%, respectively of total sales. Health Care Products accounted for 46%
and Consumer Products 54% of foreign sales. Lower foreign exchange rates had the
effect of decreasing foreign sales by approximately $16,300,000.
DIVIDENDS
Dividends of $.33 per share were paid in both the current and prior year. The
Company has paid dividends for 111 consecutive years.
CARTER PRODUCTS DIVISION
The past year was a challenging one for the entire Health and Beauty Care
industry. Several factors put pressure on our total business. These included
trade and distributor inventory reduction programs, account consolidations due
to mergers, an unusually harsh winter nationwide and the earthquake on the West
Coast.
Arrid continued as one of the leading anti-perspirant/ deodorant brands
recording a factory shipment gain in a very competitive market. Arrid Teen
Image, a new line of anti-perspirants and clear deodorants developed expressly
to appeal to the young female user, enjoyed a successful introduction. The more
recent launch of Arrid Clear Solid and Arrid Gel anti-perspirants is a major
reason for the increase in Arrid sales.
Trojan continues to lead the condom market with almost a 60% market share and
new products were a major reason for Trojan's success. New entries were
introduced into the two fastest growing segments of the condom category--Thin
and Ribbed. The introduction of Trojan Very Thin was completed early in the
year. Trojan Ultra Texture Ribbed condoms, introduced in January 1994, received
excellent trade acceptance.
Our new condom brand, Class Act, is positioned to compete in the "price value"
segment and began shipping in October. This new product has also met with
excellent trade and consumer acceptance.
Nair remained the leading depilatory brand with over a 40% share of category
sales.
Our pregnancy test category continues to grow at impressive rates--up 14% in
unit sales during the past year. Division brands, First Response and Answer,
combined, exceeded the category growth and represent one-quarter of U.S.
consumer sales for these products.
The Whitening/Polish segment of the dentifrice category had several new entries
and showed dynamic growth. Pearl Drops continued as the number two brand.
WALLACE LABORATORIES DIVISION
The NDA for Felbatol, the first major new anti-
epileptic drug to be introduced in the United States in over fifteen years, was
approved by the FDA
in July with the national launch commencing on
October 4, 1993. Felbatol's indications include monotherapy and adjunctive
therapy for patients with epilepsy age 14 and over with partial seizures with
and without generalization. It is also indicated for treatment of partial and
generalized seizures associated with Lennox Gastaut Syndrome in children as
young as two years old.
2
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Major emphasis at introduction was placed on professional education ensuring
comprehensive knowledge about the profile of Felbatol as well as its proper use
and limitations.
To date, Felbatol sales have exceeded expectations with each month posting new
highs in market share. This rate of growth is expected to continue as
physicians' experience with Felbatol increases and more physicians learn of its
many benefits.
The Division's cough and cold products group, including Organidin expectorant
and mucolytic, Tussi-Organidin and Tussi-Organidin DM cough preparations, and
Rynatan antihistamines containing decongestants, sustained its number one
position in prescriptions written for cough/cold products.
Our muscle relaxants sold under the Soma 350 brand posted a new prescribing high
which greatly exceeded the overall growth of the market.
WAMPOLE LABORATORIES DIVISION
We continue to experience overall product acceptance and opportunities in many
areas of our diagnostic business.
Sales of the Isostat product line for the rapid detection of micro-organisms in
the blood increased. The product line was supported throughout the year by a
broad range of promotional programs directed at the laboratory professional.
The Division maintained its leading position in serological testing with
Streptozyme, a test for streptococcal antibodies, Rheumaton, a test to detect
rheumatoid factor and Mono-Test and Mono-Latex, products for the detection of
infectious mononucleosis. Sales were further enhanced by the introduction of
Wampole Impact Rubella for the determination of immunity to rubella infections
and of Wampole Impact RPR for the serologic detection of syphilis.
Strong sales gains were recorded for key products in the Zeus Scientific line of
immunofluorescent and enzyme immunoassay tests. These included products for
detection of antinuclear antibodies in autoimmune disorders, for the detection
of treponemal antibodies in the confirmation of syphilis and for the detection
of antibodies resulting from mycoplasma infections.
The Stat-Crit system for the rapid measurement of hematocrit levels in the blood
continued to be a strong contributor to the Division's results despite the
passage of the Clinical Laboratories Improvement Act legislation and the Act's
subsequent impact on physician office testing.
Sales of the Clearview line of rapid diagnostic tests for chlamydia and group A
streptococcus were also slowed by the Clinical Laboratories Improvement Act.
However, this legislation had little impact on the Clearview hCG test product,
which is used as an aid in the determination of pregnancy and which showed
significant sales growth.
LAMBERT KAY DIVISION
Division sales again reached record levels. Lambert Kay housebreaking pads,
slicker brushes, toys, and flea and tick products all registered gains. Sales of
Lambert Kay products to pet stores grew significantly with the addition of a
number of new products. The award winning line of Vermont Chewman toys,
introduced last year, was enhanced with new bears, dinosaurs, ducks and bunnies
in assorted colors. A new Tea Tree Oil Shampoo, made from the oil of the
Melaleuca plant which deodorizes, moisturizes and conditions the dog's coat, met
with excellent trade and consumer acceptance.
A new manufacturing facility for the production of grooming tools, choke chains
and web leads was opened on April 14, 1993 in Winsted, Connecticut, a few miles
from the former plant. This facility is the only plant in the United States that
manufactures choke chains and grooming tools for pets. Using state-of-the-art
systems, the facility is a model of environmentally sound manufacturing.
The Lassie line of products, manufactured for mass merchandisers, showed
impressive sales growth due to new products and expanded distribution. New
products in the Lassie line included a new Citrus Essence line which includes a
flea shampoo, flea dip and flea spray. These products use essence of citrus
fruits as the active ingredient and are regarded as being much safer than
conventional insecticide products. Other new products include economy size
housebreaking pads and a repellent that is designed to keep pets away from
"forbidden" areas, both inside and outside of the house.
Both the Lambert Kay and Lassie lines benefited from more aggressive
merchandising and promotion, including innovative point of sale displays.
3
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The Division has shown consistent growth over the years, aided by the aggressive
new products program. Last year, fully one third of Lambert Kay sales were in
products or line extensions that were not marketed five years ago.
INTERNATIONAL DIVISION
The Division's sales advanced again this year when measured in local currencies
but because of unfavorable fluctuations in foreign exchange rates declined when
translated into U.S. dollars. Had exchange rates remained as in the prior year,
international sales would have increased by 4%. Overall results were bolstered
by strong gains in a number of markets including the United Kingdom, Italy and
Australia, as well as Spain, where the new subsidiary operation, Icart, S.A. had
its first year under Carter-Wallace management.
Consumer product sales advanced further in several areas. Our Pearl Drops brand
continued to be the leader in a number of European markets and showed notable
growth in the United Kingdom and Germany. Our dominant share of the OTC
pregnancy test market was maintained in Canada and Mexico, while sales increases
for our tests were achieved in Australia, United Kingdom and Germany. Our
leading share in the topical analgesic market in Canada with Antiphlogistine Rub
A-535 was strengthened further with the introduction of Ice and No Odor brand
extensions and in Australia with the launch of a line of therapeutic bath
additives under the Dencorub name. Trojan condoms continued to maintain a
leading market share in both Canada and Mexico and was also launched during the
year in Australia. In Italy, GranVista, a line of nonprescription reading
glasses was successfully introduced in the pharmacy trade. Nair depilatories
enjoyed a strong sales presence in the Middle East, particularly Saudi Arabia,
and in Spain, Icart's Taky depilatories and Eudermin hand cream showed unit
growth.
The health care and pharmaceutical segment of our business continues to be an
important part of our business worldwide. Governmental efforts to reduce
expenditures on healthcare by either limiting reimbursements or establishing
ceiling prices had the effect of restricting prices and constricting demand.
These governmental initiatives were reflected in somewhat lowered volumes of
some of the products we offer in Canada, Mexico and France.
Professional diagnostic sales continued to show growth particularly in Italy and
Mexico. A new and improved Automated Immunoassay System, the Gralis AT-2000 with
updated software and reagent handling capabilities, was introduced in Italy
along with a new generation system, the Gralis 4000, for large volume blood
testing laboratories. Italy also launched a new line of allergy tests and a
microbiology test system for determination of the identification and antibiotic
sensitivity of pathogenic bacteria. A new infectious disease test technology for
Rubella virus antibody has received favorable acceptance in Europe and emerging
countries. France has successfully introduced two new and simple slide tests to
aid in the diagnosis of streptococcal and staphylococcal infections.
RESEARCH AND DEVELOPMENT
Expenditures for research and development totaled $52,278,000 compared to
$49,903,000 a year ago.
The New Drug Application ("NDA") for Felbatol, the trademark for felbamate, was
approved by the FDA on July 29, 1993. Studies have been initiated in generalized
epileptic seizures in adults and partial onset seizures in children to support
expanded claims and an NDA for the Felbatol Chewable Tablet will be submitted to
the FDA during spring, 1994.
Astelin (azelastine) and Astelin Nasal Spray NDA's for rhinitis were submitted
to the FDA in March, 1991 and an NDA for asthma was submitted in December, 1992.
In the spring of 1994, the Company received "non-approvable" letters from the
FDA for Astelin nasal spray for allergic rhinitis and Astelin tablets for
asthma. The Company is aware that it will receive a similar letter with respect
to Astelin tablets for rhinitis. The Company is responding to these letters in
writing. A meeting has been scheduled in July with the FDA to resolve any
remaining issues after the Company's written responses. The Company is confident
that these issues raised by the FDA are resolvable. Until the July meeting has
occurred, the Company is unable to project when approval of these NDA's will
occur.
During the fiscal year, development continued on taurolidine, an antitoxin for
the treatment of sepsis.
D-23129 was accepted by Carter-Wallace as a development compound licensed from
ASTA Pharma AG for the treatment of epilepsy. Discussions are under-
4
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way for a joint development program leading to an Investigational New Drug (IND)
application.
LICENSING
Early in fiscal 1993, Carter-Wallace signed an agreement with Schering-Plough
Corporation. This agreement granted Schering-Plough exclusive marketing rights
to Felbatol (felbamate) in all markets except the United States and its
territories and possessions, Canada and Mexico. Schering-Plough began sales of
felbamate under the Taloxa brand name in Argentina earlier this year. In March,
the drug was recommended for approval by a majority of the members of the
European Union (EU) Committee for Proprietary Medicinal Products. While each of
the twelve member countries must issue local approvals, Schering-Plough
anticipates the product will be available for physician use by most of the EU
countries by the end of 1994.
Under the licensing agreement, Carter-Wallace received in April, 1992 an
initial, non-refundable license payment of $10,000,000 and is to receive
royalties, which could be significant, on net sales of its Felbatol compound in
the territory covered by the license. Separately, Schering-Plough and Carter-
Wallace agreed that under certain circumstances, they will put into effect a
co-promotional arrangement with respect to a Schering-Plough pharmaceutical
product to be determined in the future.
FACILITIES
After several years of revising lines for new product introductions, upgrading
existing facilities and consolidating selected distribution and warehouse
arrangements, last year was a time of relative inactivity in major capital
facilities programs.
At Humacao, Puerto Rico, the 14,000 square foot addition to the Company's
existing pharmaceutical plant is complete. As a result of the relocation of
offices and selected activities, minor renovations to the existing plant are
underway and should be complete this summer.
At Trenton, New Jersey, a number of significant facilities upgrade projects are
underway and are expected to continue through the coming year.
REGULATORY MATTERS
In connection with the Food and Drug Administration Drug Efficacy Study
Implementation program, the FDA granted the Company a hearing on the FDA's order
proposing to withdraw approval of the New Drug Application for Deprol. The
hearing has been completed and the FDA's Administrative Law Judge ruled that the
New Drug Application for Deprol should be withdrawn. The Company appealed this
decision to the Commissioner of Food and Drugs. The decision was sustained by
the Commissioner. Approval of the New Drug Application for Deprol was withdrawn
effective April 29, 1994.
The FDA has initiated review of the safety and efficacy of the Organidin
products. An FDA Advisory Committee recommended on March 23, 1992 that the
products remain on the market pending further FDA review, that certain changes
in the products' labeling be made and that doctors be appropriately notified of
these labeling changes. The Company implemented these FDA Advisory Committee
recommendations and is developing additional data in support of the safety and
efficacy of the products.
On April 22, 1993, the Company received a letter from the FDA requesting that
the Company discontinue the marketing of its Organidin family of products. On
May 13, 1993, the Company met with the FDA to discuss this matter. The Company
has replied to the FDA letter and is awaiting further response from the FDA. For
further information about this matter, refer to Note 15 "Regulatory Matters" of
Notes to the Consolidated Financial Statements on page 25.
LITIGATION
The EPA advised Carter-Wallace, Inc., the Coca-Cola Company, Millipore
Corporation, Minnesota Mining and Manufacturing Company, The Nestle Company,
Inc. and Owens-Illinois, Inc. (The "Corporations"), as well as over 200 other
companies, in 1982 that they may be responsible parties with respect to waste
deposited at the Lone Pine Landfill in Freehold, N.J. Although the Corporations
have conducted scientific studies which have shown that the Landfill is not a
current threat to area drinking water supplies or aquatic life in the Manasquan
River, the EPA continues to demand that the Corporations and other companies
conduct a clean-up of the Landfill. The Company and over 115 other companies,
without admitting liability, have entered into two consent decrees with EPA
agreeing to conduct a clean-up of the Lone Pine Landfill and the clean-up is in
progress. In August, 1989, the Company instituted suit in
5
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New Jersey state court against twenty-two insurers to recover, inter alia, the
Company's share of cleanup costs at Lone Pine. The Company has reached
settlements in this case and has obtained a liability verdict against the only
nonsettling insurer which should result in the Company being fully reimbursed
for its share of the currently estimated cleanup costs at Lone Pine.
The Company faces potential liability involving waste material generated by the
Lambert Kay division at its former manufacturing facility in Winsted,
Connecticut. In May, 1991, EPA issued special notice letters under the
Comprehensive Environmental Response, Compensation and Liability Act to Lambert
Kay and about 50 other potentially responsible parties ("PRPs") notifying them
of potential liability with respect to waste deposited at the Barkhamsted-New
Hartford landfill in Barkhamsted, Connecticut. In September, 1991 and in
February, 1994, the Company and 21 other PRPs, without admitting liability,
entered consent agreements under which the PRPs agreed to perform certain
investigation and engineering evaluation work at the site, including the
remedial investigation and feasibility study and to reimburse EPA for certain
costs. Based on preliminary information from the investigation work (which is
not completed), the total cost for performing the current and future cleanup
work at Barkhamsted, including the investigation work, is estimated to be $30-40
million. Although applicable environmental law provides for joint and several
liability for the cost of cleanup work, the Company believes, based on present
estimates, that substantially all of the cleanup costs will be paid by other
PRPs.
PEOPLE
We are pleased that George H. Ohye has rejoined Carter-Wallace as Corporate Vice
President, Compliance and Regulatory. From 1961 to 1969, Mr. Ohye was with our
Wallace Laboratories Division, holding a series of pharmaceutical research and
regulatory positions, including Assistant Director, New Products Development.
Since 1969, he has held a variety of progressively senior positions in
regulatory affairs with Merrell National Laboratories, Bristol-Myers Squibb Co.,
and Johnson & Johnson.
Joseph S. Harun, M.D., Vice President, Medical and Scientific Affairs,
Carter-Wallace, Inc., retired in May, 1994. Dr. Harun has made significant
contributions to the Company throughout his 23 years of service and we are
pleased that he will continue as Chairman of our Scientific Advisory Board.
George C. Finlay, President of Carter Products, Canada, retired after 28 years
of service. Mr. Finlay has made numerous contributions to the growth of the
Company's marketing and operations during his career with Carter-Wallace.
Gregory J. Drohan was appointed President, Carter Products, Canada, succeeding
George C. Finlay. Mr. Drohan was formerly Vice President, Marketing and Sales
for Carter Products, Canada.
We sincerely regret the passing of Dr. Sheldon M. Wolff, M.D., who had been a
distinguished member of our Scientific Advisory Board for more than ten years.
Dr. Wolff was the Physician-in-Chief, New England Medical Center, Endicott
Professor and Chairman, Department of Medicine, Tufts University, School of
Medicine. His advice and counsel will be greatly missed.
, , ,
We are grateful for the ongoing trust and confidence of the consumers and
professionals who use our products and for the continued strong support of our
shareholders and our suppliers. We thank them for their interest and confidence
in Carter-Wallace.
Henry H. Hoyt, Jr.,
Chairman of the Board and
Chief Executive Officer
Daniel J. Black,
President and
Chief Operating Officer
June 6, 1994
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Carter-Wallace, Inc. and Subsidiaries
SUMMARY OF SELECTED FINANCIAL DATA
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------------------------------------
1994 1993 1992 1991 1990
----------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AND EMPLOYEE DATA)
<S> <C> <C> <C> <C> <C>
OPERATIONS
Net sales $664,789 $653,511 $673,390 $634,890 $555,149
Net earnings before the cumulative
effect of accounting changes 26,609 47,200(a) 45,740(b) 51,750 50,274
Net earnings (loss) (20,030) 47,200(a) 45,740(b) 51,750 50,274
Net earnings per share before the
cumulative effect of accounting
changes .58 1.03(a) 1.00(b) 1.12 1.10
Net earnings (loss) per average share
of common stock outstanding (c) (.44) 1.03(a) 1.00(b) 1.12 1.10
Dividends per share (c) .33 .33 .33 .30 .26
Average common shares outstanding (c) 45,900 45,786 45,783 46,029 45,693
FINANCIAL POSITION
Working capital(d) $185,159 $184,175 $170,279 $151,735 $184,665
Net property, plant and equipment 157,059 150,070 142,854 136,345 123,626
Total assets(d) 628,562 595,550 577,181 557,301 510,524
Long-term debt 9,309 13,184 14,927 16,576 20,788
Stockholders' equity(d) 393,508 429,161 407,261 380,630 343,522
OTHER DATA
Capital expenditures $ 24,305 $ 25,500 $ 22,313 $ 18,735 $ 34,915
Book value per share (c)(d) 8.54 9.37 8.89 8.31 7.47
Number of employees 4,060 4,020 4,170 4,270 4,110
<FN>
(a) Includes income of $10,000 before taxes, or $6,000 after taxes ($.13 per
share) related to a licensing agreement with Schering-Plough Corporation
granting exclusive marketing rights in all markets except the United States
and its territories and possessions, Canada and Mexico, to Felbatol
(felbamate).
(b) Includes a one-time charge against earnings of $12,400 before taxes, or
$8,400 after taxes ($.18 per share) related to the discontinuance of the
Answer self-monitoring blood glucose system.
(c) Reflects a three-for-one stock split in April, 1992.
(d) Prior year amounts were restated to reflect the change in accounting for
income taxes.
</TABLE>
------------------------------------------------------
QUARTERLY DATA ON COMMON STOCK
The high and low selling prices of the Company's
common stock, principally traded on the New York Stock
Exchange (symbol CAR), for the two most recent fiscal
years were as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31
----------------------------------------------------
1994 1993
---------------------- ----------------------
QUARTER ENDED HIGH LOW HIGH LOW
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
June 30 30 3/8 23 7/8 33 1/2 22 7/8
September 30 33 3/4 26 1/4 31 1/8 24 7/8
December 31 32 7/8 20 1/8 40 3/8 22 5/8
March 31 26 3/8 19 7/8 36 5/8 22 7/8
</TABLE>
A dividend of $.08 1/3 per share was declared in all
four quarters of 1994 and 1993.
7
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
- - --------------------------------------------------------------------------------
NET SALES AND EARNINGS
Net earnings before the cumulative effect of the accounting changes for the year
were $26,609,000 or $.58 a share, compared to earnings of $47,200,000 or $1.03 a
share last year. Consolidated net loss after the cumulative effect of the
accounting changes in 1994 was $20,030,000 or $.44 a share. See Note 8
"Postretirement Benefits Other Than Pensions and Postemployment Benefits" of
Notes to the Consolidated Financial Statements on page 21 for discussion of the
accounting changes.
Net sales in 1994 were $664,789,000, an increase of $11,278,000 or 2% from 1993.
This increase was due to higher sales in the Health Care segment. Domestic sales
increased 4% and foreign sales decreased 6% from the prior year. Lower foreign
exchange rates had the effect of decreasing foreign sales by approximately
$16,300,000. Without the negative foreign exchange effect, foreign sales would
have increased by 4%.
Consumer Products sales decreased 1% in 1994 due to the negative effect of
foreign exchange rates. Without the effect of foreign exchange rates, Consumer
Products sales would have increased 1%. Factory sales of worldwide
anti-perspirant and deodorant products were $124,547,000 in 1994, or 3% lower
than the $128,321,000 sales level in 1993.
Health Care sales were 6% higher than the prior year due to selling price
increases in the Health Care segment which were implemented in the prior year.
The timing and amount of future price increases in the Health Care segment may
be negatively influenced by competitive pressures and the possibility of
government regulation. Unit volume declined slightly in the Health Care segment
from the prior year. Included in Health Care unit volume were greater than
planned introductory sales of Felbatol (felbamate) which the Company began
marketing in August, 1993 and higher sales of Organidin products. The unit
volume gain in Organidin products was due primarily to a decline in sales of
competitive products. The Company is unable to determine whether such reduced
sales of competitive products will continue. A reversal of this trend, depending
on its magnitude, could have a material adverse effect on results of operations.
Sales of Organidin products represented approximately 11% of consolidated sales
in the fiscal 1994 period compared to 7% in the fiscal 1993 period. The
Company's 1994 net earnings were substantially favorably impacted by the
increase in sales of Organidin products. Sales of other pharmaceutical products
in the Health Care segment continue to be adversely impacted by generic erosion.
Net sales in 1993 were $653,511,000, a decrease of $19,879,000 or 3% from 1992.
This decline was due to lower sales in the Health Care segment partly offset by
increased sales in the Consumer Products segment. Domestic sales decreased 4%
and foreign sales decreased 1% from the prior year. Lower foreign exchange rates
had the effect of decreasing foreign sales by approximately $3,400,000.
Consumer Products sales increased 2% in 1993 due to selling price increases.
Factory sales of anti-perspirant and deodorant products were $128,321,000 in
1993, or 2% lower than the $131,053,000 sales level in 1992.
In 1993, Health Care sales were 9% lower than the prior year due to reduced unit
volume partially offset by selling price increases. The decline in unit volume
was a result of the continuing adverse effect of generic competition on
pharmaceutical products.
Included in earnings in 1993 is an initial, non-refundable payment of
$10,000,000 before taxes or $6,000,000 after taxes ($.13 per share) related to a
licensing agreement with Schering-Plough Corporation. This agreement grants
Schering-Plough exclusive marketing rights in all markets except the United
States and its territories and possessions, Canada and Mexico, to Felbatol, a
promising compound for the treatment of seizures associated with epilepsy.
During 1993, the Company incurred costs of $14,800,000 before taxes or
$8,880,000 after taxes ($.19 per share) related to pre-launch activity,
exclusive of research and development, for Felbatol. This compares to pre-launch
spending in 1992 of $4,300,000 before taxes or $2,580,000 after taxes ($.06 per
share). The fourth quarter of 1993 included pre-launch costs of $9,200,000
before taxes or $5,520,000 after taxes ($.12 per share) which compares to
$3,300,000 before taxes or $1,980,000 after taxes ($.04 per share) in the fourth
quarter of 1992.
INTEREST INCOME
The average interest bearing investment, principally government securities and
certificates of deposit, and average yields were:
<TABLE>
<CAPTION>
IN THOUSANDS
------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Average investment $ 41,000 $ 45,900 $ 40,900
Interest income $ 2,339 $ 2,989 $ 3,190
Yield 5.7% 6.5% 7.8%
</TABLE>
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- - --------------------------------------------------------------------------------
COST AND EXPENSES
Cost of goods sold as a percentage of net sales was 35.0% in 1994, 34.2% in
1993, and 32.8% in 1992. The increase in 1994 and 1993 was due primarily to
changes in product mix. Throughout this period, the Company has minimized the
effects of higher costs by selective price increases and cost control measures.
Advertising, marketing and other selling expenses increased 7% in 1994 and
decreased 1% in 1993. The increase in 1994 was due to higher advertising and
promotional support of products in both business segments. In 1994, Felbatol
(felbamate) was supported by substantial introductory spending levels. The
higher level of spending in the Consumer Products segment is primarily a result
of the marketing support for line extensions of anti-perspirant and deodorant
products.
Research and development expenses increased 5% in 1994 and decreased 4% in 1993.
Research spending, most of which was in the Health Care segment, was principally
related to Felbatol for the treatment of seizures associated with epilepsy and
Astelin (azelastine) for rhinitis and asthma. The decline in 1993 was due
primarily to the reorganization of the Consumer Products research program as
well as the completion of clinical studies necessary for the submission of the
NDA for Felbatol.
General and administrative expenses increased by 4% in 1994 and 6% in 1993. The
increase in 1994 is primarily due to increased compensation including a higher
charge for postretirement benefit expense. The increase in 1993 included a
provision for loss of $1,200,000 before taxes related to trade receivables from
Phar-Mor, Inc., a drugstore chain which filed for bankruptcy.
Interest expense decreased in 1993 as a result of a reduced level of borrowings.
In 1994, the Company adjusted its net deferred tax asset to reflect the recently
enacted change in federal corporate income tax rates. As a result, the provision
for income taxes in the fiscal 1994 period includes a one-time credit of
$815,000 or $.02 per share as required by Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes". The effect of the tax law
change on the current provision for income taxes was not significant. Excluding
the effect of this one-time adjustment of deferred taxes, the estimated annual
effective consolidated income tax rate on operations in the fiscal 1994 period
was 31%, the same as the fiscal 1993 consolidated income tax rate.
The consolidated income tax rate was 31% in 1993 and 32% in 1992. The decline in
1993 was due to increased utilization of foreign tax credits and a change in the
mix of income partially offset by lower Puerto Rico tax benefits.
LICENSING ARRANGEMENT
In April 1992, Carter-Wallace entered into a licensing agreement with
Schering-Plough Corporation, granting Schering-Plough exclusive marketing rights
in all markets except the United States and its territories and possessions,
Canada and Mexico, to Felbatol. Under the licensing agreement, Carter-Wallace
received in April, 1992 an initial, non-refundable license payment of
$10,000,000 and is to receive royalties, which could be significant, on net
sales of its Felbatol compound in the territory covered by the license.
Separately, Schering-Plough and Carter-Wallace agreed that, under certain
circumstances, they will put into effect a co-promotional arrangement with
respect to a Schering-Plough pharmaceutical product to be determined in the
future. This agreement will permit Carter-Wallace to receive fees for services
and additional remuneration attributable to growth in sales of such product,
which, in total, may be significant to the Company.
REGULATORY MATTERS
The Food and Drug Administration ("FDA") has initiated review of the safety and
efficacy of the Organidin brand of expectorant/mucolytic products. An FDA
Advisory Committee recommended on March 23, 1992, that the products remain on
the market pending further FDA review, that certain changes in the products'
labeling be made and that doctors be appropriately notified of these labeling
changes. The Company implemented these FDA Advisory Committee recommendations
and is developing additional data in support of the safety and efficacy of the
products.
On April 22, 1993, the Company received a letter from the FDA requesting that
the Company discontinue the marketing of its Organidin products. On May 13,
1993, the Company met with the FDA to discuss this matter. The Company has
replied to the FDA letter and is awaiting further response from the FDA.
9
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- - --------------------------------------------------------------------------------
If the Company and the FDA fail to reach an agreement, the Company may be
required to restrict or possibly discontinue the marketing of the Organidin
products. Any substantial reduction in Organidin product sales or the
discontinuance of marketing of the Organidin products as a result of the FDA
determination would not have a material adverse effect on the Company's
financial position, but would have a material adverse effect on results of
operations since, although the products approximate only 11% of consolidated
sales, they represent a significantly greater portion of the Company's profits.
In addition, the Company would incur at that time a material one-time charge to
earnings.
ENVIRONMENTAL MATTER
The Company faces potential liability involving waste material generated by the
Lambert Kay division at its former manufacturing facility in Winsted,
Connecticut. In May, 1991, EPA issued special notice letters under the
Comprehensive Environmental Response, Compensation and Liability Act to Lambert
Kay and about 50 other potentially responsible parties ("PRPs") notifying them
of potential liability with respect to waste deposited at the Barkhamsted-New
Hartford landfill in Barkhamsted, Connecticut. In September, 1991 and in
February, 1994, the Company and 21 other PRPs, without admitting liability,
entered consent agreements under which the PRPs agreed to perform certain
investigation and engineering evaluation work at the site, including the
remedial investigation and feasibility study and to reimburse EPA for certain
costs. Based on preliminary information from the investigation work (which is
not completed), the total cost for performing the current and future cleanup
work at Barkhamsted, including the investigation work, is estimated to be $30-40
million. Although applicable environmental law provides for joint and several
liability for the cost of cleanup work, the Company believes, based on present
estimates, that substantially all of the cleanup costs will be paid by other
PRPs. The Company believes, based upon the information available at this time,
that the matter discussed above will not have a material effect on its financial
position.
LIQUIDITY
Funds provided from operations and the Company's short-term investments and cash
equivalents are the main source for financing working capital requirements,
additions to property, plant and equipment, the payment of dividends and the
purchases of treasury stock. External borrowings are incurred as needed to
satisfy cash requirements relating to seasonal business fluctuations and to
finance major facility expansion programs and major acquisitions.
At March 31, 1994, the Company had available various bank credit lines amounting
to $149,400,000, consisting of $140,000,000 in domestic credit lines and
$9,400,000 for foreign borrowings. The domestic lines are made up of a
$75,000,000 revolving credit facility expiring in September, 1996 and in
$65,000,000 in uncommitted credit lines from various banks.
The decrease in accounts receivable in 1994 is primarily due to the timing of
sales and collections.
During 1993, the Company established inventory levels sufficient to support the
launch in 1994 of Felbatol.
The provision for the discontinuance of the Answer self-monitoring blood glucose
system of $12,400,000 before taxes, included $9,460,000 which did not require a
cash outlay during the year ended March 31, 1992. This amount consists
principally of a write-off of loans, investments and certain other assets which
did not require the future outlay of cash.
CAPITAL RESOURCES
During the past three years, the Company has continued to upgrade its
manufacturing operations. Capital expenditures were $24,300,000 in 1994,
$25,500,000 in 1993 and $22,300,000 in 1992.
10
<PAGE>
<PAGE>
DESCRIPTION OF BUSINESS SEGMENTS
- - --------------------------------------------------------------------------------
The Company is engaged in the manufacture and sale of a diversified line of
products in the Consumer Products and Health Care business segments described
below:
CONSUMER PRODUCTS
These products are promoted directly to the consumer by television and other
advertising media and are sold to wholesalers and various retailers. They are
manufactured and sold domestically by our consumer products divisions and some
are sold throughout the rest of the world by various subsidiaries and
distributors. Principal products include:
ANTI-PERSPIRANTS AND DEODORANTS
* Arrid Extra Dry and Arrid XX
* Lady's Choice
OTHER CONSUMER PRODUCTS
* Answer and First Response at-home pregnancy and ovulation test kits
* Carter's laxative
* H-R lubricating jelly
* Nair depilatories and waxes
* Pearl Drops whitening toothpolish and whitening toothpaste
* Rigident denture adhesive
* Trojan, Class Act, Mentor and Naturalamb condoms
* Color Guard flea and tick collars
* Fresh 'N Clean grooming products,
stain and odor remover and puppy housebreaking pads
* Lassie and Tiny Tiger pet product lines
* Linatone food supplement
* Twinco chains
* Vermont Chewman pet chew toys
* X-O-Trol flea and tick household and dog sprays and household foggers
HEALTH CARE
Health care products are promoted primarily to physicians, pharmacists,
hospitals, laboratories and clinics by a staff of specially trained professional
sales representatives and by advertising in professional journals. These
products are manufactured and sold domestically by our professional products
divisions and some are sold throughout the rest of the world by various
subsidiaries and distributors. Principal products include:
* Felbatol for the treatment of seizures associated with epilepsy
* Organidin brand of expectorant/mucolytics
* Ryna line of cough/cold products
* Soma brand muscle relaxants
* Butisol sedative hypnotic
* Depen penicillamine for severe rheumatoid arthritis
* Doral sedative hypnotic
* Lufyllin xanthine bronchodilator
* Maltsupex laxative
* VoSoL topical antibacterial and anti-fungal agent
* Clearview product line of rapid tests for the determination of pregnancy,
group A streptococcus and chlamydia
* Isostat product line to aid in the detection of micro-organisms in blood
* Mono-Test and Mono-Latex for the detection of mononucleosis
* Rheumaton and Rheumatex for the detection of rheumatoid factor
* Stat-Crit, a portable instrument for use in measuring blood hematocrit levels
* Streptozyme for the detection of streptococcal antibodies
* Zeus Scientific line of immunofluorescent and ELISA test systems for the
detection of autoimmune, viral and bacterial diseases including Lyme
disease
--------------------------
INTERNATIONAL PRODUCT LINES
In addition to many of the products listed above, the Company sells the
following products exclusively in certain International markets:
CONSUMER PRODUCTS
* Cerox adhesive tapes and bandages
* Confidelle, Discover and Gravix at-home pregnancy test kits
* Cossack line of men's grooming products
* Dentovax line of oral hygiene products
* Eudermin line of skin care and toiletry products
* GranVista non-prescription eyeglasses
* Poupina line of skin care and toiletry products
* Rilacrin hair lotion
* Taky depilatories and waxes
HEALTH CARE
* Antiphlogistine Rub A-535 and Dencorub topical analgesics
* Atasol analgesic/antipyretic
* Bentasil medicated throat lozenges
* Cerulisina otic solution
* Colfur antidiarrheal
* Diovol antacid products
* Gravol antinauseant
* Jordan toothbrushes
* Maltlevol and Pangavit vitamin supplements
* Ovol antiflatulent
* Sterimar nasal decongestant
11
<PAGE>
<PAGE>
Carter-Wallace, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 1994 AND 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993*
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 23,311,000 $ 8,231,000
Short-term investments, principally government securities and
certificates of deposit 32,883,000 28,207,000
Accounts receivable-trade, less allowances of
$5,955,000 in 1994 and $5,639,000 in 1993 112,367,000 134,786,000
Other receivables 4,703,000 4,627,000
Inventories
Finished goods 60,515,000 52,835,000
Work in process 22,121,000 22,520,000
Raw materials and supplies 39,553,000 39,085,000
------------ ------------
122,189,000 114,440,000
------------ ------------
Prepaid expenses, deferred taxes and other current assets 19,973,000 22,507,000
------------ ------------
TOTAL CURRENT ASSETS 315,426,000 312,798,000
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 3,544,000 3,407,000
Buildings and improvements 108,033,000 103,995,000
Machinery, equipment and fixtures 142,354,000 131,199,000
Leasehold improvements 25,109,000 24,766,000
------------ ------------
279,040,000 263,367,000
Accumulated depreciation and amortization 121,981,000 113,297,000
------------ ------------
157,059,000 150,070,000
------------ ------------
INTANGIBLE ASSETS
Excess of purchase price of businesses acquired over the
net assets at date of acquisition, less amortization 68,292,000 69,842,000
Patents, trademarks, contracts and formulae, less
amortization 41,921,000 47,390,000
------------ ------------
110,213,000 117,232,000
------------ ------------
DEFERRED TAXES AND OTHER ASSETS 45,864,000 15,450,000
------------ ------------
$628,562,000 $595,550,000
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
*Restated to reflect the change in accounting for income taxes.
12
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993*
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 27,844,000 $ 32,866,000
Accrued expenses 72,041,000 67,285,000
Notes payable 5,709,000 1,950,000
Taxes on income 24,673,000 26,522,000
------------ ------------
TOTAL CURRENT LIABILITIES 130,267,000 128,623,000
------------ ------------
LONG-TERM LIABILITIES
Long-term debt 9,309,000 13,184,000
Deferred compensation 7,661,000 7,751,000
Accrued postretirement benefit obligation 71,804,000 --
Other long-term liabilities 16,013,000 16,831,000
------------ ------------
TOTAL LONG-TERM LIABILITIES 104,787,000 37,766,000
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 1,000,000 shares,
without par value; issued--none
Common stock, authorized 80,000,000 shares,
par value $1 per share; issued 34,432,000
shares in 1994 and 34,373,000 shares in 1993 34,432,000 34,373,000
Class B common stock, authorized 13,056,800 shares, par
value $1 per share; issued 12,773,000 shares in 1994
and 12,832,000 in 1993 12,773,000 12,832,000
Capital in excess of par value 1,972,000 637,000
Retained earnings 380,047,000 415,369,000
------------ ------------
429,224,000 463,211,000
Less:
Equity adjustment from foreign currency translation 20,404,000 14,739,000
Treasury stock at cost--981,900 common and 153,600
Class B common shares in 1994 and 1,267,800 common
and 153,600 Class B common shares in 1993 15,312,000 19,311,000
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 393,508,000 429,161,000
------------ ------------
$628,562,000 $595,550,000
------------ ------------
------------ ------------
</TABLE>
13
<PAGE>
<PAGE>
Carter-Wallace, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF
EARNINGS AND RETAINED EARNINGS
THREE YEARS ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF EARNINGS
Revenues:
Net sales $664,789,000 $653,511,000 $673,390,000
Income from licensing agreement -- 10,000,000 --
Interest income 2,339,000 2,989,000 3,190,000
Royalty and other income 3,135,000 2,698,000 4,559,000
------------ ------------ ------------
670,263,000 669,198,000 681,139,000
------------ ------------ ------------
Cost and Expenses:
Cost of goods sold 232,560,000 223,358,000 221,206,000
Advertising and promotion 128,917,000 114,932,000 119,159,000
Marketing and other selling 133,765,000 129,763,000 127,907,000
Research and development 52,278,000 49,903,000 51,955,000
General and administrative 76,937,000 74,125,000 70,025,000
Provision for loss on discontinuance of the
Answer blood glucose system -- -- 12,400,000
Interest 1,976,000 1,789,000 3,370,000
Other 6,448,000 6,922,000 7,852,000
------------ ------------ ------------
632,881,000 600,792,000 613,874,000
------------ ------------ ------------
Earnings before taxes on income 37,382,000 68,406,000 67,265,000
Provision for taxes on income 10,773,000 21,206,000 21,525,000
------------ ------------ ------------
Net earnings before cumulative effect of accounting
changes 26,609,000 47,200,000 45,740,000
Cumulative effect of accounting changes, net of tax (46,639,000) -- --
------------ ------------ ------------
Net earnings (loss) $(20,030,000) $ 47,200,000 $ 45,740,000
------------ ------------ ------------
------------ ------------ ------------
Net earnings per average share of common stock before
cumulative effect of accounting changes $ .58 $ 1.03 $ 1.00
Cumulative effect of accounting changes (1.02) -- --
------------ ------------ ------------
Net earnings (loss) per average share of common stock $ (.44) $ 1.03 $ 1.00
------------ ------------ ------------
------------ ------------ ------------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Amount at beginning of year* $415,369,000 $383,435,000 $372,745,000
Net earnings (loss) (20,030,000) 47,200,000 45,740,000
------------ ------------ ------------
395,339,000 430,635,000 418,485,000
Dividends--$.33 per share in 1994, 1993, and 1992 (15,292,000) (15,256,000) (14,956,000)
Three-for-one stock split in April, 1992 -- -- (20,094,000)
Cost of treasury stock (over) market value at date of
award or issuance -- (10,000) --
------------ ------------ ------------
Amount at end of year $380,047,000 $415,369,000 $383,435,000
------------ ------------ ------------
------------ ------------ ------------
<FN>
See accompanying notes to consolidated financial statements.
*Retained earnings in 1993 and 1992 were restated to reflect the change in
accounting for income taxes.
</TABLE>
14
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF
CASH FLOWS
THREE YEARS ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings (loss) $(20,030,000) $ 47,200,000 $ 45,740,000
Adjustments to reconcile net earnings (loss) to cash
flows
provided by operating activities:
Cumulative effect of accounting changes 46,639,000 -- --
Depreciation and amortization 15,707,000 15,250,000 14,341,000
Amortization of patents, trademarks, contracts and
formulae 9,720,000 8,623,000 8,255,000
Amortization of excess purchase price of businesses
acquired over the net assets at date of
acquisition 2,015,000 1,968,000 1,912,000
Provision for the loss on discontinuance of the
Answer
blood glucose system, net of cash payments -- -- 9,460,000
Changes in assets and liabilities:
Decrease (increase) in accounts and other
receivables 19,548,000 (6,883,000) (6,171,000)
(Increase) in inventories (9,086,000) (16,317,000) (654,000)
Decrease (increase) in prepaid expenses 1,240,000 2,062,000 (4,887,000)
(Decrease) increase in accounts payable and
accrued expenses (3,237,000) 61,000 4,301,000
(Decrease) increase in deferred compensation (28,000) 383,000 556,000
Increase (decrease) in deferred taxes 1,101,000 (488,000) (1,495,000)
Other changes (566,000) (4,469,000) (4,286,000)
------------ ------------ ------------
Cash flows provided by operating activities 63,023,000 47,390,000 67,072,000
------------ ------------ ------------
Cash flows used in investing activities:
Additions to property, plant and equipment (24,305,000) (25,500,000) (22,313,000)
Acquisition of Icart, S.A., net of cash received -- (7,432,000) --
Acquisition of the Cossack product line -- -- (4,236,000)
Payments for the acquisition of other businesses and
licensing agreements and loans (1,196,000) (1,783,000) (891,000)
(Increase) in short-term investments (6,341,000) (6,512,000) (13,446,000)
Other investing activities 1,078,000 3,994,000 (3,708,000)
------------ ------------ ------------
Cash flows used in investing activities (30,764,000) (37,233,000) (44,594,000)
------------ ------------ ------------
Cash flows used in financing activities:
Dividends paid (15,292,000) (15,256,000) (14,956,000)
Increase in borrowings 1,343,000 1,783,000 4,830,000
Payments of debt (1,237,000) (2,607,000) (15,821,000)
Purchase of treasury stock (436,000) (834,000) --
------------ ------------ ------------
Cash flows used in financing activities (15,622,000) (16,914,000) (25,947,000)
------------ ------------ ------------
Effect of foreign exchange rate changes on cash
and cash equivalents (1,557,000) (856,000) (715,000)
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents $ 15,080,000 $ (7,613,000) $ (4,184,000)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE>
<PAGE>
Carter-Wallace, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Carter-Wallace,
Inc. and all of its subsidiaries (the "Company"). All significant intercompany
transactions have been eliminated.
Cash Equivalents and Short-term Investments
Cash equivalents consist of certificates of deposit and other short-term
securities with maturities of three months or less when purchased. Investments
with a maturity of greater than three months but less than one year are
classified as short-term investments. The carrying value of cash equivalents and
short-term investments approximated fair value at March 31, 1994 and 1993.
Inventories
Inventories are valued at the lower of cost or market on the first-in, first-out
(FIFO) method, except for certain domestic inventories which are stated at cost
on the last-in, first-out (LIFO) method.
Property, Plant and Equipment
Depreciation is provided over the estimated useful lives of the assets,
principally using the straight line method. Leasehold improvements are amortized
on a straight line basis over the life of the related asset or the life of the
lease, whichever is shorter. Expenditures for renewals and betterments are
capitalized. Upon sale or retirement of assets, the appropriate asset and
related accumulated depreciation accounts are adjusted and the resultant gain or
loss is reflected in earnings. Maintenance and repairs are charged to expense as
incurred.
Intangible Assets
The excess of purchase price of businesses acquired over net assets at date of
acquisition is being amortized over 40 years for amounts relating to
acquisitions subsequent to October 31, 1970. The excess purchase price,
$6,459,000 related to companies acquired prior to that date, is not being
amortized. The cost of patents, formulae and contracts is amortized on a
straight line basis over their legal or contractual lives. The cost of
trademarks is being amortized over no longer than 40 years for amounts relating
to acquisitions subsequent to October 31, 1970. Trademarks of $2,756,000 related
to products acquired prior to that date are not being amortized.
Management reviews the carrying value of intangible assets and adjusts for any
diminution in value.
Income Taxes
Deferred income taxes are determined using the liability method based on the
estimated future tax effects of differences between the financial statement and
tax bases of assets and liabilities given the provisions of enacted tax laws.
Advertising and Marketing Costs
Advertising, promotion and other marketing costs are charged to earnings in the
period in which they are incurred. Advertising costs relating to significant
national introductions of products are accrued during the introductory period as
sales are recognized.
Earnings per Common Share
Net earnings (loss) per share of common stock is based on the average number of
common and Class B common shares outstanding during the year: 45,900,000 in
1994, 45,786,000 in 1993 and 45,783,000 in 1992. The average number of shares
and all per share amounts reflect the three-for-one stock split in April 1992.
2. INVENTORIES
Approximately 14% of inventories are valued using the LIFO inventory method in
both 1994 and 1993. If these inventories had been valued on the FIFO inventory
method (which approximates current or replacement cost), total inventories would
have been approximately $11,000,000 and $12,040,000 higher than reported at
March 31, 1994 and 1993, respectively.
16
<PAGE>
<PAGE>
3. TAXES ON INCOME
The provision for taxes on earnings before the cumulative effect of accounting
changes was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Domestic $ 5,236,000 $15,774,000 $16,170,000
Foreign 5,414,000 5,867,000 6,785,000
----------- ----------- -----------
10,650,000 21,641,000 22,955,000
----------- ----------- -----------
Deferred:
Domestic 455,000 (363,000) (1,510,000)
Foreign (332,000) (72,000) 80,000
----------- ----------- -----------
123,000 (435,000) (1,430,000)
----------- ----------- -----------
Total $10,773,000 $21,206,000 $21,525,000
----------- ----------- -----------
----------- ----------- -----------
The components of income before taxes and the
cumulative effect of accounting changes were
as follows:
Domestic $24,303,000 $53,103,000 $50,612,000
Foreign 13,079,000 15,303,000 16,653,000
----------- ----------- -----------
Total $37,382,000 $68,406,000 $67,265,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
It is anticipated that the undistributed earnings of the Company's Puerto Rican
subsidiaries will be free of United States income taxes upon repatriation.
Deferred income taxes are provided for temporary differences between the book
and tax bases of the Company's assets and liabilities. The temporary differences
which give rise to deferred tax assets and liabilities at March 31 were as
follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Postretirement benefit plans $27,304,000 $ --
Employee benefit plans 11,453,000 8,237,000
Accrued liabilities 8,008,000 10,057,000
Asset valuation accounts 2,107,000 4,437,000
All other 4,388,000 801,000
----------- -----------
Total deferred tax assets 53,260,000 23,532,000
----------- -----------
Depreciation 12,175,000 11,693,000
All other 4,440,000 2,523,000
----------- -----------
Total deferred tax liabilities 16,615,000 14,216,000
----------- -----------
Net deferred tax assets $36,645,000 $ 9,316,000
----------- -----------
</TABLE>
Effective April 1, 1993, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 109 "Accounting for Income Taxes". This statement
requires a change in the method of accounting for income taxes from the deferred
method to the liability method.
The effect of adopting this statement was a one-time non-cash charge of
$1,970,000 which was recognized on a restated basis in the year ended March 31,
1989. Accordingly, retained earnings as of March 31, 1989 through 1993 have been
restated to reflect the adoption. In addition, as a result of the restatement of
acquisitions made subsequent to March 31, 1989, intangible assets have been
restated and reduced by $800,000.
During 1994, the enacted federal statutory tax rate increased from 34% to 35%.
In accordance with SFAS No. 109, deferred income taxes were adjusted to reflect
this change which resulted in a credit to the income tax provision of $815,000.
The effect of the tax law change on the current provision was not significant.
17
<PAGE>
<PAGE>
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax assets will not be realized. Management believes,
based on the Company's history of prior and current operating earnings, that the
Company will realize the benefits of the existing deferred tax assets.
The effective tax rate of the provision for taxes on earnings before the
cumulative effect of accounting changes as compared with the U.S. Federal
statutory income tax rate was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------------------- ---------------------- ----------------------
% TO % TO % TO
TAX PRE-TAX TAX PRE-TAX TAX PRE-TAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Computed tax expense $13,084,000 35.0% $23,258,000 34.0% $22,870,000 34.0%
Puerto Rican income (2,855,000) (7.6) (2,786,000) (4.1) (3,749,000) (5.6)
Foreign income taxed at a
different
effective rate 315,000 .8 (1,476,000) (2.2) 783,000 1.2
State income taxes, net of
federal tax benefit 878,000 2.4 2,141,000 3.1 1,790,000 2.7
Amortization of intangibles 839,000 2.2 781,000 1.2 844,000 1.2
Deferred tax adjustment due to
federal tax rate change (815,000) (2.2) -- --
Other (673,000) (1.8) (712,000) (1.0) (1,013,000) (1.5)
----------- ------- ----------- ------- ----------- -----
$10,773,000 28.8% $21,206,000 31.0% $21,525,000 32.0%
----------- ------- ----------- ------- ----------- -----
----------- ------- ----------- ------- ----------- -----
</TABLE>
The U.S. Internal Revenue Service completed its examination of the Company's tax
returns through the fiscal year 1989 resulting in no material impact on the
Company.
4. FOREIGN OPERATIONS
Net current assets and net sales of the Company's foreign subsidiaries and
branches operating outside of the United States, and the Company's equity in net
assets and net earnings of such operations were:
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Net current assets $ 89,307,000 $ 88,063,000 $ 85,982,000
Equity in net assets 97,316,000 94,984,000 95,573,000
Net sales 159,454,000 169,032,000 170,464,000
Net earnings 7,997,000 9,508,000 9,788,000
</TABLE>
The equity adjustment from foreign currency translation is comprised of the
following:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
-------------------------------
1994 1993
----------- -----------
<S> <C> <C>
Opening balance $14,739,000 $ 4,642,000
Current year 5,665,000 10,097,000
----------- -----------
Ending balance $20,404,000 $14,739,000
----------- -----------
----------- -----------
</TABLE>
5. NOTES PAYABLE AND LONG-TERM DEBT
Notes Payable
Notes payable consisting of borrowings from banks under available lines of
credit were $1,834,000, $645,000 and $511,000 and the current portion of
long-term debt was $3,875,000, $1,305,000 and $1,705,000 at March 31, 1994, 1993
and 1992, respectively. Data related to the amount of short-term borrowings
outstanding during the year and related interest rates are not presented since
they are immaterial.
The Company has available various bank credit lines amounting to $149,400,000 of
which $140,000,000 is for domestic borrowings and $9,400,000 is for
international borrowings. The availability of the lines of credit is subject to
review by the banks involved. Commitment fees are immaterial.
18
<PAGE>
<PAGE>
Long-Term Debt
Long-term debt at March 31 is summarized below:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Connecticut Development Authority Industrial Development Bond, 6.75%
payable October 1, 1998 $ 4,300,000 $ 4,300,000
City of Decatur, Illinois adjustable rate Industrial Revenue Bond
payable
December 1, 2010 3,000,000 3,000,000
Promissory Notes, 9.66%, payable no later than September 13, 1994 2,940,000 3,000,000
Promissory Notes, 7.96%, repaid in March, 1994 -- 284,000
Unsecured Italian lira term loan, at a variable rate payable in
semi-annual
installments through July 1, 1995 1,111,000 1,963,000
New Jersey Economic Development Authority Bonds, 7 3/8%, payable in
annual installments of $65,000 through 1999, and $70,000 through
September 1, 2004 740,000 805,000
Unsecured Italian lira term loan, 4.5%, payable in equal semi-annual
installments
from January 1, 1995 to July 1, 2003 682,000 610,000
Unsecured Italian lira term loan, 5.5%, payable in equal semi-annual
installments
through July 1, 1998 407,000 514,000
Other 4,000 13,000
----------- -----------
13,184,000 14,489,000
Less, current portion of long-term debt included in notes payable (3,875,000) (1,305,000)
----------- -----------
$ 9,309,000 $13,184,000
----------- -----------
----------- -----------
</TABLE>
Maturities of long-term debt for each of the four fiscal years 1996 through 1999
are $607,000, $242,000, $246,000 and $4,500,000, respectively.
Interest on the Decatur, Illinois Industrial Revenue Bond carries a rate of 72%
of the prime rate (unless earlier converted to a fixed rate at the Company's
option) through December, 1995, adjustable thereafter.
The Company issued promissory notes in connection with the acquisition of the
net assets of Youngs Drug Products Corporation and affiliates. Prepayments of
all or portions of the notes are required as certain contractual conditions are
satisfied.
The Company's revolving credit facility and the Connecticut Development
Authority Industrial Development Bond contain covenants which require that total
long-term liabilities will not exceed 40% of total capitalization and that net
worth, as defined, may not be less than $300,000,000.
The fair value of long-term debt, including current maturities was $13,543,000
at March 31, 1994 and $14,865,000 at March 31, 1993.
6. COMMON STOCK, CLASS B COMMON STOCK AND CAPITAL IN EXCESS OF PAR VALUE
The Company has two classes of common stock with a par value of $1.00 per share.
Class B common stock generally has ten votes per share on all matters and votes
as a class with common stock which has one vote per share. The transfer of Class
B common stock is restricted; however, Class B common stock is at all times
convertible into shares of common stock on a share-for-share basis. Common stock
and Class B common stock have identical rights with respect to cash dividends
and upon liquidation.
Effective April 27, 1992, the Company's stockholders approved an amendment to
the Certificate of Incorporation increasing the authorized common shares to
80,000,000 and Class B common shares to 13,056,800. The Company subsequently
issued 22,815,000 shares of common stock and 8,655,000 shares of Class B common
stock including 940,400 shares added to treasury stock in connection with a
three-for-one stock split. At March 31, 1992, stockholders' equity reflects the
three-for-one stock split effective April 27, 1992. All prior year per share
information has been restated to reflect the stock split.
19
<PAGE>
<PAGE>
Activity for the years ended March 31, 1994, 1993 and 1992 was as follows:
<TABLE>
<CAPTION>
CLASS B CAPITAL IN
COMMON COMMON EXCESS OF
STOCK STOCK PAR VALUE
----------- ----------- -----------
<S> <C> <C> <C>
Balance at March 31, 1991 $11,325,000 $ 4,410,000 $11,328,000
Conversion of Class B common stock to Common stock 83,000 (83,000) --
Cost of treasury stock under market value at date of
award or issuance -- -- 48,000
Three-for-one stock split in April, 1992 22,815,000 8,655,000 (11,376,000)
----------- ----------- -----------
Balance at March 31, 1992 34,223,000 12,982,000 --
Conversion of Class B common stock to Common stock 150,000 (150,000) --
Tax benefit on appreciation of restricted stock
awards -- -- 637,000
----------- ----------- -----------
Balance at March 31, 1993 34,373,000 12,832,000 637,000
Conversion of Class B common stock to Common Stock 59,000 (59,000) --
Tax benefit on appreciation of restricted stock
awards -- -- 845,000
Cost of treasury stock under market value at date of
award or issuance -- -- 490,000
----------- ----------- -----------
Balance at March 31, 1994 $34,432,000 $12,773,000 $ 1,972,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The tax benefit on the appreciation of restricted stock awards and the cost of
treasury stock over or under the market value of the stock on the date of the
award or issuance have been applied to capital in excess of par value. To the
extent that charges from the cost of treasury stock over the market value at the
date of the award exceed accumulated credits to capital in excess of par value
in the prior years, the excess is charged to retained earnings.
7. RETIREMENT PLANS
The Company has several contributory and non-contributory pension plans in which
substantially all employees with over one year of service participate. The
Company's funding policy is to make annual contributions to these plans in
amounts equal to the minimum required by applicable regulations. The plans'
assets are invested primarily in common stocks and corporate and government
bonds.
The pension expense for the years ended 1994, 1993 and 1992 included the
following components:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 7,416,000 $ 6,398,000 $ 5,610,000
Interest cost on projected benefit obligation 11,474,000 10,983,000 10,228,000
Actual return on assets (16,799,000) (15,149,000) (30,834,000)
Net amortization and deferral (299,000) (1,173,000) 15,632,000
----------- ----------- -----------
Total pension expense $ 1,792,000 $ 1,059,000 $ 636,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The following table sets forth the funded status of the plans at March 31, 1994
and 1993:
<TABLE>
<CAPTION>
PLANS IN WHICH
------------------------------------------------------------------
ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS
----------------------------- ----------------------------
1994 1993 1994 1993
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested $105,300,000 $ 95,876,000 $ 31,215,000 $22,283,000
Nonvested 1,840,000 1,577,000 832,000 463,000
------------ ------------ ------------ -----------
Accumulated benefit obligation $107,140,000 $ 97,453,000 $ 32,047,000 $22,746,000
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Projected benefit obligation $127,785,000 $121,089,000 $ 45,196,000 $29,048,000
Plan assets at fair value 156,792,000 154,127,000 23,603,000 17,694,000
------------ ------------ ------------ -----------
Plan assets in excess of (less than)
projected
benefit obligation 29,007,000 33,038,000 (21,593,000) (11,354,000)
Unrecognized net (gain) or loss (41,000) (7,790,000) 3,854,000 1,141,000
Prior service not recognized in pension
costs (6,561,000) 131,000 7,524,000 522,000
Unrecognized net transition (asset)
liability (12,908,000) (15,527,000) 262,000 478,000
Minimum liability adjustment -- -- (374,000) --
------------ ------------ ------------ -----------
Prepaid (accrued) pension costs recognized
in the consolidated balance sheets $ 9,497,000 $ 9,852,000 $(10,327,000) $(9,213,000)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
20
<PAGE>
<PAGE>
The principal assumptions used in determining 1994, 1993 and 1992 actuarial
values were:
Discount rate 7 - 9%
Rate of increase in compensation levels 4 - 6%
Expected long-term rate of return on plan assets. 8 -10%
Expense for the employee savings plan under which the Company matches the
contributions of participating employees up to a designated level was
$1,488,000, $1,340,000 and $1,384,000 in 1994, 1993 and 1992 respectively.
8. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT BENEFITS
The Company provides certain health care and life insurance benefits for retired
employees. Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions". SFAS No. 106 requires companies to accrue
postretirement benefits during the years the employees render service until they
attain full eligibility for those benefits. Previously, these costs were
recognized as expense as the premiums were paid.
The cumulative effect of adopting SFAS No. 106 as of April 1, 1993, resulted in
a pre-tax charge of $69,554,000 or $43,819,000 after taxes ($.96 per share).
This non-cash charge represents the accumulated benefit obligation which the
Company has elected to recognize immediately. The initial postretirement benefit
obligation was subsequently reduced as a result of plan modifications made
effective July 1, 1993. In accordance with SFAS No. 106, this reduction in the
obligation is being amortized as a component of the net periodic postretirement
benefit expense in current and future years. The effect of adopting SFAS No. 106
and the subsequent amendment of the plan increased 1994 postretirement benefit
expense by approximately $2,500,000 before taxes or $1,700,000 after taxes ($.04
per share).
The components of the postretirement benefit expense for the year ended March
31, 1994 are:
<TABLE>
<S> <C>
Service cost -- benefits earned during the year $ 2,416,000
Interest cost on accumulated postretirement benefit
obligation 4,531,000
Net amortization and deferral (2,516,000)
-----------
Net periodic postretirement benefit expense $ 4,431,000
-----------
-----------
</TABLE>
The following table sets forth the accumulated postretirement benefit obligation
of the plans at March 31, 1994:
<TABLE>
<S> <C>
Retirees $30,425,000
Active participants eligible for retirement 13,366,000
Other active participants 18,020,000
-----------
Accumulated postretirement benefit obligation 61,811,000
Unrecognized net (loss) (7,281,000)
Unrecognized prior service credit 17,274,000
-----------
Accrued postretirement benefit obligation $71,804,000
-----------
-----------
</TABLE>
The assumed health care cost trend rate used to measure the accumulated
postretirement benefit obligation is 15 percent for 1994 trending to 5 percent
over a ten-year period. A one percent increase in the assumed respective annual
medical cost trend rate would increase the accumulated postretirement benefit
obligation by approximately $4,100,000 and the service and interest components
of net postretirement benefit expense by $700,000.
Other principal actuarial assumptions used in determining the accumulated
postretirement benefit obligation were:
<TABLE>
<S> <C>
Discount rate 7-9%
Rate of increase in compensation levels 4-6%
</TABLE>
Effective April 1, 1993, the Company also adopted SFAS No. 112 "Employers'
Accounting for Postemployment Benefits". SFAS No. 112 requires accrual
accounting for benefits provided to former or inactive employees after
employment but before retirement. The cumulative effect of adopting SFAS No. 112
resulted in pre-tax charge of $4,700,000 or $2,820,000 after taxes ($.06 per
share). Annual ongoing costs for these benefits related to the adoption of this
statement are not material.
21
<PAGE>
<PAGE>
9. DEFERRED COMPENSATION
Under provisions of a deferred compensation plan, the Company may, at the
discretion of the Board of Directors, award additional compensation to officers
and employees whose regular compensation is $10,000 or more per year. The
aggregate of such awards in any year may not exceed 7 1/2% of the bonus net
income of the Company before any income taxes as determined by the Board of
Directors, less 10% of capital employed in the business, as defined in the plan.
As to participants awarded more than $7,500, partial payment is made in the year
of the grant, and the balance is payable with interest in ten annual
installments starting after death, disability, retirement or discharge, or in
reduced amounts after voluntary resignation. There were no awards made in 1994,
1993 and 1992 under the plan.
10. RESTRICTED STOCK AWARD PLAN
The plan as amended provides for awards of not more than 750,000 shares of
common stock, subject to adjustments for stock splits, stock dividends and other
changes in the Company's capitalization to key employees, to be issued either
immediately after the award or at a future date. As a result of the
three-for-one stock split in April 1992 and the issuance of the Class B common
stock in 1987, the 750,000 shares of common stock provided for in the Plan has
been adjusted to 3,593,154 shares. As provided in the Plan and subject to
restrictions, shares awarded may not be disposed of by the recipients for a
period of five years from the date of the award. Cash dividends on shares
awarded are held by the Company for the benefit of the recipients, subject to
the same restrictions as the award. Such dividends (without interest) are paid
to the recipients upon lapse of the restrictions. The cost of the awards, equal
to the fair market value at the date of award, is being charged to operations in
equal annual amounts over a five year period commencing at the date of the
award.
Award transactions for the past three years were:
<TABLE>
<CAPTION>
SHARES
---------------------------------------------
<S> <C> <C> <C>
1994 1993 1992
--------- --------- ---------
Cumulative awards--beginning of year 3,384,227 3,314,685 1,091,207
Adjustment for three-for-one stock split -- -- 2,182,414
New awards 32,895 69,542 41,064
--------- --------- ---------
Cumulative awards--end of year 3,417,122 3,384,227 3,314,685
--------- --------- ---------
--------- --------- ---------
</TABLE>
The financial statements reflect the transfer of the awarded shares from
treasury stock as of the date of their issuance. Included in total outstanding
awards of 759,017 shares at March 31, 1994 are 623,198 shares to be issued at a
future date no later than five years from the date of the award. For shares that
have been issued, the market value at the date of the awards was $4,924,000,
$250,000 and $252,000 in 1994, 1993, and 1992, respectively. The cost of
treasury stock for these awards was $4,434,000, $260,000 and $204,000 in 1994,
1993 and 1992, respectively. The differences between the market value at the
date of the awards and the cost of the treasury stock were included in capital
in excess of par value or retained earnings.
11. ACQUISITION
In March, 1993, the Company acquired Icart, S.A. for approximately $8,300,000.
Icart, S.A. manufactures and markets a line of depilatory products, hand and
body creams and lotions, footcare products and other toiletries in Spain.
This acquisition is being accounted for by the purchase method and, accordingly,
results of operations for Icart, S.A. are included in the Company's results of
operations from the acquisition date. Pro forma results of operations are not
presented since the effect would not be material.
22
<PAGE>
<PAGE>
12. BUSINESS SEGMENTS
Information on the Company's Business Segments is presented below--dollars in
thousands. (See "Management's Discussion and Analysis of Results of Operations
and Financial Condition" on page 8 and "Description of Business Segments" on
page 11). Prior year identifiable asset information has been restated to reflect
the change in accounting for income taxes.
<TABLE>
<CAPTION>
Business Segments MARCH 31
----------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Sales
Health Care $296,621 $281,036 $307,406
Consumer
Anti-Perspirants and Deodorants 124,547 128,321 131,053
Other Consumer Products 243,621 244,154 234,931
-------- -------- --------
Consolidated $664,789 $653,511 $673,390
-------- -------- --------
-------- -------- --------
Operating Profit
Health Care $ 37,223 $ 46,465 $ 69,098
Consumer
Anti-Perspirants and Deodorants (4,766) (1,512) 1,206
Other Consumer Products 53,473 58,292 50,587
Income from licensing agreement -- 10,000 --
Provision for loss on discontinuance of
the Answer blood glucose system -- -- (12,400)
Interest income net of interest (expense) 363 1,200 (180)
Other (expense) net of other income (6,614) (7,039) (4,914)
General corporate expenses (42,297) (39,000) (36,132)
-------- -------- --------
Earnings before taxes on income $ 37,382 $ 68,406 $ 67,265
-------- -------- --------
-------- -------- --------
Identifiable Assets
Health Care $219,920 $241,819 $225,760
Consumer
Anti-Perspirants and Deodorants 81,347 79,597 87,640
Other Consumer Products 197,550 195,290 187,130
Corporate Assets 129,745 78,844 76,651
-------- -------- --------
Total Assets $628,562 $595,550 $577,181
-------- -------- --------
-------- -------- --------
Depreciation and Amortization
and Capital Expenditures
Depreciation and Amortization
Health Care $ 11,314 $ 10,228 $ 9,610
Consumer
Anti-Perspirants and Deodorants 3,764 3,656 3,485
Other Consumer Products 6,908 7,095 6,572
-------- -------- --------
Total Operating Segments $ 21,986 $ 20,979 $ 19,667
-------- -------- --------
-------- -------- --------
Capital Expenditures
Health Care $ 5,261 $ 12,373 $ 10,031
Consumer
Anti-Perspirants and Deodorants 7,400 2,652 2,595
Other Consumer Products 9,412 9,598 7,299
-------- -------- --------
Total Operating Segments $ 22,073 $ 24,623 $ 19,925
-------- -------- --------
-------- -------- --------
Geographic Areas
Sales
U.S.A. $505,335 $484,479 $502,926
Other North America 62,470 68,698 73,962
Other Countries 96,984 100,334 96,502
-------- -------- --------
Consolidated $664,789 $653,511 $673,390
-------- -------- --------
-------- -------- --------
</TABLE>
23
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Business Segments Continued MARCH 31
----------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Operating Profit
U.S.A. $ 72,732 $ 87,870 $103,790
Other North America 5,564 7,461 9,884
Other Countries 7,634 7,914 7,217
Income from licensing agreement -- 10,000 --
Provision for loss on discontinuance of
the Answer blood glucose system -- -- (12,400)
Interest income net of interest (expense) 363 1,200 (180)
Other (expense) net of other income (6,614) (7,039) (4,914)
General corporate expenses (42,297) (39,000) (36,132)
-------- -------- --------
Earnings before taxes on income $ 37,382 $ 68,406 $ 67,265
-------- -------- --------
-------- -------- --------
Identifiable Assets
U.S.A. $384,413 $403,447 $375,945
Other North America 40,608 45,578 48,130
Other Countries 73,796 67,681 76,455
Corporate Assets 129,745 78,844 76,651
-------- -------- --------
Total Assets $628,562 $595,550 $577,181
-------- -------- --------
-------- -------- --------
</TABLE>
Corporate assets include principally cash and cash equivalents, short-term
investments, miscellaneous receivables and other miscellaneous assets.
13. RENTAL EXPENSE AND LEASE COMMITMENTS
Rental expense, in thousands of dollars, for operating leases with a term
greater than one year for 1994, 1993 and 1992 was as follows:
<TABLE>
<CAPTION>
REAL PROPERTY
YEAR ENDED REAL SUB-RENTAL NET REAL EQUIPMENT
MARCH 31 PROPERTY INCOME PROPERTY AND OTHER
- - ----------- -------- ------------- -------- ---------
<S> <C> <C> <C> <C>
1994 $8,322 $ (688) $7,634 $ 7,250
1993 8,809 (690) 8,119 7,051
1992 9,401 (376) 9,025 8,542
</TABLE>
Minimum rental commitments, in thousands of dollars, under non-cancellable
leases in effect at March 31, 1994 were as follows:
<TABLE>
<CAPTION>
MINIMUM CAPITAL
RENTAL REAL EQUIPMENT LEASE
COMMITMENTS PROPERTY AND OTHER OBLIGATIONS
- - ------------ -------- --------- -----------
<S> <C> <C> <C>
1995 $ 7,775 $ 1,281 $ 52
1996 7,291 703 47
1997 6,508 236 44
1998 6,665 -- 25
1999 6,665 -- 17
2000-2012 87,220 -- 58
-----------
243
Less interest and
executory cost (59)
-----------
Present value of minimum lease
payments (of which $34 is
included in current liabilities) $ 184
-----------
-----------
</TABLE>
24
<PAGE>
<PAGE>
14. SUPPLEMENTAL FINANCIAL INFORMATION
The following is presented in support of balance sheet captions:
<TABLE>
<CAPTION>
MARCH 31
--------------------------
1994 1993
-------- --------
(dollars in thousands)
<S> <C> <C>
Intangible Assets:
Excess of purchase price of businesses acquired over the
net assets at date of acquisition $ 86,572 $ 86,106
Trademarks 28,782 28,872
Other 38,342 39,171
-------- --------
153,696 154,149
Accumulated amortization 43,483 36,917
-------- --------
$110,213 $117,232
-------- --------
-------- --------
Accounts Payable:
Trade $ 26,609 $ 31,444
Other 1,235 1,422
-------- --------
$ 27,844 $ 32,866
-------- --------
-------- --------
Accrued Expenses:
Salaries and wages $ 25,313 $ 23,127
Advertising and promotion 13,330 14,279
Other 33,398 29,879
-------- --------
$ 72,041 $ 67,285
-------- --------
-------- --------
</TABLE>
Income taxes paid were $11,004,000, $24,898,000 and $22,133,000 in 1994, 1993
and 1992, respectively. Interest paid was $1,617,000, $1,639,000 and $2,966,000
in 1994, 1993 and 1992, respectively.
15. REGULATORY MATTERS
Organidin
The Food and Drug Administration ("FDA") has initiated review of the safety and
efficacy of the Organidin brand of expectorant/mucolytic products. An FDA
Advisory Committee recommended on March 23, 1992, that the products remain on
the market pending further FDA review, that certain changes in the products'
labeling be made and that doctors be appropriately notified of these labeling
changes. The Company implemented these FDA Advisory Committee recommendations
and is developing additional data in support of the safety and efficacy of the
products.
On April 22, 1993, the Company received a letter from the FDA requesting that
the Company discontinue the marketing of its Organidin products. On May 13,
1993, the Company met with the FDA to discuss this matter. The Company has
replied to the FDA letter and is awaiting further response from the FDA.
If the Company and the FDA fail to reach an agreement, the Company may be
required to restrict or possibly discontinue the marketing of the Organidin
products. Any substantial reduction in Organidin product sales or the
discontinuance of marketing of the Organidin products as a result of the FDA
determination would not have a material adverse effect on the Company's
financial position, but would have a material adverse effect on results of
operations since, although the products approximate only 11% of consolidated
sales, they represent a significantly greater portion of the Company's profits.
In addition, the Company would at that time incur a material one-time charge to
earnings.
Deprol
In connection with the FDA Drug Efficacy Study Implementation (DESI) program the
FDA granted the Company a hearing on the FDA's order proposing to withdraw
approval of the New Drug Application for Deprol. The hearing has been completed
and the FDA's Administrative Law Judge ruled that the New Drug Application for
Deprol should be withdrawn. The Company appealed this decision to the
Commissioner of Food and Drugs. On September 29, 1993, the decision was
sustained by the Commissioner. The New Drug Application for Deprol was withdrawn
effective April 29, 1994. Discontinuation of marketing of the product did not
require material write-offs and will not have a material adverse effect on sales
or earnings.
16. LITIGATION AND ENVIRONMENTAL MATTERS
The Company has been named a third party defendant in the case of the State of
New Jersey, Department of Environmental Protection vs. the Lone Pine Landfill,
et al. The third party complaint alleges that the Company, through certain waste
haulers, deposited toxic substances at the Lone Pine Landfill in Freehold, New
Jersey. This action has been stayed by the court. The United States
Environmental Protection Agency ("EPA") has also advised the Company that it may
be a "responsible party" with respect to a release or substantial threat of
release of hazardous substances at the Lone Pine Landfill. To the best of the
Company's knowledge, at the time of disposal, the Company disposed of its waste
in a completely lawful manner.
25
<PAGE>
<PAGE>
Subsequently, certain categories of waste have been legislated to be hazardous
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980. Although several companies have conducted scientific studies which have
shown that the landfill is not a current threat to area drinking water supplies
or aquatic life in the Manasquan River the EPA continues to demand a clean-up be
conducted of the landfill. The Company and over 115 other companies, without
admitting liability, have entered into two consent decrees with EPA agreeing to
conduct a clean-up of the Lone Pine Landfill and the clean-up is in progress. In
August, 1989, the Company instituted suit in New Jersey state court against
twenty-two insurers to recover, inter alia, the Company's share of cleanup costs
at Lone Pine. The Company has reached settlements in this case and has obtained
a liability verdict against the only nonsettling insurer which should result in
the Company being fully reimbursed for its share of the currently estimated
cleanup costs at Lone Pine.
The Company faces potential liability involving waste material generated by the
Lambert Kay division at its former manufacturing facility in Winsted,
Connecticut. In May, 1991, EPA issued special notice letters under the
Comprehensive Environmental Response, Compensation and Liability Act to Lambert
Kay and about 50 other potentially responsible parties ("PRPs") notifying them
of potential liability with respect to waste deposited at the Barkhamsted-New
Hartford landfill in Barkhamsted, Connecticut. In September, 1991 and in
February, 1994, the Company and 21 other PRPs, without admitting liability,
entered consent agreements under which the PRPs agreed to perform certain
investigation and engineering evaluation work at the site, including the
remedial investigation and feasibility study and to reimburse EPA for certain
costs. Based on preliminary information from the investigation work (which is
not completed), the total cost for performing the current and future cleanup
work at Barkhamsted, including the investigation work, is estimated to be $30-40
million. Although applicable environmental law provides for joint and several
liability for the cost of cleanup work, the Company believes, based on present
estimates, that substantially all of the cleanup costs will be paid by other
PRPs.
The Company believes, based upon the information available at this time, that
the matters discussed above will not have a material effect on its financial
position.
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly net sales, gross margin, net earnings (loss) and earnings (loss) per
share are set forth in the following table (dollars in thousands, except per
share amounts).
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------
1994 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 TOTAL YEAR
<S> <C> <C> <C> <C> <C>
Net Sales $162,750 $150,266 $176,459 $175,314 $664,789
Gross Margin 106,396 95,698 119,361 110,774 432,229
Net earnings before cumulative effect
of accounting changes 5,835 1,379 12,889 6,506 26,609
Cumulative effect of accounting changes (46,639) -- -- -- (46,639)
Net earnings (loss) (40,804) 1,379 12,889 6,506 (20,030)
Earnings per share before cumulative
effect of accounting changes .13 .03 .28 .14 .58
Cumulative effect of accounting changes (1.02) -- -- -- (1.02)
Earnings (loss) per share (.89) .03 .28 .14 (.44)
1993
Net Sales $157,184 $167,326 $159,640 $169,361 $653,511
Gross Margin 104,265 109,126 105,385 111,377 430,153
Net Earnings 16,023 9,968 13,353 7,856 47,200
Earnings per share .35 .22 .29 .17 1.03
</TABLE>
The quarter ended June 30, 1993 includes a one-time charge to earnings
reflecting the adoption of SFAS No. 106 "Employers' Accounting for
Postretirement Benefits other than Pensions" of $43,819 after taxes or $.96 per
share.
The quarter ended June 30, 1993 was restated to reflect the cumulative effect of
the adoption of SFAS No. 112 "Employers' Accounting for Postemployment Benefits"
resulting in a one-time charge to earnings of $2,820 after taxes or $.06 per
share.
The quarter ended June 30, 1992 includes income of $10,000 before taxes or
$6,000 after taxes ($.13 per share) related to a licensing agreement with
Schering-Plough Corporation granting exclusive marketing rights in all markets
except the United States and its territories and possessions, Canada and Mexico,
to Felbatol (felbamate).
Refer to "Management's Discussion and Analysis of Results of Operations and
Financial Condition" on page 8 for comments regarding pre-launch spending for
Felbatol.
26
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick
345 Park Avenue
New York, NY 10154
The Board of Directors and Stockholders
Carter-Wallace, Inc.:
We have audited the accompanying consolidated balance sheets of Carter-Wallace,
Inc. and subsidiaries as of March 31, 1994 and 1993 and the related consolidated
statements of earnings and retained earnings and cash flows for each of the
years in the three-year period ended March 31, 1994. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Carter-Wallace, Inc.
and subsidiaries as of March 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in notes 3 and 8 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statements No. 106 "Employers' Accounting for Postretirement Benefits Other Than
Pensions", No. 109 "Accounting for Income Taxes" and No. 112 "Employers'
Accounting for Postemployment Benefits" in 1994.
As discussed in Note 15 to the consolidated financial statements, the Company
received a letter from the Food and Drug Administration (FDA) requesting the
discontinuance of the marketing of its Organidin products. The Company met with
the FDA, has replied to the letter and is awaiting further response from the
FDA. The ultimate outcome of this matter cannot presently be determined.
Accordingly, no provision for any liability that may result upon resolution has
been recognized in the accompanying consolidated financial statements.
KPMG Peat Marwick
June 6, 1994
27
<PAGE>
<PAGE>
Carter-Wallace, Inc. and Subsidiaries
BOARD OF DIRECTORS
Henry H. Hoyt, Jr.
Chairman and Chief Executive Officer
Daniel J. Black
President and Chief Operating Officer
David M. Baldwin
Chairman, David M. Baldwin Realty Company, Inc.
Dr. Richard L. Cruess
Dean, Faculty of Medicine, McGill University
Montreal, Quebec, Canada
Scott C. Hoyt
Vice President, New Products
Carter Products Division of the Company
Ralph Levine
Vice President, Secretary and General Counsel
Herbert M. Rinaldi
Partner
Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein
Paul A. Veteri
Vice President, Finance and Chief Financial Officer
SCIENTIFIC ADVISORY BOARD
Joseph S. Harun, M.D., Chairman
Former Vice President, Medical and Scientific Affairs
Carter-Wallace, Inc.
Paul Calabresi, M.D.
Professor and Chairman, Department of Medicine
Brown University
Providence, RI
Robert E. Canfield, M.D.
Irving Professor of Medicine and
Director, Irving Center for Clinical Research
Columbia University, College of Physicians and Surgeons
New York, NY
Noel Rose, M.D., Ph.D.
Professor and Chairman, Department of Immunology
and Infectious Diseases
Johns Hopkins University, School of Hygiene and Public Health
Baltimore, MD
Morton K. Schwartz, Ph.D.
Chairman, Department of Clinical Chemistry
Memorial Sloan Kettering Cancer Center
New York, NY
EXECUTIVE OFFICERS
Henry H. Hoyt, Jr.
Chairman of the Board and Chief Executive Officer
Daniel J. Black
President and Chief Operating Officer
John Bridgen, Ph.D.
Vice President, Diagnostics, U.S.
Robert A. Cuthbert
Vice President, Pet Products, U.S.
Donald R. Daoust, Ph.D.
Vice President, Quality Control
Miguel Fernandez
Vice President, International
Peter J. Griffin
Vice President and Controller
John R. Hughes
Vice President, Consumer Products, U.S.
Michael J. Kopec
Vice President, Manufacturing
Ralph Levine
Vice President, Secretary and General Counsel
Thomas B. Moorhead
Vice President, Human Resources
George H. Ohye
Vice President, Compliance and Regulatory
Herbert Sosman
Vice President, Pharmaceuticals, U.S.
Donald J. Stack
Vice President, Taxes
C. Richard Stafford
Vice President, Corporate Development
Paul A. Veteri
Vice President, Finance and Chief Financial Officer
James L. Wagar
Vice President and Treasurer
DIVISIONAL MANAGEMENT
John Bridgen, Ph.D., President, Wampole Laboratories
Robert A. Cuthbert, President, Lambert Kay
Miguel Fernandez, President, International
John R. Hughes, President, Carter Products
Michael J. Kopec, President, Manufacturing
Herbert Sosman, President, Wallace Laboratories
PRINCIPAL SUBSIDIARIES
Francois Depoil, President, Laboratoires Fumouze, S. A. (France)
Gregory J. Drohan, President, Carter Products, Canada
J. Robert Fraser, President, Frank W. Horner, Inc. (Canada)
Adrian J.L. Huns, Managing Director, Carter-Wallace,
Limited (United Kingdom)
Jose Maria Icart, Managing Director, Icart, S.A. (Spain)
Alan W. Nash, Managing Director, Carter-Wallace
(Australia) Pty. Limited
Lino Santambrogio, Managing Director, S.p.A. Italiana
Laboratori Bouty (Italy)
Francis Santiago, President, Carter-Wallace, S. A. (Mexico)
28
<PAGE>
<PAGE>
Printed in U.S.A.
<PAGE>
<PAGE>
CARTER-WALLACE, INC.
1345 Avenue of the Americas
New York, NY 10105
<PAGE>
CARTER-WALLACE, INC.
EXECUTIVE PENSION BENEFITS PLAN
(AS AMENDED EFFECTIVE APRIL 1, 1994)
1. Purpose of the Plan
This Carter-Wallace, Inc. Executive Pension Benefits Plan,
as amended and restated (the "Plan"), is effective with
respect to eligible employees who retire or otherwise
terminate employment after having been actively employed on
at least one day on or after April 1, 1994.
The Plan is intended to replace the benefits that certain
employees would be entitled to receive under the Employees'
Retirement Plan of Carter-Wallace, Inc. (the "Retirement
Plan"), but which cannot be paid to such employees as a
result of the restrictions imposed by Sections 401(a)(17)
and 415 of the Internal Revenue Code of 1986, as amended,
which limit the amount of individual compensation that can
be recognized and the benefits that can be provided under
the Retirement Plan, or because of the exclusion from the
Retirement Plan compensation base of annual pay deferred
under the Carter-Wallace, Inc. Executive Savings Plan. The
Plan is intended to remedy the inequities created by these
limitations, as well as to provide enhanced benefits to
certain executives upon their retirement or death while in
active service.
An additional purpose of the Plan is to mitigate the
reduction in retirement benefits of certain key executives
who elect early retirement. The Plan is also intended to
protect the retirement benefit expectations of senior
executives against the effects of a Change in Control and as
a result of such protection to obtain the continued
availability of such executives' services.
2. Definitions
(a) "Annuity Starting Date" shall mean the later of (i) the
date as of which a participant commences to receive, or
receives in a lump sum, his vested accrued benefit
under the Retirement Plan or (ii) the first business
day of the month coinciding with or next following the
participant's retirement or other termination of
employment.
(b) "Applicable Interest Rate" shall mean the interest rate
used under the Retirement Plan as of the Annuity
Starting Date, or, if earlier, the Retirement Benefit
Date, for purposes of determining lump-sum benefits.
<PAGE>
(c) "Cause" shall mean the conviction of a felony involving
injury to the Company's business or assets.
(d) "Change in Control" shall have the meaning ascribed
thereto in Section 10.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(f) "Company" shall mean Carter-Wallace, Inc. and any
successor thereto.
(g) "Corporate Officer" shall mean an elected corporate
officer of the Company, or an employee or former
employee who was an elected corporate officer of the
Company at any time after first becoming eligible to
elect an immediate retirement benefit under the
Retirement Plan.
(h) "Death Benefit Date" shall mean the date following a
participant's death and preceding his Annuity Starting
Date that is (i) the earliest date as of which a
participant's spouse is eligible to begin receiving a
50 percent preretirement survivor annuity under the
Retirement Plan, or (ii) if earlier, 30 days after the
occurrence of a Change in Control.
(i) "Earliest Retirement Date" shall mean the earliest date
as of which a participant could elect to retire and
begin receiving his benefit under the Retirement Plan,
based on the participant's service rendered through the
date on which the Earliest Retirement Date is being
determined.
(j) "Executive Savings Plan" shall mean the Carter-Wallace,
Inc. Executive Savings Plan, as amended from time to
time.
(k) "Immediate Annuity" as of a reference date shall mean a
single life annuity commencing on such date.
(l) "Includible Compensation" shall mean compensation as
defined for benefit calculation purposes under the
Retirement Plan, but calculated without regard to the
limitation imposed by Section 401(a)(17) of the Code
and without excluding amounts that would have
constituted includible compensation for benefit
calculation purposes under the Retirement Plan had the
participant not elected to defer such amounts under the
Executive Savings Plan. In addition, in the case of a
participant who was a Corporate Officer on the date of
his retirement or other termination of employment, or
at any time during the six-month period ending on such
date, such participant's Includible Compensation during
any period relevant to the calculation of his benefit
under the Plan shall include any bonuses accrued by
such participant during such period under the Company's
profit-sharing plan (whether or not the payment of such
bonuses is deferred). For purposes of the preceding
sentence, a bonus shall be deemed to "accrue" only if
it is ultimately
-2-
<PAGE>
awarded, and then shall be deemed to have accrued
ratably over the 12 months of the Company's fiscal
year to which the bonus relates (or, in the case of
a prorated bonus awarded to a participant who
retires or otherwise separates from service before
the end of the fiscal year, over the months of service
during such fiscal year on account of which the bonus is
awarded).
(m) "Modified Average Compensation" shall mean 12 times the
average monthly Includible Compensation of a
participant during the 60 months (not necessarily
consecutive) out of the participant's last 120 months
of continuous service (as defined in the Retirement
Plan) affording the highest such average (or during all
months of continuous service if less than 60 months).
(n) "Normal Retirement Date" shall mean the participant's
normal retirement date under the Retirement Plan.
(o) "Plan" shall mean this Carter-Wallace, Inc. Executive
Pension Benefits Plan, as amended from time to time.
(p) "Retirement Benefit Date" shall have the meaning
ascribed thereto in Section 8.
(q) "Retirement Plan" shall mean the Employees' Retirement
Plan of Carter-Wallace, Inc., as amended from time to
time.
(r) "Savings Plan" shall mean the Carter-Wallace, Inc.
Supplemental Retirement and Savings Plan, as amended
from time to time.
(s) "Supplemental Preretirement Death Benefit" shall mean
the benefit payable under the Plan pursuant to Section
6.
(t) "Supplemental Retirement Benefit" shall mean the
benefit payable under the Plan pursuant to Section 5.
3. Participation
Participation in this Plan shall be limited to (i) those
employees of the Company whose benefits under the Retirement
Plan would be adversely affected by the limitations imposed
by Sections 401(a)(17) or 415 of the Code or by the deferral
of annual pay under the Executive Savings Plan, and (ii)
Corporate Officers. In determining whether an employee's
benefit under the Retirement Plan has been adversely
affected by Section 415 of the Code, any contributions made
to the Savings Plan by the employee which are not matched by
the Company, i.e., which exceeded 4% of his compensation as
defined in the Savings Plan, shall not be taken into
account. Each affected employee shall automatically become
a participant in the Plan whenever the application of either
of the foregoing Code sections, in the manner described, or
the deferral of annual pay under the Executive
-3-
<PAGE>
Savings Plan, would reduce the benefit payable to him under
the Retirement Plan in any manner.
4. Vesting
A benefit shall be payable under this Plan only to the
extent that it is vested. A participant's benefits
hereunder shall vest in accordance with the vesting
provisions of the Retirement Plan (i.e., at the same time
and to the same extent that his benefit under such plan
vests); provided, however, that a participant's benefits
under the Retirement Plan following a Change in Control
shall be deemed to be fully vested for purposes of
determining his benefits under this Plan if the participant
was actively employed by the Company immediately before such
Change in Control, or if his employment with the Company was
involuntarily terminated (other than for Cause) by the
Company within six months prior to such Change in Control.
5. Supplemental Retirement Benefit
(a) Each participant shall be entitled under this Plan to a
benefit (the "Supplemental Retirement Benefit")
commencing on his Retirement Benefit Date, provided
that no benefit shall be payable pursuant to this
Section 5 after the death of a participant occurring
before his Annuity Starting Date. The amount of such
benefit shall be determined by applying the following
steps (or, if applicable, the steps described in
Section 5(b)), modified, to the extent applicable, by
Sections 5(c) through 5(e):
(1) Determine the participant's accrued benefit
(expressed as an Immediate Annuity as of the
Annuity Starting Date) under the applicable
provisions of the Retirement Plan, calculated (i)
by substituting Modified Average Compensation for
the Retirement Plan's definition of final average
compensation, and (ii) without regard to any
benefit limitation pursuant to Section 415 of the
Code. Such Immediate Annuity value shall be
determined using the early retirement reduction
factors and actuarial assumptions applicable under
the Retirement Plan as of the Annuity Starting
Date.
(2) Determine the greater of (a) the participant's
actual accrued benefit under the Retirement Plan
or (b) the participant's accrued benefit that
would have resulted under the Retirement Plan if
his Participant Contributions to the Savings Plan
had never exceeded 4% of his compensation as
defined in the Savings Plan, such accrued benefit
being expressed in either case as an Immediate
Annuity as of the Annuity Starting Date using the
early retirement reduction factors and actuarial
assumptions applicable under the Retirement Plan
as of the Annuity Starting Date.
-4-
<PAGE>
(3) Subtract the benefit determined in Step 2 from the
benefit determined in Step 1.
(4) Convert the net benefit determined in Step 3 to an
equivalent benefit payable as of the Retirement
Benefit Date in the form in which the
participant's Supplemental Retirement Benefit
under the Plan is payable, using whichever of the
following procedures is applicable:
(A) If the participant's benefit is payable in
the form of annuity, determine such
equivalent benefit using the early retirement
and actuarial assumptions employed in Step 1.
(B) If the participant's benefit is payable in a
lump sum, convert the net benefit determined
in Step 3 to an equivalent lump-sum payment
as of the Annuity Starting Date using the
actuarial assumptions applicable under the
Retirement Plan as of such date. If the
Retirement Benefit Date is later than the
Annuity Starting Date, the amount calculated
pursuant to the preceding sentence shall then
be credited with interest at the Applicable
Interest Rate, compounded annually, for the
period between the Annuity Starting Date and
the Retirement Benefit Date.
(b) If, as a result of a Change in Control, a participant's
Retirement Benefit Date precedes his Annuity Starting
Date, the Supplemental Retirement Benefit payable in a
lump sum on such Retirement Benefit Date shall be
calculated in the manner set forth in this Section 5(b)
rather than as set forth in Section 5(a):
(1) Determine the lump-sum value as of the
participant's Earliest Retirement Date of his
accrued benefit under the applicable provisions of
the Retirement Plan, calculated (i) by
substituting for benefit calculation purposes
Modified Average Compensation for the Retirement
Plan's definition of final average compensation,
and (ii) without regard to any benefit limitation
pursuant to Section 415 of the Code. Such lump-
sum value shall be determined using the early
retirement reduction factors and actuarial
assumptions applicable under the Retirement Plan
as of the Retirement Benefit Date.
(2) Determine the greater of (a) the lump-sum amount
that would be payable to the participant under the
Retirement Plan on the Earliest Retirement Date
and (b) the lump-sum amount that would be payable
to the participant under the Retirement Plan on
the Earliest Retirement Date if his Participant
Contributions to the Savings Plan had never
exceeded 4% of his compensation as defined in the
Savings Plan. Such lump-sum amounts shall be
determined by (i) using the early retirement
reduction factors and actuarial assumptions
applicable under the Retirement Plan as of the
-5-
<PAGE>
Retirement Benefit Date and (ii) projecting future
increases in the limitations under Section 415 of
the Code in such manner as the enrolled actuary
for the Retirement Plan shall determine.
(3) Subtract the amount obtained in Step 2 from the
amount obtained in Step 1 and, if the Retirement
Benefit Date is earlier than the Earliest
Retirement Date, discount the difference to its
present value as of the Retirement Benefit Date
using the Applicable Interest Rate. The result is
the participant's Supplemental Retirement Benefit.
(c) Except as otherwise provided in Section 5(d), in the
case of a participant who was a Corporate Officer on
the date of his retirement or other termination of
employment, or at any time during the six-month period
ending on such date, the calculations in Step 1 of
Section 5(a) or of Section 5(b), whichever is
applicable, shall be modified as set forth in
subsections (1) and (2) below:
(1) In determining credited service for benefit
calculation purposes, the participant shall be
deemed to have become a participant in the
Retirement Plan on the date his participation
would have commenced if the eligibility
requirements of the Retirement Plan as in effect
on April 1, 1994 had been in effect under such
plan on and after the date the participant became
an employee.
(2) There shall be substituted for the early
retirement reduction factors under the Retirement
Plan the following factors:
Age Reduction Factor
--- ----------------
62-65 0%
61 3%
60 6%
59 12%
58 18%
57 24%
56 30%
55 36%
(d) In the case of a participant who (a) is employed by the
Company immediately prior to a Change in Control, or
whose employment with the Company is involuntarily
terminated (other than for Cause) by the Company within
six months prior to a Change in Control and (b) was a
Corporate Officer at any time during the six-month
period ending on the date of such Change in Control,
(i) the calculations in Step 1 of Section 5(a) or Step
1 of Section 5(b), whichever is applicable, shall be
modified by eliminating any early retirement reduction
factors, and (ii) the calculation in Step 3 of Section
5(b), if applicable, shall be modified
-6-
<PAGE>
by applying a zero percent discount rate in lieu of the
Applicable Interest Rate.
(e) If a participant's employment continues past his
original Retirement Benefit Date occurring by reason of
a Change in Control, he shall continue to accrue
benefits under the Plan and shall become entitled to a
second benefit as of his subsequent Retirement Benefit
Date (as determined under Section 8 without regard to
the occurrence of such Change in Control). The amount
of such benefit shall be (x) the benefit to which he
would otherwise be entitled under the terms of the
Plan, offset by (y) the lump-sum amount paid to him on
the original Retirement Benefit Date plus interest,
compounded annually, at the Applicable Interest Rate in
effect on such original Retirement Benefit Date,
credited from the original Retirement Benefit Date to
such subsequent Retirement Benefit Date. If such
second benefit is payable in a form other than a lump
sum, the offset amount calculated in clause (y) of the
preceding sentence shall be converted to an equivalent
benefit in the form in which the participant's benefit
is payable, using the early retirement reduction
factors and actuarial assumptions applicable under the
Retirement Plan as of such subsequent Retirement
Benefit Date.
6. Supplemental Preretirement Death Benefit
(a) In the case of a participant who dies before receiving
a benefit under this Plan and before his Annuity
Starting Date and whose spouse is entitled to a 50
percent preretirement survivor annuity under the
Retirement Plan, a Supplemental Preretirement Death
Benefit shall be payable to the participant's spouse
commencing on the Death Benefit Date pursuant to this
Section 6.
(b) A participant's Supplemental Preretirement Death
Benefit shall be paid in the form of an annuity over
the lifetime of the participant's spouse unless the
participant shall have filed with the plan
administrator a valid election to have such benefit
paid in a lump sum. Such an election may be made or
revoked at any time, provided, however, that no such
election or revocation shall be valid in the event of
the participant's death within one year after such
election or revocation is made.
(c) The Supplemental Preretirement Death Benefit shall be
calculated using the procedures set forth in Section 5,
modified by substituting the Death Benefit Date for the
Retirement Benefit Date and applying such procedures to
the 50 percent preretirement survivor annuity under the
Retirement Plan rather than the participant's accrued
benefit under such plan.
(d) In the event of a participant's death following his
original Retirement Benefit Date occurring by reason of
a Change in Control, but before receiving the portion
of his benefit attributable to service rendered after
such original Retirement Benefit Date, his Supplemental
Preretirement Death Benefit, as calculated pursuant to
the
-7-
<PAGE>
preceding paragraph, shall be offset by the lump-sum
payment previously distributed to him on his
original Retirement Benefit Date plus interest,
compounded annually, at the Applicable Interest Rate in
effect on his original Retirement Benefit Date.
7. Elections
(a) As soon as practicable following his commencement of
participation in the Plan, each participant shall file
an election with the plan administrator, on such form
as the administrator shall prescribe, specifying (i)
the form in which his Supplemental Retirement Benefit
is to be paid and (ii) the time at which such benefit
is to commence or is to be paid in a lump sum.
(b) An election pursuant to Section 7(a) may be changed
from time to time, provided, however, that no such
change shall be valid if the participant's separation
from service from the Company occurs less than one year
after the date on which such change is made.
Notwithstanding the preceding sentence, if a
participant whose most recent valid election is for an
annuity form of benefit demonstrates to the
satisfaction of the administrator that a relevant
change in family circumstances has occurred since the
filing of such election, such participant may change
his election to a different form of annuity (but not to
a lump sum) commencing on the same date as that
specified on such prior election, or may designate a
new contingent beneficiary, without regard to such one-
year requirement.
(c) The forms of benefit that a participant may elect under
the Plan are (i) a lump sum and (ii) any form of
annuity available (as determined without regard to
spousal consent rules) under the Retirement Plan.
(d) A participant who elects a joint and survivor form of
benefit shall designate his contingent beneficiary in
conjunction with such election. In the event of such
contingent beneficiary's death before the Retirement
Benefit Date, the participant's Supplemental Retirement
Benefit shall be paid in the form of a single life
annuity unless he has filed a valid change in election
form pursuant to Section 7(b).
(e) In the event of a participant's death following his
Annuity Starting Date but before his Retirement Benefit
Date, notwithstanding any contrary provision herein his
Supplemental Retirement Benefit shall be paid in a lump
sum within 30 days after the administrator receives
notification of such death.
8. Payment of Supplemental Retirement Benefit
A participant's Supplemental Retirement Benefit shall
commence, or shall be paid in a lump sum, on the date (the
"Retirement Benefit Date") which is (a) the first business
day of the month coinciding with or next following the
latest of (i) the date specified in his most recent election
or valid change in election pursuant to Section 7, but in no
event
-8-
<PAGE>
later than his Normal Retirement Date or later date of
actual retirement, (ii) the date of his retirement or other
separation from service, or (iii) his Annuity Starting Date,
or (b) if earlier, 30 days following the occurrence of a
Change in Control. Such benefit shall be paid in the form
elected in the most recent valid election filed by the
participant pursuant to Section 7 except in the event of a
Change in Control, in which event such benefit shall be paid
in a lump sum irrespective of the form of benefit elected by
the participant.
9. Other Plans
If an employee is entitled to a benefit under a defined
benefit plan maintained by the Company other than the
Retirement Plan, and if such benefit is required to be taken
into account for purposes of Section 415 of the Code, such
benefits shall be added to the benefits accrued under the
Retirement Plan for purposes of determining whether the
employee is entitled to participate in the Plan and the
amount of any benefit payable hereunder.
10. Change in Control
(a) For purposes of this Plan, a Change in Control shall
mean the acquisition by any person (including an
individual, a corporation, a partnership, an
association, a joint-stock company, a trust, or any
unincorporated organization, but excluding a member of
the Hoyt Family, a trust primarily for the benefit of
members of the Hoyt Family or parties controlled by
members of the Hoyt Family) in one or in a series of
transactions of (i) shares of stock which would, alone
or aggregated with shares of stock already owned by
such person, result in such person owning more than 50
percent of the voting power of the securities of the
Company possessing the right to vote on the election of
directors and all other matters which require the
approval of shareholders generally; (ii) all or
substantially all of the properties and assets of the
Company; or (iii) the power, whether direct or
indirect, whether exercised or not, to direct or cause
the direction of the management or policies of the
Company, whether through record or beneficial ownership
of voting securities or other equity or debt interests,
by contract, by proxy or otherwise. For purposes of
this definition, the "Hoyt Family" shall mean the
family of Henry H. Hoyt, Sr., his descendants, and
members of such descendants' families.
(b) In the case of any participant for whom the payment in
the form of an annuity of a Supplemental Retirement
Benefit or Supplemental Preretirement Death Benefit has
commenced as of the time of the Change in Control, the
payment of such annuity shall be discontinued and in
lieu thereof the actuarial present value (as determined
by applying the principles of Section 5) of future
payments under such annuity shall be paid in a lump sum
within 30 days following such Change in Control.
-9-
<PAGE>
(c) If a participant becomes subject to an excise tax under
Section 4999 of the Code upon the occurrence of a
Change in Control, the amount of any benefit payable
under the Plan with respect to such participant shall
be increased by the amount necessary to make him whole,
on an after-tax basis (based on applicable federal,
state, and local income tax rates and after giving
effect to the federal deduction arising from such state
or local income taxes), for the amount of increase in
such excise tax arising as a result of the payment of
such benefit.
11. Administration
This Plan shall be administered by the Retirement Committee
established to manage the Retirement and Savings Plans. The
Retirement Committee shall have discretionary authority to
interpret the Plan, and the Retirement Committee's good-
faith determination with respect to any issue relating to
the interpretation of the Plan shall be conclusive and
final.
12. General Provisions
(a) The establishment of the Plan shall not be construed as
conferring any legal rights upon any participant for a
continuation of employment, nor shall it interfere with
the rights of the Company to discharge a participant
and to treat him without regard to the effect which
such treatment might have upon him as a participant in
the Plan.
(b) As a condition to a participant's entitlement to
benefits hereunder, the Company shall have the right to
deduct (or cause to be deducted) from any amounts
otherwise payable to a participant, whether pursuant to
the Plan or otherwise, or otherwise to collect from the
participant, any required withholding taxes with
respect to benefits under the Plan.
(c) Notwithstanding any provision herein to the contrary,
nothing in this Plan shall require the duplication of
any benefit previously paid to a participant under the
Plan.
(d) Subject to any applicable law, no benefit under the
Plan shall be subject in any manner to, nor shall the
Company be obligated to recognize, any purported
anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, or charge, and any attempt to do
so shall be void. No such benefit shall in any manner
be liable for or subject to garnishment, attachment,
execution, or a levy, or liable for or subject to the
debts, contracts, liabilities, engagements, or torts of
the participant.
(e) The Plan shall not be construed as conferring on a
participant any right, title, interest, or claim in or
to any specific asset, reserve, account, or property of
any kind possessed by the Company. To the extent that
a participant or any other
-10-
<PAGE>
person acquires a right to receive payments from the
Company, such rights shall be no greater than the
rights of an unsecured general creditor.
(f) This plan shall be binding upon the successors and
assigns of the Company. The Company shall require any
successor (whether direct or indirect, and whether by
purchase, merger, consolidation, or otherwise) to all
or substantially all of the business or assets of the
Company, by written agreement to expressly assume and
agree to perform the Company's obligations under the
Plan in the same manner and to the same extent that the
Company would be required to perform them if no such
succession had taken place. The provisions of this
Section 12(f) shall continue to apply to each
subsequent employer of the participant hereunder in the
event of any subsequent merger, consolidation, or
transfer of assets of such subsequent employer.
(g) The laws of the State of New York shall govern the
construction of this Plan and the rights and the
liabilities hereunder of the parties hereto.
(h) The masculine pronoun shall mean the feminine wherever
appropriate.
13. Plan Year
The plan year shall be the calendar year.
14. Recalculation of Benefits
In the case of a participant whose Includible Compensation
includes his accrued bonus under the Company's profit-
sharing plan, the participant's entitlement to, and amount
of, any such accrued bonus for the fiscal year in which, or
immediately following which, he retires or otherwise
separates from service may not be determinable at the time
the participant's benefit commences or is paid in a lump
sum. In such event, the participant's benefit payment or
payments shall initially be based on the assumption that his
accrued bonus for such fiscal year is zero. In the event
the participant is subsequently awarded a bonus on account
of such fiscal year, his benefit under the Plan shall be
recalculated. If such recalculation results in an increased
benefit, the Company shall, within 30 days after the date
the amount of such bonus award is determined, pay the
participant (or, in the case of a supplemental preretirement
death benefit, his spouse) a single-sum adjustment equal to
the aggregate amount by which the benefit payment or
payments previously made with respect to the participant
would have been increased if such recalculation had been
given effect. The recalculation shall also be taken into
account for purposes of determining the amount of any
subsequent benefit payments under the Plan.
15. Source of Benefits
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The Plan is an unfunded plan maintained by the Company for
the purpose of providing deferred compensation for a select
group of management or highly compensated employees.
Benefits under the Plan shall be payable from the general
assets of the Company except to the extent paid from the
Carter-Wallace, Inc. Executive Plan Trust, and any payment
made from such trust on account of a participant shall
reduce the Company's obligation hereunder with respect to
such participant. The Plan shall not be construed as
conferring on a participant any right, title, interest, or
claim in or to any specific asset, reserve, account, or
property of any kind possessed by the Company. To the
extent that a participant or any other person acquires a
right to receive payments from the Company, such right shall
be no greater than the right of an unsecured general
creditor.
16. Effective Date
This Plan shall be effective upon adoption by the Board of
Directors of the Company.
17. Amendment or Termination
The Board of Directors of the Company reserves the right to
amend or terminate this Plan at any time; provided, however,
that without such participant's written consent, (i) no
amendment or termination of the Plan shall adversely affect
the right of any participant to receive, or otherwise result
in a material adverse effect on such participant's rights
under the Plan with respect to, his accrued vested benefits
(including contingent rights conditioned upon a subsequent
Change in Control), as determined as of the date of
amendment or termination, and (ii) no amendment (other than
one which has no material adverse effect on such
participant) or termination of the Plan shall be effective
with respect to such participant if he was a Corporate
Officer immediately prior to such amendment or termination.
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<PAGE>
CARTER-WALLACE, INC.
EXECUTIVE SAVINGS PLAN
1. Purpose of the Plan
The purpose of this Carter-Wallace, Inc. Executive Savings
Plan is to provide a select group of executives with an
opportunity to defer a portion of their annual pay which
they may be precluded from deferring under the Carter-
Wallace, Inc. Supplemental Retirement and Savings Plan, and
to defer some or all of their awards under the Company's
profit-sharing bonus award plan.
2. Definitions
2.01 "Account" shall mean the bookkeeping account
maintained for a Participant to record his Annual-
Pay Deferrals, Company Matching Amounts, and Bonus
Deferrals, together with earnings thereon credited
pursuant to Section 5.03.
2.02 "Administrator" shall mean the Retirement Committee
established to manage the Company's retirement and
savings plans.
2.03 "Annual Pay" shall mean a Participant's base salary
and overtime pay, including any portion thereof
deferred pursuant to the Savings Plan, this Plan, or
another nonqualified deferred compensation plan or
arrangement.
2.04 "Annual-Pay Deferral Election" shall mean a
Participant's election pursuant to Section 3.02 to
defer a portion of his Annual Pay.
2.05 "Annual-Pay Deferrals" shall mean the amounts
credited to a Participant's Account pursuant to
Section 3.02.
2.06 "Bonus" shall mean an award under the Company's
Profit Sharing Plan, including the portion of such
an award deferred pursuant to this Plan or another
nonqualified deferred compensation plan or
arrangement.
2.07 "Bonus Deferral Election" shall mean a Participant's
election pursuant to Section 3.03 to defer all or a
portion of such Participant's Bonus.
2.08 "Bonus Deferrals" shall mean the amounts credited to
a Participant's Account pursuant to Section 3.03.
<PAGE>
<PAGE>
2.10 "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
2.11 "Company" shall mean Carter-Wallace, Inc. and any
successor thereto.
2.12 "Company Matching Amount" shall mean the amount
credited to a Participant's Account pursuant to
Article 4.
2.13 "Eligible Employee" shall have the meaning ascribed
thereto in Section 3.01.
2.14 "Employee" shall mean an "Employee" as defined in
the Savings Plan, but shall not include any employee
covered by a collective bargaining unit.
2.15 "Investment Election" shall mean a Participant's
election under Article 5 of the investment fund or
funds used to measure the investment performance of
the Participant's Account.
2.16 "Make-Up Election" shall mean an Annual-Pay Deferral
Election made pursuant to Section 3.02(a).
2.17 "Participant" shall mean an Employee who satisfies
the requirements for participation in the Plan
pursuant to Section 3.01 and whose Account has not
been distributed.
2.18 "Plan" shall mean this Carter-Wallace, Inc.
Executive Savings Plan, as amended from time to
time.
2.19 "Plan Year" shall mean the calendar year.
2.20 "Projected Annual Total Compensation" for a calendar
year shall mean the sum of (i) a Participant's
combined Annual Pay and Bonus during the first 10
months of such year and (ii) the Participant's
projected base salary for the last two months of
such year (based on the salary rate in effect on
November 1 of such year).
2.21 "Savings Plan" shall mean the Carter-Wallace, Inc.
Supplemental Retirement and Savings Plan, as amended
from time to time.
2.22 "Section 401(a)(17) Limitation" with respect to a
Plan Year or calendar year shall mean the dollar
limitation under Section 401(a)(17) of the Code in
effect for such year. For purposes of this
definition, the Section 401(a)(17) Limitation for
1993 shall be deemed to be $150,000.
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<PAGE>
2.23 "Select Group" shall mean, with respect to a Plan
Year, the group of Employees whose Projected Annual
Total Compensation for the immediately preceding
calendar year exceeds the Section 401(a)(17)
Limitation for such immediately preceding year.
2.24 "Unforeseeable Emergency" shall have the meaning
ascribed thereto in Section 10.03.
2.25 "Valuation Date" shall mean the last day of each
calendar month.
2.26 "Whole-Year Election" shall mean an Annual-Pay
Deferral Election made pursuant to Section 3.02(b).
3. Participation and Deferral Elections
3.01 Participation. Any Employee who is a member of the
Select Group with respect to a Plan Year (an
"Eligible Employee") shall be eligible to
participate in the Plan for such Plan Year as of the
latest of (i) the first day of such Plan Year, (ii)
the first day on which he is eligible to participate
in the Savings Plan, or (iii) April 1, 1994. To
become a Participant with respect to a Plan Year, an
Eligible Employee must file with the Company an
Annual-Pay Deferral Election or a Bonus Deferral
Election (or both) with respect to such Plan Year in
accordance with Sections 3.02 or 3.03, respectively.
Participation in the Plan shall terminate when all
amounts credited to a Participant's Account have
been distributed.
3.02 Annual-Pay Deferral Elections. An Eligible Employee
may elect to defer a portion of his Annual Pay by
making a written election on such form as the
Administrator shall designate. Such election must
be made prior to the later of April 1, 1994 or the
first day of the Plan Year to which such election
relates, or such earlier date as the Administrator
may specify, and may not be modified or revoked
after the commencement of such Plan Year except as
provided in Sections 3.04 and 10.01. An Annual-Pay
Deferral Election applies only to the Annual Pay for
the Plan Year to which such election relates; to
defer a portion of his Annual Pay in a subsequent
Plan Year a Participant must make a new Annual-Pay
Deferral Election. An amount deferred pursuant to
an Annual-Pay Deferral election shall be credited to
the Participant's Account within 30 days after the
date on which such amount was otherwise payable.
An Annual-Pay Deferral Election shall consist of a
Make-Up Election, a Whole-Year Election, or both.
(a) A Make-Up Election, which shall be for any
whole percentage up to 4% of a Participant's
Annual Pay, shall be effective with respect
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<PAGE>
to all Annual Pay for the Plan Year earned after
the last day of the payroll period during which
such Annual Pay attains the Section 401(a)(17)
Limitation.
(b) A Whole-Year Election shall be for any whole
percentage up to 20% of a Participant's Annual
Pay, and shall be effective for the entire Plan
Year to which it relates.
No Make-Up Election or Whole-Year Election shall be
effective with respect to Annual Pay that is payable
prior to the effective date of his participation
pursuant to Section 3.01.
3.03 Bonus Deferral Elections. An Eligible Employee may
elect to defer any whole percentage of his Bonus by
making a written election on such form as the
Administrator shall designate. Such election must
be made prior to the first day of the Company's
fiscal year during which the services to which the
Bonus relates are rendered, or such earlier date as
the Administrator may specify, and may not be
modified or revoked after the commencement of such
fiscal year except as specified in Sections 3.04 and
10.01. A Bonus Deferral Election applies only to
the Bonus paid for the fiscal year to which such
election relates; to defer all or a portion of a
Bonus paid on account of a subsequent fiscal year
the Participant must file a new Bonus Deferral
Election. The portion of a Bonus deferred pursuant
to a Bonus Deferral Election shall be credited to
the Participant's Account on the Valuation Date
coinciding with or next following the date on which
the Bonus was otherwise payable.
3.04 Suspension of Deferrals. Notwithstanding anything
to the contrary in this Article 3, in the event (i)
a Participant receives a qualifying emergency
withdrawal from the Savings Plan or (ii) the
Administrator approves a Participant's request for a
suspension of deferrals pursuant to Section 10.01 on
account of an Unforeseeable Emergency, the
Participant's Annual-Pay Deferral Election and Bonus
Deferral Election shall be suspended with respect to
any Annual Pay or Bonuses otherwise payable during
the period beginning on the date of such withdrawal
or effective date of such approval and ending on the
last day of the next succeeding Plan Year.
4. Company Matching Amount
For each Plan Year, the Company shall credit to a
Participants's Account a Company Matching Amount equal to
50% of the amount of the Participant's Annual Pay deferred
pursuant to his Make-Up Election; provided, however, that
no matching contribution shall be made with respect to a
Participant for a Plan Year unless such Participant's total
elective deferrals under the Savings Plan for such Plan
Year were equal to the dollar limitation under Section
402(g)(1) of the Code (or such lesser
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<PAGE>
limitation on elective deferrals as may apply to the
Participant under the Savings Plan) for such Plan Year.
Such Company Matching Amount shall be credited to the
Participant's Account not later than 60 days following
the end of such Plan Year.
Solely for purposes of calculating the Company Matching
Amount, the amount deferred by a Participant pursuant to
his Make-Up Election shall be deemed to include the amount
that would have been deferred had his Make-Up Election
become effective at the point at which his Annual Pay
attained the Section 401(a)(17) Limitation (rather than on
the first day of the following payroll period).
5. Investment Performance Elections
5.01 Initial Election. Prior to the commencement of his
participation in the Plan, each Participant shall
file an initial Investment Election which shall
designate from among the investment funds available
for selection under the Plan the investment fund or
funds which shall be used to measure the investment
performance of the Participant's Account.
5.02 Change in Election. A Participant may change his
Investment Election by a filing a written notice
with the Administrator. Such change may relate to
the Participant's existing Account balance, to
future Annual-Pay Deferrals, Bonus Deferrals, and
Company Matching Amounts, or to both, and shall be
effective on the first day of the calendar quarter
next following receipt of such notice by the
Administrator; provided, however, that if the
Administrator adopts rules permitting changes to be
made more frequently than quarterly the effective
date of a change in a Participant's Investment
Election shall be modified accordingly.
5.03 Crediting of Investment Return. As of any Valuation
Date, each Participant's Account shall, under such
procedures as the Administrator shall establish, be
credited with any income, and debited with any loss,
that would have been realized if the amounts
credited to his Account had been invested since the
preceding Valuation Date in accordance with his
Investment Election.
References in the Plan to Investment Elections are
for the sole purpose of attributing hypothetical
investment performance to each Participant's
Account. Nothing herein shall require the Company
to invest, earmark, or set aside its general assets
in any specific manner.
6. Accounts
6.01 Maintenance of Accounts. The Administrator shall
maintain or cause to be maintained records showing
the individual balances of each Account. At
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least once per year each Participant shall be
furnished with a statement setting forth the value
of his Account.
6.02 Vesting. All amounts in a Participant's Account
shall be fully vested.
7. Distribution of Benefits
7.01 Benefit Payment Election. Prior to the commencement
of his participation in the Plan, each Participant
shall file a benefit payment election with the
Administrator on such form as the Administrator
shall prescribe specifying (i) whether the
Participant's benefit is to be paid in a lump sum or
in substantially equal annual installments, (ii) the
year in which such lump-sum payment is to be made or
such installments are to commence, (iii) if
installments are elected, the number of such
installments. Except as provided in Section 10.02,
no portion of a Participant's benefit may be
distributed prior to his separation from service.
Lump-sum payments may not be made later than, and
installment payments may not extend beyond, the 15th
anniversary of the date of the Participant's
separation from service.
7.02 Change in Election. A Participant's benefit payment
election may be changed from time to time, provided,
however, that no such change shall be effective if
the Participant's separation from service from the
Company occurs less than one year after the date
such change is made. In such event the
Participant's benefit shall be paid in accordance
with his most recent election or change in election
(other than a change in election made less than one
year before his separation from service).
7.03 Distribution of Benefits. Except as otherwise
provided in Article 9, a Participant's Account shall
be distributed in accordance with his benefit
payment election made pursuant to Section 7.01
(after giving effect to any modifications to such
election pursuant to Section 7.02). The payment of
any installment or lump sum shall, in accordance
with the Participant's election, be made either (i)
within 30 days after the date of the Participant's
separation from service or (ii) during the first 30
days of a calendar year commencing after the
Participant separates from service.
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<PAGE>
8. Death of a Participant
8.01 Except as otherwise provided in Article 9 and in
Section 8.02, in the event of a Participant's death
prior to the distribution of his entire Account
balance, the remaining balance in his Account shall
be distributed in accordance with his benefit
payment election made pursuant to Section 7.01
(after giving effect to any modifications to such
election pursuant to Section 7.02). Such
distribution shall be made to the beneficiary
designated by the Participant under the Savings
Plan, unless the Participant has specifically
designated a different beneficiary under this Plan
in a writing filed with the Administrator.
8.02 A Participant may elect to have any amount remaining
in his account upon his death paid to his
beneficiary in a lump sum within 30 days after the
Administrator has received notification of his
death, rather than in accordance with his benefit
payment election under Section 7.01. Such a lump-
sum death benefit election may be made or revoked at
any time, provided, however, that no such election
or revocation shall be effective if made less than
one year before the date of the Participant's death.
9. Change in Control
9.01 Notwithstanding any provision to the contrary
herein, in the event of a Change in Control (as
defined in Section 9.02) the entire balance in a
Participant's Account shall be distributed in a lump
sum to the Participant or his beneficiary within 30
days following such Change in Control.
9.02 A Change in Control shall mean the acquisition by
any person (including an individual, a corporation,
a partnership, an association, a joint-stock
company, a trust, or any unincorporated
organization, but excluding a member of the Hoyt
Family, a trust primarily for the benefit of members
of the Hoyt Family or parties controlled by members
of the Hoyt Family) in one or in a series of
transactions of (i) shares of stock which would,
alone or aggregated with shares of stock already
owned by such person, result in such person owning
more than 50 percent of the voting power of the
securities of the Company possessing the right to
vote on the election of directors and all other
matters which require the approval of shareholders
generally; (ii) all or substantially all of the
properties and assets of the Company; or (iii) the
power, whether direct or indirect, whether exercised
or not, to direct or cause the direction of the
management or policies of the Company, whether
through record or beneficial ownership of voting
securities or other equity or debt interests, by
contract, by proxy or otherwise. For purposes of
this definition, the
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"Hoyt Family" shall mean the family of Henry H. Hoyt,
Sr., his descendants, and members of such descendants'
families.
10. Unforeseeable Emergencies
10.01 Suspension of Deferrals. In the event of a
Participant's Unforeseeable Emergency, such
Participant may request a suspension of his Annual-
Pay Deferral and Bonus Deferral in accordance with
Section 3.04 (if a suspension is not already in
effect pursuant to such section). Any such request
shall be subject to the approval of the
Administrator, which approval shall not be granted
unless such need cannot be relieved (i) through
reimbursement or compensation by insurance or
otherwise or (ii) by liquidation of the
Participant's assets (to the extent the liquidation
of such assets would not itself cause severe
financial hardship). If the request is granted,
such suspension shall be effective as of such date
as the Administrator shall prescribe.
10.02 Emergency Withdrawal. In the event of a
Participant's Unforeseeable Emergency, such
Participant may request an emergency withdrawal from
his Account. Any such request shall be subject to
the approval of the Administrator, which approval
(a) shall not be granted unless the Participant's
Annual-Pay Deferral Election and Bonus Deferral
Election have been suspended pursuant to Section
3.04, (b) shall only be granted to the extent
reasonably needed to satisfy the need created by the
Unforeseeable Emergency, and (c) shall not be
granted to the extent that such need may be relieved
(i) through reimbursement or compensation by
insurance or otherwise or (ii) by liquidation of the
Participant's assets (to the extent the liquidation
of such assets would not itself cause severe
financial hardship).
10.03 Unforeseeable Emergency. An "Unforeseeable
Emergency" means severe financial hardship to the
Participant resulting from a sudden and unexpected
illness or accident of the Participant or his
dependent, loss of the Participant's property due to
casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of
events beyond the Participant's control. Examples
of circumstances not qualifying as an Unforeseeable
Emergency include the need to send a Participant's
child to college and the desire to purchase a home.
11. Administration
The Plan shall be administered by the Administrator, which
shall have discretionary authority to determine eligibility
for benefits and to construe the terms of the Plan. The
Administrator's good-faith determination with respect to
any issue relating to the interpretation of the Plan shall
be conclusive and final.
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<PAGE>
12. General Provisions
12.01 No Contract of Employment. The establishment of the
Plan shall not be construed as conferring any legal
rights upon any Participant for a continuation of
employment, nor shall it interfere with the rights
of the Company to discharge a Participant and to
treat him without regard to the effect which such
treatment might have upon him as a Participant in
the Plan.
12.02 Withholding. As a condition to a Participant's
entitlement to benefits hereunder, the Company shall
have the right to deduct from any amounts otherwise
payable to a Participant, whether pursuant to the
Plan or otherwise, or otherwise to collect from the
Participant, any required withholding taxes with
respect to benefits under the Plan.
12.03 Non-Assignability of Benefits. Subject to any
applicable law, no benefit under the Plan shall be
subject in any manner to, nor shall the Company be
obligated to recognize, any purported anticipation,
alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to do so
shall be void. No such benefit shall in any manner
be liable for or subject to garnishment, attachment,
execution, or a levy, or liable for or subject to
the debts, contracts, liabilities, engagements, or
torts of the Participant.
12.04 Successor Employers. The Plan shall be binding upon
the successors and assigns of the Company. The
Company shall require any successor (whether direct
or indirect, and whether by purchase, merger,
consolidation, or otherwise) to all or substantially
all of the business or assets of the Company, by
written agreement to expressly assume and agree to
perform the Company's obligations under the Plan in
the same manner and to the same extent that the
Company would be required to perform them if no such
succession had taken place. The provisions of this
Section 12.04 shall continue to apply to each
subsequent employer of the Participant hereunder in
the event of any subsequent merger, consolidation,
or transfer of assets of such subsequent employer.
12.05 Governing Law. The laws of the State of New York
shall govern the construction of this Plan and the
rights and the liabilities hereunder of the parties
hereto.
12.06 Pronouns. The masculine pronoun shall mean the
feminine wherever appropriate.
13. Source of Benefits
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<PAGE>
The Plan is an unfunded plan maintained by the Company for
the purpose of providing deferred compensation for a select
group of management or highly compensated employees.
Benefits under the Plan shall be payable from the general
assets of the Company. The Plan shall not be construed as
conferring on a Participant any right, title, interest, or
claim in or to any specific asset, reserve, account, or
property of any kind possessed by the Company. To the
extent that a Participant or any other person acquires a
right to receive payments from the Company, such right
shall be no greater than the right of an unsecured general
creditor.
14. Effective Date
This Plan shall be effective April 1, 1994.
15. Grandfather Provisions
15.01 In the case of a Participant who (i) was a
participant in the Savings Plan during the 1993 plan
year and deferred under that plan for such plan year
at least 4% of his compensation (as defined in the
Savings Plan), and (ii) is a Participant in this
Plan as of April 1, 1994, such Participant's Account
shall be credited as of April 1, 1994 with an amount
equal to the excess of (a) 2% of his Annual Pay for
the 1993 plan year over (b) the amount of the
matching contribution allocated to his account under
the Savings Plan for such plan year. Such credited
amount shall be treated as a Company Matching Amount
for purposes of the Plan.
15.02 In the case of any Participant who had entered into
one or more agreements with the Company (other than
deferral elections under the Savings Plan) (the
"Agreements") providing for the deferral of all or a
portion of his Bonus payable on account of any
fiscal year ending before April 1, 1994, the total
amount of bonuses so deferred, plus any interest
credited to the Participant's account pursuant to
the terms of such agreements, shall be transferred
to the Participant's Account under this Plan as of
April 1, 1994 (or, in the case of a bonus payable
with respect to the fiscal year ending March 31,
1994, within 30 days after the date the amount of
such bonus is otherwise payable). Any amount so
transferred shall be treated for purposes of the
Plan as a Bonus Deferral. Notwithstanding anything
to the contrary herein, an individual who had
entered into one or more Agreements shall be
required, as a condition of eligibility to
participate in the Plan, to request prior to April
1, 1994 the transfers described in this Section
15.02 and to agree that the Plan shall supersede the
respective Agreements as of the effectiveness of
such transfers.
16. Amendment or Termination
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<PAGE>
The Board of Directors of the Company reserves the right to
amend or terminate this Plan at any time; provided,
however, that without such Participant's written consent,
no amendment or termination of the Plan shall adversely
affect the right of any Participant to receive, or
otherwise result in a material adverse effect on such
Participant's rights under the Plan with respect to, his
accrued benefits as determined as of the date of amendment
or termination.
IN WITNESS OF WHICH, the Company has adopted the
Plan this ____ day of ______________, 1994.
CARTER-WALLACE, INC.
By:_____________________
Its:____________________
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Exhibit 21
Parent and Subsidiaries
Principal Owners of the Company's Stock
Information pertaining to the percentages of the Company's outstanding
common stock, par value $1 per share and Class B common stock, par value $1
per share, held by certain principal stockholders of the Company is
incorporated herein by reference to the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held on July 19, 1994, to be filed
with the Securities and Exchange Commission under the caption "Principal
Stockholders".
Subsidiaries of the Company
The following is a list of the active subsidiaries of the Company showing
the jurisdiction of incorporation and the percentage of voting securities
owned by the Company or by wholly-owned subsidiaries of the Company as of
March 31, 1994:
<TABLE>
<CAPTION>
Jurisdiction Percentage
of of Voting
Name of Corporation Incorporation Securities
<S> <C> <C>
Carter Family Products, Inc. Delaware 100%
Carter P.D., Inc. Delaware 100%
Carter-Wallace, N.S. Inc. Delaware 100%
Carter-Wallace, O.S. Inc. Delaware 100%
Carter-Wallace Limited England 100%
Carter-Wallace (Australia) Pty, Limited Australia 100%
Carter-Wallace, S.A. Mexico 100%
Carter-Wallace FSC Corp. Virgin Islands 100%
Denver Chemical (Puerto Rico), Inc. Delaware 100%
Denver Laboratories (Canada) Limited Canada 100%
Frank W. Horner Inc. Canada 100%
Icart, S.A. Spain 100%
International Biological Laboratories, Inc. Maryland 95%
Laboratoires Ethical S.A.R.L. France 100%
Laboratoires Fumouze, S.A. France 100%
Societe Germanoise de Cosmetique France 100%
S.p.A. Italiana Laboratori Bouty Italy 100%
</TABLE>
All of the above subsidiaries are included in the consolidated financial
statements of the Company.
