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

                                    FORM 10-Q

(X)  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934
For the quarter ended June 30, 2001
                      -------------

( )  Transition Report Pursuant to Section 13 or 15 (d) of the Securities
     Act of 1934

For the transition period from          to
                               --------    --------

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 Identification No.)
incorporation or organization)

1345 Avenue of the Americas
New York, New York                            10105
-------------------------------     ------------------------------
(Address of principal executive             (Zip Code)
 offices)

Registrant's telephone number, including area code: 212-339-5000

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
                                     -----      -----

The number of shares of the registrant's Common Stock and Class B Common Stock
outstanding at June 30, 2001 were 33,482,300 and 12,222,200, respectively.

<PAGE>

                      CARTER-WALLACE, INC. AND SUBSIDIARIES

                               INDEX TO FORM 10-Q

                                  JUNE 30, 2001

                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

Condensed Consolidated Statements of Earnings and
 Comprehensive Earnings for the three months ended
 June 30, 2001 and 2000                                                   1

Condensed Consolidated Balance Sheets at
 June 30, 2001 and March 31, 2001                                         2

Condensed Consolidated Statements of Cash Flows
 for the three months ended June 30, 2001 and 2000                        3

Notes to Condensed Consolidated Financial Statements                      4

Report by KPMG LLP on their limited review                                9

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS                   10

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
         FINANCIAL MARKET RISK                                           13


                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS                                              13

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                               13

Signatures                                                              14


<PAGE>

                         PART I - FINANCIAL INFORMATION

                          ITEM 1 - FINANCIAL STATEMENTS

                      CARTER-WALLACE, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                           AND COMPREHENSIVE EARNINGS
                                   (UNAUDITED)

                                                  Three Months Ended
                                                       June 30
                                            --------------------------------
                                                2001                 2000
                                            ------------        ------------
STATEMENT OF EARNINGS

Net sales                                   $234,875,000        $224,508,000
Other income                                   3,694,000           3,552,000
                                            ------------        ------------
                                             238,569,000         228,060,000
Cost and expenses:
Cost of goods sold                            75,825,000          77,484,000
Advertising, marketing &
 other selling expenses                       72,546,000          75,966,000
Research & development
 expenses                                      6,348,000           6,688,000
General, administrative
 & other expenses                             35,976,000          30,109,000
Interest expense                               1,018,000           1,145,000
                                            ------------        ------------
                                             191,713,000         191,392,000

Earnings before taxes
 on income                                    46,856,000          36,668,000
Provision for taxes
 on income                                    18,274,000          14,301,000
                                            ------------        ------------

Net earnings                                $ 28,582,000        $ 22,367,000
                                            ============        ============

Earnings per share - Basic                  $        .63        $         49
                                            ============        ============
Earnings per share - Diluted                $        .61        $        .48
                                            ============        ============
Cash dividends per share                    $        .08        $        .08
                                            ============        ============
Average shares of common
 stock outstanding                            45,661,000          45,222,000
                                            ============        ============

STATEMENT OF COMPREHENSIVE EARNINGS

Net Earnings                                $ 28,582,000        $ 22,367,000

Other comprehensive earnings (loss):
 Foreign currency translation
  adjustment and other                        (1,831,000)         (3,806,000)
                                            ------------        ------------
Total comprehensive earnings                $ 26,751,000        $ 18,561,000
                                            ============        ============

                                        1
<PAGE>
                      CARTER-WALLACE, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                   June 30,     March 31,
                                                     2001         2001
                                                ------------  ------------
ASSETS                                            (Unaudited)  (Restated)
------
Current Assets:
  Cash and cash equivalents                     $ 99,950,000  $ 97,152,000
  Short-term investments                          14,787,000    47,891,000
  Accounts and other receivables, less
    allowances of $9,326,000 at June 30,
     2001 and $8,392,000 at March 31, 2001       191,494,000   133,213,000
  Inventories:
    Finished goods                                57,189,000    59,639,000
    Work in process                               10,959,000    11,762,000
    Raw materials and supplies                    31,674,000    30,374,000
                                                ------------  ------------
                                                  99,822,000   101,775,000
                                                ------------  ------------
  Deferred taxes, prepaid expenses
   and other current assets                       38,496,000    32,469,000
                                                ------------   -----------

Total Current Assets                             444,549,000   412,500,000
                                                ------------  ------------

Property, plant and equipment, at cost           340,923,000   339,724,000
Less: accumulated depreciation and amortization  195,351,000   192,560,000
                                                 -----------   -----------
                                                 145,572,000   147,164,000
Intangible assets                                113,636,000   118,260,000
Deferred taxes and other assets                  109,067,000   107,284,000
                                                ------------  ------------

Total Assets                                    $812,824,000  $785,208,000
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable                              $ 44,637,000  $ 49,103,000
  Accrued expenses                               122,634,000   116,616,000
  Notes payable                                    7,331,000     6,658,000
                                                ------------  ------------

Total Current Liabilities                        174,602,000   172,377,000
                                                ------------  ------------

Long-Term Liabilities:
  Long-term debt                                  51,726,000    53,835,000
  Deferred compensation                           16,997,000    15,500,000
  Accrued postretirement benefit obligation       71,854,000    71,251,000
  Other long-term liabilities                     51,983,000    51,708,000
                                                ------------   -----------

Total Long-Term Liabilities                      192,560,000   192,294,000
                                                ------------   -----------

Stockholders' Equity:
  Common stock                                    34,829,000    34,827,000
  Class B common stock                            12,376,000    12,378,000
  Capital in excess of par value                   4,044,000     4,536,000
  Retained earnings                              460,268,000   435,341,000
  Less:  Foreign currency translation
           adjustment and other                   41,489,000    39,658,000
         Treasury stock, at cost                  24,366,000    26,887,000
                                                ------------   -----------
Total Stockholders' Equity                       445,662,000   420,537,000
                                                ------------   -----------

Total Liabilities and Stockholders' Equity      $812,824,000  $785,208,000
                                                ============  ============

                                        2
<PAGE>
                      CARTER-WALLACE, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                    THREE MONTHS ENDED JUNE 30, 2001 AND 2000
                                   (UNAUDITED)

                                                  2001           2000
                                              ------------   ----------
CASH FLOWS FROM OPERATIONS:

  Net earnings                                $28,582,000   $22,367,000
  Depreciation and amortization                 7,136,000     7,561,000
  Changes in assets and liabilities           (61,578,000)  (46,649,000)
                                             ------------   -----------
                                              (25,860,000)  (16,721,000)
                                             ------------   -----------


CASH FLOWS USED IN INVESTING ACTIVITIES:

  Additions to property, plant and equipment   (3,078,000)  (3,659,000)
  Decrease in short-term investments           33,250,000   14,244,000
  Proceeds from sale of property, plant
   and equipment                                   45,000       33,000
                                             ------------  -----------
                                               30,217,000   10,618,000
                                             ------------  -----------
CASH FLOWS USED IN FINANCING ACTIVITIES:

  Dividends paid                               (3,655,000)  (3,615,000)
  Increase in borrowings                        1,372,000      502,000
  Payments of debt                               (777,000)    (810,000)
  Proceeds from exercise of stock options       1,754,000      787,000
  Purchase of treasury stock                     (272,000)       -
                                             ------------   ----------
                                               (1,578,000)  (3,136,000)
                                             ------------  -----------
Effect of exchange rate changes on
 cash and cash equivalents                         19,000     (364,000)
                                             ------------  -----------
Increase (decrease) in cash and
 cash equivalents                            $  2,798,000  $(9,603,000)
                                             ============  ===========

                                        3
<PAGE>
                              CARTER-WALLACE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2001 AND 2000

NOTE 1:  DESCRIPTION OF BUSINESS AND PLANNED SALE OF COMPANY

On May 7, 2001, Carter-Wallace, Inc. (the "Company") entered into definitive
agreements for the sale of the Company in a two-step transaction. In accordance
with an Asset Purchase Agreement, the Company will first sell the net assets and
business of the Company's consumer business for $739 million, less certain debt
outstanding. Such funds will be paid directly to Carter-Wallace, Inc. Pursuant
to an Agreement and Plan of Merger, immediately following the sale of the
consumer business, the buying group will acquire the Company's outstanding
common stock and Class B common stock for $20.30 per share subject to certain
closing adjustments. CPI Development Corporation, a private holding company that
controls approximately 83% of the voting power of Carter-Wallace, Inc., has
entered into an agreement to vote in favor of the merger, subject to certain
limited exceptions, one of which is that the voting agreement will terminate if
more than 30% of the shares of the Company's common stock and Class B common
stock, taken together, outstanding immediately prior to the stockholder vote on
the merger, have properly exercised appraisal rights under Delaware law with
respect to the merger. The aggregate consideration from both transactions is
estimated to be $1.121 billion, less approximately $160 million of corporate
taxes to be paid on the sale of the consumer business. Each agreement is
conditioned on the other, so one will not be completed without the other.

The asset sale and merger have been approved by the Board of Directors of each
party to the agreements and are subject to certain conditions, including a
financing condition for each buyer, various regulatory approvals, and the
approval of Carter-Wallace, Inc. stockholders.

Under the terms of the Asset Purchase Agreement and the Merger Agreement related
to the pending sale of the Company, the Company may be required to pay
termination fees and expenses to the buyers if these transactions are not
consummated for certain specific reasons. These termination fees and expenses
would approximate $46 million at the maximum levels.

NOTE 2:  RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

In the Company's originally filed Annual Report to Stockholders on Form 10-K for
March 31, 2001, the consolidated financial statements presented the consumer
business as a discontinued operation. Subsequently, it was determined that the
pending sale of the consumer business in connection with the pending sale of the
entire company did not meet the criteria for presentation as a discontinued
operation. As a result, the consolidated financial statements have been restated
for all periods presented to reflect the consumer business as a component of
continuing operations.

NOTE 3:  INTERIM REPORTS

The results of the interim periods are not necessarily indicative of results
expected for a full year's operations. In the opinion of management, all
adjustments necessary for a fair statement of results of these interim periods
have been reflected in these financial statements and are of a normal recurring
nature.

                                   (Continued)
                                        4
<PAGE>

                              CARTER-WALLACE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2001 AND 2000
                                   (CONTINUED)

NOTE 4:  REVIEW OF INDEPENDENT AUDITORS

The financial information included in this Form has been reviewed by KPMG
LLP, independent auditors. A copy of their report on this limited review is
included in this Form.

NOTE 5:  FELBATOL

As previously reported, in the fiscal years ended March 31, 1995 and 1996 the
Company incurred one-time charges to pre-tax earnings totaling $45,980,000
related to use restrictions for Felbatol. Depending on future sales levels,
additional inventory write-offs may be required. If for any reason the product
at some future date should no longer be available in the market, the Company
will incur an additional one-time charge, consisting primarily of inventory
write-offs and anticipated returns of product currently in the market, in the
range of $15,000,000 on a pre-tax basis.

NOTE 6:  LITIGATION

Information regarding Legal Proceedings involving the Company is presented in
Note 15 "Litigation Including Environmental Matters" of the Notes to the
Consolidated Financial Statements on pages 36 to 38 of the Company's Annual
Report on Form 10-K/A-1 for the fiscal year ended March 31, 2001 and is herein
expressly incorporated by reference.

The Company continues to believe, based upon opinion of counsel, that it has
good defenses to all of the pending actions referenced in such note and should
prevail.

                                   (Continued)
                                        5

<PAGE>

                              CARTER-WALLACE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2001 AND 2000
                                   (CONTINUED)

NOTE 7:  BUSINESS SEGMENTS (IN THOUSANDS)

Business segment information for the three months ended June 30, 2001 and 2000
is as follows:

                                                2001        2000
                                             --------     --------
Sales

 Domestic Consumer Products                  $ 96,350     $ 92,549
 Domestic Health Care                          76,568       66,279
 International                                 61,957       65,680
                                             --------     --------

Consolidated                                 $234,875     $224,508
                                             ========     ========


Operating Profit

 Domestic Consumer Products                  $ 31,720     $ 28,205
 Domestic Health Care                          28,643       20,654
 International                                  6,494        6,924
 Domestic net interest income (expense)           264          (93)
 Other (expense) net of other income          (10,464)      (9,689)
 General Corporate expenses                    (9,801)      (9,333)
                                             --------     --------

Earnings before taxes on income              $ 46,856     $ 36,668
                                             ========     ========


NOTE 8: EARNINGS PER SHARE

Basic earnings per share for each period presented has been calculated using the
weighted average shares outstanding. In computing diluted earnings per share
incremental shares issuable upon the assumed exercise of stock options and the
vesting of stock awards have been added to the weighted average shares
outstanding.

For the three months ended June 30, 2001 incremental shares for purposes of
calculating diluted earnings per share amounted to 1,373,000 shares. This
compares to 1,652,000 incremental shares in the three months ended June 30,
2000.

NOTE 9: NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires that companies
recognize all derivatives as either assets or liabilities on the balance sheet
and measure these instruments at fair value. In June 1999, the FASB issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral
of the Effective Date of FASB Statement No. 133". This statement deferred the
effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. In
June 2000, the FASB issued SFAS No. 138, "Accounting for

                                   (Continued)
                                        6
<PAGE>
                              CARTER-WALLACE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2001 AND 2000
                                   (CONTINUED)

Certain Derivative Instruments and Certain Hedging Activities", which made minor
amendments to SFAS No. 133. The Company has adopted SFAS No. 133, as amended,
effective April 1, 2001. The Company's derivatives are all qualified hedges. The
derivatives are comprised of interest rate swaps and foreign exchange forward
contracts. The valuation of these derivatives at June 30, 2001 resulted in a net
asset of approximately $150,000. The adoption of this accounting requirement did
not have a material effect on the Company's consolidated financial statements.

In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No.
142, "Goodwill and Other Intangible Assets". SFAS 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001 as well as all purchase method business combinations completed after
June 30, 2001. SFAS 141 also specifies criteria intangible assets acquired in a
purchase method business combination must meet to be recognized and reported
apart from goodwill, noting that any purchase price allocable to an assembled
workforce may not be accounted for separately. SFAS 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of SFAS 142. SFAS 142 will also require that intangible
assets with definite useful lives be amortized over their respective estimated
useful lives to their estimated residual values, and reviewed for impairment in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of."

The Company is required to adopt the provisions of SFAS 141 immediately, and
SFAS 142 effective April 1, 2002. Furthermore, any goodwill and any intangible
asset determined to have an indefinite useful life that are acquired in a
purchase business combination completed after June 30, 2001 will not be
amortized, but will continue to be evaluated for impairment in accordance with
the appropriate pre-SFAS 142 accounting literature. Goodwill and intangible
assets acquired in business combinations completed before July 1, 2001 will
continue to be amortized prior to the adoption of SFAS 142.

SFAS 141 will require upon adoption of SFAS 142 that the Company evaluate its
existing intangible assets and goodwill that were acquired in a prior purchase
business combination, and to make any necessary reclassifications in order to
conform with the new criteria in SFAS 141 for recognition apart from goodwill.
Upon adoption of SFAS 142, the Company will be required to reassess the useful
lives and residual values of all intangible assets acquired in purchase business
combinations, and make any necessary amortization period adjustments by the end
of the first interim period after adoption. In addition, to the extent an
intangible asset is identified as having an indefinite useful life, the Company
will be required to test the intangible asset for impairment in accordance with
the provisions of SFAS 142 within the first interim period. Any impairment loss
will be measured as of the date of adoption and recognized as the cumulative
effect of a change in accounting principle in the first interim period.

                                   (Continued)
                                        7
<PAGE>

                              CARTER-WALLACE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2001 AND 2000
                                   (CONTINUED)

In connection with the transitional goodwill impairment evaluation, SFAS 142
will require the Company to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this the Company must identify its reporting units and determine the carrying
value of each reporting unit by assigning the assets and liabilities, including
the existing goodwill and intangible assets, to those reporting units as of the
date of adoption. The Company will then have up to six months from the date of
adoption to determine the fair value of each reporting unit and compare it to
the reporting unit's carrying amount. To the extent a reporting unit's carrying
amount exceeds its fair value, an indication exists that the reporting unit's
goodwill may be impaired and the Company must perform the second step of the
transitional impairment test. In the second step, the Company must compare the
implied fair value of the reporting unit's goodwill, determined by allocating
the reporting unit's fair value to all of its assets (recognized and
unrecognized) and liabilities in a manner similar to a purchase price allocation
in accordance with SFAS 131, to its carrying amount, both of which would be
measured as of the date of adoption. This second step is required to be
completed as soon as possible, but no later than the end of the year of
adoption. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in the Company's statement of
earnings.

As of the date of adoption, the Company expects to have total unamortized
goodwill in the amount of approximately $68,000,000 which will be subject to the
transition provisions of SFAS 141 and 142. Amortization expenses related to this
goodwill was $3,700,000 for the year ended March 31, 2001. Because of the
extensive effort needed to comply with adopting SFAS 141 and 142, it is not
practicable to reasonably estimate the impact of adopting these Statements on
the Company's financial statements at the date of this report, including whether
any transitional impairment losses will be required to be recognized as the
cumulative effect of a change in accounting principle.

NOTE 10:  PENDING LAND SALE

In June 2000 the Company entered into an agreement to sell two parcels of vacant
land adjacent to its Cranbury, NJ facility totalling approximately 210 acres.
The closings of these transactions are contingent upon certain approvals being
obtained and the satisfactory resolution of other conditions. No assurance can
be given that the closings will take place. The total proceeds from these land
sales will be approximately $22,050,000, less commissions and other expenses,
payable one-third at closing with the balance due in two equal annual
installments with interest. A down payment of $500,000 has been received as
escrow. The cost basis for the land being sold is approximately $1,000,000. It
is anticipated that the closing of one of the two parcels of land with a sales
value of approximately $17,000,000 will occur in August, 2001.

                                        8
<PAGE>

                       INDEPENDENT AUDITORS' REVIEW REPORT

The Board of Directors and Stockholders
Carter-Wallace, Inc.:

We have reviewed the condensed consolidated balance sheet of Carter-Wallace,
Inc. and subsidiaries as of June 30, 2001, and the related condensed
consolidated statements of earnings and comprehensive earnings, and cash flows
for the three month periods ended June 30, 2001 and 2000. These condensed
consolidated financial statements are the responsibility of the Company's
management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.

We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Carter-Wallace, Inc. and
subsidiaries as of March 31, 2001, and the related consolidated statements of
earnings, retained earnings, and comprehensive earnings, and cash flows for the
year then ended (not presented herein); and in our report dated May 18, 2001,
except as to Note 20, which is as of August 9, 2001, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of March 31, 2001 is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.

KPMG LLP
New York, New York
August 10, 2001

                                        9
<PAGE>

                              CARTER-WALLACE, INC.
                ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DESCRIPTION OF BUSINESS AND PLANNED SALE OF COMPANY

On May 7, 2001, Carter-Wallace, Inc. (the "Company") entered into definitive
agreements for the sale of the Company in a two-step transaction. In accordance
with an Asset Purchase Agreement, the Company will first sell the net assets and
business of the Company's consumer business for $739 million, less certain debt
outstanding. Such funds will be paid directly to Carter-Wallace, Inc. Pursuant
to an Agreement and Plan of Merger, immediately following the sale of the
consumer business, the buying group will acquire the Company's outstanding
common stock and Class B common stock for $20.30 per share subject to certain
closing adjustments. CPI Development Corporation, a private holding company that
controls approximately 83% of the voting power of Carter-Wallace, Inc., has
entered into an agreement to vote in favor of the merger, subject to certain
limited exceptions, one of which is that the voting agreement will terminate if
more than 30% of the shares of the Company's common stock and Class B common
stock, taken together, outstanding immediately prior to the stockholder vote on
the merger, have properly exercised appraisal rights under Delaware law with
respect to the merger. The aggregate consideration from both transactions is
estimated to be $1.121 billion, less approximately $160 million of corporate
taxes to be paid on the sale of the consumer business. Each agreement is
conditioned on the other, so one will not be completed without the other.

The asset sale and merger have been approved by the Board of Directors of each
party to the agreements and are subject to certain conditions, including a
financing condition for each buyer, various regulatory approvals, and the
approval of Carter-Wallace, Inc. stockholders.

Under the terms of the Asset Purchase Agreement and the Merger Agreement related
to the pending sale of the Company, the Company may be required to pay
termination fees and expenses to the buyers if these transactions are not
consummated for certain specific reasons. These termination fees and expenses
would approximate $46 million at the maximum levels.

RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

In the Company's originally filed Annual Report to Stockholders on Form 10-K for
March 31, 2001, the consolidated financial statements presented the consumer
business as a discontinued operation. Subsequently, it was determined that the
pending sale of the consumer business in connection with the pending sale of the
entire company did not meet the criteria for presentation as a discontinued
operation. As a result, the consolidated financial statements have been restated
for all periods presented to reflect the consumer business as a component of
continuing operations.

                                   (Continued)
                                       10
<PAGE>

                              CARTER-WALLACE, INC.
                ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)

RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE
MONTHS ENDED JUNE 30, 2000

Consolidated earnings after taxes in the three months ended June 30, 2001 were
$28,582,000 or $.63 per basic share compared with net earnings of $22,367,000 or
$.49 per basic share in the three months ended June 30, 2000.

Net sales increased $10,367,000 (4.6%) in the current year period as compared to
net sales in the prior year period. The sales increase was due largely to
selling price increases in all business segments, with the largest increase in
the Domestic Health Care segment. Unit volume increases in the Domestic Health
Care and Consumer segments also contributed to the sales increase. Sales of
pharmaceutical products in the Domestic Health Care segment continue to be
adversely affected by generic competition.

Sales and earnings from foreign operations are subject to fluctuations in
exchange rates. Lower foreign exchange rates had the effect of decreasing sales
in the current year period by approximately $4,500,000. The effect of changes in
foreign exchange on earnings was not material.

Other income increased by $142,000 from $3,552,000 in the prior year period to
$3,694,000 in the current year period due to higher interest income.

Cost of goods sold as a percentage of net sales decreased from 34.5% in the
prior year period to 32.3% in the current year period primarily due to changes
in product mix.

Advertising, marketing and other selling expenses decreased by $3,420,000 or
4.5% versus the prior year period due to decreased spending in the Domestic
Health Care and International business segments.

Research and development expenses decreased by $340,000 or 5.1% versus the prior
year period due to lower spending in the Domestic Consumer segment.

General, administrative and other expenses increased $5,867,000, or 19.5% versus
the prior year period due largely to higher expenses related to the pending sale
of the Company and increased compensation related expenses. In addition, there
were increased costs associated with the sharing of profits on a reformulated
product and an increased charge related to ASTA Medica's share of joint venture
operations.

Interest expense decreased $127,000 from $1,145,000 in the prior year period to
$1,018,000 in the current year period. This decrease results from lower levels
of borrowing.

The estimated annual effective tax rate applied in the three months ended June
30, 2001 was 39%, the same rate as in the prior year period.

                                   (Continued)
                                       11

<PAGE>

                              CARTER-WALLACE, INC.
                ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (CONTINUED)

FELBATOL

As previously reported, in the fiscal years ended March 31, 1995 and 1996 the
Company incurred one-time charges to pre-tax earnings totaling $45,980,000
related to use restrictions for Felbatol. Depending on future sales levels,
additional inventory write-offs may be required. If for any reason the product
at some future date should no longer be available in the market, the Company
will incur an additional one-time charge, consisting primarily of inventory
write-offs and anticipated returns of product currently in the market, in the
range of $15,000,000 on a pre-tax basis.

LIQUIDITY AND CAPITAL RESOURCES

Funds provided from operations are used for capital expenditures, acquisitions,
the purchase of treasury stock, the payment of dividends and working capital
requirements. External borrowings are incurred as needed to satisfy cash
requirements relating to seasonal business fluctuations, to finance major
facility expansion programs and to finance major acquisitions.

In the Statement of Cash Flows, the change in assets and liabilities is due
primarily to increased working capital requirements, primarily accounts
receivable.

In June 2000 the Company entered into an agreement to sell two parcels of vacant
land adjacent to its Cranbury, NJ facility totalling approximately 210 acres.
The closings of these transactions are contingent upon certain approvals being
obtained and the satisfactory resolution of other conditions. No assurance can
be given that the closings will take place. The total proceeds from these land
sales will be approximately $22,050,000, less commissions and other expenses,
payable one-third at closing with the balance due in two equal annual
installments with interest. A down payment of $500,000 has been received as
escrow. The cost basis for the land being sold is approximately $1,000,000. It
is anticipated that the closing of one of the two parcels of land with a sales
value of approximately $17,000,000 will occur in August, 2001.

Under the terms of the Asset Purchase Agreement and the Merger Agreement related
to the pending sale of the Company, the Company may be required to pay
termination fees and expenses to the buyers if these transactions are not
consummated for certain specific reasons. These termination fees and expenses
would approximate $46 million at the maximum levels.

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<PAGE>

                              CARTER-WALLACE, INC.
                      ITEM 3 - QUANTITATIVE AND QUALITATIVE
                     DISCLOSURES ABOUT FINANCIAL MARKET RISK

A portion of the Company's revenues and earnings are exposed to changes in
foreign exchange rates. Where practical, the Company seeks to relate expected
local currency revenues with local currency costs and local currency assets with
local currency liabilities.

The Company's interest bearing investments and a portion of its debt are subject
to interest rate risk. Changes in interest rates could affect interest income
and expense in future periods. The Company invests on a short-term basis.

There has been no material impact on operations from financial market risk
exposure during the three-month period ended June 30, 2001.

                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

Refer to Note 6: "Litigation" of Notes to Condensed Consolidated Financial
Statements for information regarding legal proceedings.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

  (a) Exhibit 23 - KPMG LLP Letter Regarding Interim Review Report

  (b) Reports on Form 8-K -

          On May 7, 2001, the Company filed a report on Form 8-K stating that it
          had entered into definitive agreements for the sale of the Company in
          a two-step transaction in which stockholders will receive $20.30 per
          share on a fully diluted basis, subject to certain tax adjustments.

          Pursuant to the Asset Purchase Agreement, dated as of May 7, 2001, by
          and between Armkel, LLC and the Company, the Company proposes to sell
          for $739 million in cash, less certain debt outstanding at closing,
          the Company's consumer products business.

          Pursuant to the Agreement and Plan of Merger, dated as of May 7, 2001,
          among the Company, CPI Development Corporation, MCC Acquisition
          Holdings Corporation, MCC Merger Sub Corporation and MCC Acquisition
          Sub Corporation, the Company proposes to sell for $408 million in cash
          its remaining healthcare business, by means of a merger.

          Upon consummation of the merger, the aggregate consideration estimated
          to be $1.121 billion, less the corporate taxes to be paid on the sale
          of the consumer products business and the cash-out of options, would
          be received by the holders of the Company's outstanding Common Stock
          and Class B Common Stock. Each transaction is conditioned on the
          other, so one transaction will not be consummated without the other.

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<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                               Carter-Wallace, Inc.
                                                  (Registrant)


Date:  August 14, 2001                        /s/ Paul A. Veteri
                                              -----------------------
                                              Paul A. Veteri
                                              President & Chief
                                              Operating Officer


Date:  August 14, 2001                        /s/ Peter J. Griffin
                                              -----------------------
                                              Peter J. Griffin
                                              Vice President, Finance
                                              and Controller

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