UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549
                                  FORM 10-K/A-1

(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
     of 1934
For the fiscal year ended MARCH 31, 2001
Commission File Number 1-5910

                              CARTER-WALLACE, INC.
             (Exact name of registrant as specified in its charter)

            DELAWARE                                    13-4986583
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

1345 AVENUE OF THE AMERICAS, NEW YORK, NY                  10105
(Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code: 212-339-5000 Securities
registered pursuant to Section 12(b) of the Act:

                                                  NAME OF EACH EXCHANGE
         TITLE OF EACH CLASS                       ON WHICH REGISTERED

            Common Stock
      Par value $1.00 per share                   New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

                 Class B Common Stock, par value $1.00 per share
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                             Yes    X            No
                                 -------            -------

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K/A-1 or any amendment to
this Form 10-K /A-1. (X)

The number of shares of the registrant's Common Stock and Class B Common Stock
outstanding at June 4, 2001 was 33,468,339 and 12,222,207 respectively.

The aggregate market value of voting stock held by non-affiliates of the
registrant as of June 4, 2001 was approximately $416,599,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for the Annual Meeting of
Stockholders held July 17, 2001                         Parts III & IV

<PAGE>
                                EXPLANATORY NOTE

This Form 10-K/A-1 amends and restates in its entirety the Annual Report on Form
10-K for the year ended March 31, 2001 of Carter-Wallace, Inc. filed with the
Securities and Exchange Commission on June 27, 2001 (the "Form 10-K"). This Form
10-K/A-1 reflects the restatement of the Company's financial position as of
March 31, 2001 and 2000 and the results of operations and cash flows for each of
the years in the three-year period ended March 31, 2001 as discussed in Note 20
of the Notes to Consolidated Financial Statements included herein on page 39.

The Form 10-K as amended and restated hereby continues to speak as of the date
of the Form 10-K. No attempt has been made to update disclosures for events
subsequent to the initial filing date of June 27, 2001.

                                        1
<PAGE>
                                     PART I

ITEM 1. BUSINESS

Carter-Wallace, Inc. (the "Company") is engaged in the manufacture and sale of a
diversified line of products. Additional information is presented under the
caption "Description of Business Segments" included on page 48 of this Form
10-K/A-1.

PENDING SALE OF THE COMPANY

In May 2001 the Company announced that it had entered into agreements for the
sale of the Company in a two-step transaction in which stockholders will receive
$20.30 per share, subject to certain closing adjustments. This transaction is
pending at this time and subject to approval by stockholders and other
conditions. Full details will be included in a proxy statement regarding this
transaction which will be sent to all stockholders.

In this two-step transaction, the consumer business, consisting of the Carter,
Lambert Kay and International Divisions will be sold by the Company immediately
prior to the merger of the remainder of the Company.

BUSINESS SEGMENTS AND GEOGRAPHIC DATA

Financial information about the Company's business segments and geographic areas
for the three years ended March 31, 2001 is presented in Part II, Item 7
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" included on pages 8 through 10 of this Form 10-K/A-1 and under the
caption "Description of Business Segments" included on page 48 of this form.
Additional information is presented in note 12, "Business Segments" of the Notes
to Consolidated Financial Statements included on pages 33 and 34 of this Form
10-K/A-1.

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 approximately $22,000,000 in the fiscal year ended March 31, 2001 in
comparison to the prior year. Additional information is presented in note 5
"Foreign Operations" of the Notes to Consolidated Financial Statements included
on page 27 of this Form 10-K/A-1.

COMPETITION

The three 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 fiscal 2001, the Company's Arrid line of anti-perspirants and
deodorants is believed to have accounted for an estimated 5.8% share of the
domestic anti-perspirant and deodorant market. The Company's worldwide
anti-perspirant and deodorant sales were approximately $100,400,000,
$105,900,000, and $101,600,000 in the fiscal years ended March 31, 2001, 2000
and 1999, respectively. The Trojan, Class Act and Naturalamb

                                        2
<PAGE>
condom brands are estimated to have accounted for over 68% of total domestic
retail condom sales. The Company's worldwide condom sales were approximately
$135,900,000, $123,600,000 and $114,100,000 in the fiscal years ended March 31,
2001, 2000 and 1999, respectively. Additional information is presented in Part
II, Item 7 "Management's Discussion and Analysis of Results of Operations and
Financial Condition" included on pages 8 and 9 of this Form 10-K/A-1.

RAW MATERIALS

The Company's major raw materials are chemicals, plastics, latex, steel cans and
packaging materials. These materials are generally available from several
sources and the Company has had no significant supply problems to date. The
Company generally has two or more approved suppliers for production materials
and issues purchase commitments to provide its suppliers with adequate lead
time.

PATENTS AND LICENSES

The Company owns or is licensed under a number of patents and patent
applications covering certain of its products. The expiration or any other
change in any of these patents or patent applications will not materially affect
the Company's business. Royalty income does not constitute a material portion of
total revenue.

FELBATOL (FELBAMATE)

Information regarding the effect of Felbatol matters on the Company's business
is presented in Part II, Item 7 "Management's Discussion and Analysis of Results
of Operations and Financial Condition" Felbatol (felbamate), included on page 11
of this Form 10-K/A-1 and in note 19 Felbatol (felbamate) of the Notes to
Consolidated Financial Statements, included on page 39 of this Form 10-K/A-1.

ENVIRONMENTAL MATTERS

Information regarding environmental matters is presented in note 15, "Litigation
Including Environmental Matters" of the Notes to Consolidated Financial
Statements, included on pages 36 and 37 of this Form 10-K/A-1.

RESEARCH AND DEVELOPMENT

Expenditures for research and development totaled $30,613,000 in 2001,
$28,508,000 in 2000 and $25,846,000 in 1999. Research and development expenses
increased in 2001 by $2,105,000 or 7.4% due to higher spending for taurolidine,
a compound being tested to determine if it has clinically important
antineoplastic activity. In fiscal 2000, research and development expenses
increased by $2,662,000 or 10.3% also due in part to spending for taurolidine.

Research at independent facilities determined that taurolidine induced cell
death in numerous human cancer cells in vitro. These developments prompted the
Company to initiate an R&D program directed at multiple cancer cell lines to
determine if taurolidine has clinically important antineoplastic activity. An
Investigational New Drug Application (IND) was filed with and accepted by the
FDA. Clinical trials in patients with brain, ovarian and mesothelioma cancer are
in progress.

                                        3
<PAGE>
Two multicenter clinical studies showed that Astelin Nasal Spray is effective
for treating vasomotor (nonallergic) rhinitis. A Supplemental New Drug
Application was approved by the FDA for use in vasomotor rhinitis in September,
2000. Astelin Nasal Spray is now indicated for both allergic and nonallergic
vasomotor rhinitis in adults and for use in children five years of age and older
for seasonal allergic rhinitis. The Astelin tablet NDA for allergic rhinitis is
pending at the FDA. The Company has not decided whether to seek final approval
for this NDA.

Approximately 120 employees are employed in research and development activities.

EMPLOYEES

The Company, together with its subsidiaries, employed approximately 3,340 people
worldwide at March 31, 2001.

ACQUISITIONS

Information regarding acquisitions is presented in note 10, "Acquisitions" of
the Notes to Consolidated Financial Statements, included on page 33 of this Form
10-K/ A-1.

ITEM 2. PROPERTIES

The executive offices of the Company are located at 1345 Avenue of the Americas,
New York, New York, in space leased until May, 2011. A portion of this space has
been subleased. The following are the other principal facilities of the Company:

                                                                   AREA
LOCATION                   PRODUCTS MANUFACTURED                (SQ. FEET)

OWNED IN FEE:

MANUFACTURING FACILITIES
 AND OFFICES:

Cranbury, New Jersey       Pharmaceuticals, toiletries
                            and pet products                      734,000
Colonial Heights,
 Virginia                  Condoms                                220,000
Decatur, Illinois          Pharmaceuticals and pet products       108,000
Winsted, Connecticut       Pet products                            45,000
Montreal, Canada           OTC pharmaceuticals and toiletries     157,000
Folkestone, England        Toiletries                              76,000
Milan, Italy               OTC pharmaceuticals and toiletries      60,000
Mexico City, Mexico        Pharmaceuticals                         94,400
New Plymouth, New Zealand  Condom processing                       31,000

                                        4
<PAGE>
WAREHOUSE AND OFFICES:

Toronto, Canada                                                    52,000

LEASED:

MANUFACTURING FACILITIES AND OFFICES:

Barcelona, Spain           Toiletries                              58,400
Milan, Italy               Diagnostics and toiletries              49,100
Folkestone, England        Toiletries                              21,500

WAREHOUSE AND OFFICES:

Dayton, New Jersey                                                200,000
Momence, Illinois                                                  43,000
Plainsboro, New Jersey *                                           23,300
Mexico City, Mexico                                                27,500
Sydney, Australia                                                  24,900
Folkestone, England                                                37,500
Levallois, France *                                                22,500
Revel, France                                                      35,500

* OFFICES ONLY

The Company has agreements with several companies throughout the world for the
manufacture of certain products to its specifications. The Company has several
other short-term leases for manufacturing plants, warehousing space and sales
offices. With minor exceptions, all facilities are operating at normal capacity.

In June 2000, Carter-Wallace, Inc. entered into an agreement to sell two parcels
of vacant land adjacent to its Cranbury, New Jersey facility totaling
approximately 210 acres. The closings of these transactions are contingent upon
certain approvals being obtained and the satisfactory resolution of other
conditions. No assurance can be given that the closings will take place. The
total proceeds from these land sales would be approximately $22,050,000, less
commissions and other expenses. The cost basis for the land subject to sale is
approximately $1,000,000. 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.

ITEM 3. LEGAL PROCEEDINGS

Information regarding Legal Proceedings involving the Company is presented in
note 15, "Litigation Including Environmental Matters" of the Notes to
Consolidated Financial Statements included on pages 36 through 38 of this Form
10-K/A-1.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

                                        5
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT *

Executive Officers of the Registrant are as follows:
                                                                   HELD PRESENT
NAME                   AGE  OFFICE                                 OFFICE SINCE

Ralph Levine            65  Chairman of the Board and
                             Chief Executive Officer                   2001

Paul A. Veteri          59  President and Chief Operating
                             Officer                                   2001

Peter J. Griffin        58  Vice President, Finance and Controller
                             Chief Financial Officer                   2001

T. Rosie Albright       54  Vice President, Consumer Products, U.S.    1995

John Bridgen, Ph.D.     54  Vice President, Diagnostics, U.S.          1984

James C. Costin, M.D.   57  Vice President, Medical and
                             Scientific Affairs                        1999

Donald R. Daoust, Ph.D. 65  Vice President, Quality Control            1978

Thomas G. Gerstmyer     58  Vice President, Pharmaceuticals, U.S.      1999

Adrian J. L. Huns       53  Vice President, International              1996

Michael J. Kopec        61  Vice President, Manufacturing              1978

Stephen R. Lang         66  Vice President, Secretary and
                             General Counsel                           1997

Thomas B. Moorhead      67  Vice President, Human Resources            1987

C. Richard Stafford     65  Vice President, Corporate Development      1977

James L. Wagar          66  Vice President and Treasurer               1981

Mark Wertlieb           45  Vice President, Taxes                      1996

Each officer holds office until the first meeting of the Board of Directors
following each Annual Meeting of the Stockholders and until his successor has
been duly elected and qualified (except that the Board of Directors may at any
meeting elect additional officers), unless his term is earlier terminated
through death, resignation, removal or otherwise. The Annual Meeting of the
Stockholders was held July 17, 2001.

                                        6
<PAGE>
*All executive officers have held their present office for the last five years
except those noted below:

Ralph Levine was appointed Chairman of the Board and Chief Executive Officer in
January, 2001. Mr. Levine was previously President and Chief Operating Officer
since April 1997. Prior to April 1997, Mr. Levine was Vice President, Secretary
and General Counsel since prior to 1996.

Paul A. Veteri was appointed President and Chief Operating Officer in January,
2001. Mr. Veteri was previously Executive Vice President and Chief Financial
Officer since April 1997. Prior to April 1997, Mr. Veteri was Vice President and
Chief Financial Officer since prior to 1996.

Peter J. Griffin was appointed Vice President, Finance and Controller and Chief
Financial Officer in January, 2001. Mr. Griffin was previously Vice President
and Controller since prior to 1996.

Thomas G. Gerstmyer was appointed Corporate Vice President, Pharmaceuticals,
U.S. in January, 1999. He was appointed President, Wallace Laboratories Division
in August, 1998. Mr. Gerstmyer was previously Vice President of Marketing,
Wallace Laboratories since prior to 1996.

James C. Costin, M.D., was appointed Corporate Vice President, Medical and
Scientific Affairs in January, 1999. Dr. Costin continues to be responsible for
the Wallace Laboratories' Research and Development department, where he was
previously Vice President, Research and Development, a position he held since
prior to 1996.

Stephen R. Lang was appointed Corporate Vice President in March, 1997 and
Secretary and General Counsel in April, 1997. Mr. Lang was previously a Partner
and Chairman of the Litigation Department of Whitman Breed Abbott & Morgan LLP
since prior to 1996.

Mark Wertlieb was appointed Corporate Vice President, Taxes in August, 1996. Mr.
Wertlieb was previously a Tax Partner at KPMG LLP since prior to 1996.

Adrian J. L. Huns was appointed Corporate Vice President, International and
President, International Division in May, 1996. Mr. Huns was Managing Director
of Carter-Wallace Ltd., a subsidiary of Carter-Wallace, Inc., since prior to
1996.

                                        7
<PAGE>
                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Information required by this item is presented in the "Summary of Selected
Financial Data" included on page 47 of this Form 10-K/A-1.

ITEM 6. SELECTED FINANCIAL DATA

Information required by this item is presented in the "Summary of Selected
Financial Data" included on page 47 of this Form 10-K/A-1.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
        FINANCIAL CONDITION

RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

The Company's consolidated financial statements included in its originally filed
Annual Report on Form 10-K for the year ended March 31, 2001 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.

PENDING SALE OF COMPANY

In May 2001, the Company announced it had entered into agreements for the sale
of the Company in a two-step transaction in which stockholders will receive
$20.30 per share, subject to certain closing adjustments. This transaction is
pending at this time and is subject to approval by stockholders and other
conditions. Full details will be included in a proxy statement regarding this
transaction which will be sent to all stockholders.

In this two-step transaction, the consumer business, consisting of the Carter,
Lambert Kay and International divisions will be sold by the Company immediately
prior to the merger of the remainder of the Company. Each transaction is
conditioned on the other, so one will not be completed without the other.

SALES AND EARNINGS

Net earnings were $49,222,000 in the year ended March 31, 2001 compared to net
earnings of $43,332,000 in the prior year. Basic earnings per share were $1.09
per share in the current year compared to $.96 per share in the prior year, an
increase of 14%. On a diluted basis, earnings per share were $1.04 per share
compared to $.94 per share in the prior year.

Net sales in 2001 were $781,392,000 compared to prior year's sales of
$747,668,000, a gain of 5%.

                                        8
<PAGE>
Sales of Domestic Consumer Products increased by $22,334,000 or 7.3% due to
higher unit volume, and to a lesser extent, selling price increases. Sales of
Trojan condoms, Nair depilatories and First Response pregnancy and ovulation
test kits were all higher.

Domestic Health Care sales increased $14,864,000 or 7.2% in 2001 due to higher
selling prices as well as increased unit volume. The unit volume increase was
due largely to higher sales of Astelin Nasal Spray and cough/cold products.
Sales of most pharmaceutical products in the Domestic Health Care segment
continue to be adversely affected by generic competition.

Sales of International products decreased $3,474,000 or 1.5% in 2001 due to the
unfavorable effect of lower foreign exchange rates, reduced in part by higher
volume, and to a lesser extent, selling price increases. Lower foreign exchange
rates had the effect of decreasing sales in the current year period by
approximately $22,000,000.

Net sales in 2000 were $747,668,000 compared to prior year's sales of
$668,872,000, a gain of 12%.

Sales of Domestic Consumer Products increased by $21,025,000 or 7.4% almost
entirely due to higher unit volume. Selling price increases also had a positive
effect on sales in this segment. Domestic condom sales increased versus the
prior year by 7.4%. Domestic anti-perspirant and deodorant sales increased by
7.2% in comparison to the prior year. Domestic sales of Nair depilatory
increased significantly versus 1999.

Domestic Health Care sales increased $25,001,000 or 13.8% in 2000 due to
increased unit volume as well as higher selling prices. The unit volume increase
was due to the continued growth of Astelin Nasal Spray and the introduction of
several new cough/cold prescription products. Sales of most pharmaceutical
products in the Domestic Health Care segment continue to be adversely affected
by generic competition.

Sales of International products increased $32,770,000 or 16.0% in 2000 due to
higher unit volume and, to a lesser extent, selling price increases. A
significant portion of the unit volume increase related to the acquisition of
the Barbara Gould line of skin care products in France and product
introductions. Lower foreign exchange rates had the effect of decreasing sales
in the current year period by approximately $10,400,000.

Interest income increased in 2001 by $4,209,000 or 79% from the prior year. In
2000 interest income was higher than 1999 by $646,000. The increase in both
years was due primarily to a higher level of interest bearing investments.

Other income decreased by $2,912,000 versus 2000. In 2000 other income decreased
by $3,470,000 versus the prior year. See comments in the Astelin section below.

COSTS AND EXPENSES

Cost of goods sold as a percentage of net sales was 35.1% in 2001, 36.5% in 2000
and 37.9% in 1999. The variations from year to year were due primarily to
changes in product mix as well as selling price increases in excess of cost
increases. Throughout this period, the Company has taken steps to minimize the
effects of higher costs by selective price increases and cost control and
reduction measures.

                                        9
<PAGE>
Advertising, marketing and other selling expenses in 2001 increased $3,146,000
or 1.1% as a result of higher spending in the Domestic Consumer and
International segments. In 2000, advertising, marketing and other selling
expenses increased $25,805,000 or 9.9% as a result of higher spending
principally in the International and Domestic Health Care segments. Spending was
higher in the International segment due in part to promotional support for the
recently acquired Barbara Gould product line and product introductions. Spending
was higher in the Domestic Health Care segment partly as a result of costs
associated with the introduction of a reformulated version of an existing
product and product introductions.

Research and development increased in 2001 by $2,105,000 or 7.4% due to higher
spending in the Domestic Health Care segments for taurolidine, a compound being
tested to determine if it has clinically important antineoplastic activity. In
2000, research and development expenses increased by $2,662,000 or 10.3% due
mostly to increased spending in the Domestic Health Care segment, also due to
higher spending for taurolidine.

General and administrative expenses increased in 2001 by $11,220,000 or 13.4%
versus the prior year due largely to an acceleration of certain pension costs as
a result of the retirement of the Company's former Chairman of the Board and
Chief Executive Officer, and costs associated with the pending sale of the
Company. Pension costs and compensation related expense also increased. In 2000,
general and administrative expenses decreased by $1,383,000 or 1.6% due largely
to nonrecurring prior year employee termination costs related to organizational
changes.

Interest expense decreased in 2001 by $220,000 or 4.8%. In 2000 interest expense
increased by $122,000 or 2.7% over the prior year. Both of these changes are
related to fluctuations in the levels of borrowing.

Other expenses increased in 2001 by $7,607,000 or 61.4%. This increase resulted
primarily from higher costs associated with the sharing of profits on a
reformulated product and increased non-cash charges related to incentive plans.
In 2000, other expenses increased by $4,580,000 or 58.7% due to higher non-cash
charges related to incentive plans, and other miscellaneous expenses.

The consolidated income tax rate in 2001, 2000 and 1999 was 39%.

TAUROLIDINE

Research at independent facilities determined that taurolidine induced cell
death in numerous human cancer cells in vitro. These developments prompted the
Company to initiate an R&D program directed at multiple cancer cell lines to
determine if taurolidine has clinically important antineoplastic activity. An
Investigational New Drug Application (IND) was filed with and accepted by the
FDA. Clinical trials in patients with ovarian cancer is in progress. Additional
clinical trials in patients with brain, ovarian and mesothelioma cancer are in
progress.

ASTELIN

In July 1998, the Company entered into a joint venture agreement with ASTA
Medica AG with an effective date of November 1997. Under the terms of the
agreement the Company is responsible for all manufacturing, selling, marketing
and administrative activities for Astelin and Depen, another product licensed
from ASTA Medica AG, and receives compensation for these activities from the
joint venture. Included in other income

                                       10
<PAGE>
is $140,000 in 2001, $3,981,000 in 2000 and $6,782,000 in 1999 related to ASTA
Medica's share of joint venture operations.

FELBATOL (FELBAMATE)

As previously reported in the 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 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
purchase of treasury stock. External borrowings are incurred as needed to
satisfy cash requirements related to seasonal business fluctuations and to
finance major facility expansion programs and major acquisitions.

At March 31, 2001, the Company had available various bank credit lines amounting
to $125,400,000 consisting of $110,000,000 in domestic credit lines and
$15,400,000 in foreign credit lines, of which $2,740,000 of the foreign lines
were utilized at March 31, 2001. The domestic lines are made up of a
$100,000,000 revolving credit facility and $10,000,000 in an uncommitted credit
line.

In fiscal 1999, the Company borrowed approximately $15,200,000 to finance
International acquisitions.

Inventory levels increased in 2000 over the previous year due to a planned
increase in condom inventory as well as new product introductions and
acquisitions.

Under stock repurchase programs approved by the Company's Board of Directors,
the Company purchased 246,000 shares at a cost of $3,885,000 in the year ended
March 31, 1999.

In June 2000, Carter-Wallace, Inc. entered into an agreement to sell two parcels
of vacant land adjacent to its Cranbury, New Jersey facility totaling
approximately 210 acres. The closings of these transactions are contingent upon
certain approvals being obtained and the satisfactory resolution of other
conditions. No assurance can be given that the closings will take place. The
total proceeds from these land sales would be approximately $22,050,000 less
commissions and other expenses. The cost basis for the land subject to sale is
approximately $1,000,000.

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 $46,000,000 at the maximum levels.

                                       11
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CAPITAL EXPENDITURES

Capital expenditures were $14,062,000 in 2001, $18,056,000 in 2000 and
$17,271,000 in 1999.

ITEM 7A. 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 year ended March 31, 2001.

                                    PART III

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information required by this item is included on pages 19 through 44 of this
Form 10- K/A-1.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to Directors of the Company is incorporated by
reference to the Company's Proxy Statement, dated June 20, 2001, for the Annual
Meeting of Stockholders held July 17, 2001, under the captions "Stock
Ownership", "Election of Directors" and "Board of Directors and Committees".

Information with respect to Executive Officers of the Registrant is set forth
under the heading "Executive Officers of the Registrant" in Part I on pages 6
and 7 of this Form 10-K/A-1.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this item is incorporated herein by reference to the
Company's Proxy Statement, dated June 20, 2001, for the Annual Meeting of
Stockholders held July 17, 2001, under the caption "Executive Compensation and
Other Information".

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information pertaining to the security ownership of certain beneficial owners
and management is incorporated herein by reference to the Company's Proxy
Statement, dated June 20, 2001, for the Annual Meeting of Stockholders held July
17, 2001, under the captions "Voting Rights" and "Stock Ownership".

                                       12
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this item is incorporated herein by reference to the
Company's Proxy Statement, dated June 20, 2001, for the Annual Meeting of
Stockholders held July 17, 2001, under the caption "Election of Directors".

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

(A)(1),(A)(2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

The financial statements and financial statement schedule filed as part of this
report are listed in the "Index of Financial Statements, Financial Statement
Schedule and Other Financial Information" on page 18 of this Form 10-K/A-1.

(A)(3) EXHIBITS

       2.1     Asset Purchase Agreement, dated as of May 7, 2001, by and between
               Armkel,LLC and Carter-Wallace, Inc. (incorporated herein by
               reference to Item 7 of the Company's Form 8-K dated May 7, 2001).

       2.2     Agreement and Plan of Merger, dated as of May 7, 2001, among the
               Company, CPI Development Corporation, MCC Acquisition Holdings
               Corporation, MCC Merger Sub Corporation and MCC Acquisition Sub
               Corporation (incorporated herein by reference to Item 7 of the
               Company's Form 8-K dated May 7, 2001).

       3.1     Certificate of Incorporation, as amended, of the Company
               (incorporated herein by reference to Exhibit 3.1 of the Company's
               Annual Report on Form 10-K for the fiscal year ended March 31,
               1992).

       3.2     By-Laws of the Company, as amended through 5/15/97 (incorporated
               herein by reference to Exhibit 3.2 of the Company's Annual Report
               on Form 10-K for the fiscal year ended March 31, 1998).

       4.1     Instruments defining the rights of security holders, including
               indentures -- The Company agrees to furnish to the Commission
               upon request a copy of each instrument pursuant to which long-
               term debt of the Company and its subsidiaries not exceeding 10%
               of total assets of the Company and its consolidated subsidiaries
               is authorized.

       10.2    1977 Restricted Stock Award Plan, as amended (incorporated herein
               by reference to Exhibit 10.2 of the Company's Annual Report on
               Form 10-K for the fiscal year ended March 31, 1990).

                                   (CONTINUED)

                                       13
<PAGE>
(A)(3) EXHIBITS (CONTINUED)

       10.3    Employees' Retirement Plan, as amended (incorporated herein by
               reference to Exhibit 10.3 of the Company's Annual Report on Form
               10-K for the fiscal year ended March 31, 1993).

       10.4    Description of Profit Sharing Plan (incorporated herein by
               reference to Exhibit 10.4 of the Company's Annual Report on Form
               10-K for the fiscal year ended March 31, 2000).

       10.5    Executives' Additional Compensation Plan (incorporated herein by
               reference to the description of such plan set forth in the
               Company's Proxy Statement dated June 18, 1993, for the Annual
               Meeting of Stockholders held July 20, 1993, under the caption
               "Executive Compensation and Other Information").

       10.6    Employment Agreement, dated June 4, 1998, between the Company and
               Ralph Levine (incorporated herein by reference to Exhibit 10.6 of
               the Company's Annual Report on Form 10-K for the fiscal year
               ended March 31, 1998).

       10.6(A) Amendment, dated January 27, 2000, to the Employment Agreement
               dated June 4, 1998 between the Company and Ralph Levine
               (incorporated herein by reference to Exhibit 10.6(a) of the
               Company's Annual Report on Form 10-K for the fiscal year ended
               March 31, 2000).

       10.6(B) Amendment, dated January 25, 2001, to the Employment Agreement
               dated June 4, 1998 between the Company and Ralph Levine
               (incorporated herein by reference to Exhibit 10.6(b) of the
               Company's Annual Report on Form 10-K for the fiscal year ended
               March 31, 2001).

       10.7    Employment Agreement, dated June 4, 1998, between the Company and
               Paul A. Veteri (incorporated herein by reference to Exhibit 10.7
               of the Company's Annual Report on Form 10-K for the fiscal year
               ended March 31, 1998).

       10.7(A) Amendment, dated January 27, 2000, to the Employment Agreement
               dated June 4, 1998 between the Company and Paul A. Veteri
               (incorporated herein by reference to Exhibit 10.7(a) of the
               Company's Annual Report on Form 10-K for the fiscal year ended
               March 31, 2000).

       10.7(B) Amendment, dated January 25, 2001, to the Employment Agreement
               dated June 4, 1998 between the Company and Paul A. Veteri
               (incorporated herein by reference to Exhibit 10.7(b) of the
               Company's Annual Report on Form 10-K for the fiscal year ended
               March 31, 2001).

       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).

                                   (CONTINUED)

                                       14
<PAGE>
(A)(3) EXHIBITS (CONTINUED)

       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 10.11 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 of the
               Company's Annual Report on Form 10-K for the fiscal year ended
               March 31, 1993).

       10.14   Executive Pension Benefits Plan, as amended (incorporated herein
               by reference to Exhibit 10.14 of the Company's Annual Report on
               Form 10-K for the fiscal year ended March 31, 1995).

       10.15   Executive Savings Plan (incorporated herein by reference to
               Exhibit 10.15 of the Company's Annual Report on Form 10-K for the
               fiscal year ended March 31, 1995).

       10.18   1996 Long-Term Incentive Plan, as amended (incorporated herein by
               reference to Exhibit 10.18 of the Company's Annual Report on Form
               10-K for the fiscal year ended March 31, 1999)

       10.19   Employment Agreement, dated October 2, 2000 between the Company
               and T. Rosie Albright (incorporated herein by reference to
               Exhibit 10.19 of the Company's Annual Report on Form 10-K for the
               fiscal year ended March 31, 2001).

       10.21   Letter Agreement, dated September 14, 1998, between the Company
               and T. Rosie Albright (incorporated herein by reference to
               Exhibit 10.21 of the Company's Annual Report on Form 10-K for the
               fiscal year ended March 31, 1999).

       10.21(A)Amendment, dated January 27, 2000, to the Letter Agreement, dated
               September 14, 1998, between the Company and T. Rosie Albright
               (incorporated herein by reference to Exhibit 10.21(a) of the
               Company's Annual Report on Form 10-K for the fiscal year ended
               March 31, 2000).

       10.22   Letter Agreement, dated June 4, 1998, between the Company and
               Stephen R. Lang (incorporated herein by reference to Exhibit
               10.22 of the Company's Annual Report on Form 10-K for the fiscal
               year ended March 31, 1999).

                                   (CONTINUED)

                                       15
<PAGE>
(A)(3) EXHIBITS (CONTINUED)

       10.22(A)Amendment, dated January 27, 2000, to the Letter Agreement,
               dated June 4, 1998 between the Company and Stephen R. Lang.
               (incorporated herein by reference to Exhibit 10.22(a) of the
               Company's Annual Report on Form 10-K for the fiscal year
               ended March 31, 2000).

       10.23   Consulting Agreement dated July 21, 1999 between the Company and
               Henry H. Hoyt, Jr.(incorporated herein by reference to Exhibit
               10.23 of the Company's Annual Report on Form 10-K for the fiscal
               year ended March 31, 2000).

       10.23(A)Amendment, dated January 27, 2000, to the Consulting Agreement
               dated July 21, 1999 between the Company and Henry H. Hoyt, Jr.
               (incorporated herein by reference to Exhibit 10.23(a) of the
               Company's Annual Report on Form 10-K for the fiscal year
               ended March 31, 2000).

       10.24   Letter Agreement, dated January 1, 1999 between the Company and
               Thomas G. Gerstmyer (incorporated herein by reference to Exhibit
               10.24 of the Company's Annual Report on Form 10-K for the fiscal
               year ended March 31, 2000).

       10.24(A)Amendment, dated January 27, 2000, to the Letter Agreement dated
               January 1, 1999, between the Company and Thomas G. Gerstmyer
               (incorporated herein by reference to Exhibit 10.24(a) of the
               Company's Annual Report on Form 10-K for the fiscal year ended
               March 31, 2000).

       21      Subsidiaries (incorporated herein by reference to Exhibit 21 of
               the Company's Annual Report on Form 10-K for the fiscal year
               ended March 31, 2001).

       23      KPMG LLP Independent Auditors' Consent

(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 domestic consumer products business and international
         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 domestic healthcare business, by means of a merger.

                                       16
<PAGE>
         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.

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: August 13, 2001                          BY: /s/ Paul A. Veteri
                                                --------------------
                                                    Paul A. Veteri
                                                    President and Chief
                                                    Operating Officer

                                       17
<PAGE>
                      CARTER-WALLACE, INC. AND SUBSIDIARIES

         INDEX OF FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULE AND

                           OTHER FINANCIAL INFORMATION

                                                                          PAGE

The following are set forth in this Form 10-K/A-1

CONSOLIDATED FINANCIAL STATEMENTS

         Consolidated Balance Sheets                                       19
         Consolidated Statements of Earnings, Retained                     21
           Earnings and Comprehensive Earnings
         Consolidated Statement of Cash Flows                              22
         Notes to Consolidated Financial Statements                        23
         Independent Auditors' Report                                      44

INDEPENDENT AUDITORS' REPORT ON FINANCIAL
 STATEMENT SCHEDULE                                                        45

SCHEDULE II  - Valuation and qualifying accounts for each
                of the three years ended March 31, 2001                    46

SUMMARY OF SELECTED FINANCIAL DATA                                         47
DESCRIPTION OF BUSINESS SEGMENTS                                           48

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.

                                       18

<Page>
Carter-Wallace, Inc. and Subsidiaries

                          CONSOLIDATED BALANCE SHEETS
                           AT MARCH 31, 2001 AND 2000

<Table>
<Caption>
                           ASSETS                                      2001                        2000
-----------------------------------------------------------------------------------------------------------
CURRENT ASSETS                                                              (RESTATED, SEE  NOTE 20)
<S>                                                                <C>                         <C>
Cash and cash equivalents                                          $ 97,152,000                $ 62,638,000
Short-term investments                                               47,891,000                  41,150,000
Accounts receivable-trade, less allowances of
  $8,392,000 in 2001 and $8,030,000 in 2000                         126,925,000                 118,710,000
Other receivables                                                     6,288,000                   7,759,000
Inventories
  Finished goods                                                     59,639,000                  63,684,000
  Work in process                                                    11,762,000                  13,376,000
  Raw materials and supplies                                         30,374,000                  29,208,000
                                                                   ------------                ------------
                                                                    101,775,000                 106,268,000
                                                                   ------------                ------------
Deferred taxes                                                       21,525,000                  25,496,000
Prepaid expenses and other current assets                            10,944,000                  11,997,000
                                                                   ------------                ------------
TOTAL CURRENT ASSETS                                                412,500,000                 374,018,000
                                                                   ------------                ------------

PROPERTY, PLANT AND EQUIPMENT, AT COST
  Land                                                                5,042,000                   4,803,000
  Buildings and improvements                                        114,006,000                 111,616,000
  Machinery, equipment and fixtures                                 197,992,000                 184,207,000
  Leasehold improvements                                             22,684,000                  23,287,000
                                                                   ------------                ------------
                                                                    339,724,000                 323,913,000
  Accumulated depreciation and amortization                         192,560,000                 174,503,000
                                                                   ------------                ------------
                                                                    147,164,000                 149,410,000
                                                                   ------------                ------------

INTANGIBLE ASSETS
  Excess of purchase price of businesses acquired over the
     net assets at date of acquisition, less amortization            72,241,000                  77,457,000
  Patents, trademarks, contracts and formulae, less
     amortization                                                    46,019,000                  47,227,000
                                                                   ------------                ------------
                                                                    118,260,000                 124,684,000
                                                                   ------------                ------------
DEFERRED TAXES                                                       31,837,000                  32,652,000
OTHER ASSETS                                                         75,447,000                  81,472,000
                                                                   ------------                ------------
                                                                   $785,208,000                $762,236,000
                                                                   ============                ============
</Table>

See accompanying notes to consolidated financial statements.

                                       19
<Page>

<Table>
<Caption>
            LIABILITIES AND STOCKHOLDERS' EQUITY                       2001                        2000
-----------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES                                                         (RESTATED, SEE  NOTE 20)
<S>                                                                <C>                         <C>
Accounts payable                                                   $ 49,103,000                $ 46,935,000
Accrued expenses                                                    106,399,000                 104,485,000
Notes payable                                                         6,658,000                   6,711,000
Taxes on income                                                      10,217,000                  10,440,000
                                                                   ------------                ------------
TOTAL CURRENT LIABILITIES                                           172,377,000                 168,571,000
                                                                   ------------                ------------

LONG-TERM LIABILITIES
Long-term debt                                                       53,835,000                  59,541,000
Deferred compensation                                                15,500,000                  26,647,000
Accrued postretirement benefit obligation                            71,251,000                  70,308,000
Other long-term liabilities                                          51,708,000                  46,131,000
                                                                   ------------                ------------
TOTAL LONG-TERM LIABILITIES                                         192,294,000                 202,627,000
                                                                   ------------                ------------

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, one vote per share; issued
  34,827,000  shares in 2001 and 34,776,000 shares in 2000           34,827,000                  34,776,000
Class B common stock, authorized 13,056,800 shares, par
  value $1 per share, ten votes per share; issued 12,378,000
  shares in 2001 and 12,429,000 in 2000                              12,378,000                  12,429,000
Capital in excess of par value                                        4,536,000                   4,231,000
Retained earnings                                                   435,341,000                 400,616,000
                                                                   ------------                ------------
                                                                    487,082,000                 452,052,000
Less:
  Accumulated other comprehensive loss
     Foreign currency translation adjustment                         39,658,000                  31,385,000
  Treasury stock at cost--1,494,500 common and 153,600
     Class B common shares in 2001 and 1,857,900 common
     and 153,600 Class B common shares in 2000                       26,887,000                  29,629,000
                                                                   ------------                ------------
TOTAL STOCKHOLDERS' EQUITY                                          420,537,000                 391,038,000
                                                                   ------------                ------------
                                                                   $785,208,000                $762,236,000
                                                                   ============                ============
</Table>

See accompanying notes to consolidated financial statements.

                                       20
<Page>
Carter-Wallace, Inc. and Subsidiaries

                           CONSOLIDATED STATEMENTS OF
                           EARNINGS, RETAINED EARNINGS AND
                           COMPREHENSIVE EARNINGS

                           THREE YEARS ENDED MARCH 31, 2001
<Table>
<Caption>
                                                             2001                 2000                 1999
---------------------------------------------------------------------------------------------------------------
                                                                        (RESTATED, SEE NOTE 20)
CONSOLIDATED STATEMENTS OF EARNINGS
<S>                                                      <C>                  <C>                  <C>
Net sales                                                $781,392,000         $747,668,000         $668,872,000
Interest income                                             9,537,000            5,328,000            4,682,000
Other income                                                4,736,000            7,648,000           11,118,000
                                                         ------------         ------------         ------------
                                                          795,665,000          760,644,000          684,672,000
                                                         ------------         ------------         ------------
Cost and Expenses:
  Cost of goods sold                                      274,349,000          272,841,000          253,447,000
  Advertising and promotion                               150,269,000          146,998,000          131,684,000
  Marketing and other selling                             140,405,000          140,530,000          130,039,000
  Research and development                                 30,613,000           28,508,000           25,846,000
  General and administrative                               94,955,000           83,735,000           85,118,000
  Interest                                                  4,394,000            4,614,000            4,492,000
  Other                                                    19,989,000           12,382,000            7,802,000
                                                         ------------         ------------         ------------
                                                          714,974,000          689,608,000          638,428,000
                                                         ------------         ------------         ------------

Earnings before taxes on income                            80,691,000           71,036,000           46,244,000
     Provision for taxes on income                         31,469,000           27,704,000           18,035,000
                                                         ------------         ------------         ------------
Net earnings                                             $ 49,222,000         $ 43,332,000         $ 28,209,000
                                                         ============         ============         ============
Earnings per share--basic                                $       1.09         $        .96         $        .62
                                                         ============         ============         ============
Earnings per share--diluted                              $       1.04         $        .94         $        .62
                                                         ============         ============         ============

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Amount at beginning of year                              $400,616,000         $368,093,000         $349,815,000
Net earnings                                               49,222,000           43,332,000           28,209,000
                                                         ------------         ------------         ------------
                                                          449,838,000          411,425,000          378,024,000
Dividends--$.32 per share in 2001, $.24 per share
  in 2000 and $.22 per share in 1999                      (14,497,000)         (10,809,000)          (9,931,000)
                                                         ------------         ------------         ------------
Amount at end of year                                    $435,341,000         $400,616,000         $368,093,000
                                                         ============         ============         ============

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
Net earnings                                             $ 49,222,000         $ 43,332,000         $ 28,209,000
Other comprehensive earnings (loss)
  Foreign currency translation adjustment                  (8,273,000)          (3,600,000)          (2,974,000)
                                                         ------------         ------------         ------------
Total comprehensive earnings                             $ 40,949,000         $ 39,732,000         $ 25,235,000
                                                         ============         ============         ============
</Table>

See accompanying notes to consolidated financial statements.

                                       21
<Page>
                           CONSOLIDATED STATEMENTS OF
                          CASH FLOWS

                          THREE YEARS ENDED MARCH 31, 2001
<Table>
<Caption>
                                                               2001               2000               1999
-------------------------------------------------------------------------------------------------------------
                                                                        (RESTATED, SEE NOTE 20)
<S>                                                        <C>                <C>                <C>
Net earnings                                               $ 49,222,000       $ 43,332,000       $ 28,209,000
Adjustments to reconcile net earnings to cash flows
  provided by operating activities:
     Depreciation and amortization                           17,573,000         17,470,000         16,372,000
     Amortization of patents, trademarks, contracts and
     formulae                                                12,114,000          9,066,000          6,199,000
     Amortization of excess of purchase price of
       businesses
       acquired over the net assets at date of
       acquisition                                            3,713,000          4,139,000          4,178,000
     Other changes in assets and liabilities:
       (Increase) decrease in accounts and other
       receivables                                          (11,173,000)        (2,124,000)         3,602,000
       Decrease (increase) in inventories                     1,968,000        (17,380,000)       (10,289,000)
       Decrease (increase) in prepaid expenses                  749,000           (932,000)        (3,647,000)
       Increase in accounts payable and accrued expenses      8,014,000          4,326,000          6,477,000
       (Decrease) increase in deferred compensation         (11,249,000)         6,564,000          2,548,000
       Decrease (increase) in deferred taxes                  4,786,000         (1,654,000)         1,998,000
       Other changes                                          3,705,000         (9,303,000)        (7,263,000)
                                                           ------------       ------------       ------------
Cash flows provided by operating activities                  79,422,000         53,504,000         48,384,000
                                                           ------------       ------------       ------------
Cash flows used in investing activities:
  Additions to property, plant and equipment                (14,062,000)       (18,056,000)       (17,271,000)
  (Increase) in short-term investments                       (6,784,000)        (9,189,000)        (6,273,000)
  Proceeds from sale of property, plant and equipment         1,446,000          1,042,000            371,000
  Payments for international acquisitions, net of cash
  received:
     Barbara Gould product line in France                       --                 --             (15,129,000)
     Femfresh product line in the U.K.                          --                 --              (3,633,000)
                                                           ------------       ------------       ------------
Cash flows used in investing activities                     (19,400,000)       (26,203,000)       (41,935,000)
                                                           ------------       ------------       ------------
Cash flows used in financing activities:
  Dividends paid                                            (14,497,000)       (10,809,000)        (9,931,000)
  Increase in borrowings                                      2,173,000          2,781,000         17,385,000
  Payments of debt                                           (6,806,000)        (5,215,000)       (11,569,000)
  Purchase of treasury stock                                 (5,861,000)          (492,000)        (4,381,000)
  Proceeds from exercise of stock options                       787,000            --                 --
                                                           ------------       ------------       ------------
Cash flows used in financing activities                     (24,204,000)       (13,735,000)        (8,496,000)
                                                           ------------       ------------       ------------
Effect of foreign exchange rate changes on cash
  and cash equivalents                                       (1,304,000)          (310,000)          (232,000)
                                                           ------------       ------------       ------------
Increase (decrease) in cash and cash equivalents           $ 34,514,000       $ 13,256,000       $ (2,279,000)
                                                           ============       ============       ============
</Table>

See accompanying notes to consolidated financial statements.

                                       22
<Page>
       Carter-Wallace, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------

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.

2. SUMMARY OF SIGNIFICANT 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.

Revenue Recognition Policy

Revenue is recognized when products are shipped.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and use assumptions
that affect certain reported amounts and disclosures. Actual amounts may differ.

Cash Equivalents and Short-term Investments

Cash equivalents consist of 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, 2001 and 2000.

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.

                                       23
<Page>
Property, Plant and Equipment

Depreciation is provided over the estimated useful lives of the assets,
principally using the straight line method. Machinery, equipment and fixtures
are depreciated over a period ranging from five to twenty years. Buildings and
improvements are depreciated over a period ranging from twenty to forty years.
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.

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.
The cost basis for the land being sold is approximately $1,000,000.

Intangible Assets

The excess of purchase price of businesses acquired over net assets at date of
acquisition is assessed to the product or group of products which constitute the
business acquired and amortized over no longer than 40 years for amounts
relating to acquisitions subsequent to October 31, 1970. 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.
Amounts related to intangibles acquired prior to October 31, 1970 are not
material.

The policy of the Company in assessing the recoverability of intangible assets
is to compare the carrying value of the intangible asset with the undiscounted
cash flow generated by products related to the intangible asset. In addition,
the Company continually evaluates whether adverse developments indicate that an
intangible asset may be impaired.

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.

Earnings Per Common Share

Basic earnings per share is based on the average number of common and Class B
common shares outstanding during the year: 45,311,000 in 2001, 45,019,000 in
2000 and 45,180,000 in 1999. 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 average shares outstanding.
Incremental shares for purposes of calculating diluted earnings per shares
amounted to 2,236,900 in 2001, 1,033,200 in 2000 and 688,500 in 1999.

Foreign Currency Translation

The assets and liabilities of foreign subsidiaries are translated at the
year-end rate of exchange, and income statement items are translated at the
average rates prevailing during the year. The resulting translation adjustment
is recorded as a component of stockholders' equity. The effects of foreign
exchange gains and losses arising from these translations of assets and
liabilities are included as a component of other comprehensive income.

                                       24
<Page>
New Accounting Pronouncements

Emerging Issues Task Force Issue No. 00-14, "Accounting for Certain Sales
Incentives" ("EITF Issue No. 00-14") outlines required accounting treatment for
certain sales incentives, including manufacturer's coupons. It requires
companies to record coupon expense as a reduction of sales, rather than
marketing expense. The Company currently records coupon expense as a component
of marketing expense. The Company is required to implement EITF Issue No. 00-14
for the quarter beginning January 1, 2002. It will require the Company to report
coupon expense as a reduction of net sales. Coupon expense approximates
$6,000,000 per year based on historical amounts, spread relatively evenly
throughout the year.

Emerging Issues Task Force Issue No. 00-25, "Vendor Income Statement
Characterization of Consideration from a Vendor to a Retailer" ("EITF 00-25"),
outlines required accounting treatment of certain sales incentives, including
slotting or placement fees, cooperative advertising arrangements, buydowns and
other allowances. The Company currently records such costs as marketing
expenses. EITF 00-25 will require the Company to report the paid consideration
expense as a reduction of sales, rather than marketing expense. The Company is
required to implement EITF 00-25 for the quarter beginning January 1, 2002. The
Company has not yet determined the effect of implementing the guidelines of EITF
00-25, but in any case, implementation will not have an effect on net earnings.

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 Certain
Derivative Instruments and Certain Hedging Activities," which made minor
amendments to SFAS No. 133. The Company will adopt SFAS No. 133, as amended,
effective April 1, 2001. The adoption of this accounting requirement is not
expected to have a material effect on the Company's consolidated financial
statements.

3. INVENTORIES

Inventories computed on the last-in, first-out (LIFO) method comprised 16% and
14% of inventories included in current assets at year end 2001 and 2000,
respectively. If these inventories had been valued on the FIFO inventory method
(which approximates current or replacement cost), total inventories would have
been approximately $9,600,000 and $9,500,000 higher than reported at March 31,
2001 and 2000, respectively. Felbatol inventories of $2,339,000 and $2,502,000
at March 31, 2001 and March 31, 2000, respectively, which are expected to be
sold in the next fiscal year, are included in inventory. Felbatol inventories of
$4,078,000 at March 31, 2001 and $6,387,000 at March 31, 2000, not expected to
be sold in the next fiscal year, are included in Other Assets.

                                       25
<Page>
4. TAXES ON INCOME

The provision for taxes on income was as follows:

<Table>
<Caption>
                                               2001                     2000                     1999
                                            -----------              -----------              -----------
<S>                                         <C>                      <C>                      <C>
Current:
     Domestic                               $17,102,000              $21,742,000              $ 8,648,000
     Foreign                                 10,171,000                7,673,000                7,305,000
                                            -----------              -----------              -----------
                                             27,273,000               29,415,000               15,953,000
                                            -----------              -----------              -----------
Deferred:
     Domestic                                 4,101,000               (1,378,000)               1,869,000
     Foreign                                     95,000                 (333,000)                 213,000
                                            -----------              -----------              -----------
                                              4,196,000               (1,711,000)               2,082,000
                                            -----------              -----------              -----------
Total                                       $31,469,000              $27,704,000              $18,035,000
                                            ===========              ===========              ===========
</Table>

The components of income before taxes were as follows:

<Table>
<S>                                         <C>                      <C>                      <C>
Domestic                                    $58,160,000              $49,696,000              $27,478,000
Foreign                                      22,531,000               21,340,000               18,766,000
                                            -----------              -----------              -----------
Total                                       $80,691,000              $71,036,000              $46,244,000
                                            ===========              ===========              ===========
</Table>

Deferred income taxes are provided for temporary differences between the
financial statement and tax bases of the Company's assets and liabilities. The
temporary differences gave rise to the following deferred tax assets and
liabilities at March 31:

<Table>
<Caption>
                                                                    2001                     2000
                                                                 -----------              -----------
<S>                                                              <C>                      <C>
Postretirement benefit plans                                     $30,657,000              $30,160,000
Employee benefit plans                                             3,652,000               13,588,000
Accrued liabilities                                               16,831,000               15,390,000
Asset valuation accounts                                          16,760,000               16,517,000
All other                                                          9,051,000                8,417,000
Valuation allowances                                                 --                    (3,247,000)
                                                                 -----------              -----------
     Total deferred tax assets                                    76,951,000               80,825,000
                                                                 -----------              -----------
Depreciation                                                      15,156,000               15,011,000
All other                                                          8,433,000                7,666,000
                                                                 -----------              -----------
     Total deferred tax liabilities                               23,589,000               22,677,000
                                                                 -----------              -----------
Net deferred tax assets                                          $53,362,000              $58,148,000
                                                                 -----------              -----------
</Table>

Realization of the Company's deferred tax assets is dependent on generating
sufficient taxable income in future years. Although realization is not assured,
management believes it is more likely than not that all of the deferred tax
assets will be realized. However, the deferred tax assets could be reduced if
estimates of future taxable income are lowered. A valuation allowance is
provided when it is more likely than not that some portion of the deferred tax
assets will not be realized.

Deferred taxes have not been provided on undistributed earnings of foreign
subsidiaries. It has been management's practice and intent to reinvest such
earnings in the operations of these subsidiaries.

                                       26
<Page>
The effective tax rate of the provision for taxes on income as compared with the
U.S. Federal statutory income tax rate was as follows:

<Table>
<Caption>
                                              2001                         2000                          1999
                                     -----------------------      -----------------------      ------------------------
                                                     % 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                 $28,242,000      35.0%       $24,863,000      35.0%       $ 16,185,000      35.0%
Foreign income taxed at a
  different
  effective rate                       3,110,000       3.9            446,000       0.6           1,619,000       3.5
State income taxes, net of
  federal tax benefit                  2,799,000       3.5          2,443,000       3.4           1,345,000       2.9
Amortization of intangibles              534,000       0.6            534,000       0.8             534,000       1.2
Other                                     31,000       0.1           (582,000)     (0.8)         (1,648,000)     (3.6)
Reversal of valuation allowance       (3,247,000)     (4.1)           --           --               --           --
                                     -----------     -----        -----------     -----        ------------     -----
Provision for taxes on income        $31,469,000      39.0%       $27,704,000      39.0%       $ 18,035,000      39.0%
                                     ===========     =====        ===========     =====        ============     =====
</Table>

The U.S. Internal Revenue Service completed its examination of the Company's tax
returns through fiscal year 1995 resulting in no material impact on the Company.
The statute of limitations period for the examination of the Company's U.S.
Federal income tax return has expired for fiscal years 1996 and 1997.

5. 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>
                                    2001                    2000                    1999
                                ------------            ------------            ------------
<S>                             <C>                     <C>                     <C>
Net current assets              $109,860,000            $106,331,000            $ 99,535,000
Equity in net assets             155,384,000             151,392,000             140,992,000
Net sales                        232,079,000             235,549,000             202,799,000
Net earnings                      12,265,000              14,000,000              11,248,000
</Table>

The equity adjustment from foreign currency translation is comprised of the
following:

<Table>
<Caption>
                                                             YEARS ENDED MARCH 31
                                                     ------------------------------------
                                                        2001                     2000
                                                     -----------              -----------
<S>                                                  <C>                      <C>
Opening balance                                      $31,385,000              $27,785,000
Current year                                           8,273,000                3,600,000
                                                     -----------              -----------
Ending balance                                       $39,658,000              $31,385,000
                                                     ===========              ===========
</Table>

6. NOTES PAYABLE AND LONG-TERM DEBT

Notes Payable

Notes payable consisting of borrowings from banks under available lines of
credit were $2,740,000, $1,047,000 and $2,752,000 and the current portion of
long-term debt was $2,488,000, $4,169,000 and $3,103,000 at March 31, 2001, 2000
and 1999, respectively. In addition, other short-term notes payable in
international operations amounted to $1,430,000, $1,495,000 and $2,279,000 at
March 31, 2001, 2000 and 1999, respectively. Additional data related to the
amount of short-term borrowings is not presented since it is immaterial.

                                       27
<Page>
The Company has available various bank credit lines amounting to $125,400,000 of
which $110,000,000 is for domestic borrowings and $15,400,000 is for
international borrowings. The availability of the lines of credit is subject to
review by the banks involved. Commitment fees are immaterial.

Long-Term Debt
Long-term debt at March 31 is summarized below:

<Table>
<Caption>
                                                                     2001                2000
                                                                  -----------         -----------
<S>                                                               <C>                 <C>
Promissory Notes, 7.62%, payable in equal annual
  installments of $7,000,000 from December 21, 2003 through
  December 21, 2007                                               $35,000,000         $35,000,000
Unsecured Euro term loan, 4.10%, payable in installments
  beginning June 1, 2002 through March 1, 2004                      8,493,000           8,882,000
Unsecured French franc term loan, 4.10%, payable in
  installments through
  February 25, 2006                                                 3,135,000           3,860,000
Unsecured French franc loan, 5.10%, payable February 24,
  2003                                                              2,814,000           2,944,000
Unsecured Italian lira term loan, adjustable rate, payable
  in installments through
  December 31, 2004                                                 2,358,000           2,992,000
Unsecured French franc loan, adjustable rate, payable in
  installments through April 1, 2006                                1,809,000           2,208,000
Promissory Notes, 6.18%, payable no later than September 12,
  2002                                                              1,214,000           1,424,000
Unsecured French franc loan, adjustable rate, payable in
  installments through
  September 18, 2003                                                  492,000           1,105,000
Secured Italian lira term loans, adjustable rate, payable in
  installments through
  July 1, 2001                                                        490,000           1,499,000
Unsecured French franc loan, 4.50%, payable in installments
  through
  August 5, 2001                                                      193,000             399,000
City of Decatur, Illinois adjustable rate Industrial Revenue
  Bond, payable
  December 1, 2010, repaid December 1, 2000                               -0-           3,000,000
Other Long-Term Debt                                                  325,000             397,000
                                                                  -----------         -----------
                                                                   56,323,000          63,710,000
Less, current portion of long-term debt included in notes
  payable                                                          (2,488,000)         (4,169,000)
                                                                  -----------         -----------
                                                                  $53,835,000         $59,541,000
                                                                  ===========         ===========
</Table>

Maturities of long-term debt for each of the four fiscal years 2003 through 2006
are $8,572,000, $13,148,000, $9,678,000 and $7,998,000, respectively.

With respect to the Italian lira loan payable through December 31, 2004,
interest on this loan is the Euro Interbank Offered Rate plus a nominal
increment.

With respect to the French franc loan payable February 24, 2003, interest is
adjustable based on the Euro Interbank Offered Rate plus a nominal increment,
adjusted quarterly and was converted to a fixed rate at the inception of the
loan.

With respect to the French franc loan payable through April 1, 2006, interest on
this loan is the Euro Interbank Offered Rate plus a nominal increment.

The Italian lira loans due July 1, 2001 are secured by irrevocable letters of
credit. Commitment fees are immaterial. Interest on these loans is the Euro
Interbank Offered Rate plus a nominal increment, adjusted quarterly.

The Company issued promissory notes, payable no later than September 12, 2002,
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.

With respect to the French franc loan payable through September 18, 2003,
interest on this loan is the Euro Interbank Offered Rate plus a nominal
increment.
                                       28
<Page>
Certain of the Company's long-term debt agreements contain covenants which
require the Company to maintain a minimum level of net worth and limit total
long-term liabilities to a stated percentage of total capitalization.

With respect to the $35,000,000 notes, should the Company, of which the
healthcare business and the consumer business are parts, sell a substantial
portion of its assets, the holders of the notes have the right to redeem the
notes at face value plus a premium of approximately $4,000,000.

Carter-Wallace, Inc. has guaranteed the repayment of debt in the consumer
business of Carter-Wallace, Inc. in the amount of $19,800,000. This debt may be
called by the lender if Carter-Wallace, Inc. ceases to be the majority
stockholder of the borrowing subsidiaries in the consumer business.

The fair value of long-term debt, including current maturities, was $57,156,000
on March 31, 2001 and $60,366,000 at March 31, 2000.

7. 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.

Activity for the years ended March 31, 2001, 2000 and 1999 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, 1998                                        $34,698,000         $12,507,000         $4,204,000
Conversion of Class B common stock to Common Stock                    42,000             (42,000)            --
Cost of treasury stock under market value at date of award
  or issuance                                                        --                  --                 279,000
                                                                 -----------         -----------         ----------
Balance at March 31, 1999                                         34,740,000          12,465,000          4,483,000
Conversion of Class B common stock to Common Stock                    36,000             (36,000)            --
Cost of treasury stock over market value at date of award
  or issuance                                                        --                  --                (252,000)
                                                                 -----------         -----------         ----------
Balance at March 31, 2000                                         34,776,000          12,429,000          4,231,000
Conversion of Class B common stock to Common Stock                    51,000             (51,000)            --
Cost of treasury stock under market value at date of award
  or issuance                                                        --                  --                 305,000
                                                                 -----------         -----------         ----------
Balance at March 31, 2001                                        $34,827,000         $12,378,000         $4,536,000
                                                                 ===========         ===========         ==========
</Table>

The cost of treasury stock over or under the market value of the stock on the
date of the award or issuance has been applied to capital in excess of par
value, as well as any tax benefit on the appreciation of restricted stock
awards.

Shares issued from treasury stock for stock awards amounted to 546,400, 239,100
and 28,000 shares at a cost of $8,603,000, $3,703,000 and $429,000 in 2001, 2000
and 1999, respectively. Shares purchased and added to treasury stock amounted to
182,900, 27,700 and 274,400 shares at a cost of $5,861,000, $492,000 and
$4,381,000 in 2001, 2000 and 1999, respectively. In 1999, the Company exchanged
155,500 shares with a value of $2,125,000 previously issued as restricted stock
awards for an equivalent number of deferred stock awards.

8. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS (DOLLARS IN THOUSANDS)

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 Company also provides certain health care and insurance benefits for retired
employees. The cost of the benefits is accrued during the years the employees
render service until they attain full eligibility for those benefits.

                                       29
<Page>
The components of the pension and postretirement benefit expense for the years
ended March 31, 2001, 2000 and 1999 were:

<Table>
<Caption>
                                                RETIREMENT PLANS          OTHER POSTRETIREMENT BENEFITS
                                         ------------------------------   ------------------------------
                                          2001       2000       1999       2001       2000       1999
                                         -------    -------    -------    -------    -------    -------
<S>                                      <C>        <C>        <C>        <C>        <C>        <C>
Service cost                             $ 8,833    $ 8,819    $ 8,332    $ 1,710    $ 1,946    $ 1,924
Interest cost                             17,691     15,455     14,846      4,082      3,734      3,775
Expected return on assets                (24,089)   (22,000)   (20,179)     --         --         --
Amortization of prior service cost         3,817      2,358      2,270       (472)    (1,037)    (3,415)
Amortization of transition cost               72     (2,074)    (2,065)      (156)     --         --
Amortization of actuarial (gain)          (2,218)       (23)      (153)      (788)      (465)      (328)
Settlement loss                            2,634      --         --         --         --         --
                                         -------    -------    -------    -------    -------    -------
     Total benefit expense               $ 6,740    $ 2,535    $ 3,051    $ 4,376    $ 4,178    $ 1,956
                                         =======    =======    =======    =======    =======    =======
</Table>

The components of the changes in the benefit obligation were as follows:

<Table>
<Caption>
                                                                                          OTHER POSTRETIREMENT
                                                        RETIREMENT PLANS                        BENEFITS
                                                    -------------------------           -------------------------
                                                      2001             2000               2001             2000
                                                    --------         --------           --------         --------
<S>                                                 <C>              <C>                <C>              <C>
Benefit obligation at beginning of year             $230,740         $229,885           $ 50,632         $ 57,776
Service cost                                           8,833            8,819              1,710            1,946
Interest cost                                         17,691           15,455              4,082            3,734
Plan participants' contributions                         391              367              --               --
Amendments                                            (3,220)          20,196              --               --
Actuarial (gain)/loss                                 19,993          (29,207)             2,617           (9,649)
Effect of exchange rate changes                       (1,455)             737               (143)              54
Benefits paid                                        (32,057)         (15,512)            (3,203)          (3,229)
                                                    --------         --------           --------         --------
     Benefit obligation at end of year              $240,916         $230,740           $ 55,695         $ 50,632
                                                    ========         ========           ========         ========
</Table>

The components of the changes in plan assets were as follows:

<Table>
<S>                                                 <C>              <C>                <C>              <C>
Fair value of plan assets at beginning of year      $287,191         $263,568              --               --
Actual return on plan assets                          (2,841)          36,754              --               --
Employer contributions                                18,666            1,212           $  3,203         $  3,229
Plan participants' contributions                         391              367              --               --
Effect of exchange rate changes                       (1,801)             802              --               --
Benefits paid                                        (32,057)         (15,512)            (3,203)          (3,229)
                                                    --------         --------           --------         --------
     Fair value of plan assets at end of year       $269,549         $287,191              --               --
                                                    ========         ========           ========         ========
</Table>

The following is a reconciliation of the funded status of the plans to the
Company's balance sheets at March 31:

<Table>
<S>                                                 <C>              <C>                <C>              <C>
Funded status                                       $ 28,633         $ 56,451           )(55,695         )(50,632
Unrecognized actuarial (gain)                        (40,512)         (87,187)           (15,257)         (18,905)
Unrecognized prior service cost                       21,153           28,202               (299)            (771)
Unrecognized transition amounts                          186              265              --               --
Minimum liability adjustment                          (6,146)          (3,206)             --               --
                                                    --------         --------           --------         --------
     Accrued benefit cost                           $  3,314         $ (5,475)          $(71,251)        $(70,308)
                                                    ========         ========           ========         ========
</Table>

Amounts recognized in the Company's balance sheets at March 31 were as follows:

<Table>
<S>                                                 <C>              <C>                <C>              <C>
Other assets                                        $ 34,208         $ 29,533              --               --
Accrued expenses                                      (7,058)         (12,582)             --               --
Long-term liabilities                                (23,836)         (22,426)          $(71,251)        $(70,308)
Intangible assets                                      6,146            3,206              --               --
                                                    --------         --------           --------         --------
     Net amount recognized                          $  9,460         $ (2,269)          $(71,251)        $(70,308)
                                                    ========         ========           ========         ========
</Table>
                                       30
<Page>
Plan amendments made in fiscal 2000 included a change related to credited
service and a federally mandated actuarial change related to mortality tables.

At March 31, the only pension plans with accumulated benefit obligations in
excess of plan assets were unfunded non-qualified plans which had no assets.
Information on these plans is as follows:

                                                    2001             2000
                                                  -------          -------
  Projected Benefit Obligation                    $43,391          $45,782
                                                  =======          =======
  Accumulated Benefit Obligation                  $27,333          $31,568
                                                  =======          =======

The principal assumptions used in determining 2001, 2000 and 1999 actuarial
values were:

      Discount rate                                    6.75 - 8%
      Rate of increase in compensation levels             4 - 6%
      Expected long-term rate of return on plan assets    7 -10%

Expense for the employee savings plan under which the Company matches the
contributions of participating employees up to a designated level was
$1,480,000, $1,514,000 and $1,478,000 in 2001, 2000 and 1999, respectively.

The assumed health care cost trend rate used to measure the accumulated
postretirement benefit obligation for those over age 65 is 8 percent for 2001
trending to 5 percent over a three year period. For those under age 65, the
trend rate is 6.3 percent for 2001 trending to 5 percent over a three year
period. A one percent increase or decrease in the assumed respective annual
medical cost trend rate would change the accumulated postretirement benefit
obligation by approximately $2,600,000 and the service and interest components
of net postretirement benefit expense by approximately $300,000.

9. LONG-TERM INCENTIVE PLANS

1977 Restricted Stock Award Plan

The plan as amended provides for awards of not more than 2,750,000 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 2,750,000 shares of common stock provided for in the Plan
have been adjusted to 5,593,154 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 charged to operations in equal
annual amounts over a five year period commencing at the date of the award.

Cumulative awards as of March 31, 2001 amount to 3,466,250 shares. There were no
new awards granted in any of the past three fiscal years.

The financial statements reflect the transfer of the awarded shares from
treasury stock as of the date of their issuance. For shares that have been
issued, the market value at the date of the awards was $540,000 and $708,000 in
fiscal 2000 and 1999, respectively. The cost of treasury stock for these awards
was $428,000 and $429,000 in fiscal 2000 and 1999, respectively.

1996 Long-Term Incentive Plan

The plan as amended provides for awards of not more than 9,000,000 shares of
common stock, subject to adjustment 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. The awards consist of
restricted and/or deferred stock or options, or a combination thereof. At
March 31, 2001,  5,827,337 shares had been granted under the 1996 long-term
incentive plan. Outstanding awards of deferred stock become fully vested and
outstanding options become immediately exercisable upon the occurrence of a
change in control of the Company.
                                       31
<Page>
Stock Options

Under the plan, both qualified and non-qualified options may be granted to key
executive employees at fair market value at the date of grant. The right to
exercise the options, in installments, commences one year from the date of grant
and expires ten years after that date. As permitted by Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation", the Company has chosen to continue to account for options granted
under the plan using the intrinsic value method. Accordingly, no compensation
expense has been recognized for these options. Had the fair value method of
accounting, as defined in SFAS No. 123, been applied to the Company's stock
options, the Company's net income would have been reduced by approximately
$3,810,000 or $.08 per share in 2001, $4,510,000 or $.10 per share in 2000 and
$3,390,000 or $.08 per share in 1999. The weighted-average fair market value of
options granted was $7.86 and $7.71 in 2000 and 1999, respectively. No options
were granted in 2001. For purposes of fair market value disclosures, the fair
market value of an option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:

<Table>
<Caption>
                                           2001                          2000                          1999
                                         --------                      --------                      --------
<S>                                      <C>                           <C>                           <C>
Risk-Free Interest Rate                    --                             6.3%                          4.9%
Expected Life                              --                               8 yrs.                        8 yrs.
Volatility                                 --                            31.7%                         35.4%
Dividend Yield                             --                             1.2%                          1.1%
</Table>

A summary of the status of stock options granted under the plan as of March 31,
2001, 2000 and 1999 and changes during the years ended on those dates is
presented below:

<Table>
<Caption>
                                  2001                             2000                             1999
                       --------------------------       --------------------------       --------------------------
                                    WEIGHTED-AVG.                    WEIGHTED-AVG.                    WEIGHTED-AVG.
                        OPTION      EXERCISE             OPTION      EXERCISE             OPTION      EXERCISE
                        SHARES        PRICE              SHARES        PRICE              SHARES        PRICE
                       ---------       ------           ---------       ------           ---------       ------
<S>                    <C>          <C>                 <C>          <C>                 <C>          <C>
Outstanding April 1    4,303,629       $16.09           3,672,143       $15.70           2,479,601       $14.70
Granted                   --           --                 683,926        18.06           1,192,542        17.77
Exercised                (57,240)       13.75              --           --                  --           --
Forfeited                (26,546)       15.39             (52,440)       14.38              --           --
                       ---------                        ---------                        ---------
Outstanding March 31   4,219,843        16.12           4,303,629       $16.09           3,672,143       $15.70
                       =========                        =========                        =========
</Table>

The following table summarizes information about stock options outstanding at
March 31, 2001:

<Table>
<Caption>
                                              OPTIONS OUTSTANDING                                  OPTIONS EXERCISABLE
                            -------------------------------------------------------         ---------------------------------
      RANGE OF                NUMBER            WEIGHTED-AVG.         WEIGHTED-AVG.           NUMBER            WEIGHTED-AVG.
      EXERCISE              OUTSTANDING          REMAINING            EXERCISE              EXERCISABLE         EXERCISE
       PRICES               AT 3/31/01             LIFE                 PRICE               AT 3/31/01            PRICE
     ----------              ---------            ---------              ------              ---------             ------
<S>                         <C>                 <C>                   <C>                   <C>                 <C>
  $12.13 to
  $19.69                     4,219,843            6.9 years              $16.12              3,183,010             $15.65
</Table>

For shares issued upon exercise of options, the proceeds from the exercise of
the options was $787,000 in 2001. The cost of treasury stock for the shares
issued was $886,000. The difference between the exercise price and the cost of
treasury stock was included in capital in excess of par value.

Stock Awards

Restricted and/or deferred stock awards which are awarded subject to
restrictions, may not be disposed of by the recipient for a period of four 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 the four-year vesting period commencing at the date of the award.
Amortization related to stock awards made under the 1996 Long Term Incentive
Plan amounted to $9,115,000, $5,729,000 and $2,860,000 in 2001, 2000 and 1999,
respectively. If a recipient's employment terminates by reason of retirement,
death or permanent disability, the award would vest immediately with the
unamortized value of the award charged to operations at that time.

                                       32
<Page>
Award transactions for the past three years were:

<Table>
<Caption>
                                                                  SHARES
                                               --------------------------------------------
                                                 2001              2000             1999
                                               ---------         ---------         -------
<S>                                            <C>               <C>               <C>
Cumulative Awards--Beginning of Year           1,552,700           909,053         606,689
New Awards                                        --               648,834         302,364
Forfeited Awards                                  (2,446)           (5,187)          --
                                               ---------         ---------         -------
Cumulative Awards--End of Year                 1,550,254         1,552,700         909,053
                                               =========         =========         =======
</Table>

The financial statements reflect the transfer of the awarded shares from
treasury stock as of the date of their issuance. Outstanding awards of 832,319
shares at March 31, 2001 will be issued at a future date no later than four
years from the date of the award. For shares that have been issued, the market
value at the date of the awards was $8,908,000 in 2001 and $2,911,000 in 2000.
The cost of treasury stock for these awards was $8,603,000 in 2001 and
$3,275,000 in 2000. 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.

10. ACQUISITIONS

At the beginning of fiscal 1999, the Company acquired the Femfresh line of
feminine hygiene products in England for approximately $3,600,000.

In February, 1999, the Company acquired the Barbara Gould line of skin care
products in France for approximately $15,100,000. Sales of this product line
commenced in the fiscal year beginning April 1, 1999.

These acquisitions are being accounted for by the purchase method and,
accordingly, their results of operations 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.

11. SHORT-TERM INVESTMENTS

At March 31, 2001 and 2000, short-term investments were intended to be held to
maturity and have remaining maturities of less than one year. The amortized cost
approximated fair value. The amortized cost of certificates of deposit were
$3,417,000 and $19,649,000 respectively, in 2001 and 2000. The amortized cost of
commercial paper was $24,321,000 and $21,501,000 in 2001 and 2000. In addition,
included in 2001 are bankers' acceptances in the amount of $20,153,000.

12. BUSINESS SEGMENTS (DOLLARS IN THOUSANDS)

The Company's reportable business segments are Domestic Consumer Products,
Domestic Health Care and International. The Accounting policies of the segments
are the same as those described in the Summary of Significant Accounting
Policies. Information on the Company's Business Segments is presented below.

Domestic Consumer Products primarily include anti-perspirants and deodorants,
condoms, at-home pregnancy and ovulation test kits, hair removal products, tooth
whitening products and various pet 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 by the
Company's consumer products divisions.

Domestic Health Care products primarily include prescription pharmaceuticals as
well as professional diagnostic products. These products are promoted 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 by the Company's
health care products divisions.

International products primarily include consumer products such as
anti-perspirants and deodorants, condoms, at-home pregnancy and ovulation test
kits, skin care and oral hygiene products, as well as health care products such
as over the counter pharmaceuticals and diagnostic products. These products are
sold throughout the world by various subsidiaries and distributors.
International products include many of the same consumer and health care
products which are sold domestically, as well as certain consumer and health
care products which are sold exclusively in international markets.

                                       33
<Page>
The Company's worldwide anti-perspirant and deodorant sales were approximately
$100,400,000, $105,900,000 and $101,600,000 in the fiscal years ended March 31,
2001, 2000 and 1999, respectively. The Company's worldwide condom sales were
approximately $135,900,000, $123,600,000 and $114,100,000 in the fiscal years
ended March 31, 2001, 2000 and 1999, respectively.

Some of the Company's domestic divisions sell to a small number of high volume
customers, the largest of which accounted for approximately 10.6%, 9.6% and 9.6%
of consolidated net sales in 2001, 2000 and 1999, respectively.

<Table>
<Caption>
                                                                              MARCH 31
                                                   ---------------------------------------------------------------
                                                     2001                        2000                       1999
                                                   ---------                   --------                   --------
<S>                                                <C>                         <C>                        <C>
Sales
     Domestic Consumer Products                    $ 326,587                   $304,253                   $283,228
     Domestic Health Care                            221,022                    206,158                    181,157
     International                                   233,783                    237,257                    204,487
                                                   ---------                   --------                   --------
     Consolidated                                  $ 781,392                   $747,668                   $668,872
                                                   =========                   ========                   ========

Operating Profit
     Domestic Consumer Products                    $  75,149                   $ 58,585                   $ 44,807
     Domestic Health Care                             52,552                     48,729                     40,282
     International                                    19,294                     17,765                     14,969
     Domestic net interest income (expense)            1,569                     (1,481)                    (2,037)
     Other (expense) net of other income             (27,171)                   (15,037)                   (12,091)
     General Corporate expenses                      (40,702)                   (37,525)                   (39,686)
                                                   ---------                   --------                   --------
     Earnings before taxes on income               $  80,691                   $ 71,036                   $ 46,244
                                                   =========                   ========                   ========

Identifiable Assets
     Domestic Consumer Products                    $ 269,126                   $219,359                   $211,776
     Domestic Health Care                            103,030                    105,885                    119,783
     International                                   129,603                    187,230                    177,759
     Corporate Assets                                283,449                    249,762                    212,634
                                                   ---------                   --------                   --------
     Total Assets                                  $ 785,208                   $762,236                   $721,952
                                                   =========                   ========                   ========

Depreciation and Amortization
     Domestic Consumer Products                    $  11,855                   $ 11,778                   $ 10,805
     Domestic Health Care                              6,072                      6,161                      6,187
     International                                     5,301                      5,535                      5,339
                                                   ---------                   --------                   --------
     Total Operating Segments                      $  23,228                   $ 23,474                   $ 22,331
                                                   =========                   ========                   ========

Capital Expenditures
     Domestic Consumer Products                    $   7,693                   $  7,984                   $ 12,553
     Domestic Health Care                              1,823                      1,246                      1,678
     International                                     4,387                      8,331                      2,838
                                                   ---------                   --------                   --------
     Total Operating Segments                      $  13,903                   $ 17,561                   $ 17,069
                                                   =========                   ========                   ========
</Table>

Corporate assets include principally cash and cash equivalents, short-term
investments, miscellaneous receivables, deferred taxes and other miscellaneous
assets.
                                       34
<Page>
Segment operating income is total segment revenue reduced by direct segment
operating expenses and allocations of indirect corporate charges to that
segment. Other expense net of other income and general corporate expenses
consists primarily of general corporate administrative expenses pertaining to
the headquarters function.

13. RENTAL EXPENSE AND LEASE COMMITMENTS (DOLLARS IN THOUSANDS)

Rental expense for operating leases with a term greater than one year for 2001,
2000 and 1999 was as follows:

<Table>
<Caption>
                           REAL PROPERTY
    RENTAL        REAL      SUB-RENTAL       NET REAL        EQUIPMENT
   EXPENSE      PROPERTY      INCOME         PROPERTY        AND OTHER
   -------      --------   -------------     --------        ---------
<S>             <C>        <C>             <C>             <C>
     2001       $ 8,880      $ (3,047)        $ 5,833         $ 7,320
     2000         8,285        (2,929)          5,356           6,990
     1999         8,021        (2,702)          5,319           6,837
</Table>

The real property rental expense for 2001, 2000 and 1999 excludes approximately
$1,000 annually, of rental costs which have been charged to the one-time charges
for restructuring of operations and facilities.

Minimum rental commitments, under non-cancellable leases in effect at March 31,
2001 were as follows:

<Table>
<Caption>
                           REAL PROPERTY
MINIMUM RENTAL    REAL      SUB-RENTAL       NET REAL        EQUIPMENT      CAPITAL LEASE
 COMMITMENTS    PROPERTY      INCOME         PROPERTY        AND OTHER       OBLIGATIONS
--------------  --------   -------------     --------        ---------      -------------
<S>             <C>        <C>             <C>             <C>              <C>
     2002         9,433        (3,515)          5,918            896              275
     2003         8,623        (3,515)          5,108            564              216
     2004         7,742        (3,515)          4,227            249              203
     2005         7,420        (3,515)          3,905             69              190
     2006         8,131        (3,597)          4,534             15              127
2007 and
thereafter       41,049       (19,443)         21,606             --               --
                                                                               ------
                                                                                1,011
   Less interest and
     executory cost                                                              (163)
                                                                               ------
  Present value of minimum lease payments (of which $213 is included in
                          current liabilities)                                 $  848
                                                                               ======
</Table>

Included in the real property rental commitments indicated above is
approximately $13,400 of future rental costs which were included in the one-time
charges for restructuring of operations and facilities. These costs are
associated with the subleasing of office space on which the Company holds a
long-term lease.

                                       35
<Page>
14. SUPPLEMENTAL FINANCIAL INFORMATION

The following is presented in support of balance sheet captions:

<Table>
<Caption>
                                                                           MARCH 31
                                                              -----------------------------------
                                                                2001                       2000
                                                              --------                   --------
                                                                    (dollars in thousands)
<S>                                                           <C>                        <C>
Intangible Assets:
  Excess of purchase price of businesses acquired over the
     net assets at date of acquisition                        $113,236                   $114,738
  Trademarks                                                    46,715                     47,889
  Other                                                         31,234                     28,995
                                                              --------                   --------
                                                               191,185                    191,622
  Accumulated amortization                                      72,925                     66,938
                                                              --------                   --------
                                                              $118,260                   $124,684
                                                              ========                   ========
Accounts Payable:
  Trade                                                       $ 46,076                   $ 45,913
  Other                                                          3,027                      1,022
                                                              --------                   --------
                                                              $ 49,103                   $ 46,935
                                                              ========                   ========
Accrued Expenses:
  Salaries and wages                                          $ 28,400                   $ 31,376
  Advertising and promotion                                     17,858                     19,233
  One-time charges                                               1,174                      1,373
  Retirement and related plans                                   8,234                     13,383
  Other                                                         50,733                     39,120
                                                              --------                   --------
                                                              $106,399                   $104,485
                                                              ========                   ========
Other Long-Term Liabilities:
  Retirement plans                                            $ 23,836                   $ 22,426
  One-time charges                                              12,104                      8,700
  Other                                                         15,768                     15,005
                                                              --------                   --------
                                                              $ 51,708                   $ 46,131
                                                              ========                   ========
</Table>

Income taxes paid were $26,939,000, $29,264,000 and $21,959,000 in 2001, 2000
and 1999, respectively. Interest paid was $4,173,000, $4,422,000 and $4,527,000
in 2001, 2000 and 1999, respectively.

Included in other income is $140,000 in 2001, $3,981,000 in 2000 and $6,782,000
in 1999 related to ASTA Medica's share of joint venture operations. Included in
other expense is stock award amortization of $9,115,000 in 2001, $5,729,000 in
2000 and $2,860,000 in 1999, and costs associated with the sharing of profits on
a reformulated product of $4,517,000 in 2001 and $550,000 in 2000.

15. LITIGATION INCLUDING ENVIRONMENTAL MATTERS

Environmental Matters

In 1982, the United States Environmental Protection Agency ("EPA") advised
Carter-Wallace, Inc. and over 200 other companies that they may be potentially
responsible parties ("PRPs") under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") with respect to waste deposited at the
former Lone Pine Landfill ("Lone Pine") in Freehold, New Jersey. In 1989 and
1991, respectively, the Company and approximately 122 other PRPs, without
admitting liability, entered into two consent decrees with EPA, agreeing to
conduct a cleanup of the Lone Pine, and that cleanup is in progress. The total
estimated cost of the cleanup, which will continue many years into the future,
is $104 million to $120 million in current dollars. In addition, on October 23,
1997 the Company and eight other PRPs entered into a third consent decree with
EPA, the Department of Interior, and New Jersey to resolve the government's
natural resource damage claims, which obligation

                                       36
<Page>
could cost as much as $2 million. After factoring in past and expected
recoveries from nonsettlors, the net share of cleanup costs and natural resource
damage claims (exclusive of defense costs) to the Company is expected to be from
$8 million to $10 million, of which it has paid about $7 million through March
31, 2001.

In August 1989, the Company instituted suit in New Jersey state court against 22
of its liability insurers to recover, inter alia, the share of costs of the
Company at Lone Pine, including related legal defense costs. The Company reached
settlements in this case with 19 of the insurers. There is no remaining solvent
insurer in the case. The Company has received approximately $12.5 million in
settlement payments from its insurers. Except for a portion of its legal fees
incurred in pursuing its insurers for coverage, the Company expects to be fully
reimbursed for its share of past and currently estimated future cleanup and
natural resource damage costs at Lone Pine.

The Company and nine other settling PRPs are party to two actions in NJ state
court against a former cleanup contractor at Lone Pine concerning amounts
allegedly owed to that contractor. The first action was filed by the contractor
on July 7, 1995 against the settling PRPs (including the Company), who
subsequently filed counterclaims against the contractor. The Company and the
nine other settling PRPs brought a separate action against the contractor on
July 10, 1995. Both lawsuits were subsequently consolidated. A settlement was
reached in these cases wherein the settling PRPs paid $1,287,500 to the
contractor. The Company's share of that $1,287,500 was approximately $115,000.
These amounts are included in the cleanup cost estimate and the Company's
estimated share thereof set forth above.

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, the United States Environmental Protection Agency
("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 into 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. The estimated cost of
this work is about $5.4 million. The Company's share of this cost is estimated
to be $190,000, which includes an allowance for insolvency or nonpayment of
other PRPs' shares. To date the Company has paid or received credit for about
$175,000. In addition, the Company and other settling PRPs have sued certain
nonsettlors for their share of these costs and have obtained some settlement
recoveries. Based on preliminary information from the site investigation work
(which is not completed), the total cost for performing the current and future
work at Barkhamsted, including the site investigation work, is estimated to be
from $6 to $32 million. In June 1995, the Connecticut legislature authorized the
issuance of bonds to pay for approximately $8 million of the future cleanup
costs at the site. The issuance of these bonds is expected to reduce by that
amount those cleanup costs subject to PRP funding. Based on expected PRP
participation in future cleanup work and other factors, the Company anticipates
that its share of projected cleanup costs subject to PRP funding (including
costs incurred to date) will be not more than 4 to 5% of total cleanup costs,
and that the Company's total expenditure will therefore range from about
$250,000 to $1,500,000. Thus, although applicable environmental law provides for
joint and several liability for the cost of cleanup work, based on present
estimates, the Company believes that the other PRPs will pay substantially all
of their allocated percentage shares of cleanup costs.

The Company believes, based upon the information available at this time, that
the environmental matters discussed above will not have a material effect on its
financial statements.

Litigation

The Company, along with numerous other drug manufacturers, wholesalers and
suppliers, was named in a series of class action suits, the first of which was
filed in August, 1994 in the California Superior Court, San Francisco County.
These suits were brought on behalf of all California independent retail
pharmacists who had purchased any brand name prescription drugs since August,
1989. The complaint alleged that the defendants, including the Company, entered
into a conspiracy to fix prices for brand-name prescription drugs and gave lower
prices to certain favored purchasers, while the alleged favored prices were
denied to the plaintiffs. Plaintiffs are seeking injunctive relief and
unspecified trebled compensatory damages, restitution of unspecified amounts by
which defendants are alleged to be unjustly enriched and litigation costs,
interest and attorney's fees. Class certification of the price-fixing conspiracy
claims was granted by order dated June 23, 1995, establishing a class of
independent retail pharmacists and small chains with ten or fewer California
locations. An individual action brought by two mid-size chain pharmacies was
subsequently coordinated with the consolidated class action as an "add-on" case
asserting virtually identical claims and demands for relief. Plaintiffs in that
action have amended their complaint to seek class certification, which has not

                                       37
<Page>
been granted. There has been no activity in these cases since 1996 because of
the pendency of related actions brought under the federal antitrust laws. These
cases have been settled or otherwise resolved by the Company with the exception
of one case to which a settlement in principle has been reached and should be
finally resolved shortly.

The Company is engaged in litigation with Tambrands Inc. in Supreme Court of the
State and County of New York arising out of a patent infringement and
misappropriation suit previously filed against both companies in the United
States District Court, Southern District of New York, by New Horizons
Diagnostics Corporation ("NHDC"), et al. The NHDC suit, which was settled and
discontinued in July 1996, asserted claims with respect to certain "gold sol"
technology (used in the Company's First Response and Answer home pregnancy and
ovulation predictor test kits) that the Company had acquired from Tambrands
pursuant to a written purchase agreement in March 1990. The Company paid an
immaterial amount toward that settlement. In the pending Supreme Court action,
Tambrands seeks reimbursement from the Company of an unspecified portion of the
amount paid by Tambrands in settlement of the NHDC suit, and for defense costs.
Cross-motions for summary judgement have been filed. The Company believes it has
good defenses, under the terms of the purchase agreement, to Tambrands' claim.

The Company is subject to other legal actions arising out of its operations. The
Company believes, based on the opinion of counsel, that it has good defenses to
such actions and should prevail.

16. EMPLOYMENT AGREEMENTS AND TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS

Carter-Wallace, Inc. has entered into employment agreements with its present
Chairman of the Board and Chief Executive Officer and its President that provide
for payments equal to salary and bonus multiples, certain pension enhancements
and a gross-up of applicable excise taxes if the executives' employment is
terminated as specified in the agreements. Carter-Wallace, Inc. has also entered
into an employment agreement with its Vice President, Consumer Products U.S.
that provides for her employment through December 2003. The obligation with
regard to its Vice President, Consumer Products U.S. is expected to be assumed
as part of the acquisition of the consumer business. The Company has also
entered into a consulting agreement with its former Chairman of the Board and
Chief Executive Officer that provides for a specified payment if that agreement
is terminated.

Carter-Wallace, Inc. has also entered into agreements with certain executive
officers. These agreements also provide for payments equal to salary and bonus
multiples, certain pension enhancements and a gross-up of applicable excise
taxes if the executives' employment is terminated as specified in the agreements
after a change in control of the Company.

The payments required by these agreements, based on a termination under the
agreements of all of the executives, is approximately $115,000,000.

Pursuant to the long-term incentive plan, outstanding awards of restricted and
deferred stock become fully vested and outstanding options become immediately
exercisable upon the occurrence of a change in control as defined in the
agreements.

A change in control also results in the immediate vesting and payment of
benefits under the Executive Pension Benefits Plans and, in the case of certain
officers, the elimination of early retirement reductions.

The transactions disclosed in note 1 relating to the contemplated sale of the
consumer business and the Company meet the definition of a change in control as
defined in the various agreements.

17. ACCELERATION OF CERTAIN PENSION AND OTHER COSTS

Included in general and administrative expenses for the fiscal year ended March
31, 2001 is a pretax charge amounting to $6,110,000 related to the acceleration
of certain pension and other costs as a result of the retirement of Henry H.
Hoyt, Jr., the former Chairman of the Board and Chief Executive Officer of
Carter-Wallace, Inc., in December 2000.

                                       38
<Page>
18. QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly net sales, gross margin, net earnings and earnings per share are set
forth in the following table (dollars in thousands, except per share amounts).

<Table>
<Caption>
                                                               QUARTER ENDED
                                           -----------------------------------------------------
2001                                       JUNE 30        SEPT. 30       DEC. 31        MARCH 31         TOTAL YEAR
----                                       -------        --------       -------        --------         ----------
<S>                                        <C>            <C>            <C>           <C>               <C>
  Net sales                                $224,508       $182,434       $196,250      $178,200           $781,392
  Gross margin                              147,024        115,592        129,849       114,578            507,043
  Net earnings                               22,367          8,105         12,534         6,216             49,222
  Earnings per share--basic                     .49            .18            .28           .14               1.09
  Earnings per share--diluted                   .48            .17            .26           .13               1.04

2000
----
  Net sales                                $199,954       $185,147       $192,066      $170,501         $  747,668
  Gross margin                              124,878        116,215        126,313       107,421            474,827
  Net earnings                               13,161          9,400         13,956         6,815             43,332
  Earnings per share--basic                     .29            .21            .31           .15                .96
  Earnings per share--diluted                   .29            .20            .30           .15                .94
</Table>

19. FELBATOL (FELBAMATE)

As previously reported, in the 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.

20. RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

The Company's consolidated financial statements included in its originally filed
Annual Report on Form 10-K for the year ended March 31, 2001 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 as follows:

                                       39
<Page>
Carter-Wallace, Inc. and Subsidiaries

                               BALANCE SHEET DATA
                           AT MARCH 31, 2001 AND 2000

<Table>
<Caption>
                                                                        2001                      2000
                                                               ----------------------    ----------------------
                                                               ORIGINALLY                ORIGINALLY
ASSETS                                                         PRESENTED     RESTATED    PRESENTED     RESTATED
-----------------------------------------------------------    ----------    --------    ----------    --------
<S>                                                            <C>           <C>         <C>           <C>
Current Assets                                                  $314,129     $412,500     $285,032     $374,018
Property, Plant and Equipment, net                                23,370      147,164       19,395      149,410
Intangible Assets, net                                            31,864      118,260       32,180      124,684
Deferred Taxes                                                    35,999       31,837       36,473       32,652
Net Noncurrent Assets of Discontinued Consumer Operations
  held for Sale                                                  182,478           --      190,987           --
Other Assets                                                      71,823       75,447       78,036       81,472
                                                                --------     --------     --------     --------
TOTAL ASSETS                                                    $659,663     $785,208     $642,103     $762,236
                                                                ========     ========     ========     ========

LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------------------------------
Current Liabilities                                             $ 74,006     $172,377     $ 79,585     $168,571
Long-Term Liabilities                                            165,120      192,294      171,480      202,627
                                                                --------     --------     --------     --------
TOTAL LIABILITIES                                                239,126      364,671      251,065      371,198
STOCKHOLDERS' EQUITY                                             420,537      420,537      391,038      391,038
                                                                --------     --------     --------     --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                      $659,663     $785,208     $642,103     $762,236
                                                                ========     ========     ========     ========
</Table>

                                       40
<Page>
Carter-Wallace, Inc. and Subsidiaries

                          STATEMENTS OF EARNINGS DATA
                        THREE YEARS ENDED MARCH 31, 2001

<Table>
<Caption>
                                                 2001                    2000                    1999
                                         ---------------------   ---------------------   ---------------------
                                         ORIGINALLY              ORIGINALLY              ORIGINALLY
                                         PRESENTED    RESTATED   PRESENTED    RESTATED   PRESENTED    RESTATED
                                         ----------   --------   ----------   --------   ----------   --------
<S>                                      <C>          <C>        <C>          <C>        <C>          <C>
Net sales                                 $222,727    $781,392    $207,866    $747,668    $182,845    $668,872
Cost of goods sold                          50,772     274,349      48,306     272,841      46,247     253,447
                                          --------    --------    --------    --------    --------    --------
     Gross Profit                          171,955     507,043     159,560     474,827     136,598     415,425
Operating Expenses                         177,046     426,352     157,247     403,791     143,621     369,181
                                          --------    --------    --------    --------    --------    --------
Earnings (loss) from continuing
  operations before provision (benefit)
  for taxes on income                       (5,091)     80,691       2,313      71,036      (7,023)     46,244
  Provision (benefit for taxes on
     income)                                (4,757)     31,469         954      27,704      (3,890)     18,035
                                          --------    --------    --------    --------    --------    --------
Earnings (loss) from continuing
  operations                                  (334)     49,222       1,359      43,332      (3,133)     28,209
Earnings from discontinued operations,
  net of tax                                49,556          --      41,973          --      31,342          --
                                          --------    --------    --------    --------    --------    --------
Net Earnings                              $ 49,222    $ 49,222    $ 43,332    $ 43,332    $ 28,209    $ 28,209
                                          ========    ========    ========    ========    ========    ========
Earnings (loss) per share--basic:
  Continuing operations                   $  (0.01)   $   1.09    $   0.03    $   0.96    $  (0.07)   $   0.62
  Discontinued consumer operations            1.10          --        0.93          --        0.69          --
                                          --------    --------    --------    --------    --------    --------
Earnings per share--basic                 $   1.09    $   1.09    $   0.96    $   0.96    $   0.62    $   0.62
                                          ========    ========    ========    ========    ========    ========
Earnings (loss) per share--diluted:
  Continuing operations                   $  (0.01)   $   1.04    $   0.03    $   0.94    $  (0.07)   $   0.62
  Discontinued consumer operations            1.05          --        0.91          --        0.69          --
                                          --------    --------    --------    --------    --------    --------
Earnings per share--diluted               $   1.04    $   1.04    $   0.94    $   0.94    $   0.62    $   0.62
                                          ========    ========    ========    ========    ========    ========
</Table>

                                       41
<Page>
Carter-Wallace, Inc. and Subsidiaries

                         STATEMENTS OF CASH FLOWS DATA
                        THREE YEARS ENDED MARCH 31, 2001

<Table>
<Caption>
                                                 2001                    2000                    1999
                                         ---------------------   ---------------------   ---------------------
                                         ORIGINALLY              ORIGINALLY              ORIGINALLY
                                         PRESENTED    RESTATED   PRESENTED    RESTATED   PRESENTED    RESTATED
                                         ----------   --------   ----------   --------   ----------   --------
<S>                                      <C>          <C>        <C>          <C>        <C>          <C>
Net earnings                              $ 49,222    $ 49,222    $ 43,332    $ 43,332    $ 28,209    $ 28,209

Adjustments to reconcile net earnings
  to
  cash flow                                (33,978)     30,200     (20,387)     10,172     (33,376)     20,175
                                          --------    --------    --------    --------    --------    --------

Cash flows provided by operating
  activities                                15,244      79,422      22,945      53,504      (5,167)     48,384

Cash flows used in investing activities     (9,068)    (19,400)    (11,557)    (26,203)     (7,468)    (41,935)

Cash flows used in financing activities    (22,781)    (24,204)    (11,508)    (13,735)    (18,792)     (8,496)

Effect of foreign exchange rate changes
  on cash and cash equivalents                (751)     (1,304)        212        (310)        371        (232)

Net cash provided by discontinued
  consumer operations                       47,060          --      17,436          --      26,724          --
                                          --------    --------    --------    --------    --------    --------

Increase (decrease) in cash and cash
  equivalents                             $ 29,704    $ 34,514    $ 17,528    $ 13,256    $ (4,332)   $ (2,279)
                                          ========    ========    ========    ========    ========    ========
</Table>

                                       42
<Page>
Carter-Wallace, Inc. and Subsidiaries

                      QUARTERLY FINANCIAL DATA (UNAUDITED)
--------------------------------------------------------------------------------
<Table>
<Caption>
                                                             QUARTER ENDED
                         -------------------------------------------------------------------------------------
                               JUNE 30              SEPT. 30               DEC. 31              MARCH 31             TOTAL YEAR
                         -------------------   -------------------   -------------------   -------------------   -------------------
                         ORIGINALLY            ORIGINALLY            ORIGINALLY            ORIGINALLY            ORIGINALLY
                         PRESENTED  RESTATED   PRESENTED  RESTATED   PRESENTED  RESTATED   PRESENTED  RESTATED   PRESENTED  RESTATED
                         --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
<S>                      <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
2001
Net sales                $66,822    $224,508   $41,270    $182,434   $70,453    $196,250   $44,182    $178,200   $222,727   $781,392
Gross Margin              53,490     147,024    30,921     115,592    54,995     129,849    32,549     114,578   171,955     507,043
Earnings (loss) from
  continuing operations  $ 4,040    $ 22,367   $(4,939)   $  8,105   $ 2,928    $ 12,534   $(2,363)   $  6,216   $  (334)   $ 49,222
Earnings from
  discontinued
  operations              18,327          --    13,044          --     9,606          --     8,579          --    49,556          --
                         --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
Net Earnings             $22,367    $ 22,367   $ 8,105    $  8,105   $12,534    $ 12,534   $ 6,216    $  6,216   $49,222    $ 49,222
                         ========   ========   ========   ========   ========   ========   ========   ========   ========   ========
Earnings (loss) per
  share from continuing
  operations--basic      $  0.09    $   0.49   $ (0.11)   $   0.18   $  0.06    $   0.28   $ (0.05)   $   0.14   $ (0.01)   $   1.09
Earnings per share from
  discontinued
  operations--basic         0.40          --      0.29          --      0.22          --      0.19          --      1.10          --
                         --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
Earnings per
  share--basic           $  0.49    $   0.49   $  0.18    $   0.18   $  0.28    $   0.28   $  0.14    $   0.14   $  1.09    $   1.09
                         ========   ========   ========   ========   ========   ========   ========   ========   ========   ========
Earnings (loss) per
  share from continuing
  operations--diluted    $  0.09    $   0.48   $ (0.11)   $   0.17   $  0.06    $   0.26   $ (0.05)   $   0.13   $ (0.01)   $   1.04
Earnings per share from
  discontinued
  operations--diluted       0.39          --      0.28          --      0.20          --      0.18          --      1.05          --
                         --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
Earnings per share--
  diluted                $  0.48    $   0.48   $  0.17    $   0.17   $  0.26    $   0.26   $  0.13    $   0.13   $  1.04    $   1.04
                         ========   ========   ========   ========   ========   ========   ========   ========   ========   ========

2000
Net sales                $49,298    $199,954   $44,765    $185,147   $67,290    $192,066   $46,513    $170,501   $207,866   $747,668
Gross Margin              36,613     124,878    34,869     116,215    54,476     126,313    33,602     107,421   159,560     474,827
Earnings (loss) from
  continuing operations  $(2,198)   $ 13,161   $(2,435)   $  9,400   $ 6,625    $ 13,956   $  (633)   $  6,815   $ 1,359    $ 43,332
Earnings from
  discontinued
  operations              15,359          --    11,835          --     7,331          --     7,448          --    41,973          --
                         --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
Net Earnings             $13,161    $ 13,161   $ 9,400    $  9,400   $13,956    $ 13,956   $ 6,815    $  6,815   $43,332    $ 43,332
                         ========   ========   ========   ========   ========   ========   ========   ========   ========   ========
Earnings (loss) per
  share from continuing
  operations--basic      $ (0.05)   $   0.29   $ (0.06)   $   0.21   $  0.15    $   0.31   $ (0.01)   $   0.15   $  0.03    $   0.96
Earnings per share from
  discontinued
  operations--basic         0.34          --      0.27          --      0.16          --      0.16          --      0.93          --
                         --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
Earnings per
  share--basic           $  0.29    $   0.29   $  0.21    $   0.21   $  0.31    $   0.31   $  0.15    $   0.15   $  0.96    $   0.96
                         ========   ========   ========   ========   ========   ========   ========   ========   ========   ========
Earnings (loss) per
  share from continuing
  operations--diluted    $ (0.05)   $   0.29   $ (0.06)   $   0.20   $  0.15    $   0.30   $ (0.01)   $   0.15   $  0.03    $   0.94
Earnings per share from
  discontinued
  operations--diluted       0.34          --      0.26          --      0.15          --      0.16          --      0.91          --
                         --------   --------   --------   --------   --------   --------   --------   --------   --------   --------
Earnings per share--
  diluted                $  0.29    $   0.29   $  0.20    $   0.20   $  0.30    $   0.30   $  0.15    $   0.15   $  0.94    $   0.94
                         ========   ========   ========   ========   ========   ========   ========   ========   ========   ========
</Table>

                                       43
<Page>

K P M G
               345 Park Avenue
               New York, NY 10154

                          INDEPENDENT AUDITORS' REPORT

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, 2001 and 2000, and the related
consolidated statements of earnings, retained earnings and comprehensive
earnings, and cash flows, for each of the years in the three-year period ended
March 31, 2001. 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 auditing standards generally accepted
in the United States of America. 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, 2001 and 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.

As discussed in Note 20 to the consolidated financial statements, the
accompanying consolidated financial statements have been restated to present the
Company's consumer business as a component of continuing operations.

                                                                  /s/ KPMG LLP

May 18, 2001, except for note 20, which is as of August 9, 2001

                                       44

<PAGE>
                          INDEPENDENT AUDITORS' REPORT

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

Under date of May 18, 2001, except as to Note 20, which is as of August 9, 2001,
we reported on the consolidated balance sheets of Carter-Wallace, Inc. and
subsidiaries as of March 31, 2001 and 2000, and the related consolidated
statements of earnings, retained earnings and comprehensive earnings, and cash
flows, for each of the years in the three-year period ended March 31, 2001. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedule as listed
in the accompanying index on page 18 of this Annual Report on Form 10-K/A-1.
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 Note 20 to the aforementioned consolidated financial statements,
the Company's consolidated financial statements have been restated to present
the Company's consumer business as a component of continuing operations.

                                                    KPMG LLP

New York, New York

May 18, 2001, except as to Note 20 to the consolidated financial statements,
which is as of August 9, 2001.

                                       45

<PAGE>
                                   SCHEDULE II
                      CARTER-WALLACE, INC. AND SUBSIDIARIES

                        Valuation and Qualifying Accounts
                        Three Years Ended March 31, 2001
                            (in thousands of dollars)

                                      Charged to
                         Balance at   costs and   Charged               Balance
                         beginning   expenses or  to other              at end
Description              of period    revenues    accounts  Deductions of period

YEAR ENDED MARCH 31, 2001

   Deducted from assets
   to which they apply:
    Allowance for
     doubtful accounts      $6,672    $ 1,315     $   -     $   820(a)   $ 7,167
    Allowance for
     cash discounts          1,358     10,818         -      10,951(b)     1,225
                            ------    -------     -------   -------      -------
                            $8,030    $12,133         -     $11,771       $8,392
                            ------    -------     -------   -------      -------
YEAR ENDED MARCH 31, 2000

  Deducted from assets
  to which they apply:
    Allowance for
     doubtful accounts      $5,963    $ 1,063     $   -     $   354(a)   $ 6,672
    Allowance for
     cash discounts          1,452      9,983         -      10,077(b)     1,358
                            ------    -------     -------   -------      -------
                             7,415    $11,046     $   -     $10,431      $ 8,030
                            ------    -------     -------   -------      -------
YEAR ENDED MARCH 31, 1999

  Deducted from assets
  to which they apply:
    Allowance for
     doubtful accounts      $5,716    $   752     $   -     $   505(a)   $ 5,963
    Allowance for
     cash discounts          1,590      8,737         -       8,875(b)     1,452
                            ------    -------     -------   -------      -------
                            $7,306    $ 9,489     $   -     $ 9,380      $ 7,415
                            ------    -------     -------   -------      -------
NOTES:

(A)  Accounts written off net of recoveries.
(B)  Net discounts allowed to customers.

                                       46

<Page>
Carter-Wallace, Inc. and Subsidiaries

                       SUMMARY OF SELECTED FINANCIAL DATA
              (IN THOUSANDS, EXCEPT PER SHARE DATA, EMPLOYEE DATA
                   AND THE NUMBER OF STOCKHOLDERS OF RECORD)

--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                 YEARS ENDED MARCH 31
                                           ----------------------------------------------------------------
                                             2001          2000          1999          1998          1997
                                           ----------------------------------------------------------------
                                                               (RESTATED, SEE NOTE 20)
<S>                                        <C>           <C>           <C>           <C>           <C>
OPERATIONS
  Net sales                                $781,392      $747,668      $668,872      $662,229      $648,755
  Earnings before taxes                      80,691        71,036        46,244        44,755        45,349
  Net earnings                               49,222        43,332        28,209        27,301        26,756
  Earnings per share--basic                    1.09           .96           .62           .59           .58
  Earnings per share--diluted                  1.04           .94           .62           .59           .58
  Dividends                                  14,497        10,809         9,931         7,392         7,423
  Dividends per share                           .32           .24           .22           .16           .16
  Average common shares outstanding          45,311        45,019        45,180        46,093        46,389

FINANCIAL POSITION
  Working capital                          $240,123      $205,447      $159,549      $145,715      $142,972
  Net property, plant and equipment         147,164       149,410       150,596       150,223       154,844
  Total assets                              785,208       762,236       721,952       693,613       685,922
  Long-term debt                             53,835        59,541        64,861        48,887        51,025
  Stockholders' equity                      420,537       391,038       359,156       349,650       349,154

OTHER DATA
  Capital expenditures                     $ 14,062      $ 18,056      $ 17,271      $ 15,676      $ 31,066
  Book value per share                         9.23          8.65          7.98          7.70          7.53
  Number of employees                         3,340         3,320         3,310         3,360         3,460
  Number of stockholders of record
     Common                                   1,741         1,913         2,108         2,340         2,656
     Class B Common                           1,065         1,142         1,241         1,343         1,471
</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:

                                 FISCAL YEARS ENDED MARCH 31
                         ------------------------------------------
                                  2001                  2000
                         --------------------  --------------------
                            HIGH        LOW       HIGH        LOW
         QUARTER ENDED   ---------  ---------  ---------  ---------
         June 30           $23.69     $17.38     $18.25     $17.19

         September 30       28.00      19.00      18.56      17.56

         December 31        34.50      23.44      18.88      17.44

         March 31           33.38      22.95      19.56      17.44

             A dividend of $.08 per share was declared in all four
             quarters of 2001. A dividend of $.06 per share was
             declared in all four quarters of 2000.

                                       47

<Page>
                        DESCRIPTION OF BUSINESS SEGMENTS
--------------------------------------------------------------------------------
The Company is engaged in the manufacture and sale of a diversified line of
products in the Domestic Consumer Products, Domestic Health Care and
International business segments described below:

DOMESTIC 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 by our consumer products divisions and some are sold
throughout the rest of the world by various subsidiaries and distributors.
Principal products include:

* Arrid Extra Dry and Arrid XX anti-perspirants and deodorants
* Lady's Choice anti-perspirants and deodorants
* Answer and First Response at-home pregnancy and ovulation test kits; First
     Response pregnancy planning kit and urinary tract infection kit
* Carter's laxative
* H-R lubricating jelly
* Nair depilatories, waxes and bleach
* Pearl Drops whitening toothpolish and whitening toothpaste
* Rigident denture adhesive
* Trojan, Class Act, Naturalamb and Supra condoms
* Boundary dog and cat repellants
* Fresh 'n Clean grooming products,
     stain and odor remover and puppy housebreaking pads
* Lassie and Tiny Tiger pet product lines
* Linatone food supplement
* Twinco chain collars and leads, nail trimmers, slicker brushes and combs
* Mr. Spats' cat toys

DOMESTIC 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 by our professional products divisions and
some are sold throughout the rest of the world by various subsidiaries and
distributors. Principal products include:
* Astelin Nasal Spray for the treatment of symptoms of seasonal allergic
     rhinitis and vasomotor rhinitis
* Felbatol for the treatment of seizures associated with epilepsy
* Organidin NR family of expectorants/antitussives
* Ryna line of cough/cold products
* Tussi-12 cough/cold product
* Soma brand muscle relaxants
* Butisol sedative hypnotic
* Depen penicillamine for severe rheumatoid arthritis
* Doral sedative hypnotic
* Lufyllin xanthine bronchodilator
* Maltsupex laxative
* Analyst physician office chemistry system
* Clearview product line of rapid tests for the determination of pregnancy,
     group A streptococcus, chlamydia and C. difficile
* Prevue and Status rapid tests to aid in the determination of pregnancy
* Wampole and other branded enzyme and fluorescent immunoassay tests to detect
     a broad range of infectious and autoimmune diseases
* Isostat product line to aid in the detection of micro-organisms in blood
* MicroTrak line of immunoassay products for the detection of sexually
     transmitted diseases, primarily chlamydia
* Mono-Test, Mono-Latex and Mono-plus for the detection of mononucleosis
* Stat-Crit portable instrument for use in measuring blood hematocrit levels
                           --------------------------
INTERNATIONAL
In addition to many of the products listed above, the Company sells the
following products exclusively in certain International markets:

CONSUMER PRODUCTS
* Anne French facial cleansing products
* Barbara Gould facial beauty and cleansing products
* Bi-Solution acne treatment products
* Cerox adhesive tapes and bandages
* Confidelle, Discover and Gravix at-home pregnancy test kits
* Cossack line of men's grooming products
* Curash line of skin care products
* Email Diamant toothpastes
* Eudermin line of skin care and toiletry products
* Femfresh line of feminine hygiene products
* GranVista non-prescription eyeglasses
* Lineance line of anti-cellulite and associated skin care products
* Odontovax line of oral hygiene products
* Orasiv denture adhesive
* Poupina line of skin care and toiletry products
* Taky depilatories and waxes
* Ultrafresh mouthwash and breath freshening products

HEALTH CARE
* Antiphlogistine Rub A-535 and Dencorub topical analgesics
* Atasol analgesic/antipyretic
* Bentasil medicated throat lozenges
* Cerulisina otic solution
* Diovol antacid products
* Gravol antinauseant
* Jordan toothbrushes
* Maltlevol and Pangavit vitamin supplements
* Ovol antiflatulent
* Sterimar nasal decongestant
* Technogenetics line of diagnostic tests for thyroid metabolism,
     fertility/pregnancy conditions and other hormonal (endocrine) disorders
                                       48


<PAGE>
                                INDEX TO EXHIBITS
                               14 (A)(3) EXHIBITS

        2.1  Asset Purchase Agreement, dated as of May 7, 2001, by and between
             Armkel, LLC and Carter-Wallace, Inc.(incorporated herein by
             reference to Item 7 of the Company's Form 8-K dated May 7, 2001).

        2.2  Agreement and Plan of Merger, dated as of May 7, 2001, among the
             Company, CPI Development Corporation, MCC Acquisition Holdings
             Corporation, MCC Merger Sub Corporation and MCC Acquisition Sub
             Corporation. (incorporated herein by reference to Item 7 of the
             Company's Form 8-K dated May 7, 2001).

        3.1  Certificate of Incorporation, as amended, of the Company
             (incorporated herein by reference to Exhibit 3.1 of the Company's
             Annual Report on Form 10-K for the fiscal year ended March 31,
             1992).

        3.2  By-Laws of the Company, as amended through 5/15/97 (incorporated
             herein by reference to Exhibit 3.2 of the Company's Annual Report
             on Form 10-K for the fiscal year ended March 31, 1998).

        4.1  Instruments defining the rights of security holders, including
             indentures -- The Company agrees to furnish to the Commission upon
             request a copy of each instrument pursuant to which long- term debt
             of the Company and its subsidiaries not exceeding 10% of total
             assets of the Company and its consolidated subsidiaries is
             authorized.

       10.2  1977 Restricted Stock Award Plan, as amended (incorporated herein
             by reference to Exhibit 10.2 of the Company's Annual Report on Form
             10-K for the fiscal year ended March 31, 1990).

       10.3  Employees' Retirement Plan, as amended (incorporated herein by
             reference to Exhibit 10.3 of the Company's Annual Report on Form
             10-K for the fiscal year ended March 31, 1993).

       10.4  Description of Profit Sharing Plan (incorporated herein by
             reference to Exhibit 10.4 of the Company's Annual Report on Form
             10-K for the fiscal year ended March 31, 2000).

       10.5  Executives' Additional Compensation Plan (incorporated herein by
             reference to the description of such plan set forth in the
             Company's Proxy Statement dated June 18, 1993, for the Annual
             Meeting of Stockholders held July 20, 1993, under the caption
             "Executive Compensation and Other Information".)

       10.6  Employment Agreement, dated June 4, 1998, between the Company and
             Ralph Levine (incorporated herein by reference to Exhibit 10.6 of
             the Company's Annual Report on Form 10-K for the fiscal year ended
             March 31, 1998).

                                   (CONTINUED)

                                       49
<PAGE>
(A)(3) EXHIBITS (CONT'D)

      10.6(A)Amendment, dated January 27, 2000, to the Employment Agreement
             dated June 4, 1998 between the Company and Ralph Levine
             (incorporated herein by reference to Exhibit 10.6(a) of the
             Company's Annual Report on Form 10-K for the fiscal year ended
             March 31, 2000).

      10.6(B)Amendment, dated January 25, 2001, to the Employment Agreement
             dated June 4, 1998 between the Company and Ralph Levine
             (incorporated herein by reference to Exhibit 10.6(b) of the
             Company's Annual Report on Form 10-K for the fiscal year ended
             March 31, 2001).

      10.7   Employment Agreement, dated June 4, 1998, between the Company and
             Paul A. Veteri (incorporated herein by reference to Exhibit 10.7 of
             the Company's Annual Report on Form 10-K for the fiscal year ended
             March 31, 1998).

      10.7(A)Amendment, dated January 27, 2000, to the Employment Agreement
             dated June 4, 1998 between the Company and Paul A. Veteri
             (incorporated herein by reference to Exhibit 10.7(a) of the
             Company's Annual Report on Form 10-K for the fiscal year ended
             March 31, 2000).

      10.7(B)Amendment, dated January 25, 2001, to the Employment Agreement
             dated June 4, 1998 between the Company and Paul A. Veteri
             (incorporated herein by reference to Exhibit 10.7(b) of the
             Company's Annual Report on Form 10-K for the fiscal year ended
             March 31, 2001).

      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 10.11 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 of the Company's
             Annual Report on Form 10-K for the fiscal year ended March 31,
             1993).

                                   (CONTINUED)

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<PAGE>
(A)(3) EXHIBITS (CONTINUED)

      10.14   Executive Pension Benefits Plan, as amended (incorporated herein
              by reference to Exhibit 10.14 of the Company's Annual Report on
              Form 10-K for the fiscal year ended March 31, 1995).

      10.15   Executive Savings Plan (incorporated herein by reference to
              Exhibit 10.15 of the Company's Annual Report on Form 10-K for the
              fiscal year ended March 31, 1995).

      10.18   1996 Long-Term Incentive Plan, as amended (incorporated herein by
              reference to Exhibit 10.18 of the Company's Annual Report on Form
              10-K for the fiscal year ended March 31, 1999)

      10.19   Employment Agreement, dated October 2, 2000 between the Company
              and T. Rosie Albright (incorporated herein by reference to Exhibit
              10.19 of the Company's Annual Report on Form 10-K for the fiscal
              year ended March 31, 2001).

      10.21   Letter Agreement, dated September 14, 1998, between the Company
              and T. Rosie Albright (incorporated herein by reference to Exhibit
              10.21 of the Company's Annual Report on Form 10-K for the fiscal
              year ended March 31, 1999).

      10.21(A)Amendment, dated January 27, 2000, to the Letter Agreement, dated
              September 14, 1998, between the Company and T. Rosie Albright
              (incorporated herein by reference to Exhibit 10.21(a) of the
              Company's Annual Report on Form 10-K for the fiscal year ended
              March 31, 2000).

      10.22   Letter Agreement, dated June 4, 1998, between the Company and
              Stephen R. Lang (incorporated herein by reference to Exhibit 10.22
              of the Company's Annual Report on Form 10-K for the fiscal year
              ended March 31, 1999).

      10.22(A)Amendment, dated January 27, 2000, to the Letter Agreement,
              dated June 4, 1998 between the Company and Stephen R. Lang.
              (incorporated herein by reference to Exhibit 10.22(a) of the
              Company's Annual Report on Form 10-K for the fiscal year
              ended March 31, 2000).

      10.23   Consulting Agreement dated July 21, 1999 between the Company and
              Henry H. Hoyt, Jr.(incorporated herein by reference to Exhibit
              10.23 of the Company's Annual Report on Form 10-K for the fiscal
              year ended March 31, 2000).

      10.23(A)Amendment, dated January 27, 2000, to the Consulting Agreement
              dated July 21, 1999 between the Company and Henry H. Hoyt, Jr.
              (incorporated herein by reference to Exhibit 10.23(a) of the
              Company's Annual Report on Form 10-K for the fiscal year
              ended March 31, 2000).

                                   (CONTINUED)

                                       51
<PAGE>
(A)(3) EXHIBITS (CONTINUED)

      10.24   Letter Agreement, dated January 1, 1999 between the Company and
              Thomas G. Gerstmyer (incorporated herein by reference to Exhibit
              10.24 of the Company's Annual Report on Form 10-K for the fiscal
              year ended March 31, 2000).

      10.24(A)Amendment, dated January 27, 2000, to the Letter Agreement dated
              January 1, 1999, between the Company and Thomas G. Gerstmyer
              (incorporated herein by reference to Exhibit 10.24(a) of the
              Company's Annual Report on Form 10-K for the fiscal year ended
              March 31, 2000).

         21   Subsidiaries (incorporated herein by reference to Exhibit 21 of
              the Company's Annual Report on Form 10-K for the fiscal year ended
              March 31, 2001).

         23   KPMG LLP Independent Auditors' Consent

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