Annual Report (Form 10-K), fiscal year 1994

Item 1. Business
Carter-Wallace, Inc. (the "Company") is engaged in the manufacture and sale of a diversified line of products in the Consumer Products and Health Care segments. Additional information is presented on page 11 "Description of Business Segments" of the 1994 Annual Report to Stockholders and is herein expressly incorporated by reference.
Business Segments and Geographic Data
Financial information about the Company's business segments and geographic areas for the three years ended March 31, 1994 is presented on pages 23 and 24, note 12, "Business Segments" of the Notes to Consolidated Financial Statements of the 1994 Annual Report to Stockholders and is herein expressly incorporated by reference.
Foreign Operations
Foreign operations are generally subject to certain political and economic risks that are not present in domestic operations. Such risks may include expropriation of assets, restrictions on earnings remittances and fluctuating exchange rates. Changes in foreign exchange rates had the effect of decreasing sales by $16,300,000 in the fiscal year ended March 31, 1994 in comparison to the prior year. Additional information is presented on page 18, note 4, "Foreign Operations" of the Notes to Consolidated Financial Statements of the 1994 Annual Report to Stockholders and is herein expressly incorporated by reference.
Competition
Both business segments in which the Company operates are extremely competitive and include larger corporations with greater resources for research, product development and promotion. The Company competes on the basis of price, advertising, promotion, quality of product and other methods relevant to the business. In 1994, the Company's "Arrid" line of anti-perspirants and deodorants is believed to account for an estimated 8.4% share of the domestic anti-perspirant and deodorant market. The "Trojan" condom line is estimated to account for almost 60% of total domestic retail condom sales. The Company's worldwide condom sales were approximately $88,300,000, $88,600,000 and $87,400,000 in the fiscal years ended March 31, 1994, 1993 and 1992, respectively. The "Organidin" line of expectorant/mucolytics has a leading position in prescriptions written for cough/cold products. Sales of the "Organidin" product line were approximately $74,400,000, $43,400,000 and $59,900,000 in the fiscal years ended March 31, 1994, 1993 and 1992, respectively. Additional information is presented on page 8 under "Management's Discussion and Analysis of Results of Operations and Financial Condition - Net Sales and Earnings" of the 1994 Annual Report to Stockholders and is herein expressly incorporated by reference.
Raw Materials
The Company's major raw materials are chemicals, plastics, latex, steel cans and packaging materials. These materials are generally available from several sources and the Company has had no significant supply problems to date. The Company has two or more approved suppliers for production materials and issues purchase commitments to provide its suppliers with adequate lead time.
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Patents and Licenses
The Company owns or is licensed under a number of patents and patent applications covering several of its products. Except for the patents related to "Felbatol" (felbamate), the expiration or any other change in any of these patents or patent applications will not materially affect the Company's business. "Felbatol" is covered by patents which expire during the period from 2006 to 2011. Royalty income does not constitute a material portion of total revenue.
In April, 1992, Carter-Wallace entered into a licensing agreement with Schering-Plough Corporation. Additional information is presented on page 9 under "Management's Discussion and Analysis of Results of Operations and Financial Condition - Licensing Arrangement" in the 1994 Annual Report to Stockholders and is herein expressly incorporated by reference.
Environmental Matters
Information regarding environmental matters is presented on page 5 under the caption "Litigation" and on page 25 under note 16, "Litigation and Environmental Matters" of the Notes to Consolidated Financial Statements, both included in the 1994 Annual Report to Stockholders and are herein expressly incorporated by reference.
Research and Development
Expenditures for research and development totaled $52,278,000 in 1994, $49,903,000 in 1993 and $51,955,000 in 1992. Research and development expenses increased 5% in 1994 and decreased 4% in 1993. Research spending, most of which was in the Health Care segment was principally related to "Felbatol" for the treatment of seizures associated with epilepsy and "Astelin" (azelastine) for rhinitis and asthma. The decline in 1993 was due primarily to the reorganization of the Consumer Products research program as well as the completion of clinical studies necessary for the submission of the New Drug Application ("NDA") for "Felbatol".
The NDA for "Felbatol", the trademark for felbamate, was approved by the Food and Drug Administration ("FDA") on July 29, 1993. Studies have been initiated in generalized epileptic seizures in adults and partial onset seizures in children to support expanded claims and an NDA for the "Felbatol" Chewable Tablet will be submitted to the FDA during spring, 1994.
"Astelin" (azelastine) and "Astelin" Nasal Spray NDA's for rhinitis were submitted to the FDA in March, 1991 and an NDA for asthma was submitted in December, 1992. In the spring of 1994, the Company received "non- approvable" letters from the FDA for "Astelin" nasal spray for allergic rhinitis and "Astelin" tablets for asthma. The Company is aware that it will receive a similar letter with respect to "Astelin" tablets for rhinitis. The Company is responding to these letters in writing. A meeting has been scheduled in July with the FDA to resolve any remaining issues after the Company's written responses. The Company is confident that these issues raised by the FDA are resolvable. Until the July meeting has occurred, the Company is unable to project when approval of these NDA's will occur.
During the fiscal year, development continued on taurolidine, an antitoxin for the treatment of sepsis.
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D-23129 was accepted by Carter-Wallace as a development compound licensed from ASTA Pharma AG for the treatment of epilepsy. Discussions are underway for a joint development program leading to an Investigational New Drug (IND) application.
Approximately 270 employees are employed in research and development activities.
Employees
The Company has been in existence since 1880 and together with its subsidiaries employed approximately 4,060 people worldwide at March 31, 1994.
Regulatory Matters
Information regarding the effect of Regulatory Matters on the Company's business is presented on page 5 under the caption "Regulatory Matters" and on page 25 in note 15, "Regulatory Matters" of the Notes to Consolidated Financial Statements, both are included in the 1994 Annual Report to Stockholders and are herein expressly incorporated by reference.
Acquisition
Information regarding acquisitions is presented on page 22 in note 11, "Acquisition" of the Notes to Consolidated Financial Statements, is included in the 1994 Annual Report to Stockholders and is herein expressly incorporated by reference.
Item 2.



Item 2. Properties
The executive offices of the Company and a divisional headquarters are located at 1345 Avenue of the Americas, New York, New York, in space leased until May, 2011. The following are principal facilities of the Company: Area Location Products Manufactured (Sq. Feet)
Owned in Fee:
Manufacturing Facilities and Offices:
Cranbury, New Jersey Pharmaceuticals, toiletries and pet products 734,000 Decatur, Illinois Pharmaceuticals 108,000 East Windsor, New Jersey Diagnostics 156,000 Trenton, New Jersey Condoms, pediculicide, lubricating jelly and pet products 169,500 Winsted, Connecticut Pet products 45,000 Montreal, Canada Pharmaceuticals 162,000 Humacao, Puerto Rico Pharmaceuticals 34,000 Toronto, Canada Toiletries 52,000 Folkestone, England Toiletries 55,000 Milan, Italy Pharmaceuticals and diagnostics 52,000 Pisa, Italy Toiletries, adhesive tapes and bandages 49,000 Mexico City, Mexico Pharmaceuticals and diagnostics 63,000 New Plymouth, New Zealand (1) Condom processing 31,000
(1) The land on which the building is located is leased under a long-term agreement. - 3 -
Properties (Cont'd) Area Location Products Manufactured (Sq. Feet)
Leased:
Manufacturing Facilities and Offices:
Santa Ana, California Toiletries 10,400 Rincon, Puerto Rico Toiletries and condoms 67,000 Mexico City, Mexico Toiletries 56,000 Barcelona, Spain Toiletries 58,600
Warehouse and Offices:
Dayton, New Jersey 200,000 Momence, Illinois 43,000 Plainsboro, New Jersey * 45,000 Twin Rivers, New Jersey* 14,500 Sydney, Australia 19,000 Folkestone, England 40,000 Clichy, France * 11,800
* Offices only
The Company has agreements with several agents throughout the world for the manufacture of certain products to its specifications. The Company has several other short-term leases for manufacturing plants, warehousing space and sales offices. With minor exceptions, all facilities are operating at normal capacity. Maintenance and Repairs were $7,950,000 in 1994, $7,550,000 in 1993 and $6,960,000 in 1992.
Item 3.

Item 3. Legal Proceedings
Information regarding Legal Proceedings involving the Company is presented on page 5 under the caption "Litigation" and on page 25 in note 16, "Litigation and Environmental Matters" of the Notes to Consolidated Financial Statements, both included in the 1994 Annual Report to Stockholders and are herein expressly incorporated by reference.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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Executive Officers of the Registrant
Executive Officers of the Registrant are as follows:
Held Present Name Age Office Office Since
Henry H. Hoyt, Jr. 66 Chairman of the Board and Chief Executive Officer 1974
Daniel J. Black 62 President and Chief Operating Officer 1979
John Bridgen, Ph.D. 47 Vice President, Diagnostics, U.S. 1984
Robert A. Cuthbert 67 Vice President, Pet Products, U.S. 1983
Donald R. Daoust,Ph.D. 58 Vice President, Quality Control 1978
Miguel Fernandez 63 Vice President, International 1980
Peter J. Griffin 51 Vice President and Controller 1983
John R. Hughes 56 Vice President, Consumer Products, U.S. 1991
Michael J. Kopec 54 Vice President, Manufacturing 1978
Ralph Levine 57 Vice President, Secretary and General Counsel 1976
Thomas B. Moorhead 60 Vice President, Human Resources 1987
George H. Ohye 58 Vice President, Compliance and Regulatory 1994
Herbert Sosman 61 Vice President, Pharmaceuticals, U.S. 1984
Donald J. Stack 56 Vice President, Taxes 1989
C. Richard Stafford 58 Vice President, Corporate Development 1977
Paul A. Veteri 52 Vice President, Finance and Chief Financial Officer 1983
James L. Wagar 59 Vice President and Treasurer 1981
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Executive Officers of the Registrant (Cont'd)
Each officer holds office until the first meeting of the Board of Directors following each Annual Meeting of the Stockholders and until his successor has been duly elected and qualified (except that the Board of Directors may at any meeting elect additional officers), unless his term is earlier terminated through death, resignation, removal or otherwise. The next Annual Meeting of the Stockholders is scheduled to be held July 19, 1994.
Mr. John R. Hughes was appointed Vice President, Consumer Products, U.S., in June, 1991 and President, Carter Products Division in April, 1991. He was employed by Vermont Castings, Inc. from April, 1990 to April, 1991 as Chief Executive Officer. He was employed as President of Mennen, USA, a division of the Mennen Company prior to August, 1989.
Mr. George H. Ohye was appointed Vice President, Compliance and Regulatory in April, 1994. Mr. Ohye was previously Senior Vice President, Regulatory Affairs with Johnson & Johnson's R.W. Johnson Pharmaceutical Research Institute since 1989. He held the concomitant position of Member, Board of Directors of the Ortho-McNeil Pharmaceutical Division of Johnson & Johnson.
Part II
Item 5.

Item 5. Market for Registrant's Common Equity and Related Stock- Holder Matters
Information required by this item is presented on pages 1 and 7 of the 1994 Annual Report to Stockholders and is herein expressly incorporated by reference.
Item 6.

Item 6. Selected Financial Data
Information required by this item is incorporated herein by reference to page 7 of the 1994 Annual Report to Stockholders.
Item 7.

Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition
Information required by this item is incorporated herein by reference to pages 8, 9 and 10 of the 1994 Annual Report to Stockholders.
Item 8.


Item 8. Financial Statements and Supplementary Data
Information required by this item is incorporated herein by reference to pages 12 through 27 of the 1994 Annual Report to Stockholders.
Item 9.

Item 9. Disagreements on Accounting and Financial Disclosure
Not applicable.
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Part III
Item 10.



Item 10. Directors and Executive Officers of the Registrant
Information with respect to Directors of the Company is incorporated by reference to the Company's Proxy Statement for the Annual Meeting of Stockholders to be held July 19, 1994, to be filed with the Securities and Exchange Commission under the captions "Election of Directors" and "Board of Directors and Committees" and Note 7 to "Principal Stockholders".
Information with respect to Executive Officers of the Registrant is set forth under the heading "Executive Officers of the Registrant" in Part I on pages 5 and 6 of this Form.
Item 11.

Item 11. Executive Compensation
Information required by this item is incorporated herein by reference to the Company's Proxy Statement for the Annual Meeting of Stockholders to be held July 19, 1994, to be filed with the Securities and Exchange Commission under the caption "Executive Compensation and Other Information".
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
Information pertaining to the security ownership of certain beneficial owners and management is incorporated herein by reference to the Company's Proxy Statement for the Annual Meeting of Stockholders to be held July 19, 1994, to be filed with the Securities and Exchange Commission under the captions "Voting Rights", "Principal Stockholders" and "Election of Directors".
Item 13.

Item 13. Certain Relationships and Related Transactions
Information required by this item is incorporated herein by reference to the Company's Proxy Statement for the Annual Meeting of Stockholders to be held July 19, 1994, to be filed with the Securities and Exchange Commission under the captions "Principal Stockholders" and "Election of Directors".
Part IV
Item 14.

Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a)(1),(a)(2) Financial Statements and Financial Statement Schedule
The financial statements and financial statement schedule filed as part of this report are listed or incorporated by reference in the "Index of Financial Statements and Financial Statement Schedule" on page 12 of this Form.
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(a) (3) Exhibits
3.1 Certificate of Incorporation, as amended, of the Company (incorporated herein by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1992).
3.2 By-Laws of the Company, as amended (incorporated herein by reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993).
10.2 1977 Restricted Stock Award Plan, as amended (incorporated herein by reference to Exhibit 10.2 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1990).
10.3 Employees' Retirement Plan, as amended (incorporated herein by reference to Exhibit 10.3 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993).
10.4 Profit Sharing Plan (incorporated herein by reference to the description of such plan set forth in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held July 19, 1994, to be filed with the Securities and Exchange Commission under the caption "Executive Compensation and Other Information").
10.5 Executives' Additional Compensation Plan (incorporated herein by reference to the description of such plan set forth in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held July 19, 1994, to be filed with the Securities and Exchange Commission under the caption "Executive Compensation and Other Information").
10.6 Employment Agreement dated April 24, 1992, as amended, between the Company and Daniel J. Black (incorporated herein by reference to Exhibit 10.6 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1992).
10.7 Employment Agreement dated April 10, 1992 between the Company and Ralph Levine (incorporated herein by reference to Exhibit 10.7 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1992).
10.8 Employment Agreement dated April 10, 1992 between the Company and Paul A. Veteri (incorporated herein by reference to Exhibit 10.8 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1992).
(Continued)
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(a) (3) Exhibits (cont'd)
10.9 Employment Agreement dated November 14, 1991 between the Company and Herbert Sosman (incorporated herein by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1992).
10.10 Supplemental Death Benefit Agreement, as amended (incorporated herein by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993).
10.11 Lease Agreement dated December 2, 1988 between the Company and Fisher - Sixth Avenue Company and Hawaiian Sixth Avenue Corporation (incorporated herein by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1989).
10.12 Corporate Officer Medical Expense Reimbursement Plan (incorporated herein by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993).
10.13 Executive Medical Expense Reimbursement Plan, as amended (incorporated herein by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993).
10.14 Executive Pension Benefits Plan, as amended.
10.15 Executive Savings Plan
13 Annual Report to Stockholders for the fiscal year ended March 31, 1994.
21 Subsidiaries.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended March 31, 1994.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CARTER-WALLACE, INC. (Registrant)
DATED: June 6, 1994 BY: s/Daniel J. Black Daniel J. Black President and Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the respective dates indicated:
Signature Title Date
s/Henry H. Hoyt, Jr. Chairman of the Board and June 6, 1994 Henry H. Hoyt, Jr. Chief Executive Officer, Director (Principal Execu- tive Officer)
s/Daniel J. Black President and Chief Opera- June 6, 1994 Daniel J. Black ting Officer, Director
s/David M. Baldwin Director June 6, 1994 David M. Baldwin
s/Dr. Richard L. Cruess Director June 6, 1994 Dr. Richard L. Cruess
s/Scott C. Hoyt Director June 6, 1994 Scott C. Hoyt
s/Ralph Levine Vice President, Secretary June 6, 1994 Ralph Levine and General Counsel, Director
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Signature Title Date
s/Herbert M. Rinaldi Director June 6, 1994 Herbert M. Rinaldi
s/Paul A. Veteri Vice President, Finance, June 6, 1994 Paul A. Veteri Director (Principal Financial Officer)
s/Peter J. Griffin Vice President and June 6, 1994 Peter J. Griffin Controller (Principal Accounting Officer)
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CARTER-WALLACE, INC. AND SUBSIDIARIES
INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The consolidated financial statements and the related report of KPMG Peat Marwick dated June 6, 1994 appearing on pages 12 through 27 of the 1994 Annual Report to Stockholders are incorporated herein by reference in this Form 10-K Annual Report.
The following are set forth in this Annual Report on Form 10-K:
Page
Independent Auditors' Report on Supporting Financial Statement Schedule 13
Schedule VIII - Valuation and qualifying accounts for each of the three years ended March 31, 1994 14
All other financial statement schedules are omitted because they are not applicable or not required or because the information is included in the consolidated financial statements or related notes.
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders Carter-Wallace, Inc.:
Under date of June 6, 1994, we reported on the consolidated balance sheets of Carter-Wallace, Inc. and subsidiaries as of March 31, 1994 and 1993, and the related consolidated statements of earnings and retained earnings and cash flows for each of the years in the three-year period ended March 31, 1994, as contained in the 1994 Annual Report to Stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the Annual Report on Form 10-K for the year 1994. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in notes 3 and 8 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statements No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions", No. 109 "Accounting for Income Taxes" and No. 112 "Employers' Accounting for Postemployment Benefits" in 1994.
The audit report on the consolidated financial statements of Carter-Wallace, Inc. and subsidiaries referred to above contains an explanatory paragraph that states that the Company received a letter from the Food and Drug Administration (FDA) requesting the discontinuance of the marketing of its Organidin products. The Company met with the FDA, has replied to the letter and is awaiting further response from the FDA. The ultimate outcome of this matter cannot presently be determined. Accordingly, no provision for any liability that may result upon the resolution has been recognized in the financial statement schedule.
KPMG PEAT MARWICK
New York, New York June 6, 1994
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SCHEDULE VIII
CARTER-WALLACE, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts Three Years Ended March 31, 1994 (in thousands of dollars)
Balance at Charged to Charged Balance beginning costs and to other at end Description of period expenses accounts Deductions of period
Year ended March 1994:
Deducted from assets to which they apply:
Allowance for doubtful accounts $3,589 $ 1,121 $ - $ 426 (a) $4,284 Allowance for cash discounts 2,050 8,200 - 8,579 (b) 1,671 $5,639 $ 9,321 $ - $9,005 $5,955
Year ended March 31, 1993:
Deducted from assets to which they apply:
Allowance for doubtful accounts $4,860 $ 1,606 (c) $ - $ 2,877 (a)(c) $3,589 Allowance for cash discounts 1,995 7,719 - 7,664 (b) 2,050 $6,855 $ 9,325 $ - $10,541 $5,639
Year ended March 31, 1992:
Deducted from assets to which they apply:
Allowance for doubtful accounts $4,501 $ 628 $ - $ 269 (a) $4,860 Allowance for cash discounts 2,041 7,713 - 7,759 (b) 1,995 $6,542 $ 8,341 $ - $ 8,028 $6,855
Notes:
(a) Accounts written off and recovered.
(b) Net discounts allowed to customers.
(c) Includes $1,200 related to trade receivables from Phar-Mor, Inc., a drugstore chain which has filed for bankruptcy.
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