UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended March 31, 1995
Commission File Number 1-5910
CARTER-WALLACE, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-4986583
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1345 Avenue of the Americas, New York, NY 10105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-339-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -----------------------
Common Stock
Par value $1.00 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock, par value $1.00 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K of any amendment to
this Form 10-K. (X)
The number of shares of the registrant's Common Stock and Class B Common Stock
outstanding at June 1, 1995 was 33,600,414 and 12,512,858, respectively.
The aggregate market value of voting stock held by non-affiliates of the
registrant as of June 1, 1995 was approximately $257,205,000.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for the fiscal
year ended March 31, 1995 Parts I & II
Proxy Statement for the Annual Meeting of
Stockholders, to be held July 18, 1995 Parts III & IV
Part I
ITEM 1. BUSINESS
Carter-Wallace, Inc. (the "Company") is engaged in the manufacture and sale
of a diversified line of products in the Consumer Products and Health Care
segments. Additional information is presented on page 13 "Description of
Business Segments" of the 1995 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, 1995 is presented on pages 8 and
9 under the caption "Net Sales and Earnings" and also on pages 26 and 27,
note 14, "Business Segments" of the Notes to Consolidated Financial
Statements, both included in the 1995 Annual Report to Stockholders and are
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 $1,300,000 in the fiscal year ended March 31,
1995 in comparison to the prior year. Additional information is presented
on page 20, note 4, "Foreign Operations" of the Notes to Consolidated
Financial Statements of the 1995 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 1995, the Company's "Arrid" line of
anti-perspirants and deodorants is believed to account for an estimated
8.3% share of the domestic anti-perspirant and deodorant market. The
"Trojan" condom line is estimated to account for over 60% of total domestic
retail condom sales. The Company's worldwide condom sales were
approximately $91,900,000, $88,300,000 and $88,600,000 in the fiscal years
ended March 31, 1995, 1994 and 1993, respectively. In June, 1994 the
Company and the Food and Drug Administration (FDA) reached an agreement to
discontinue the manufacture and shipment of its "Organidin" (iodinated
glycerol) line of products. The Company has introduced a reformulated line
of "Organidin" products, marketed as "Organidin NR". Sales of the
"Organidin" product line including both iodinated glycerol and NR, were
approximately $32,800,000, $74,400,000 and $43,400,000 in the fiscal years
ended March 31, 1995, 1994 and 1993, respectively. Additional information
is presented on pages 8 and 9 under the caption "Net Sales and Earnings" in
the 1995 Annual Report to Stockholders and is herein expressly incorporated
by reference.
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 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 several 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.
In April, 1992, Carter-Wallace entered into a licensing agreement with
Schering-Plough Corporation. Additional information is presented on pages
8 and 11 under the captions "Net Sales and Earnings" and "Felbatol
(felbamate)" both included in the 1995 Annual Report to Stockholders and
are herein expressly incorporated by reference.
RESTRUCTURING OF OPERATIONS AND FACILITIES
Information regarding the Company's restructuring of operations and
facilities is presented on page 10 under the caption "Restructuring of
Operations and Facilities" and on pages 25 and 26 in note 13,
"Restructuring of Operations and Facilities" of the Notes to Consolidated
Financial Statements, both included in the 1995 Annual Report to
Stockholders and are herein expressly incorporated by reference.
FELBATOL (FELBAMATE)
Information regarding the effect of "Felbatol" matters on the Company's
business is presented on pages 10 and 11 under the caption "Felbatol
(felbamate)" and on page 29 in note 17, "Felbatol (felbamate)" of the Notes
to Consolidated Financial Statements, both included in the 1995 Annual
Report to Stockholders and are herein expressly incorporated by reference.
ENVIRONMENTAL MATTERS
Information regarding environmental matters is presented on pages 11 and 12
under the caption "Environmental Matter" and on page 30 in note 19,
"Litigation including Environmental Matters" of the Notes to Consolidated
Financial Statements, both included in the 1995 Annual Report to
Stockholders and are herein expressly incorporated by reference.
2
RESEARCH AND DEVELOPMENT
Expenditures for research and development totaled $41,315,000 in 1995,
$52,278,000 in 1994 and $49,903,000 in 1993. Research and development
expenses decreased 21% in 1995 and increased 5% in 1994. The decline in
1995 was due to the significant reduction of felbamate clinical studies and
the termination of "Organidin" (iodinated glycerol) clinical studies. The
increase in 1994 was primarily related to "Felbatol" for the treatment of
seizures associated with epilepsy and "Astelin" (azelastine) for rhinitis
and asthma.
The three "Astelin" (azelastine) New Drug Applications ("NDA") are pending
at the FDA. Answers to all outstanding questions for the "Astelin" Nasal
Spray non-approvable letter will be submitted to the FDA in June, 1995 and
remaining chemistry work is expected to be completed by September, 1995.
The FDA has suggested that a fall, 1995 Advisory Committee meeting for the
"Astelin" Nasal Spray NDA might be possible pending satisfactory review of
our June responses. Additional formulation work will be required to
satisfactorily complete work on the "Astelin" tablet for rhinitis NDA which
will remain pending during fiscal year 1996. The "Astelin" tablet for
asthma NDA will be withdrawn following the recently completed analysis of
two steroid sparing trials which did not support the product's efficacy in
treating asthma.
A large scale, multi-center clinical efficacy trial was initiated for
taurolidine, an antitoxin for the treatment of sepsis, in October, 1994.
D-23129, a new chemical entity with anticonvulsant activity in preclinical
testing, was accepted by Carter-Wallace as a development compound from ASTA
Medica AG during fiscal year 1994. ASTA Medica will begin Phase I clinical
trials in Germany during 1995. Discussions are underway with ASTA
regarding what role, if any, Carter-Wallace will play in the future
development of this product in the United States.
Approximately 160 employees are employed in research and development
activities.
Additional information regarding the Company's research and development
capability is presented on page 10 under the caption "Restructuring of
Operations and Facilities" included in the 1995 Annual Report to
Stockholders and is herein expressly incorporated by reference.
EMPLOYEES
The Company has been in existence since 1880 and together with its
subsidiaries employed approximately 3,670 people worldwide at March 31,
1995.
REGULATORY MATTERS
Information regarding the effect of Regulatory Matters on the Company's
business is presented on page 11 under the caption "Regulatory Matters" and
on pages 29 and 30 in note 18, "Regulatory Matters" of the Notes to
Consolidated Financial Statements, both included in the 1995 Annual Report
to Stockholders and are herein expressly incorporated by reference.
3
ACQUISITIONS
Information regarding acquisitions is presented on page 25 in note 11,
"Acquisitions" of the Notes to Consolidated Financial Statements, included
in the 1995 Annual Report to Stockholders and is herein expressly
incorporated by reference.
ITEM 2. PROPERTIES
The executive offices of the Company and a divisional headquarters are
located at 1345 Avenue of the Americas, New York, New York, in space leased
until May, 2011. The Company is in the process of relocating the
divisional headquarters to its Cranbury, New Jersey facility. The
following are principal facilities of the Company:
AREA
LOCATION PRODUCTS MANUFACTURED (SQ. FEET)
- -------- --------------------- ----------
OWNED IN FEE:
- -------------
MANUFACTURING FACILITIES
AND OFFICES:
Colonial Heights,
Virginia (1) Condoms 68,000
Cranbury, New Jersey Pharmaceuticals, toiletries
and pet products 734,000
Decatur, Illinois Pharmaceuticals 108,000
Trenton, New Jersey Condoms, pediculicide, lubricating
jelly and pet products 169,500
Winsted, Connecticut Pet products 45,000
Montreal, Canada Pharmaceuticals 162,000
Toronto, Canada Toiletries 52,000
Folkestone, England Toiletries 75,000
Milan, Italy Pharmaceuticals and diagnostics 52,000
Pisa, Italy Toiletries, adhesive tapes
and bandages 49,000
Mexico City, Mexico Pharmaceuticals and diagnostics 63,000
(1) Purchased in April, 1995
LEASED:
- -------
MANUFACTURING FACILITIES
AND OFFICES:
Santa Ana, California Toiletries 10,400
Mexico City, Mexico Toiletries 56,000
Barcelona, Spain Toiletries 58,600
Milan, Italy Diagnostics 21,000
WAREHOUSE AND OFFICES:
Dayton, New Jersey 200,000
Momence, Illinois 43,000
Plainsboro, New Jersey * 45,000
Sydney, Australia 19,000
Folkestone, England 40,000
Clichy, France * 11,800
Revel, France 36,000
* OFFICES ONLY
4
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. The Company has announced the planned closure of its
East Windsor and Trenton, New Jersey facilities. The East Windsor facility
(156,000 sq. ft.) is scheduled to be closed by October, 1995. The closure
of the Trenton facility is scheduled over a projected period of eighteen to
twenty-four months. With minor exceptions, all other facilities are
operating at normal capacity. Maintenance and Repairs were $6,950,000 in
1995, $7,950,000 in 1994 and $7,550,000 in 1993.
ITEM 3. LEGAL PROCEEDINGS
Information regarding Legal Proceedings involving the Company is presented
on page 6 under the caption "Litigation" and on pages 30 through 32 in note
19, "Litigation including Environmental Matters" of the Notes to
Consolidated Financial Statements, both included in the 1995 Annual Report
to Stockholders and are herein expressly incorporated by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
5
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers of the Registrant are as follows:
HELD PRESENT
NAME AGE OFFICE OFFICE SINCE
- ------- --- ------ ------------
Henry H. Hoyt, Jr. 67 Chairman of the Board and
Chief Executive Officer 1974
Daniel J. Black 63 President and Chief Operating
Officer 1979
John Bridgen, Ph.D. 48 Vice President, Diagnostics, U.S. 1984
Robert A. Cuthbert 68 Vice President, Pet Products, U.S. 1983
Donald R. Daoust,Ph.D. 59 Vice President, Quality Control 1978
Miguel Fernandez 64 Vice President, International 1980
Peter J. Griffin 52 Vice President and Controller 1983
John R. Hughes 57 Vice President, Consumer
Products, U.S. 1991
Michael J. Kopec 55 Vice President, Manufacturing 1978
Ralph Levine 58 Vice President, Secretary and
General Counsel 1976
Thomas B. Moorhead 61 Vice President, Human Resources 1987
George H. Ohye 59 Vice President, Compliance and
Regulatory 1994
Herbert Sosman 62 Vice President, Pharmaceuticals,
U.S. 1984
Donald J. Stack 57 Vice President, Taxes 1989
C. Richard Stafford 59 Vice President, Corporate
Development 1977
Paul A. Veteri 53 Vice President, Finance and
Chief Financial Officer 1983
James L. Wagar 60 Vice President and Treasurer 1981
6
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 18, 1995.
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. since prior to June, 1990.
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 prior to 1990. He held the concomitant position of Member,
Board of Directors of the Ortho-McNeil Pharmaceutical Division of Johnson &
Johnson.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK-
HOLDER MATTERS
Information required by this item is presented on pages 1 and 7 of the 1995
Annual Report to Stockholders and is herein expressly incorporated by
reference.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is incorporated herein by reference to
page 7 of the 1995 Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Information required by this item is incorporated herein by reference to
pages 8 through 12 of the 1995 Annual Report to Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is incorporated herein by reference to
pages 14 through 35 of the 1995 Annual Report to Stockholders.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
7
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors of the Company is incorporated by
reference to the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held July 18, 1995, to be filed with the Securities and
Exchange Commission under the captions "Election of Directors" and "Board
of Directors and Committees" and "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 6 and 7 of this Form.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated herein by reference to
the Company's Proxy Statement for the Annual Meeting of Stockholders to be
held July 18, 1995, to be filed with the Securities and Exchange Commission
under the caption "Executive Compensation and Other Information".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information pertaining to the security ownership of certain beneficial
owners and management is incorporated herein by reference to the Company's
Proxy Statement for the Annual Meeting of Stockholders to be held July 18,
1995, to be filed with the Securities and Exchange Commission under the
captions "Voting Rights", "Principal Stockholders" and "Election of
Directors".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is incorporated herein by reference to
the Company's Proxy Statement for the Annual Meeting of Stockholders to be
held July 18, 1995, to be filed with the Securities and Exchange Commission
under the captions "Principal Stockholders" and "Election of Directors".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(A)(1),(A)(2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The financial statements and financial statement schedule filed as part of
this report are listed or incorporated by reference in the "Index of
Financial Statements and Financial Statement Schedule" on page 13 of this
Form.
8
(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 18, 1995, 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 18, 1995, 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)
9
(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
(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, 1994).
13 Annual Report to Stockholders for the fiscal year ended
March 31, 1995.
21 Subsidiaries.
27 Financial Data Schedule (EDGAR filing only)
(B) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter ended
March 31, 1995.
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
CARTER-WALLACE, INC.
(Registrant)
DATED: June 21, 1995 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 21, 1995
- -------------------- Chief Executive Officer,
Henry H. Hoyt, Jr. Director (Principal Execu-
tive Officer)
s/Daniel J. Black President and Chief Opera- June 21, 1995
- ------------------- ting Officer, Director
Daniel J. Black
s/David M. Baldwin Director June 21, 1995
- --------------------
David M. Baldwin
s/Dr. Richard L. Cruess Director June 21, 1995
- --------------------
Dr. Richard L. Cruess
s/Scott C. Hoyt Director June 21, 1995
- --------------------
Scott C. Hoyt
s/Ralph Levine Vice President, Secretary June 21, 1995
- -------------------- and General Counsel,
Ralph Levine Director
11
SIGNATURE TITLE DATE
- --------- ----- ----
s/Herbert M. Rinaldi Director June 21, 1995
- --------------------
Herbert M. Rinaldi
s/Paul A. Veteri Vice President, Finance, June 21, 1995
- -------------------- Director (Principal
Paul A. Veteri Financial Officer)
s/Peter J. Griffin Vice President and June 21, 1995
- -------------------- Controller (Principal
Peter J. Griffin Accounting Officer)
12
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 LLP dated May 3, 1995 appearing on pages 14 through 35 of the 1995
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 14
SCHEDULE II - Valuation and qualifying accounts for each
of the three years ended March 31, 1995 16
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.
13
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Carter-Wallace, Inc.:
Under date of May 3, 1995, we reported on the consolidated balance sheets
of Carter-Wallace, Inc. and subsidiaries as of March 31, 1995 and 1994, 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,
1995, as contained in the 1995 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 1995. 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.
As a result of the Felbatol matters discussed in Note 17 to the
consolidated financial statements, the Company incurred in the year ended
March 31, 1995 a one-time charge to pre-tax earnings of $37,780,000. As
further discussed, depending on future sales levels, additional inventory
write-offs may be required. At the present time Felbatol continues to be
available on the market. If for any reason the product at some future date
is no longer available in the market, the Company will incur an additional
one-time charge that would have a material adverse effect of the Company's
results of operations and possibly on its financial condition. Should the
product no longer be available, the Company currently estimates that the
additional one-time charge, consisting primarily of inventory write-offs
and anticipated returns of product currently in the market, will be in the
range of $30,000,000 to $35,000,000 on a pre-tax basis.
(CONTINUED)
14
INDEPENDENT AUDITORS' REPORT
(CONTINUED)
As discussed in Note 19 to the consolidated financial statements, the
Company is a defendant in several lawsuits including two product liability
class action suits, two federal securities class action suits, one state
court action suit and seven individual product liability suits related to
Felbatol, three class action suits involving alleged price fixing within
the pharmaceutical industry and a patents infringement suit involving the
Company's diagnostic products. In addition, an alleged shareholder of the
Company instituted an action which purports to be brought derivatively on
behalf and for the benefit of the Company against the directors of the
Company for breach of fiduciary duty, gross mismanagement and waste of
corporate assets in connection with the development and marketing of
Felbatol. The Company believes, based on opinion of counsel, it has good
defenses to each of the above-described legal actions and should prevail.
In addition, product liability claims related to Felbatol use have been
threatened against the Company. At this point, the Company cannot evaluate
the merits of such claims and does not know whether or to what extent legal
actions will arise from such claims, and therefore, is unable to predict
the financial impact they may have. The ultimate outcome of all of these
matters cannot presently be determined. Accordingly, no provision for any
liability has been recognized in the accompanying financial statements.
KPMG PEAT MARWICK LLP
New York, New York
June 21, 1995
15
SCHEDULE II
CARTER-WALLACE, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Three Years Ended March 31, 1995
(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 31, 1995:
Deducted from assets
to which they apply:
Allowance for
doubtful accounts $4,284 $ 2,043 (c) $ - $1,500 (a)(c) $ 4,827
Allowance for cash
discounts 1,671 8,127 - 8,281 (b) 1,517
------ ------- ------ ------ -------
$5,955 $10,170 $ - $9,781 $ 6,344
------ ------- ------ ------ -------
Reserve for Property
Plant and Equipment $ - $18,028 $ - $3,720 $14,308
------ ------- ------ ------ -------
YEAR ENDED MARCH 31, 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 (d) $ - $ 2,877 (a)(d) $ 3,589
Allowance for cash
discounts 1,995 7,719 - 7,664 (b) 2,050
------ ------- ------ ------ -------
$6,855 $ 9,325 $ - $10,541 $ 5,639
------ ------- ------ ------ -------
NOTES:
(a) Accounts written off and recovered.
(b) Net discounts allowed to customers.
(c) Includes $529 related to trade receivables from a drug wholesaler who
filed for bankruptcy.
(d) Includes $1,200 related to trade receivables from Phar-Mor, Inc., a
drugstore chain which has filed for bankruptcy.