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 1996 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, 1996 is presented on page 8 under the caption "Net Sales and Earnings" and also on pages 27 and 28, note 15, "Business Segments" of the Notes to Consolidated Financial Statements, both included in the 1996 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 $2,400,000 in the fiscal year ended March 31, 1996 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 1996 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 1996, the Company's "Arrid" line of anti-perspirants and deodorants is believed to account for an estimated 7.7% share of the domestic anti-perspirant and deodorant market. The "Trojan", "Class Act" and "Naturalamb" condom brands are estimated to account for over 60% of total domestic retail condom sales. The Company's worldwide condom sales were approximately $98,700,000, $91,900,000 and $88,300,000 in the fiscal years ended March 31, 1996, 1995 and 1994, 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 until June, 1994 and "Organidin NR" from September, 1994, were approximately $30,100,000, $32,800,000 and $74,400,000 in the fiscal years ended March 31, 1996, 1995 and 1994, respectively. Additional information is presented on page 8 under the caption "Net Sales and Earnings" in the 1996 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.
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.
Restructuring of Operations and Facilities
Information regarding the Company's restructuring of operations and facilities is presented on pages 9 and 10 under the caption "Restructuring of Operations and Facilities" and on page 26 in note 14, "Restructuring of Operations and Facilities" of the Notes to Consolidated Financial Statements, both included in the 1996 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 30 in note 18, "Felbatol (felbamate)" of the Notes to Consolidated Financial Statements, both included in the 1996 Annual Report to Stockholders and are herein expressly incorporated by reference.
Environmental Matters
Information regarding environmental matters is presented on page 11 under the caption "Environmental Matter" and on page 31 in note 20, "Litigation Including Environmental Matters" of the Notes to Consolidated Financial Statements, both included in the 1996 Annual Report to Stockholders and are herein expressly incorporated by reference.
Research and Development
Expenditures for research and development totaled $26,494,000 in 1996, $41,315,000 in 1995 and $52,278,000 in 1994. In 1996 research and development expenses decreased by $14,821,000 or 36% from the prior year primarily due to lower spending for felbamate as well as the completion of "Astelin" (azelastine) clinical trials. The $10,963,000 or 21% decline in 1995 compared to 1994 was due to the significant reduction of felbamate clinical studies and the termination of "Organidin" I.G. clinical studies.
Three "Astelin" (azelastine) New Drug Applications ("NDAs") are pending at the FDA. Following a unanimous recommendation for approval of the "Astelin" Nasal Spray NDA for seasonal allergic rhinitis by the FDA's Pulmonary Advisory Committee in November, 1995, the Company received an "approvable letter" in January, 1996. The letter included a request for additional chemistry information that has been developed and will be submitted in June, 1996. Additional formulation work is needed in connection with the "Astelin" tablet NDA for rhinitis. The Company is unable to determine when and if the "Astelin" rhinitis NDAs will be approved by the FDA. The "Astelin" tablet for asthma NDA will be withdrawn as soon as it is determined it is no longer needed to support the rhinitis NDAs.
A large scale, multi-centered clinical efficacy trial for taurolidine, an antitoxin for the treatment of sepsis, is ongoing.
Approximately 155 employees are employed in research and development activities.
Additional information regarding the Company's research and development capability is presented on pages 9 and 10 under the caption "Restructuring of Operations and Facilities" included in the 1996 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 3,610 people worldwide at March 31, 1996.
Discontinuation of the Organidin (iodinated glycerol) Product Line
Information regarding the effect of discontinuing the "Organidin" (iodinated glycerol) product line on the Company's business is presented on page 11 under the caption "Discontinuance of the Organidin (Iodinated Glycerol) Product Line" and on pages 30 and 31 in note 19, "Discontinuance of the Organidin (Iodinated Glycerol) Product Line" of the Notes to Consolidated Financial Statements, both included in the 1996 Annual Report to Stockholders and are herein expressly incorporated by reference.
Acquisitions
Information regarding acquisitions is presented on pages 25 and 26 in note 11, "Acquisitions" of the Notes to Consolidated Financial Statements, included in the 1996 Annual Report to Stockholders and is herein expressly incorporated by reference.
Item 2.
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. In July, 1995, the Company relocated a 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 200,000 Cranbury, New Jersey Pharmaceuticals, toiletries and pet products 734,000 Decatur, Illinois Pharmaceuticals 108,000 Trenton, New Jersey (2) Condoms, pediculicide, lubricating jelly and pet products 169,500 Winsted, Connecticut Pet products 45,000 Montreal, Canada Pharmaceuticals 162,000 Folkestone, England Toiletries 76,000 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) Scheduled to be in full operation prior to December, 1996 (2) Scheduled to be closed in fiscal year 1997
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 * 23,300 Sydney, Australia 19,000 Toronto, Canada 52,000 Folkestone, England 40,000 Clichy, France * 11,800 Revel, France 36,000
* 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 renovations completed at the Wallace Research building in Cranbury, New Jersey, Wallace R&D personnel formerly housed in leased facilities in Plainsboro, New Jersey have been relocated to Cranbury. In addition, the Company is in the process of consolidating its two Canadian operations and has discontinued manufacturing operations at its Toronto, Canada facility. With the exclusion of the Colonial Heights, Virginia facility and some minor exceptions, all other facilities are operating at normal capacity. Maintenance and Repairs were $6,189,000 in 1996, $6,950,000 in 1995 and $7,950,000 in 1994.
Item 3.
Item 3. Legal Proceedings
Information regarding Legal Proceedings involving the Company is presented on pages 31 through 33 in note 20, "Litigation Including Environmental Matters" of the Notes to Consolidated Financial Statements, both included in the 1996 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.
Executive Officers of the Registrant
Executive Officers of the Registrant are as follows:
Held Present Name Age Office Office Since - ---- --- ------ ------------ Henry H. Hoyt, Jr. 68 Chairman of the Board and Chief Executive Officer 1974
Daniel J. Black 64 President and Chief Operating Officer 1979
T. Rosie Albright 49 Vice President, Consumer Products, U.S. 1995
John Bridgen, Ph.D. 49 Vice President, Diagnostics, U.S. 1984
Robert A. Cuthbert 69 Vice President, Pet Products, U.S. 1983
Donald R. Daoust,Ph.D. 60 Vice President, Quality Control 1978
Peter J. Griffin 53 Vice President and Controller 1983
Adrian J. L. Huns 48 Vice President, International 1996
Michael J. Kopec 56 Vice President, Manufacturing 1978
Ralph Levine 59 Vice President, Secretary and General Counsel 1976
Thomas B. Moorhead 62 Vice President, Human Resources 1987
George H. Ohye 60 Vice President, Compliance and Regulatory 1994
Herbert Sosman 63 Vice President, Pharmaceuticals, U.S. 1984
Donald J. Stack 58 Vice President, Taxes 1989
C. Richard Stafford 60 Vice President, Corporate Development 1977
Paul A. Veteri 54 Vice President, Finance and Chief Financial Officer 1983
James L. Wagar 61 Vice President and Treasurer 1981
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 16, 1996.
Executive Officers of the Registrant (Cont'd)
Mr. Black has advised the Company that he plans to retire effective as of March 31, 1997. Mr. Black intends to continue if elected, as a member of the Board of Directors. The Company and Mr. Black also intend to enter into a consultant agreement for a period of time and upon terms to be agreed upon by Mr. Black and the Company prior to the effective date of his retirement.
Ms. T. Rosie Albright was appointed Corporate Vice President, Consumer Products, U.S. and President, Carter Products Division, in December, 1995. Ms. Albright was previously General Manager and Executive Vice President, Beauty Care with Revlon, Inc. since 1993. She was Executive Vice President of the Carter Products Division of Carter-Wallace, Inc. from 1992 to 1993. Ms. Albright was President of Applegate Associates, Inc. since prior to 1991 until 1992.
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 1991 until May, 1996.
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 1991. 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 1996 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 1996 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 through 12 of the 1996 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 14 through 35 of the 1996 Annual Report to Stockholders.
Part III
Item 9.
Item 9. Disagreements on Accounting and Financial Disclosure
Not applicable.
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 dated June 14, 1996, for the Annual Meeting of Stockholders to be held July 16, 1996, 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.
Item 11. Executive Compensation
Information required by this item is incorporated herein by reference to the Company's Proxy Statement dated June 14, 1996, for the Annual Meeting of Stockholders to be held July 16, 1996, 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 dated June 14, 1996, for the Annual Meeting of Stockholders to be held July 16, 1996, 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 dated June 14, 1996, for the Annual Meeting of Stockholders to be held July 16, 1996, 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 13 of this Form.
(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 dated June 18, 1993, for the Annual Meeting of Stockholders to be held July 20, 1993, 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 dated June 18, 1993, for the Annual Meeting of Stockholders to be held July 20, 1993, 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).
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).
(Continued)
(a) (3) Exhibits (cont'd)
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 (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, 1994).
10.16 Amendment to revolving credit agreement dated as of October 1, 1995 (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995).
10.17 Private placement note agreement dated as of December 1, 1995 (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1995).
10.18 1996 Long-Term Incentive Plan (incorporated herein by reference to the description of such plan set forth in the Company's Consent Solicitation Statement, furnished to its Stockholders on January 22, 1996, under the caption "Carter- Wallace, Inc. 1996 Long-Term Incentive Plan").
13 Annual Report to Stockholders for the fiscal year ended March 31, 1996.
21 Subsidiaries.
23 KPMG Peat Marwick LLP Accountants' Consent
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, 1996.
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 18, 1996 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 18, 1996 Henry H. Hoyt, Jr. Chief Executive Officer, Director (Principal Execu- tive Officer)
s/Daniel J. Black President and Chief Opera- June 18, 1996 Daniel J. Black ting Officer, Director
s/David M. Baldwin Director June 18, 1996 David M. Baldwin
s/Dr. Richard L. Cruess Director June 18, 1996 Dr. Richard L. Cruess
s/Scott C. Hoyt Director June 18, 1996 Scott C. Hoyt
s/Ralph Levine Vice President, Secretary June 18, 1996 Ralph Levine and General Counsel, Director
Signature Title Date - --------- ----- ----
s/Herbert M. Rinaldi Director June 18, 1996 Herbert M. Rinaldi
s/Paul A. Veteri Vice President, Finance, June 18, 1996 Paul A. Veteri Director (Principal Financial Officer)
s/Peter J. Griffin Vice President and June 18, 1996 Peter J. Griffin Controller (Principal Accounting Officer)
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 6, 1996 appearing on pages 14 through 35 of the 1996 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, 1996 15
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.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders Carter-Wallace, Inc.:
Under date of May 6, 1996, we reported on the consolidated balance sheets of Carter-Wallace, Inc. and subsidiaries as of March 31, 1996 and 1995, 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, 1996, as contained in the 1996 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 1996. 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.
KPMG PEAT MARWICK LLP
New York, New York May 6, 1996
SCHEDULE II
CARTER-WALLACE, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts Three Years Ended March 31, 1996 (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, 1996:
Deducted from assets to which they apply:
Allowance for doubtful accounts $ 4,827 $ 1,090 $ - $ 559 (a) $ 5,358 Allowance for cash discounts 1,517 8,381 - 8,540 (b) 1,358 ------- ------- ---- ------- ------- $ 6,344 $ 9,471 $ - $ 9,099 $ 6,716 ------- ------- ---- ------- -------
Reserve for Property Plant and Equipment $14,308 $16,026 $ - $30,334 (c) $ - ------- ------- ---- ------- -------
Year ended March 31, 1995:
Deducted from assets to which they apply:
Allowance for doubtful accounts $4,284 $ 2,043 (d) $ - $ 1,500 (a)(d) $ 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 (c) $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 ------- ------- ---- ------- ------- Notes:
(a) Accounts written off and recovered. (b) Net discounts allowed to customers. (c) Reserves applied against related assets. (d) Includes $529 related to trade receivables from a drug wholesaler who filed for bankruptcy.