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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

Commission File Number 333-73160

ARMKEL, LLC

(Exact name of registrant as specified in its certificate of formation)

Registrant’s telephone Number, including area code: (609) 683-5900

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

None

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

None

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 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 or any amendment to this Form 10-K.    ¨

Indicated by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act)     Yes  ¨    No  x

As of March 11, 2004, all of the 10,000 outstanding membership interests in Armkel, LLC were held by affiliates.

Documents Incorporated by Reference:

None

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CAUTIONARY NOTE ON FORWARD LOOKING INFORMATION

This Annual Report contains forward-looking statements relating to, among other things, short- and long-term financial objectives, sales and earnings growth, and cash flow. These statements represent the intentions, plans, expectations and beliefs of the Company, and are subject to risk, uncertainties and other factors, many of which are outside the Company’s control and could cause actual results to differ materially from such forward-looking statements. The uncertainties include assumptions as to market growth and consumer demand (including the effect of political and economic events on consumer demand), raw material and energy prices, and the financial condition of major customers. With regard to the new product introductions referred to in this report, there is particular uncertainty relating to trade, competitive and consumer reactions. Other factors, which could materially affect the results, include the outcome of contingencies, including litigation, pending regulatory proceedings, environmental remediation and the divestiture of assets.

The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our filings with the U.S. Securities and Exchange Commission.

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PART I

General; Recent Developments

Armkel, LLC (the “Company”) is an equally owned joint venture formed by Church & Dwight Co., Inc. (“C&D”) and affiliates of Kelso & Company, L.P. (“Kelso”). On September 28, 2001, the Company acquired certain of the domestic consumer product assets of Carter-Wallace, primarily Trojan condoms, Nair depilatories, and First Response and Answer test kits, and the international subsidiaries of Carter-Wallace (the “Acquisition”). The remainder of Carter-Wallace, comprised of its healthcare and pharmaceuticals businesses, was merged with an unrelated third party after the completion of the Acquisition. Simultaneously with the consummation of the Acquisition, the Company sold the remainder of the consumer products businesses, Arrid antiperspirant in the U.S. and Canada and the Lambert-Kay line of pet care products, to C&D. The Company retained the Arrid antiperspirant business outside the U.S. and Canada.

C&D markets a broad range of products under various brand names including its well-recognized Arm & Hammer trademark, including personal care products such as antiperspirants, dentifrices and oral care gum and other products, such as baking soda, carpet deodorizer, air freshener and laundry detergent. C&D distributes its products through a broad distribution platform that includes mass merchandisers, food stores, drug stores, convenience stores and other channels. C&D’s senior management team has extensive experience in the branded consumer products industry with average experience of more than 20 years. C&D was founded in 1846 and its common stock is publicly traded under the symbol “CHD” and has been publicly traded for over thirty years. Kelso & Company, or Kelso, is a private investment firm founded in 1971 that specializes in acquisition transactions. Since 1980, Kelso has acquired more than 70 companies requiring total capital at closing of more than $18 billion.

In February 2003, the Company sold its Italian subsidiary, S.p.A. Italiana Laboratori Bouty, including its two subsidiaries, to a group comprised of local management and private equity investors for a price of $22.6 million. The net proceeds from the sale were used to prepay a portion of the Company’s syndicated financing loans. The Company will retain ownership of certain Italian pregnancy kit and oral care product lines with annual sales of approximately $3 million. The remainder of the Italian subsidiary’s business disposed of in the sale included a high percentage of distributor sales as well as hospital diagnostic and other products not related to the Company’s core business.

The Company is a leading marketer and manufacturer of well-recognized branded personal care consumer products. The Company’s Trojan brand occupies the number one position in the domestic condom market. The Company’s Nair brand occupies the number two position in the domestic depilatories and waxes market and the Company’s First Response brand occupies the number two position in the domestic home pregnancy and ovulation test kits market. The Company also markets value priced home pregnancy and ovulation test kits under the Answer brand name.

Similarly, the Company enjoys leading market positions in certain of its international markets. In Canada, for example, the Company’s Trojan brand is the market leader. In addition, the Company’s depilatory and wax products, marketed under the Nair and Taky brand names, have either a number one or number two market position in many of its key international markets. The Company believes its leading market positions and its well-recognized brand names are significant competitive advantages, as they typically enable it to maintain superior shelf space allocations within its retail customers’ facilities.

The Company markets its products through a well-established, diversified marketing platform that serves mass merchandisers, food stores, drug stores, convenience stores and other channels. For the period ended December 31, 2003, approximately 50% of the Company’s net sales were generated in the United States and the majority of the remainder were generated in Europe, Mexico and Canada. The Company’s products include condoms (latex, natural skin and polyurethane contraceptives), depilatories and waxes (lotion, cream and wax hair removal treatments), home pregnancy and ovulation test kits, over-the-counter (OTC) products (topical analgesics, antinauseants, nasal decongestants and vitamin supplements), oral care products (cosmetic tooth polishes and denture adhesives) skin care products (moisturizers, anti-cellulite cream and skin cleansers), and other products.

Description of Business Segments

The Company conducts its business through its domestic consumer products division and its international consumer products division.

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Neither of these segments is seasonal with the exception of the depilatories and waxes product group which performs better in the spring and summer months. Information concerning the net sales, operating income and identifiable assets of each of the segments is set forth in Note 20 to the consolidated financial statements included in Item 8 of this form 10-K.

Domestic Consumer Products. The following table sets forth the principal products of the Company’s domestic consumer products division and related data.

Condoms. The Company offers a wide variety of products under its well-recognized brand names, including: Trojan, its leading consumer brand; Naturalamb, a natural product offered at higher prices; and Class Act, a discount brand offered at lower prices.

The Company is dedicated to building its Trojan brand through advertising, trade promotions and new product development. The Company is currently the leading advertiser in the U.S. condom category based on dollars spent. The Company has increased its promotional programs and has regularly developed new and innovative product line extensions.

Condoms are recognized as highly reliable contraceptives as well as an effective means of reducing the risk of sexually transmitted diseases (STDs). The Trojan condom brand has been in use for more than 80 years. In 2003, the brand continued its share leadership in the United States behind the success of such products as Extended Pleasure and Her Pleasure, the introduction of Twisted Pleasure, the continuation of the Trojan Man advertising campaign, and its on-going comprehensive educational programs. In 2004, Armkel added two new products to the Trojan condom line, Shared Pleasure and Magnum with Warm Sensations, a unique lubricant system which warms the skin on contact for enhanced pleasure.

Depilatories and Waxes. The Company’s Nair depilatories and waxes products currently hold the number two market position. The Company believes that, as a result of its dedicated advertising and promotional programs, distinct packaging and several successful line extensions, Nair is positioned as a leader in lotion and cream depilatories. The Company’s success with female hair removal products has prompted it to broaden its product line and introduce hair removal products for men which are performing well in the marketplace. In 2003, the Company introduced Cucumber Melon lotion and Peach Melon wax. In 2004, the Company will launch its line of “No Touch” depilatory products including Nair mousse, a product designed for direct application and improved ease of use.

In 2003, the Company began shipping Lineance European Body Essentials, a line of upscale hair removal and skin care treatments. As a result of insufficient consumer demand for the products, the Company has decided to discontinue this product line in the United States in order to focus and consolidate efforts behind Nair.

Home Pregnancy and Ovulation Test Kits. First Response and Answer brand home pregnancy and ovulation test kits combined to give the Company the number two market position in each category.

The First Response home pregnancy test kit is a premium priced, branded product. In a sector with intensive advertising and promotion-based competition, First Response is well-positioned as a trusted, well-recognized brand name with high brand awareness. The Company’s Answer brand home pregnancy test kit is a value-priced product that competes with other valued-priced brands including private label products, but generally at a slightly higher price point.

The First Response 1-Step Ovulation Kit is a premium priced, branded product. The Company has introduced technology that enables the user to monitor the test while in progress. First Response appeals to customers that favor premium brand products.

Other Consumer Products. The Company’s other domestic consumer products operate in mature markets. The Company’s brands include Pearl Drops tooth-whitening products, Carter’s Little Pills, a stimulant laxative, and Rigident denture adhesive.

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International Consumer Products. The Company markets a diverse portfolio of consumer products in a broad range of international markets. The Company’s international consumer products primarily include condoms, home pregnancy and ovulation test kits, antiperspirants, skin care products, oral hygiene products and other consumer products, as well as OTC pharmaceuticals and professional diagnostic tests. The Company’s primary international markets are France, the United Kingdom “(U.K.)”, Canada, Mexico, Australia and Spain, and it has operations in each of these countries. In addition, the Company exports some of its products from the U.K. to European countries such as Germany, Belgium, Holland, Poland, Switzerland, Ireland and Greece, as well as to the Middle East. The Company’s operations in each of its primary international markets operate as independent, stand alone companies, with separate management, marketing efforts and product sourcing.

The Company believes that approximately 34% of its international net sales are attributable to brands which hold the number one or two position in their respective local markets. France accounts for 33% of the Company’s total international sales. With the exception of France, none of the countries in which the Company operates accounts for more than 23% of its total international net sales, and no brand accounts for more than 12% of its total international net sales. Certain of the Company’s international product lines are similar to its domestic product lines. For example, the Company markets depilatories and waxes, home pregnancy and ovulation test kits and oral care products in most of its international markets, as well as condoms in Canada, Mexico and the U.K.

In 2002, the Company’s Canadian subsidiary, Carter-Horner Corp., and C&D’s Canadian subsidiary, Church & Dwight Ltd./Ltee. began to provide certain services and employees to each other for the purposes of efficiently allocating management, administrative, operations and sales functions among the entities.

The following table sets forth the principal product categories of the Company’s international consumer products division.

Condoms. The Company markets condoms under the Trojan brand name in Canada, Mexico and, recently in limited distribution, in the United Kingdom. In Canada, the Company’s Trojan brand has a leading market share. The Company markets its condoms through distribution channels similar to those of its domestic condom business. These channels include pharmacies, drug stores and mass merchandisers.

Home Pregnancy and Ovulation Test Kits. The Company’s international home pregnancy and ovulation test kits consist of the First Response, Answer, Confidelle, Discover and Gravix brands. The Company sells these products in the United Kingdom, Canada, Italy, Mexico and Australia. Additionally, the Company licenses a third party to market its test kits in Germany.

Depilatories and Waxes. The Company’s international depilatories are sold under the Nair brand name and are sold in Canada, Mexico, the United Kingdom, France, Australia and Spain (marketed under the Taky brand name), as well as distributed in the Middle East and other parts of Europe.

Face and Skin Care. The Company’s face and skin care products are marketed under the Barbara Gould, Lineance, Anne French and Eudermin brand names. Barbara Gould is a range of facial and beauty skin care products that serves the French mass market. Anne French offers a traditional range of facial cleansing products that are marketed in England and

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Ireland. Lineance is an established leader in the mass market slimming, anti-cellulite category in France. Eudermin is a leading hand cream marketed in Spain.

Oral Care. The Company’s principal international oral care products are sold in Australia, Canada, France, Germany, Italy, Mexico and the United Kingdom and include: cosmetic whitening tooth polishes marketed under the Pearl Drops, Perlweiss, Nacar Blanco and Email Diamant brand names; and mouthwash and breath freshening products marketed under the Ultrafresh brand name. Pearl Drops, the Company’s leading cosmetic whitening tooth polish brand, sells at a premium price over regular toothpaste.

OTC Products. The Company’s principal OTC products are: Sterimar sea water nasal decongestant and cleansing spray, which is sold in France, Mexico and many export markets throughout the world; Gravol anti-nauseant, Atasol acetaminophen analgesic, Ovol antiflatulent and Diovol antacid, all of which are sold primarily in Canada; topical analgesics sold under Rub A-535 brand name in Canada and Dencorub brand name in Australia.

Antiperspirants. The Company’s principal antiperspirant brand is Arrid, which it manufactures and sells primarily in the United Kingdom. Arrid is manufactured and sold in United States and Canada by C&D.

Baby Care. The Company’s main baby care brands are Curash, a line of diaper rash powder, cream and wipes products sold in Australia and Poupina, a line of skin care and toiletry products sold in France.

Professional Diagnostics. The Company sells professional diagnostic tests primarily for the detection of infectious diseases in France. These comprise enzyme immuno-assay tests, which are primarily sold by the Company’s sales force to hospitals, clinics and government laboratories.

Other Consumer Products. The Company’s other international brands include the Femfresh line of feminine hygiene products sold in the United Kingdom, France and Australia and the Cossack line of men’s grooming products sold in the United Kingdom. In addition, the Company has distribution agreements with third parties to sell their products through its sales force.

Distribution

Under a management services agreement with C&D (described elsewhere in this document), the Company sells its domestic consumer products through C&D’s direct sales force. The Company also uses the independent broker currently utilized by C&D to supplement the direct sales force. C&D’s sales force makes presentations for the Company’s products at the headquarters or home offices of the Company’s customers, where applicable, as well as to individual retail outlets.

The international division sells its products through classes of trade substantially similar to the domestic division in each of the countries in which the Company operates, with some exceptions. For example, in many European countries, the pharmacy channel (high end drug stores), which is not significant to the Company’s business in the United States, is important to the distribution of certain consumer products. The Company believes its international consumer products are adequately represented by class of trade in each of the countries in which it competes.

The Company, through C&D, uses a combination of third-party distribution centers and a leased facility to ship its products in the United States. These distribution centers are located strategically to maximize the Company’s ability to service its customers.

The Company’s international distribution network is based on subsidiary capacities and cost considerations. In Canada, Mexico, Spain and Australia, finished goods are warehoused internally and shipped directly to customers through independent freight carriers. In the United Kingdom, all product distribution is subcontracted to a professional distribution company. In France, distribution of consumer products to mass markets is handled internally while distribution of OTC products to pharmacies and professional diagnostics to laboratories is handled by outside agencies.

In 2002, the Company took over distribution of the Arm & Hammer toothpaste product line in the United Kingdom and began distribution in Mexico for C&D.

Competition

For information regarding competition, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report.

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Raw Materials

The Company’s major raw materials are chemicals, plastics, latex 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. Although there are multiple providers of its raw materials, in certain instances the Company chooses to sole source certain raw materials in order to gain favorable pricing.

Trademarks, Patents and Licenses

The Company markets its products under a number of trademarks and trade names, including Trojan, Nair, First Response and Answer. The Company has registered these trademarks (identified throughout this annual report in italicized letters), or has applications pending, in the United States and in certain of the countries in which the Company sells these product lines. United States trademark registrations are for a term of 10 years, renewable every 10 years so long as the trademarks are used in the regular course of trade. The Company considers the protection of its trademarks to be important to its business. The Company maintains a portfolio of trademarks representing substantial goodwill in the businesses using the trademarks.

The Company owns or has licenses for a number of United States and foreign patents and patent applications covering certain of its products, and has an ongoing program of obtaining additional patents to protect new product developments. The Company believes that certain of these patents may provide competitive insulation and advantage. The Company does not believe that the expiration of or any other change in any of these patents or patent applications will materially affect its business. Although the Company actively develops and maintains a number of patents, no single patent is considered significant to the business as a whole.

Customers and Order Backlog

A group of five customers accounted for approximately 26% of consolidated net sales in 2003, including a single customer, Wal-Mart, who accounted for 12%. This group accounted for 27% of consolidated net sales in 2002 and 2001. The time between receipt of orders and shipment is generally short, and as a result, backlog is not significant.

New Product Development

The Company conducts the majority of its research and development (“R&D”) activities at its facility in Cranbury, New Jersey and at C&D’s facility in Princeton, NJ. C&D provides supplementary R&D services on an as needed basis. Internationally, the Company operates small satellite R&D facilities in the United Kingdom, France, Spain and Canada. The Company’s expenditures on R&D were approximately $10.4 million in the year ended December 31, 2003, $8.4 million for the twelve months ended December 31, 2002 and $1.8 million for the period from August 28, 2001 to December 31, 2001.

The primary focus of the Company’s new product development group is to design and develop new and improved products that address consumer needs. In addition, this group provides technology support to both in-house and contract manufacturing and safety and regulatory support to all of the Company’s businesses. The Company devotes significant resources and attention to product innovation and consumer research to develop differentiated products with new and distinctive features which provide increased convenience and value to its consumers. The Company’s new product development broadens its product line by creating new product line extensions and new formulations that appeal to various consumer needs.

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Quality Control

The Company places a high degree of importance on quality and product testing through its quality control department, with quality control employees in each of its manufacturing locations. Through its quality control efforts, the Company maintains rigorous standards over all of its products. In addition, the Company also tests the ingredients and packaging that comprise its product offerings. Several of the Company’s products are registered with the Food and Drug Administration (“FDA”) including condoms, home pregnancy and ovulation test kits, depilatories, oral care products and OTC product offerings. As a result, the Company is required to meet exacting standards of quality. An example of the Company’s commitment to quality control is the 100% product testing policy with respect to its condoms. Each condom is quality tested by trained and qualified employees before it is released for sale. As a result, the Company has never had to recall any of its condoms as a result of design or production flaws.

Governmental Regulation

Some of the Company’s products are subject to regulation under the Food, Drug and Cosmetic Act, which is administered by the FDA and the Fair Packaging and Labeling Act. The Company is also subject to regulation by the FTC in connection with the content of its labeling, advertising, promotion, trade practices and other matters. The Company is subject to regulation by the FDA in connection with its manufacture, labeling and sale of its condoms, home pregnancy and ovulation test kits, depilatories and certain OTC products. The Company’s relationships with certain unionized employees may be overseen by the National Labor Relations Board.

In addition, the Company’s international operations, including the production of OTC drug products, are subject to regulation in each of the foreign jurisdictions in which the Company manufactures or markets such goods.

Environmental Matters

The Company’s operations involve the use, storage and disposal of chemicals and other hazardous materials and wastes. The Company is subject to applicable federal, state, local and foreign environmental laws relating to the protection of the environment, including those governing discharges to the environment, the proper management of hazardous materials and wastes and the cleanup of contaminated sites. Some of the Company’s operations, particularly its manufacturing sites, require environmental permits and controls to prevent and reduce air, land and water pollution. These permits are subject to modification, renewal and revocation by issuing authorities.

The Company believes that its operations are currently in material compliance with applicable environmental laws, regulations and permits. While the Company does not believe that ongoing environmental operating and capital expenditures will be material, the Company could incur significant additional operating and capital expenditures in order to comply with current or future environmental laws, such as the installation of pollution control equipment at its manufacturing sites.

In addition, some environmental laws can impose liability for the cleanup of a contaminated site or for third-party claims for property damage and personal injury, regardless of whether the current owner or operator owned or operated the site at the time of the release of contaminants or the legality of the original disposal activity. With certain limited exceptions, the Company has agreed to assume environmental-related liabilities that may arise from the pre-Acquisition operation of the consumer products business and assets transferred as part of the Carter-Wallace acquisition. Many of the Company’s sites have a history of industrial operations. Some of the Company’s sites have contaminants from current and historical operations. For example, contamination has been discovered, and remediation has begun, at the Company’s Cranbury, New Jersey site. Based on the Company’s preliminary assessments, the cost of remediating such contamination is expected to be approximately $1.8 million, of which $1.5 million is remaining in the Company’s reorganization reserves at December 31, 2003. While the Company is not aware of any other material cleanup obligations or related third-party claims, the detection of additional contaminants or the imposition of additional cleanup obligations at its sites or any other properties could result in significant costs.

Geographic Areas

Approximately 50% and 55% of net sales for the years ended December 31, 2003 and 2002, respectively and 49% for the period August 28, 2001 (inception) to December 31, 2001, were to customers in the United States, and approximately 82% of long-lived assets at December 31, 2003 and 2002 were located in the U.S.

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Employees and Labor Relations

The Company’s worldwide work force consisted of approximately 1500 employees as of December 31, 2003, of whom approximately 850 were located outside the United States and approximately 650 worked in its domestic facilities.

The hourly employees at the Company’s Cranbury, New Jersey facility are represented by Paper, Allied-Industrial Chemical and Energy Workers union. In 2002, the Company shut down the Dayton facility and had substantially shut down the Cranbury facility leaving only one hourly employee to maintain the facility until its disposition. The union agreement expires on April 30, 2004. Internationally, the Company employs union representatives in France, Spain and Mexico. The Company believes that its labor relations are satisfactory.

Classes of Similar Products

Information concerning similar products marketed by the Company is set forth in Note 20 to the consolidated financial statements included in Item 8 of this Form 10-K.

Certain Risks and Uncertainties Related to the Company’s Business

The following risks and uncertainties, as well as others described in this Annual Report on Form 10-K could materially adversely affect the Company’s business results of operations and financial condition:

The Company has introduced a number of new consumer products such as Trojan Shared Pleasure, Trojan Magnum with Warm Sensations and Nair Mousse. The development and introduction of new products involves substantial research, development and marketing expenditures, which the Company may be unable to recoup if the new products do not gain widespread market acceptance. In addition, if the new products merely cause sales of existing products to decline, the Company’s financial performance could be harmed.

In addition new products carry a greater risk of supply chain interruption if product sales are significantly greater or less than expectations. Although the Company has taken steps to ensure that demand planning is done properly, interruptions in supply may occur and could affect the Company’s financial condition and operating results.

In the past, the Company has discontinued certain products and product lines, which resulted in returns from customers, asset write-offs, and shut down costs. The Company may suffer similar adverse consequences in the future to the extent it discontinues products that do not meet expectations or no longer satisfy consumer demand. Product returns, write-offs or shut down costs would reduce cash flow and earnings. Product efficacy or safety concerns could result in product recalls or declining sales which would reduce cash flow and earnings.

The Company operates in competitive consumer product markets in which performance, quality and innovation are critical to success. It holds leading market positions and possesses well recognized and respected brand names. The Company competes on the basis of name recognition, advertising, quality of products, product differentiation, promotion and price. It is either the number one or two provider of condoms, depilatories and waxes, and home pregnancy and ovulation test kits in the United States. Internationally, the Company markets a diverse portfolio of consumer products in a broad range of markets, several of which are similar to its domestic business, such as condoms, depilatories and waxes, home pregnancy and ovulation test kits and oral care products. In addition, the Company competes in a variety of other international categories including antiperspirants, skin care products and other consumer products, as well as OTC pharmaceuticals and professional diagnostic kits.

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The Company’s unit sales growth will depend on increasing usage by consumers, product innovation and capturing market share from competitors. The Company may not be able to succeed in implementing its strategies to increase revenues. To protect the Company’s existing market share or to capture increased market share, the Company may need to increase expenditures for promotions and advertising and introduce and establish new products. Increased expenditures may not prove successful in maintaining or enhancing the Company’s market share and could result in lower sales and profits.

The Company competes with SSL International and Ansell in the condom business, Pfizer and Inverness Medical Innovations in the pregnancy test kits business, Del Labs, Aussie Nads and Reckitt Benckiser in the depilatories and wax business and L’Oreal, Beiersdorf and Unilever in the skin care business. Many of the Company’s competitors are substantially larger companies with greater financial resources than the Company. These competitors have the capacity to outspend the Company in an attempt to take market share from the Company.

From time to time, the Company may need to reduce the prices for some of its products to respond to competitive and customer pressures and to maintain market share. Any reduction in prices to respond to these pressures would harm profit margins. In addition, if the Company’s sales volumes fail to grow sufficiently to offset any reduction in margins, its results of operations would suffer.

Because of the competitive environment facing retailers, many of the Company’s trade customers, particularly its high-volume retail store customers, have increasingly sought to obtain pricing concessions or better trade terms. These concessions or terms could reduce the Company’s margins. Further, if the Company is unable to maintain price or trade terms that are acceptable to its trade customers, they could reduce product purchases from the Company and increase product purchases from the Company’s competitors, which would harm the Company’s sales and profitability.

From time to time the Company’s retail customers have reduced inventory levels in managing their working capital requirements. Any reduction in inventory levels by the Company’s retail customers would harm its operating results for the financial periods affected by the reductions. In particular, continued consolidation within the retail industry could potentially reduce inventory levels maintained by the Company’s retail customers, which could adversely impact its results of operations for the financial periods affected by the reductions.

Increases in the prices of certain raw materials, such as chemicals, plastics, latex and packaging materials, or increases in energy costs could significantly impact our profit margins. If price increases were to occur we may not be able to increase the prices of our products to offset these increases. This could harm the Company’s financial condition and results of operations.

A group of five customers accounted for approximately 26% of consolidated net sales in 2003, including a single customer, Wal-Mart, who accounted for 12%. This group accounted for 27% of consolidated net sales in 2002 and 2001.

The loss or substantial decrease in the volume of purchases by Wal-Mart or any of the Company’s other top customers would harm the Company’s sales and profitability.

The Company’s distribution of condoms under the Trojan, and other trademarks is regulated by the U.S. Food and Drug Administration (FDA). Certain of the Company’s condoms contain the spermicide nonoxynol-9 (N-9). The World Health Organization and other interested groups have issued reports suggesting that N-9 should not be used rectally or for multiple daily acts of vaginal intercourse, given the ingredient’s potential to cause irritation to human membranes. The

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Company expects the FDA to issue non-binding draft guidance concerning the labeling of condoms with N-9, although the timing of such draft guidance is uncertain. The Company believes that condoms with N-9 provide an acceptable added means of contraceptive protection and it is cooperating with the FDA concerning the appropriate labeling revisions, if any. However, the Company cannot predict the outcome of the FDA review. While labeling guidance from the FDA is pending, the Company has implemented an interim label statement change cautioning against rectal use and multiple daily acts of vaginal intercourse. The Company also disseminates this cautionary statement on its product web site and in other consumer product vehicles.

In March 2003, two members of the California Assembly introduced a non-binding resolution calling on FDA to ban condoms containing N-9. The proposed resolution was not brought to a vote since legally California could not ban an FDA approved medical device from marketing. Instead, the proposed resolution was announced at a public press release and retailers were asked voluntarily not to stock any condom containing N-9. The Company had previously supplied the Assemblymen and the Assembly Speaker with information explaining why a ban would be inappropriate and outlining the interim labeling revisions and public information efforts the Company has implemented. While the resolution cannot be voted upon and passed and cannot be legally binding, making it public (as was done here) may add to activist pressure on retailers to cease carrying condoms with N-9 and could impair public perception of the product with resultant impairment of operating results of the Company.

If the FDA or state governments take action that prohibit or restrict the use of N-9 in condoms (such as new labeling requirements), the Company could incur further costs from obsolete products, packaging or raw materials and sales of condoms could decline, which, in turn, could affect the operating results of the Company.

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The Company’s headquarters are located in C&D’s global headquarters at 469 North Harrison Street, Princeton, New Jersey. The following are the Company’s principal facilities as of March 11, 2003:

The Company believes that its operating and administrative facilities are adequate and suitable for the conduct of its business. The Company also believes that its production facilities are suitable for current manufacturing requirements. In addition, the facilities possess a capacity sufficient to accommodate the Company’s estimated increases in production requirements over the next several years, based on its current product line.

On January 17, 2002, a petition for appraisal, Cede & Co., Inc. and GAMCO Investors, Inc. v. Medpointe Healthcare Inc., Civil Action No. 19354, was filed in the Court of Chancery of the State of Delaware demanding a determination of the fair value of shares of Medpointe. The action was brought by purported former shareholders of Carter-Wallace in connection with the merger on September 28, 2001 of MCC Acquisition Sub Corporation with and into Carter-Wallace. The merged entity subsequently changed its name to Medpointe. The petitioners seek an appraisal of the fair value of their shares in accordance with Section 262 of the Delaware General Corporation Law. The matter was heard on March 10 and 11, 2003, at which time the petitioners purportedly held approximately 2.3 million shares of Medpointe. An additional post-trial hearing was held on January 20, 2004 to address the valuation of the Company. No decision has yet been rendered by the court.

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Medpointe and certain former Carter-Wallace shareholders are party to an indemnification agreement pursuant to which such shareholders will be required to indemnify Medpointe from a portion of the damages, if any, suffered by Medpointe in relation to the exercise of appraisal rights by other former Carter-Wallace shareholders in the merger. Pursuant to the agreement, the shareholders have agreed to indemnify Medpointe for 40% of any Appraisal Damages (defined as the recovery greater than the per share merger price times the number of shares in the appraisal class) suffered by Medpointe in relation to the merger; provided that if the total amount of Appraisal Damages exceeds $33.3 million, then the indemnifying stockholders will indemnify Medpointe for 100% of any damages suffered in excess of that amount. The Company, in turn, is party to an agreement with Medpointe pursuant to which it has agreed to indemnify Medpointe and certain related parties against 60% of any Appraisal Damages for which Medpointe remains liable. The maximum liability to the Company pursuant to the indemnification agreement and prior to any indemnification from C&D, as described in the following sentence is $12 million. C&D is party to an agreement with the Company pursuant to which it has agreed to indemnify the Company for 17.4% of any Appraisal Damages, or up to a maximum of $2.1 million for which the Company becomes liable.

The Company, Medpointe and the indemnifying shareholders believe that the consideration offered in the merger was fair to the former Carter-Wallace shareholders and have vigorously defended the petitioner’s claim. However, the Company cannot predict the outcome of the proceedings.

On March 27, 2003, GAMCO Investors, Inc. filed another complaint in the New York Supreme Court seeking damages from MedPointe Healthcare Inc., the former directors of Carter-Wallace, and one of the former shareholders of Carter-Wallace. The complaint alleges breaches of fiduciary duty in connection with certain employment agreements with former Carter-Wallace executives, the sale of Carter Wallace’s consumer products business to the Company (some of the products acquired by the Company were subsequently sold by the Company to C&D) and the merger of MCC Acquisition Sub Corporation with and into Carter-Wallace. The complaint seeks monetary damages and equitable relief, including among other things, invalidation of the transactions. The defendants have moved to dismiss the complaint. The Company has not been named as a defendant in this action and believes it has no liability.

The Company’s distribution of condoms under the Trojan and other trademarks is regulated by the U.S. Food and Drug Administration (FDA). Certain of the Company’s condoms and similar condoms sold by the Company’s major competitors, contain the spermicide nonoxynol-9 (N-9). The World Health Organization and other interested groups have issued reports suggesting that N-9 should not be used rectally or for multiple daily acts of vaginal intercourse, given the ingredient’s potential to cause irritation to human membranes. The Company expects the FDA to issue non-binding draft guidance concerning the labeling of condoms with N-9, although the timing of such draft guidance is uncertain. The Company believes that condoms with N-9 provide an acceptable added means of contraceptive protection and is cooperating with the FDA concerning the appropriate labeling revisions, if any. However, the Company cannot predict the outcome of the FDA review. While awaiting further FDA guidance, the Company has implemented interim labeling revisions that caution against rectal use and more-than-once-a-day vaginal use of N-9-containing condoms, and has launched a public information campaign to communicate these messages to the affected communities. If the FDA or state governments promulgate rules which prohibit or restrict the use of N-9 in condoms (such as new labeling requirements), the financial condition and operating results of the Company could suffer.

In March 2003, two members of the California Assembly introduced a non-binding resolution calling on FDA to ban condoms containing N-9. The proposed resolution was not brought to a vote since legally California could not ban an FDA approved medical device from marketing. Instead, the proposed resolution was announced at a public press release and retailers were asked voluntarily not to stock any condom containing N-9. The Company had previously supplied the Assemblymen and the Assembly Speaker with information explaining why a ban would be inappropriate and outlining the interim labeling revisions and public information efforts the Company has implemented. While the resolution cannot be voted upon and passed and cannot be legally binding, making it public (as was done here) could impair public perception of the product with resultant impairment of operating results of the Company.

On August 26, 2002, the Company filed suit against Pfizer in the District Court of New Jersey to redress infringement of two Company patents directed to pregnancy diagnostic devices. The suit claimed that Pfizer’s “ept” product infringed these patents. On June 23, 2003, the Company agreed to a settlement with Pfizer resulting in a gain after attorney’s fees and costs of $12.7 million. As part of the settlement the Company granted Pfizer a fully paid-up non-exclusive worldwide license to practice and use the Company’s pregnancy diagnostic devices’ patents until July 1, 2004.

The Company, in the ordinary course of its business, is the subject of, or party to, various pending or threatened legal actions. The Company believes that any ultimate liability arising from these actions will not have a material adverse effect on its financial position or results of operation.

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None.

PART II

At March 11, 2004, the Company had 10,000 membership interests outstanding and held by C&D (5,000 interests) and Kelso (5,000 interests). There is no established trading market for the membership interests of the Company. During 2003, the Company did not declare any dividends.

The Company believes that the foregoing issuances of equity securities to C&D and Kelso did not involve a public offering or sale of securities and were exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to the exemption from registration afforded by Section 4(2) of the Securities Act. No underwriters, brokers or finders were involved in these transactions.

ARMKEL, LLC AND SUBSIDIARIES

FIVE-YEAR FINANCIAL REVIEW (2)

(in millions)

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Overview

Armkel, LLC (the “Company”) is an equally owned joint venture formed by Church & Dwight Co., Inc. (“C&D”) and affiliates of Kelso & Company, L.P. (“Kelso”). On September 28, 2001, the Company acquired certain of the domestic consumer product assets of Carter-Wallace (the “Acquisition”), primarily Trojan condoms, Nair depilatories, and First Response and Answer pregnancy and ovulation test kits, and the international subsidiaries of Carter-Wallace. Initial financing was obtained on August 28, 2001, however operations did not commence until the Acquisition was consummated on September 28, 2001. The remainder of Carter-Wallace, comprised of its healthcare and pharmaceuticals businesses, was merged with MedPointe, Inc. (“MedPointe”) after the completion of the Acquisition. Simultaneously with the consummation of the Acquisition, the Company sold the remainder of the consumer products businesses, Arrid antiperspirant in the U.S. and Canada and the Lambert-Kay line of pet care products, to C&D (the “Disposed Businesses”).

The Company is a leading marketer and manufacturer of well recognized branded personal care products. It recognizes revenues and profits from selling its products to consumers through supermarkets, drug stores and mass merchandisers. In 2003, the Company generated 50% of its revenue in the United States and 50% in International markets primarily in France, the U.K., Canada and Mexico. The Company generated 46% of its revenue behind family planning product lines, including condoms and pregnancy and ovulation kits, and 22% behind depilatories, waxes, face and skincare. In 2003, the Company faced heightened competitive activity in the domestic pregnancy kit and depilatories market. In addition, the poor weather in the United States depressed the seasonal depilatory category.

The Company’s primary financial objectives and key performance indicator is to achieve average revenue growth of around 3-5% excluding extraordinary items such as the revenue recognition adjustment. The Company expects to achieve this objective through a combination of sales from newly created and existing products referred to as organic growth.

With regard to the sales objective, the Company plans to concentrate on line extensions in all of our key categories including the introduction of Trojan Shared Pleasure and Nair “No Touch” line extensions. While difficult to predict, the Company currently expects sales growth to be within the target range for the year. As to margins, the Company’s objective is to improve its gross margin. The Company expects to achieve this by increased automation and by improved costs at our newly leased facility in Barcelona, Spain. The Company also expects to continue to significantly reduce net debt.

Operationally, the Company’s key performance indicator is Adjusted EBITDA, as defined in the syndicated bank credit and bond agreements. The Liquidity and Capital Resources section below discusses Adjusted EBITDA and its relation to the Company’s borrowing agreements. These agreements are material to the Company and information about the covenants is required for our investors’ understanding of the Company’s liquidity and financial condition. Additionally, the Company notes that its SEC filings are to meet its requirements under its bond agreement for the benefit of it bondholders. The Company has met its covenant ratios each quarter and expects to continue to do so. Operating cash flows are expected to be sufficient to meet the anticipated cash requirements for the coming year, including continued prepayments to the Company’s syndicated bank credit facility.

2003 Events

The results of operations for the period from January 1, 2003 to December 31, 2003 are affected by acquisition related expenses amounting to $4.8 million primarily for the cost to carry the Cranbury facility and for medical and pension payments for transitional employees, a $3.1 million impairment of the Cranbury facility and $12.7 million of income from a patent infringement legal settlement. The prior year results are affected by $9.0 million in transition expenses and an $8.1 million inventory step-up charge.

In December 2002, the Company entered into an agreement to sell its Italian subsidiary to a group, comprising local management and private equity investors. The sale closed in February 2003 for a purchase price of $22.6 million including the repayment of $12.8 million of intercompany debt. The Company retained ownership of certain Italian pregnancy kit and oral care product lines with annual sales of approximately $3.0 million. The remainder of the Italian subsidiary’s business included a high percentage of distributor sales as well as hospital diagnostic and other products not related to the Company’s core business. The Company reported a $1.9 million gain on the sale and $0.3 million income (net of tax) from discontinued operations in the first quarter of 2003. The financial statements have been reclassified to reflect the Italian business as a discontinued operation in 2003 and prior financial statements.

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Competitive Environment

The Company operates in competitive consumer product markets in which performance, quality and innovation are critical to success. It holds leading market positions and possesses well recognized and respected brand names. The Company competes on the basis of name recognition, advertising, quality of products, product differentiation, promotion and price. It is either the number one or two provider of condoms, depilatories and waxes, and home pregnancy and ovulation test kits in the United States. Internationally, the Company markets a diverse portfolio of consumer products in a broad range of markets, several of which are similar to its domestic business, such as condoms, depilatories and waxes, home pregnancy and ovulation test kits and oral care products. In addition, the Company competes in a variety of other international categories including antiperspirants, skin care products and other consumer products, as well as OTC pharmaceuticals.

The markets for the Company’s products are extremely competitive and are characterized by the frequent introduction of new products, often accompanied by advertising and promotional programs. The Company believes that the market for these consumer products will continue to be highly competitive and the level of competition may intensify in the future. The Company’s competitors consist of a large number of domestic and foreign companies, a number of which have significantly greater financial resources than it does.

The domestic condom market is highly concentrated in product offerings with a limited number of competitors. The market is divided between premium brands and price brands, with companies competing on the basis of quality, innovation and price. The major domestic producers are the Company, with its Trojan, Naturalamb and Class Act brands, SSL International with its Durex and Avanti brands, and Ansell with its Lifestyles brand. The Company is the market leader with an approximate 70% share. The Company is currently the leading advertiser in the U.S. condom category based on dollars spent. The Company also increased its promotional programs and has regularly developed new and innovative product line extensions including the very successful introduction of Her Pleasure in 2002 and Twisted Pleasure in 2003. In 2004, the Company added two new products to the Trojan condom line, Shared Pleasure and Magnum with Warm Sensation, a unique lubricant system which warms the skin on contact for advanced pleasure.

The domestic market for home pregnancy test kits is divided between premium and value brands. The Company markets its First Response pregnancy kits with a superior “use 5 days before a missed period” claim. The home pregnancy test kit industry is highly competitive and in 2003 the first digital pregnancy kit was introduced by Inverness. In 2004, Pfizer also introduced digital pregnancy kits. The major domestic pregnancy test kit producers are the Company, Pfizer and Inverness.

The domestic depilatories and waxes market is highly concentrated with a limited number of competitors. Products compete based on their functionality, innovation and price. The major domestic manufacturers are the Company with its Nair brand, Del Labs with its Sally Hansen brand, Reckitt Benckiser with its Veet brand, and Aussie Nads with its Nads wax product. The Company believes that, as a result of its dedicated advertising and promotional programs, distinct packaging and several successful line extensions, Nair is positioned to continue to be a leader in lotion and cream depilatories. The Company introduced an upscale depilatory line called Lineance in the first quarter of 2003. The Company has decided to focus resources in the depilatory category on Nair and is discontinuing the domestic Lineance depilatory line.

Internationally, the Company’s products compete in similar, competitive categories. Some of the Company’s U.S. branded products are also marketed in other countries, holding leading or number two market share positions. Examples include: Trojan in Canada, Mexico and the UK, and Nair, in Canada, Mexico, France, Australia, the U.K., and Spain, where the Company’s depilatory products are marketed under the Taky brand name. The Company also has a position in the cosmetic whitening dentifrice segment with its Pearl Drops brand in the U.K., Australia, Italy, and Germany, (under the PerlWeiss brand), as well as in France, (where the Company’s products are marketed as Email Diamant).

The Company markets home pregnancy test kits in many countries, under such brand names as First Response, Discover, Confidelle, and Answer. This category has been negatively affected in international markets by the introduction of many lower-priced and private label products but the Company has seen some growth for its business recently as it has rolled out the “use 3 days before a missed period” claim first used domestically.

In the skin care category the Company markets such brands as Lineance and Barbara Gould in France, the former for anti-cellulite and general body care and the latter for facial care. In Spain, the Company markets Eudermin hand care cream, in the mass market class of trade, where it has a number two position. Recently this line has been expanded to include body and foot care products.

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In various countries the Company also markets OTC pharmaceutical products. These include Gravol and Ovol, the leading anti-nauseant and anti-gas brands in Canada, the Pangavit range of vitamin supplements in Mexico, Sterimar, a sea-water nasal hygiene product sold primarily in France, but also in about fifty other countries, including most recently Mexico.

Critical Accounting Policies

The Company’s significant accounting policies are more fully described in Note 1 to its consolidated financial statements. Certain of the Company’s accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on the Company’s historical experience, its observance of trends in the industry, information provided by its customers and information available from other outside sources, as appropriate. The Company’s significant accounting policies include:

Revenue Recognition

In the fourth quarter of 2003, the Company began recognizing revenue when finished goods are delivered to its customers (“FOB Destination”). Previously, revenue was recognized upon shipment of the finished goods to the customer (“FOB Shipping”). The Company’s management has concluded that the effect of changing its revenue recognition from FOB Shipping to FOB Destination was not material to the current or prior periods’ consolidated financial statements. The adjustment to FOB Destination recorded in the fourth quarter of 2003 resulted in a reduction to net income of $1.9 million. The following table shows the net income (loss) of the Company as reported and the adjusted net income (loss) that would have been reported had the Company always recognized revenue when product was delivered to its customers:

Promotional and Sales Returns Reserves

The reserves for sales returns and consumer and trade promotion liabilities are established based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. We use historical trend experience and coupon redemption provider input in arriving at coupon reserve requirements, and we use forecasted appropriations, customer and sales organization inputs, and historical trend analysis in arriving at the reserves required for other promotional reserves and sales returns. While we believe that our promotional and sales returns reserves are adequate and that the judgment applied is appropriate, such amounts estimated to be due and payable could differ materially from what will actually transpire in the future. If the Company’s estimates for other promotional reserves and sales returns were to differ by 10%, the impact to promotional spending and sales return accruals would be approximately $2.3 million.

Impairment of Goodwill, Tradenames and Other Intangible Assets and Property, Plant and Equipment

Carrying values of goodwill, tradenames, patents and other intangible assets are reviewed periodically for possible impairment in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”. The Company’s impairment review is based on a discounted cash flow approach that requires significant judgment with respect to future volume, revenue and expense growth rates, and the selection of an appropriate discount rate. Management uses estimates based on expected trends in making these assumptions. With respect to goodwill, impairment occurs when the carrying value of the reporting unit exceeds the discounted present value of cash flows for that reporting unit. For trademarks and other intangible assets, an impairment charge is recorded for the difference between the carrying value and the net present value

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of estimated cash flows, which represents the estimated fair value of the asset. The Company uses its judgment in assessing whether assets may have become impaired between annual valuations. Indicators such as unexpected adverse economic factors, unanticipated technological change or competitive activities, acts by governments and courts, may signal that an asset has become impaired. In accordance with SFAS No. 142, the Company completed the annual impairment test of the valuation of goodwill and intangibles as of April 1, 2003 and, based upon the results, there was no impairment.

Property, plant and equipment and other long-lived assets are reviewed periodically for possible impairment in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. The Company’s impairment review is based on an undiscounted cash flow analysis at the lowest level for which identifiable cash flows exist. The analysis requires management judgment with respect to changes in technology, the continued success of product lines, and future volume, revenue and expense growth rates. The Company conducts annual reviews for idle and underutilized equipment, and reviews business plans for possible impairment implications. Impairment occurs when the carrying value of the asset exceeds the future undiscounted cash flows. When an impairment is indicated, the estimated future cash flows are then discounted to determine the estimated fair value of the asset and an impairment charge is recorded for the difference between the carrying value and the net present value of estimated future cash flows.

The estimates and assumptions used are consistent with the business plans and estimates that the Company uses to manage its business operations. The use of different assumptions would increase or decrease the estimated value of future cash flows and would have increased or decreased any impairment charge taken. Future outcomes may also differ. If the Company’s products fail to achieve estimated volume and pricing targets, market conditions unfavorably change or other significant estimates are not realized, then the Company’s revenue and cost forecasts may not be achieved, and the Company may be required to recognize additional impairment charges.

Inventory Valuation

When appropriate, the Company provided allowances to adjust the carrying value of its inventory to the lower of cost or market (net realizable value), including any costs to sell or dispose. The Company identifies any slow moving, obsolete or excess inventory to determine whether a valuation allowance is indicated. The determination of whether inventory items are slow moving, obsolete or in excess of needs requires estimates and assumptions about the future demand for the Company’s products, technological changes, and new product introductions. The estimates as to the future demand used in the valuation of inventory are dependent on the ongoing success of its products. In addition, the Company’s allowance for obsolescence may be impacted by the rationalization of the number of stock keeping units. To minimize this risk, the Company evaluates its inventory levels and expected usage on a periodic basis and records adjustments as required. Reserves for inventory obsolescence were $3.5 million at December 31, 2003, and $0.7 million at December 31, 2002. The increase is primarily related to a reserve for the Domestic division’s Lineance products of $2.1 million, which were discontinued after product launch, additional net reserve increases for Nair component waste and discontinued teen kit line, and additional waste factor reserve requirements for Trojan specialty product lines, Supra and Naturalamb.

Valuation of Pension and Postretirement Benefit Costs

The Company’s pension and postretirement benefit costs are developed from actuarial valuations. Inherent in these valuations are key assumptions provided by the Company to our actuaries, including the discount rate and expected long-term rate of return on plan assets. Material changes in the Company’s pension and postretirement benefit costs may occur in the future due to changes in these assumptions.

The discount rate is subject to change each year, consistent with changes in applicable high-quality, long-term corporate bond indices. Based on the expected duration of the benefit payments for our pension plans and postretirement plans we refer to applicable indices such as the Moody’s AA Corporate Bond Index to select a rate at which we believe the pension benefits could be effectively settled. Based on applicable published rates as of December 31, 2003, the Company used a discount rate ranging from 5.6% to 6.0% for its various, worldwide plans, compared to the discount rate range in 2002 of 5.7% to 6.75%.

The expected long-term rate of return on pension plan assets is selected by taking into account a historical long-term average, the expected duration of the projected benefit obligation for the plans, the asset mix of the plans, and known economic and market conditions at the time of valuation. Based on these factors, the Company’s expected long-term rate of return as of December 31, 2003 for its various plan is 5.5% to 8.5%, compared to a range of 5.5% to 8.5% as of December 31, 2002.

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On December 31, 2003 the accumulated benefit obligation related to the pension plans exceeded the fair value of the pension plan assets (such excess is referred to as an un-funded accumulated benefit obligation). This difference is attributed to (1) an increase in the accumulated benefit obligation that resulted from the decrease in the interest rate used to discount the projected benefit obligation to its present settlement amount from 6.75% to 6.00% in two of the Company’s plans and (2) a slight decline in the market value of the domestic plan assets at December 31, 2003. As a result, in accordance with SFAS No. 87, the Company recognized an additional minimum pension liability of $3.3 million included in benefit obligations, and recorded a charge, net of tax, to accumulated other comprehensive loss of $3.2 million which decreased members’ equity. The charge to members’ equity for the excess of additional pension liability represents a net loss not yet recognized as pension expense.

Results of Continuing Operations

2003 Compared to 2002

Year ended December 31, 2003 compared with the twelve months ended December 31, 2002

Net Sales

Net sales for the year ended December 31, 2003 increased $26.9 million, or 7.0%, to $410.7 million from $383.8 million in the same period last year. This increase includes $19.1 million of favorable foreign exchange that was partially offset by the Company’s change in revenue recognition policy from FOB shipping point to FOB destination point, which reduced sales by approximately $3.4 million in 2003. Adjusting for foreign exchange and the change in revenue recognition policy sales were 2.9% above last year. This increase is discussed by business segment below.

Domestic net sales decreased $5.5 million, or 2.6%, to $203.7 million from $209.2 million for the year ended December 31, 2003. This decrease in Domestic net sales (net of intercompany eliminations) is primarily due to the lower sales for Nair depilatories, which was impacted by weather and competitive factors, and lower sales of pregnancy test kits.

International net sales increased $32.4 million, or 18.6%, to $207.0 million from $174.6 million. On a constant dollar basis, sales increased $13.3 million or 7.6% primarily due to higher dentifrice sales in the U.K. and Mexico, higher export sales from the U.K., the addition of the Selsun brand in Australia and stronger skincare and depilatory sales in France.

Cost of Goods Sold

Cost of goods sold for the year ended December 31, 2003 increased $9.3 million or 5.4% to $182.3 million from $173.0 million in the same period last year. Cost of goods sold in 2002 included an $8.1 million charge relating to the remainder of the inventory step-up adjustments incurred at the Acquisition. Gross profit as a percentage of net sales improved to 55.6% in 2003 from 54.9% in 2002. The 0.7 percentage point improvement over 2002 results is primarily related to the step-up adjustment in 2002 partially offset by the change in revenue recognition policy and an increase in inventory reserves for slow moving and obsolete depilatory products.

Cost of goods sold for domestic products decreased $5.5 million or 6.5% to $79.6 million in 2003 from $85.1 million in 2002. Gross profit as a percentage of net sales improved to 60.9% in 2003 from 59.3% in 2002. The improvement is primarily related to the domestic inventory step-up adjustment of $7.9 million in 2002 partially offset by the domestic revenue recognition adjustment of $1.7 million and inventory reserves for slow moving and obsolete depilatory products.

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Cost of goods sold for international products increased $14.9 million or 17.0% to $102.7 million in 2003 from $87.8 million in 2002. Gross profit as a percentage of net sales improved to 50.4% in 2003 from 49.7% in 2002. Gross profit as a percentage of net sales improved to 50.4% in 2003 from 49.7% in 2002. The increase is primarily related to favorable foreign exchange and product mix.

Marketing Expenses and Selling, General and Administrative Expenses

Marketing expenses in the year ended December 31, 2003 increased by $6.5 million, or 12.2%, to $59.6 million from $53.1 million in the same period last year. The increase in marketing expenses for the year ended December 31, 2003, consists of $5.3 million in the International division primarily behind advertising for Arm & Hammer Dental Care and Trojan in the UK, Lineance skin care and Nair depilatory in France and $1.2 million in the Domestic division primarily behind introductory marketing spending behind the launch of Lineance as a depilatory in the United States. As a result of these increases, marketing expenses were 15% of net sales in 2003 verses 14% in 2002.

Selling, general and administrative (“SG&A”) expenses in the year ended December 31, 2003 decreased $8.0 million, or 9.1%, to $79.6 million from $87.6 million in the same period last year. The decrease in expenses, for the year ended December 31, 2003, is due to a $12.7 million settlement of patent infringement litigation (net of legal expenses and costs) on pregnancy test kits, partially offset by a $3.1 million impairment charge for the facility for sale at Cranbury, NJ. Additionally, there is an increase in R&D spending to support current and future initiatives which was partially offset by lower transition costs. As a result of the net decrease of $8.0 million, SG&A expense was 19% of net sales in 2003 as compared to a more normalized 23% of net sales in 2002.

Interest Expense and Other Income

Interest expense for the year ended December 31, 2003 was $34.5 million compared to $36.6 million for the same period last year. This reduction in interest expense is related to the lower debt position from prior year and lower interest rates on the Company’s credit facility loans.

Interest income of $1.0 million for the year ended December 31, 2003 remains unchanged from last year.

Other income was $1.4 million for the year ended December 31, 2003 compared to $0.9 million last year and primarily relates to foreign exchange remeasurement on intercompany loans between the Company’s subsidiaries.

Period from August 28, 2001 (Inception) to December 31, 2001

The following section refers to the financial data for the period subsequent to the inception of Armkel, LLC to December 31, 2001. Prior to September 28, 2001, the Company did not have responsibility for the predecessor’s domestic consumer products business and international subsidiary data. The Company’s operations for this period commenced on September 29, 2001. The period from August 28, 2001 (inception) to September 28, 2001 only included net interest expense of approximately $1.6 million relating to the issuance of senior subordinated notes on August 28, 2001.

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Net Sales

Net sales were $77.6 million, including $37.8 million of domestic products and $39.8 million of international products. Domestic family planning sales, which includes condoms, home pregnancy test kits and ovulation test kits, were $32.1 million, sales of depilatories and waxes were $4.3 million, and oral care and other net sales were $1.4 million. International family planning sales were $5.0 million, sales of depilatories, waxes, face and skin care products were $8.2 million, sales of OTC products were $12.2 million and oral care and other net sales were $14.4 million.

Cost of Goods Sold

Cost of goods sold was $50.5 million for the period, including $25.8 million of domestic products and $24.7 of international products. Gross margin for the period was 35%, with domestic gross margin at approximately 32% and international gross margin at approximately 38%. The consolidated cost of goods sold includes $15.1 million of additional expense relating to inventory step-up incurred at acquisition. At the time of the Acquisition, inventory book value was $57.8 million. As part of purchase accounting, the inventory value was increased by $23.2 million to $81.0 million. The majority of this step-up, $15.1 million, was reflected in the fourth quarter results of operations of 2001, including $11.2 million for domestic operations and $3.9 million for international operations. The remaining $8.1 million inventory step-up adjustment was reflected in the operating results for first quarter of 2002.

Marketing Expenses and Selling, General and Administrative Expenses

Marketing expenses were $8.0 million for the period, which represents 10% of net sales for the period. Marketing spending as a percentage of net sales for the period is slightly lower than the percentage management expects for a full year, due to the seasonality of the depilatory business, for which marketing expenditures are typically lower at this time of the year. Also, during the period, the Company was in the initial phases of its post-acquisition transition, including the initiation of marketing programs.

Selling, general and administrative (SG&A) expenses were $23.3 million for the period, which represents 30% of net sales for the period. Due to the seasonality of the depilatory business, net sales were lower during this part of the calendar year, as compared to a full year, which resulted in SG&A expenses, most of which are fixed employee compensation and benefit costs, constituting a higher percentage of net sales than the percentage management expects on an annual basis. Additionally, during this period, the Company also incurred transitional costs of approximately $1.8 million related to general and administrative costs for former Carter-Wallace employees retained to assist in the post-acquisition integration process and $1.0 million in fees paid to C&D and Kelso.

Interest Expense and Other Income

Interest expense was $11.7 million in the period ended December 31, 2001. This amount includes interest expense related to the $225.0 million principal amount of the Company’s senior subordinated notes and the $220.0 million syndicated bank credit facility, which indebtedness was incurred in connection with the Acquisition.

Interest income was $0.8 million in the period ended December 31, 2001 and includes proceeds from financing activities invested primarily in money market funds.

Other expense was $0.3 million for the period. The amount includes foreign exchange accounting remeasurement on intercompany loans between the Company’s subsidiaries.

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Period from April 1, 2001 to September 28, 2001

The following section refers to the financial data for the six month period prior to the Acquisition, as disclosed in the accompanying audited financial statements for Carter-Wallace, Inc., the predecessor company. Prior to September 28, 2001, the Company did not have responsibility for the predecessor’s domestic consumer products business and international subsidiary data.

Net Sales

Net sales were $197.7 million for the period, which included $115.9 million of domestic products and $81.8 million of international products. Domestic family planning sales, which includes condoms, home pregnancy test kits and ovulation test kits, were $89.1 million, sales of depilatories and waxes were $22.8 million, and all other net sales were $4.0 million. International family planning sales were $9.7 million, sales of depilatories, waxes and face and skin care products were $23.7 million, OTC product sales were $19.2 million and oral care and other net sales were $29.2 million.

Cost of Goods Sold

Cost of goods sold was $82.8 million for the period, which included $43.1 million for domestic products and $39.7 million for international products. Gross margin for the period was 58%, with domestic gross margin at approximately 63% and international gross margin at approximately 52%. The domestic and international gross margin percentages for the period were comparable to the predecessor’s gross margin percentages for the year ended March 31, 2001.

Marketing Expenses and Selling, General and Administrative Expenses

Marketing expenses were $23.2 million, which represents 12% of net sales for the period and is comparable to the predecessor’s marketing expenses as a percentage of net sales for the year ending March 31, 2001.

Selling, general and administrative (SG&A) expenses were $37.8 million, which represents 19% of net sales for the period and is comparable to the predecessor’s SG&A as a percentage of net sales for the year ending March 31, 2001.

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Liquidity and Capital Resources

The Company entered into a syndicated bank credit facility and also issued senior subordinated notes to finance its investment in the Acquisition. The long-term $305 million credit facility consists of $220.0 million in 6 and 7 ¹/2-year term loans, of which $ 143.7 million was outstanding at December 31, 2003 and an $85.0 million revolving credit facility, which remained fully undrawn at December 31, 2003. On August 28, 2001 the Company issued $225 million of 9.5% senior subordinated notes due in 8 years with the interest paid semi-annually. The Company had outstanding total debt of $367.5 million, and cash and cash equivalents of $69.2 million, for a net debt position of $298.3 million at December 31, 2003. This compares to the net debt position of $385.4 at December 31, 2002. The decrease in net debt is attributable to the use of proceeds from the divestiture of the Italian operation, the patent infringement litigation settlement as well as cash flow from operation. The weighted average interest rate on the credit facility borrowings at December 31, 2003, excluding deferred financing costs and commitment fees, was approximately 4.0%.

Interest payments on the notes and on borrowings under the senior credit facilities affect the Company’s liquidity requirements. Borrowings under the syndicated bank credit facility facility bear interest at variable rates plus any applicable margin. The interest rates on the syndicated bank credit facility are dependent on the attainment of certain covenants depending on the ratio of total debt to EBITDA as defined in the Company’s credit agreement (“Adjusted EBITDA”). Adjusted EBITDA is a required component of the financial covenants contained in the Company’s primary credit facility, a material agreement to the Company, and management believes that the presentation of adjusted EBITDA is useful to investors as a financial indicator of the Company’s ability to service its indebtedness. Adjusted EBITDA may not be comparable to similarly titled measures used by other entities and should not be considered as an alternative to cash flows from operating activities, which is determined in accordance with accounting principles generally accepted in the United States. Financial covenants include a total debt to Adjusted EBITDA leverage ratio and an interest coverage ratio, which if not met, could result in an event of default and trigger the early termination of the credit facility, if not remedied within a certain period of time. Adjusted EBITDA was approximately $104.6 million for the year ended December 31, 2003. The leverage ratio, as defined in the credit agreement, was 2.89 versus the agreement’s maximum 4.75, and the interest coverage ratio was 3.40 versus the agreement’s minimum of 2.25. The reconciliation of Net Cash Provided by Operating Activities (the most directly comparable GAAP financial measure) to the Company’s key liquidity measure, Adjusted EBITDA, per the term loan agreement, is as follows (in millions) for the year ended December 31, 2003:

Cash flow from operating activities was $71.6 million for the year ended December 31, 2003 which includes $3.2 million in severance payments and $4.8 million in transition expenses related to the cost to carry the Cranbury facility and for medical and pension payments for transitional employees in excess of reserves, offset by higher operating earnings before non-cash charges for depreciation and amortization, including net cash proceeds of $12.7 million from the patent infringement litigation settlement. Also, there is a reduction in working capital which included a decrease in accounts receivable of $7.5 million and a decrease in inventories of $3.4 million, which includes a $1.8 million decrease in the Domestic division and a $1.6 million decrease in the International division, offset by an increase in prepaid expense of $1.7 million attributable primarily to the Domestic division’s year-end insurance premiums and the International division’s increase in current deferred tax assets.

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Cash flow from investing activities was $13.7 million for the year ended December 31, 2003. The net cash flows provided by investing activities includes the proceeds from the Italian divestiture of $22.6 million offset by $8.5 million in capital expenditures and $0.4 million in acquisition related legal costs.

Cash flow used in financing activities was $75.9 million which includes a $21.6 million payment of debt from proceeds of the Italian sale, $12.5 million from the proceeds of the patent infringement litigation settlement and $41.7 million in voluntary debt repayments generated from cash flow from operations.

The Company incurred severance and other change in control related liabilities to certain employees. Since the Acquisition the Company paid $45.1 million in severance payments, including $3.2 million paid in the year ended December 31, 2003, and reduced its severance reserve by $0.9 million due to reversals of excess termination costs resulting in a reduction of goodwill. The Company estimates that the total severance payments will be approximately $47.0 million. The Company anticipates that approximately $0.6 million of the remaining $1.9 million reserve will be paid in 2004 for the remaining transition employees, with the majority of the balance being carried into future years for medical and life insurance payments for two former Carter-Wallace executives. The Company also paid $0.3 million for environmental remediation costs at its Cranbury, New Jersey facility in the year ended December 31, 2003.

The Company expects that the total capital expenditures will be approximately $9 million annually in 2004 and 2005. Of such amounts, the Company currently estimates that a minimum range of $3 million to $5 million of ongoing maintenance capital expenditures are required each year.

Distributions of a portion of net income may be made to fund tax distributions to Kelso and C&D. No such distributions were made in 2003.

The term loans will be subject to mandatory prepayments, subject to certain limited exceptions, in an amount equal to (1) 50% of excess cash flow of the Company and its subsidiaries, (2) 100% of the net cash proceeds of asset sales and dispositions of property of the Company and its subsidiaries, (3) 100% of the net cash proceeds of any issuance of debt obligations of the Company and its subsidiaries and (4) 50% of the net cash proceeds of issuances of equity of the Company and it subsidiaries.

The syndicated bank credit facility and the senior subordinated notes impose certain restrictions on the Company, including restrictions on its ability to incur indebtedness, pay dividends, make investments, grant liens, sell assets and engage in certain other activities. In 2002, the Company obtained a waiver to the syndicated bank credit facility in order to proceed with the sale of the Italian operations. The proceeds from the sale of the Italian operations were received in February 2003 and were used to prepay the term loans under the covenant requirements. In addition, the senior credit facilities requires the Company to maintain certain financial ratios. The borrowings under the credit facility are secured by substantially all of the domestic assets of the Company, in a pledge of stock of the Company’s operating subsidiaries and a pledge of not more than 65% of the voting capital stock of the Company’s foreign subsidiaries.

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The Company expects that funds provided from operations and available borrowings of $85.0 million under its six-year revolving credit facility, none of which was drawn at December 31, 2003, will provide sufficient funds to operate its business, to make expected capital expenditures of approximately $9.0 million in 2004 and approximately $9.0 million in 2005 and to meet foreseeable liquidity requirements, including debt service on the notes and the senior credit facilities, as noted above. There can be no assurance, however, that the Company’s business will generate sufficient cash flows or that future borrowings will be available in an amount sufficient to enable it to service its debt or to fund its other liquidity needs. If the Company is unable to pay its obligations, it will be required to pursue one or more alternative strategies, such as selling assets, refinancing or restructuring indebtedness or raising additional capital. However, the Company cannot give assurance that any alternative strategies will be feasible or prove adequate. However, management believes that operating cash flow, coupled with the Company’s access to credit markets, will be sufficient to meet the anticipated cash requirements for the coming year.

OTHER ITEMS

Related Party Transactions

The Company has achieved substantial synergies by combining certain of its operations with those of C&D particularly in the areas of sales, manufacturing and distribution, and most service functions. The Company retained its core marketing, research & development, and financial planning capabilities, and continues to manufacture condoms, but purchases virtually all the support services it requires for its U.S. domestic business from C&D under a management services agreement, which has a term of five years with possible renewal. The Company and C&D merged the two sales organizations during the fourth quarter of 2001 and merged the companies Canadian operations in 2002. The companies transferred production of antiperspirants and depilatories from the former Carter-Wallace plant at Cranbury, NJ, to C&D’s plant at Lakewood, NJ, which is a more efficient producer of antiperspirants and other personal care products. This process was completed by the third quarter 2002. The companies integrated the planning and purchasing, accounting and management information systems, and other service functions during 2002.

Arrangements with Church & Dwight

C&D charged the Company $24.4 million for primarily administrative and management oversight services for the year ended December 31, 2003. C&D charged the Company $22.5 million for primarily administrative and management services for the year ended December 31, 2002. The Company sold $1.9 of deodorant/antiperspirant inventory to C&D at its cost during the year ended December 31, 2003, compared with $7.1 million of deodorant/antiperspirant during the year ended December 31, 2002. The Company purchased $2.9 million of Arm & Hammer products to be sold in international

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markets during the year ended December 31, 2003, compared with $1.4 million during the year ended December 31, 2002. During the year ended December 31, 2003, the Company charged C&D $1.7 million of transition administrative services. The Company had a net payable to C&D at December 31, 2003 and December 31, 2002 of approximately $6.7 million and $4.8 million, respectively, that primarily related to administration fees and invoices paid by C&D on behalf of Armkel, offset by amounts owed for inventory.

Arrangements with Kelso

Kelso has agreed to provide the Company with financial advisory services for which the Company pays an annual fee of $1.0 million. The Company has agreed to indemnify Kelso against certain liabilities and reimburse expenses in connection with its engagement. For the year ended December 31, 2003, the Company expensed $1.0 million for financial advisory services which was prepaid, at a discounted value, at the end of 2002. For the year ended December 31, 2002, the Company paid Kelso $1.0 million for 2002 financial advisory fees. For the period ended December 31, 2001, the Company paid Kelso $0.3 million for financial advisory services.

Recent Accounting Pronouncements

In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The effective date for the Company was January 1, 2003. The adoption of SFAS No. 143 did not have a material impact on the Company’s financial statements.

In November 2002, the FASB issued Interpretation No. 45 (FIN No. 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“Interpretation”). This Interpretation elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair market value of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial statements. The initial recognition and measurement provisions of the Interpretation apply on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure provisions were effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN No. 45 did not have a material impact on the Company’s financial statements. However, the Company did record a liability of $0.5 million for a guarantee reserve related to an indemnification to the buyer of its Italian subsidiaries.

In December 2002, the FASB issued SFAS No 148, “Accounting for Stock-Based Compensation – Transition and Disclosure”. SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 was effective for the year ended December 31, 2002 and for interim financial statements for the first quarter of 2003. This standard did not have an effect on the Company’s consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This Statement was effective for contracts entered into or modified after June 30, 2003, with certain exceptions. The Company adopted the provisions of the statement on its effective date and it did not have a material impact to its consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, which aims to eliminate diversity in practice by requiring that the “freestanding” financial instruments be reported as liabilities by their issuers. The provisions of SFAS 150, which also include a number of new disclosure requirements, was effective for instruments entered into or modified after May 31, 2003 and for pre-existing instruments as of the beginning of the first interim period that commences after June 15, 2003. The Company adopted the provisions of the statement on its effective date and it did not have a material impact to its consolidated financial statements.

In January 2003, the FASB issued Financial Interpretation No. 46 (FIN No. 46) “Consolidation of Variable Interest Entities”, as amended in December 2003 by FIN No. 46R. FIN No. 46 sets forth criteria to be used in determining whether an investment in a variable interest entity (VIE) should be consolidated and is based on the general premise that companies that control another entity through interests other than voting interests should consolidate the controlled entity. FIN No. 46 would require the immediate consolidation of specified VIEs created after January 31, 2003. For specified VIEs created before February 1, 2003, FIN No. 46 would require consolidation in interim or annual financial statements issued for periods beginning after December 15, 2003. The Company has reviewed FIN No. 46 and determined that it would not have a material impact to its consolidated financial statements.

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In December 2003, the FASB issued a revised version of SFAS No. 132, “Employers Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88, and 106.” This Statement retained the disclosure requirements as originally included in SFAS No. 132 and contained additional disclosure requirements. The Company has included the required disclosures in Note 12 to its financial statements.

In January 2004, the FASB issued FASB Staff Position (FSP) No. 106-1 “Accounting and Disclosure Requirements to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (the Act). The Act introduces a prescription drug benefit under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The FSP permits a sponsor of a postretirement health care plan that provides a prescription drug benefit to make a one-time election to defer accounting for the effects of the Act. The Company does not believe that the effects of the Act apply to its postretirement health care plans and it will not have a material impact on its consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market Risk

Concentration of Risk

The Company is exposed to market risks, which include changes in interest rates as well as changes in foreign currency exchange rates as measured against the U.S. dollar. It does not currently have an established foreign exchange risk management policy, although it may implement such a policy in the future. The Company may, in the normal course of business, use derivative financial instruments, including foreign currency forward contracts, to manage its foreign exchange risk. The Company uses these instruments only for risk management purposes and does not use them for speculation or for trading.

A group of five customers accounted for approximately 26% of consolidated net sales in 2003, including a single customer, Wal-Mart, who accounted for 12%. This group accounted for 27% of consolidated net sales in 2002.

Interest Rate Risk

The Company entered into interest rate swap agreements, which are considered derivatives, to reduce the impact of changes in interest rates on its syndicated bank credit facility. The swap agreements are contracts to exchange floating rate for fixed interest payments periodically over the life of the agreements without the exchange of the underlying notional amounts. As of December 31, 2003, the Company had settled all of its swap agreements at fair value.

The Company measures its interest rate risk, as outlined below, utilizing a sensitivity analysis. The analysis measures the potential loss in fair values, cash flows, and earnings based on a hypothetical 10% change in interest rates and currency exchange rates. The Company uses year-end market rates on its financial instruments to perform the sensitivity analysis.

The Company’s interest rate risk related to the predecessor financial statements was not material. However, the potential loss in cash flows and earnings based on a hypothetical 10% change in interest rates over a one-year period due to an immediate change in rates at December 31, 2003, would have affected earnings by approximately $0.6 million.

Foreign Currency Risk

A portion of the Company’s revenues and earnings are exposed to changes in foreign currency 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. In connection with the Acquisition, the Company entered into intercompany loans with certain of its subsidiaries. The Company is exposed to foreign exchange accounting remeasurement gains and losses from these intercompany loans. The Company has entered into several foreign exchange contracts to hedge the net accounting remeasurement exposure on the intercompany loans. At December 31, 2003, the Company has 11.5 million EURO hedge with an average rate of 1.154, which is approximately 72.4% of the total EURO debt position. The Company has 30.0 million Mexican Pesos hedge with a rate of 0.0878, which is approximately 48.5% of the PESO debt position. The Company has 4.8 million Australian Dollar hedge with a rate of 0.6896, which is approximately 53.9% of the AUS$ debt position.

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The Company’s foreign exchange rate risk related to the predecessor financial statements was not material. However, in connection with the Company’s intercompany loans, the potential loss in cash flows and earnings based upon a hypothetical 10% change in foreign currency rates over a one-year period due to immediate change in rates at December 31, 2003, would have affected earnings by approximately $2.2 million if rates were to decrease by 10%, if rates were to increase by 10% the effect on earnings would be approximately $1.5 million.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

(A) 1. Financial Statements

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INDEPENDENT AUDITORS’ REPORT

To the Members of Armkel, LLC

Princeton, New Jersey

We have audited the accompanying consolidated balance sheets of Armkel, LLC (the “Company”) and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of income and changes in members’ equity, and cash flow for the years ended December 31, 2003 and 2002 and for the period from August 28, 2001 (inception) to December 31, 2001. Our audits also included the financial statement schedule listed in the Index at Item 15 as of December 31, 2003 and 2002 and for the years ended December 31, 2003 and 2002 and for the period from August 28, 2001 (inception) to December 31, 2001. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule 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, such consolidated financial statements present fairly, in all material respects, the financial position of Armkel, LLC and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for the years ended December 31, 2003 and 2002 and for the period from August 28, 2001 (inception) to December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule as of December 31, 2003 and 2002 and for the years ended December 31, 2003 and 2002 and for the period from August 28, 2001 (inception) to December 31, 2001, 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.

DELOITTE & TOUCHE LLP

Parsippany, New Jersey

March 11, 2004

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ARMKEL, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

AND CHANGES IN MEMBERS’ EQUITY

See Notes to Consolidated Financial Statements.

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ARMKEL, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements.

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ARMKEL, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW