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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-3608
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WARNER-LAMBERT COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 201 TABOR ROAD 22-1598912
(STATE OR OTHER JURISDICTION OF MORRIS PLAINS, NEW JERSEY 07950 (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) (ADDRESS OF PRINCIPAL IDENTIFICATION NO.)
EXECUTIVE OFFICES, INCLUDING ZIP
CODE)
201-540-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock (Par Value $1 Per Share) The New York Stock Exchange, Inc.
The Chicago Stock Exchange, Inc.
The Pacific Stock Exchange, Inc.
Rights to Purchase Series A The New York Stock Exchange, Inc.
Participating Cumulative Preferred Stock The Chicago Stock Exchange, Inc.
The Pacific Stock Exchange, Inc.
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 (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [x] NO [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
Warner-Lambert Company as of February 24, 1995 was approximately
$10,140,628,991.
The number of shares outstanding of the registrant's Common Stock as of
February 24, 1995 was 134,642,159 shares, Common Stock, par value $1.00 per
share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Warner-Lambert Company Annual Report to Shareholders for
1994 -- Part I, Part II and Part IV.
Portions of the Proxy Statement for Annual Meeting of Stockholders of
Warner-Lambert Company to be held April 25, 1995 -- Part III.
________________________________________________________________________________
PART I
ITEM 1. BUSINESS.
The term 'Warner-Lambert' or the 'Company' refers to Warner-Lambert
Company, a Delaware corporation organized in that state in 1920, and its
consolidated subsidiaries, unless otherwise indicated or unless the context
otherwise requires.
Industry Segments and Geographic Areas. Financial information by industry
segment and geographic area for the years 1994, 1993 and 1992 is presented in
the Warner-Lambert 1994 Annual Report to Shareholders as set forth below.
The summary of Warner-Lambert's industry segments, geographic areas and
related financial information, set forth on page 33 of the Warner-Lambert 1994
Annual Report, is incorporated herein by reference.
All product names appearing in capitalized letters in this report on Form
10-K are registered trademarks of Warner-Lambert, its affiliates, related
companies or licensors. ZOVIRAX, SUDAFED, ACTIFED, NEOSPORIN, POLYSPORIN, NIX,
BOROFAX and EMPIRIN are registered trademarks of Wellcome plc ('Wellcome'), its
affiliates or related companies, and ZANTAC and BECONASE are registered
trademarks of Glaxo plc ('Glaxo'), its affiliates or related companies. As
discussed below, Warner-Lambert has entered into separate joint ventures with
Wellcome and Glaxo.
BUSINESS SEGMENTS
A detailed description of Warner-Lambert's industry segments is as follows:
Consumer Health Care Products
The principal products of Warner-Lambert in its Consumer Health Care
Products segment are over-the-counter health care products, shaving products and
pet care products.
Over-the-Counter Products: In December 1993, Warner-Lambert signed separate
agreements with Wellcome and Glaxo governing the establishment of joint ventures
in various countries to develop and market a broad range of nonprescription
consumer health care products.
The alliance between Warner-Lambert and Wellcome calls for both companies
to contribute to joint venture operations being established in various
territories (referred to herein as the 'Warner Wellcome' joint venture
operations) current and future over-the-counter products (excluding HALLS and
ROLAIDS products). Pursuant to the agreements with Wellcome, Warner-Lambert and
Wellcome formed joint venture operations in the United States and Canada, which
commenced in January 1994, joint venture operations in Australia, New Zealand
and certain countries in Europe, which commenced in June 1994, and joint venture
operations in Germany, which commenced in November 1994. Additional joint
venture operations may be established by Warner-Lambert and Wellcome in other
countries throughout the world. Warner-Lambert or its affiliates are the
managing partners of the Warner Wellcome joint venture operations, with
day-to-day operating responsibility.
After a two-year phase-in period following establishment of the U.S. Warner
Wellcome joint venture operations, Warner-Lambert and Wellcome will receive
approximately 70 percent and 30 percent, respectively, of the profits generated
by Warner Wellcome in the U.S. on current products or line extensions of current
products, excluding Wellcome's antiviral drug ZOVIRAX.
Profits on current products will be shared equally between Warner-Lambert
and Wellcome in Canada, Australia, New Zealand and the European countries where
joint venture operations have been established. Profits on certain package sizes
of ZOVIRAX cold sore cream sold over-the-counter outside the United States will
also be shared equally, subject to a royalty to Wellcome if sales exceed a
certain threshold amount. ZOVIRAX cold sore cream has been approved for
over-the-counter use and is being sold over-the-counter in a number of
countries, primarily in Europe. Other future over-the-counter switch products
will be subject to a profit split favoring the innovator.
A New Drug Application ('NDA') for the conversion to over-the-counter use
of ZOVIRAX as a genital herpes medication was filed with the U.S. Food and Drug
Administration ('FDA') in August
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1993. On January 12, 1995, the FDA's Antiviral Drugs and Nonprescription Drugs
Advisory Committees met and issued a non-binding recommendation to the FDA that
the current submission provided insufficient evidence to support conversion of
ZOVIRAX to over-the-counter form. Although Wellcome will continue to pursue
approval, it is not possible to predict the actions the FDA will take, and
approval in the near-term seems unlikely. If the FDA approves conversion of
ZOVIRAX to over-the-counter use, profits on ZOVIRAX sold over-the-counter in the
United States will be shared in favor of Wellcome.
Pursuant to the agreements with Glaxo, a joint venture in the United
States, which commenced operations in December 1993 (referred to herein as the
'Glaxo Warner-Lambert' joint venture or organization), was formed. The United
States joint venture will develop, seek approval of and market over-the-counter
versions of Glaxo prescription drugs in the United States, and will concentrate
initially on developing ZANTAC, Glaxo's pharmaceutical product for ulcer
treatment, for sale as an over-the-counter product for the treatment of episodic
heartburn. Additional joint ventures are expected to be formed with Glaxo in
other major markets, excluding Japan.
Direction of the Glaxo Warner-Lambert joint ventures will be provided by a
management committee of representatives from each company. Day-to-day operations
will be the responsibility of Warner-Lambert, and the joint ventures'
over-the-counter products will be sold by Warner-Lambert's consumer health care
products sales and marketing organization, which in most countries will be a
Warner Wellcome joint venture, as described above. Warner-Lambert (or Warner
Wellcome, as appropriate) and Glaxo will share development costs, profits and
voting control equally, with Glaxo receiving a royalty on sales by the Glaxo
Warner-Lambert joint ventures of over-the-counter versions of Glaxo prescription
drugs.
Warner-Lambert assigned its interest in the U.S. Glaxo Warner-Lambert joint
venture to the U.S. Warner Wellcome joint venture organization. Warner Wellcome
and Glaxo will share development costs and profits equally, with Wellcome
receiving 10 percent of Warner Wellcome's share of the U.S. Glaxo Warner-Lambert
joint venture's profits. On September 30, 1994, Glaxo submitted an NDA to the
FDA for ZANTAC's sale in the U.S. as an over-the-counter product for the
treatment of episodic heartburn.
In the first quarter of 1994, marketing of Glaxo's nasal spray BECONASE for
over-the-counter sale in the United Kingdom commenced. In addition, approval to
market ZANTAC over-the-counter was obtained in the United Kingdom in December
1994 and marketing commenced in January 1995. Warner-Lambert will share in the
profits generated by these brands.
In January 1995, Glaxo announced an offer to acquire all of the shares of
Wellcome, which offer was recommended for acceptance by Wellcome to its
shareholders in March 1995. This offer was declared unconditional in all
respects by Glaxo on March 16, 1995. It is unclear what impact this acquisition
will have on Warner-Lambert.
Warner Wellcome Products: In each country where a Warner Wellcome joint
venture has been established, Warner Wellcome sells a line of over-the-counter
pharmaceuticals and health care products, which may include antacids (GELUSIL),
dermatological products (LUBRIDERM, LUBRIDERM BODY BAR, LUBRIDERM LOOFA BAR,
LUBRIDERM SERIOUSLY SENSITIVE, LUBRIDERM Moisture Recovery, ROSKEN SKIN REPAIR,
CORN HUSKERS and LISTEREX), topical antibiotic ointments (NEOSPORIN and
POLYSPORIN), cold and sinus preparations (SUDAFED, SINUTAB, SINUTAB NON-DRYING
and ACTIFED), antihistamines and allergy products (ACTIFED ALLERGY, SUDAFED
PLUS, BENADRYL, BENADRYL-D, BENADRYL COLD, BENADRYL DAY & NIGHT, BENADRYL
ALLERGY/SINUS/HEADACHE and BENADRYL Dye-Free), hemorrhoidal preparations
(ANUSOL, ANUSOL HC-1 and TUCKS), vaginal moisturizers (REPLENS), laxatives
(AGORAL), cough syrups/suppressants (BENYLIN, BENYLIN-DM, BENYLIN DECONGESTANT,
BENYLIN EXPECTORANT and BENYLIN PEDIATRIC), vitamins (MYADEC), antipruritics
(CALADRYL, BENADRYL spray and cream and STINGOSE), rubbing alcohol (LAVACOL),
hydrogen peroxide (PROXACOL), self-diagnostic early pregnancy test kits
(e.p.t'r'), oral antiseptics (LISTERINE, COOL MINT LISTERINE and FRESHBURST
LISTERINE), mouthwash/anticavity dental rinses (LISTERMINT and ARCTIC MINT
LISTERMINT), effervescent denture cleaning tablets and denture cleanser pastes
(EFFERDENT and FRESH 'N BRITE), denture adhesives (EFFERGRIP), head lice
treatments
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(NIX), diaper rash preparations (BOROFAX) and analgesics (EMPIRIN). SUDAFED,
ACTIFED, ACTIFED ALLERGY, SUDAFED PLUS, NEOSPORIN, POLYSPORIN, NIX, BOROFAX and
EMPIRIN were contributed by Wellcome to the joint venture operations.
Other Over-the-Counter Products: In addition to the Warner Wellcome
products named above, Warner-Lambert manufactures and/or sells, in the United
States and/or internationally, a line of antacids (ROLAIDS, SODIUM FREE ROLAIDS
and EXTRA STRENGTH ROLAIDS), cough tablets (HALLS, HALLS-PLUS and Sugar Free
HALLS), throat drops (CELESTIAL SEASONINGS SOOTHERS) and vitamin C drops
(HALLS). Furthermore, certain products named as Warner Wellcome products above
(except for products that were contributed by Wellcome to the joint venture
operations) are manufactured and/or sold by Warner-Lambert or its affiliates in
countries where Warner Wellcome joint venture operations have not been
established.
Over-the-counter products are promoted principally through consumer
advertising and promotional programs and some are promoted directly to health
care professionals. They are sold principally to drug wholesalers, chain and
retail pharmacies, chain and independent food stores, mass merchandisers,
physician supply houses and hospitals.
Shaving Products: Warner-Lambert manufactures and sells razors and blades,
both domestically and internationally. Shaving products are manufactured and
marketed under the SCHICK and other trademarks worldwide and the WILKINSON SWORD
trademark in Europe, the United States and Canada. Permanent (nondisposable)
products marketed under the SCHICK trademark include TRACER/FX, SUPER II, SUPER
II PLUS, ULTREX PLUS, SILK EFFECTS, SLIM TWIN, ADVANTAGE, PERSONAL TOUCH and
INJECTOR PLUS CHROMIUM. Disposable twin blade products marketed under the SCHICK
trademark include SCHICK DISPOSABLE, SLIM TWIN, PERSONAL TOUCH, PERSONAL TOUCH
SLIM and ULTREX DISPOSABLE. Products marketed under the WILKINSON SWORD
trademark include nondisposable systems such as PROTECTOR, PROFILE, SYSTEM II,
DUPLO and LADY PROTECTOR, and disposable products that include COLOURS, PRONTO,
RETRACTOR, RETRACTOR TWIN, SHAVA II, ULTRA CARESSE LADYSHAVER and EXTRA II.
Warner-Lambert's shaving products are promoted principally through consumer
advertising and promotional programs. They are distributed directly to
wholesalers for sale to smaller retailers, drugstores, pharmacies and retail
outlets, including pharmacies, food stores, variety stores, mass merchandisers
and other miscellaneous outlets.
Pet Care Products: Warner-Lambert manufactures and/or sells various
products on a worldwide basis for ornamental fish and for reptiles and other
small pets, as well as books relating to various pets, under the trademarks
TETRA, TETRA POND, TETRA PRESS, TETRA TERRAFAUNA and TETRA SECONDNATURE. In
addition, Warner-Lambert manufactures and/or distributes aquarium products
(including power filters and replacement cartridges, air pumps, heaters, plastic
plants and other accessories) that are marketed largely under the WHISPER and
SECONDNATURE trademarks. These pet care products are promoted to consumers
through cooperative advertising and to retailers through direct promotion and
advertising in trade publications. They are sold to wholesalers for sale to
smaller retailers and directly to larger chain stores and retailers, in each
case for ultimate sale to consumers.
Confectionery Products
The principal products of Warner-Lambert in its Confectionery Products
segment are chewing gums, breath mints and hard candies.
Warner-Lambert manufactures and/or sells, in the United States and/or
internationally, a broad line of chewing gums and breath mints, as well as
specialty candies. Among these products are slab chewing gums (TRIDENT, DENTYNE
and DENTYNE Sugarfree), chunk bubble gums (BUBBLICIOUS and BUBBLICIOUS MONDO),
center-filled gums (BUBBALOO and FRESHEN-UP), candy-coated gums (CHICLETS,
CHICLETS TINY SIZE and CLORETS) and stick gums (CLORETS, CINN*A*BURST,
MINT*A*BURST and FRUIT*A*BURST). The breath mint line includes CERTS, Sugarfree
CERTS, Sugarfree CERTS Mini-Mints, CERTS Extra Flavor and CLORETS. In 1994,
3
Warner-Lambert introduced a line of hard candies called FRUIT WAVES under the
OCEAN SPRAY trademark.
Warner-Lambert's confectionery products are promoted directly to the
consumer primarily through consumer advertising and in-store promotion programs.
They are sold directly to chain and independent food stores, chain pharmacies
and mass merchandisers or through candy and tobacco wholesalers and to other
miscellaneous outlets which in turn sell to consumers.
In June 1994, Warner-Lambert acquired Saila S.p.A., a privately held
confectionery company based in Italy, for a purchase price of approximately $66
million.
Other: In December 1994, Warner-Lambert sold substantially all of the
intellectual property relating to the Novon business, specialty polymers based
upon starch and other fully biodegradable materials. These were virtually all of
the assets remaining after the discontinuation of the operations of the Novon
Products Group in November 1993.
Pharmaceutical Products
The principal products of Warner-Lambert in its Pharmaceutical Products
segment are ethical pharmaceuticals, biologicals and capsules.
Ethical Pharmaceuticals and Biologicals: Warner-Lambert manufactures and/or
sells, in the United States and/or internationally, an extensive line of ethical
pharmaceuticals and biologicals under trademarks and trade names such as
PARKE-DAVIS and GOEDECKE. Among these products are analgesics (PONSTAN, PONSTEL,
EASPRIN, VALORON, VALORON-N, VEGANIN and VALTRAN), anesthetics (KETALAR),
anthelmintics (VANQUIN), anticonvulsants (DILANTIN, ZARONTIN and NEURONTIN),
anti-infectives (CHLOROMYCETIN, COLYMYCIN, DORYX, ERYC, MANDELAMINE and
OMNICEF), antihistamines (BENADRYL), antivaricosities (HEPATHROMBIN), anti-viral
agents (VIRA-A), bronchodilators (CHOLEDYL and CHOLEDYL SA), cardiovascular
products (NOVADRAL, DILZEM, PROCAN SR, ACCUPRIL, ACCUZIDE, ACCURETIC, NITROSTAT
and PIMENOL), cognition drugs for treatment of mild-to-moderate Alzheimer's
disease (COGNEX), dermatologics (BEBEN and UTICORT), prescription hemorrhoidal
preparations (ANUSOL HC), hemostatic agents (THROMBOSTAT), hormonal agents
(PITRESSIN), influenza vaccines (FLUOGEN), lipid regulators (LOPID),
nonsteroidal anti-inflammatories (MECLOMEN), oral contraceptives (LOESTRIN),
oxytocics (PITOCIN), psychotherapeutic products (CETAL RETARD, DEMETRIN and
NARDIL) and urinary analgesics (PYRIDIUM).
Warner-Lambert received approval to market COGNEX (Warner-Lambert's
trademark for tacrine or THA) in the United States in September 1993 and began
to ship the product in late September 1993. During 1994, Warner-Lambert received
marketing approval for COGNEX, the first effective treatment for
mild-to-moderate Alzheimer's disease, in a number of other countries, including
France, Australia and certain countries in South America. Warner-Lambert
received marketing approval of COGNEX in Sweden in February 1995, and
applications for marketing approval of COGNEX in certain other countries are
pending.
Warner-Lambert began marketing NEURONTIN (gabapentin capsules) in the
United States as add-on therapy in the treatment of certain types of adult
epilepsy (i.e., partial seizures, with and without secondary generalization) in
the first quarter of 1994 and in the United Kingdom in the first quarter of
1993. During 1994, Warner-Lambert received marketing approval for NEURONTIN in a
number of other countries, including South Africa, Australia, Sweden, Canada,
France, Ireland, Austria, Switzerland and Germany, and has begun or will begin
to market NEURONTIN in those countries where marketing approval has been
obtained.
Warner-Lambert received its first marketing approval in the world for
OMNICEF in the Philippines in July 1994 and began marketing the product in that
country in January 1995. OMNICEF is a third generation cephalosporin.
PIMENOL (Pirmenol Hydrochloride) was approved by the Ministry of Health in
Japan for the treatment of arrhythmias and was launched in December 1994 in
co-promotion with Dainippon Pharmaceutical Co., Ltd.
4
On January 4, 1993, the U.S. patent covering LOPID, a lipid regulator,
expired, subjecting LOPID to generic competition. In December 1992,
Warner-Lambert began marketing gemfibrozil, the generic equivalent of LOPID,
through its Warner Chilcott Laboratories division, as described below. Since
1993, several competitive generic versions of gemfibrozil tablets received
marketing approval in the United States. As a result, combined worldwide sales
of LOPID and gemfibrozil declined substantially in 1993 and 1994, and are
expected to decline further in 1995.
Warner-Lambert's pharmaceutical products are promoted for the most part
directly to health care professionals through personal solicitation of doctors
and other professionals by sales representatives with scientific training,
direct mail contact and advertising in professional journals. They are sold
either directly or through wholesalers to government agencies, chain and
independent retail pharmacies, hospitals, clinics, long-term care facilities,
mail order houses and health maintenance organizations. Sales to managed care
entities have become an increasingly large part of Warner-Lambert's domestic
pharmaceutical sales. The Company estimates that more than 50% of pharmaceutical
sales in the United States during 1994 were made to managed care entities
(including government agencies and hospitals). In 1994, Warner-Lambert also
announced that it would increase its efforts in the managed care market through
the formation of a marketing organization directed toward specific disease and
health care areas. For further discussion of Warner-Lambert's ethical products,
see 'Item 1. Business -- Regulation' below.
Warner-Lambert has a separate division, Warner Chilcott Laboratories, which
is dedicated solely to the generic drug business. Warner Chilcott Laboratories
is a manufacturer and/or marketer of 72 generic drugs, including gemfibrozil,
carbamazapine chewable, hydrocodone bitartrate with acetaminophen, nitroglycerin
patch, potassium chloride ER, sulindac, and a line of generic antibiotics,
including ampicillin, amoxicillin, penicillin, cephalexin and minocycline. These
products are promoted directly to the pharmacy community. They are sold either
directly or through wholesalers to government agencies, chain and independent
retail pharmacies, hospitals, clinics, managed care entities, mail order houses
and health maintenance organizations.
Capsules: Warner-Lambert is the leading worldwide producer of empty
hard-gelatin capsules used by pharmaceutical companies for their production of
encapsulated products. These capsules are used by Warner-Lambert or manufactured
by Warner-Lambert according to the specifications of each of its customers and
are sold under such trademarks as CAPSUGEL, CONI-SNAP and SNAP-FIT.
INTERNATIONAL OPERATIONS
Although Warner-Lambert has globalized most of its organization on a
segment basis, Warner-Lambert's international businesses are carried on
principally through subsidiaries and branches, which are generally staffed and
managed by citizens of the countries in which they operate. Approximately 23,500
of Warner-Lambert's employees are located outside the United States and only a
small number of such employees are United States citizens. Certain of the
products described above are manufactured and marketed solely in the United
States and certain other products are manufactured and marketed solely in one or
more foreign countries.
International sales to unaffiliated customers in 1994 amounted to
approximately 54% of the Company's worldwide sales. International sales do not
include sales of products exported from the U.S., which sales represent less
than 1% of total U.S. sales. The seven largest markets with respect to the
distribution of Warner-Lambert products sold outside the United States during
1994 were Japan, Germany, Canada, the United Kingdom, France, Mexico and Italy.
Sales in these markets accounted for approximately 64% of Warner-Lambert's
international sales, with no one country accounting for more than 17% of
international sales.
In 1994, Warner-Lambert announced that it will make an initial capital
investment of approximately $30 million over the next three years to establish a
confectionery and consumer health care products operation in the Peoples'
Republic of China. Through a joint venture with a Chinese partner, Warner-
Lambert intends to construct and operate a manufacturing facility in Guangzhou.
This facility will initially produce confectionery products which will be sold
both in China and exported.
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In accordance with customary market conditions, sales made outside the
United States are generally made on longer terms of payment than would be
customary in the United States. In addition, international operations are
subject to certain risks inherent in carrying on business abroad, including
possible nationalization, expropriation and other governmental action, as well
as fluctuations in currency exchange rates. The likelihood of such occurrences
varies from country to country and is not predictable. However, the Company
believes that its geographic diversity minimizes exposure to currency
fluctuations resulting in one or more foreign countries. Although the
devaluation of the Mexican peso in December 1994 will have an impact on the
Company's 1995 results of operations, the Company believes that such impact will
not be material.
RESTRUCTURING
In November 1993, Warner-Lambert announced a program covering the
rationalization of manufacturing facilities, principally in North America,
including the eventual closing of seven plants, an organizational restructuring
and related workforce reductions of approximately 2,800 positions over the next
several years. For further discussion of Warner-Lambert's restructuring, see
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Restructuring' and Note 3 to the Company's consolidated financial
statements, contained in Warner-Lambert's 1994 Annual Report and incorporated
herein by reference.
COMPETITION
Most markets in which Warner-Lambert is engaged are highly competitive and
characterized by substantial expenditures in the advertising and promotion of
new and existing products. In addition, there is intense competition in research
and development in all of Warner-Lambert's industry segments. No material part
of the business of any of Warner-Lambert's industry segments is dependent upon
one or a few customers.
MATERIALS AND SUPPLIES
Warner-Lambert's products, in general, are produced and packaged at its own
facilities. Other than certain Warner Wellcome products manufactured by
Wellcome, certain products manufactured by Glaxo, certain generic drug products
and certain pet products, relatively few items are manufactured in whole or in
part by outside suppliers. Raw materials and packaging supplies are purchased
from a variety of outside suppliers. Although the Company, in an effort to
achieve cost savings, is consolidating its sources of supply, the Company does
not believe that the loss of any one source of supply of such materials and
supplies would have a material effect on the business of any of Warner-Lambert's
industry segments. Warner-Lambert seeks to protect against fluctuating costs and
to assure availability of raw materials and packaging supplies by, among other
things, locating alternative sources of supply and, in some instances, making
selective advance purchases.
TRADEMARKS AND PATENTS
Warner-Lambert's major trademarks are protected by registration in the
United States and other countries where its products are marketed.
Warner-Lambert believes these trademarks are important to the marketing of the
related products and acts to protect them from infringement. Warner-Lambert owns
many patents and has many patent applications pending in the patent offices of
the United States and other countries. Although a number of products and product
lines have patent protection that is significant in the marketing of such
products, the management of Warner-Lambert does not consider that any single
patent or related group of patents is material to Warner-Lambert's business as a
whole or any of its industry segments.
Legislation enacted during 1994 in the United States in order to implement
the General Agreement on Tariffs and Trade has changed the term of U.S. patents
filed after June 8, 1995 and has lengthened the term of some granted patents
existing on June 8, 1995. It is not clear what the impact of this legislation on
Warner-Lambert will be.
6
RESEARCH AND DEVELOPMENT
Warner-Lambert employs over 2,000 scientific and technical personnel in
research and development activities at various research facilities located in
the United States and in foreign countries. Warner-Lambert invested
approximately $456 million in research and development in 1994, compared with
$465 million in 1993 and $473 million in 1992. Approximately eighty-one percent
(81%) of Warner-Lambert's 1994 research and development spending was for
research and development related to pharmaceutical products. Warner-Lambert
believes research and development activities are essential to its business and
intends to continue such activities.
EMPLOYEES
At December 31, 1994, approximately 36,000 people were employed by
Warner-Lambert throughout the world.
REGULATION
Warner-Lambert's business is subject to varying degrees of governmental
regulation in the countries in which it manufactures and distributes products,
and the general trend in these countries is toward more stringent regulation.
In the United States, the food, drug and cosmetic industries have been
subject to regulation by various federal, state and local agencies with respect
to product safety and effectiveness, manufacturing and advertising and labeling.
Accordingly, from time to time, with respect to particular products under
review, such agencies may require Warner-Lambert to participate in meetings,
whether public or private, to address safety, efficacy, manufacturing and/or
regulatory issues, to conduct additional testing or to modify its advertising
and/or labeling.
During the third quarter of 1993, a consent decree with the FDA was entered
into by Warner-Lambert and two of its principal officers, covering issues
related to compliance with manufacturing and quality procedures. The decree is a
court-approved agreement that primarily requires Warner-Lambert to certify that
laboratory and/or manufacturing procedures at its pharmaceutical manufacturing
facilities in the United States and Puerto Rico meet current Good Manufacturing
Practices established by the FDA. Under the terms of the decree, Warner-Lambert
was permitted to ship inventory existing at the time of entry of the decree of
most of its products, and has been permitted to continue to manufacture and ship
prescription medications deemed medically necessary while the certification
process is ongoing. The manufacture and distribution of its remaining products
was suspended pending completion of certain certification procedures. Relevant
laboratories in all United States plants have been certified and
Warner-Lambert's manufacturing facilities in the mainland United States quickly
resumed substantially full operations. Most prescription products manufactured
at the two Puerto Rico facilities were deemed medically necessary and
experienced no significant interruption in supply, and the production of certain
other products has been transferred from those facilities to mainland U.S.
facilities or sourced from third parties. Although there are several
prescription products that have not yet returned to the market or have been
withdrawn, most of those pharmaceutical products which the Company intends to
continue manufacturing and/or marketing have returned to full manufacture and
distribution. Warner-Lambert continues to make progress in resolving the issues
related to this matter. Warner-Lambert is working with the FDA to complete
facility certification for the Vega Baja and Fajardo plants in Puerto Rico. The
certification for the pharmaceutical portion of Warner-Lambert's manufacturing
facility at Vega Baja, Puerto Rico was accepted by the FDA in February 1995. It
is not possible to predict when certifications for the other manufacturing
facilities in Puerto Rico will be accepted by the FDA, although Warner-Lambert
is actively working with outside experts and the FDA to accomplish this as soon
as possible. Compliance with FDA restrictions, including the consent decree,
resulted in an estimated aggregate loss of sales revenue of approximately $135
million in 1993, which lost sales revenue continued in 1994. Most of these sales
will never be recovered.
The FDA's Application Integrity Policy ('AIP') was applied to
Warner-Lambert's Fajardo and Vega Baja, Puerto Rico facilities in September
1992, due to discrepancies found in data generated at those facilities. Pursuant
to the AIP, Warner-Lambert, through independent experts in pharmaceutical
7
manufacturing, has conducted validity assessments of certain FDA filings made
with respect to certain products manufactured or to be manufactured at its
facilities in Vega Baja and Fajardo, Puerto Rico. The FDA has deferred
substantive scientific reviews of pending NDA's and Abbreviated New Drug
Applications ('ANDA's') for products to be manufactured at these facilities
(including the oral contraceptive ESTROSTEP), and for supplements to NDA's or
ANDA's for products currently manufactured at these facilities, while the
Company is subject to the AIP. The FDA did not suspend review of two medically
important drugs, COGNEX (tacrine) and NEURONTIN (gabapentin), discussed above
under the caption 'Item 1. Business Segments -- Pharmaceutical Products', both
of which obtained U.S. marketing approval in 1993. Warner-Lambert has pledged
its full cooperation, has actively worked with the FDA and continues to engage
in discussions with the FDA in order to resolve all issues relating to this
matter. In 1994 and 1995, Warner-Lambert filed all the expert validity
assessments that had not yet been filed, except for one supplemental report,
which is expected to be submitted in April 1995. The Company also submitted a
Corrective Action Operating Plan to the FDA in December 1994, which outlines
corrective actions that have been or will be implemented in response to the
validity assessments. The FDA is currently inspecting the Company's Vega Baja,
Puerto Rico pharmaceutical facility and will inspect the other Puerto Rico
pharmaceutical facility prior to lifting the AIP. It is not possible to predict
when or whether the AIP will be lifted or whether the FDA will take additional
action.
Regulatory requirements concerning the research and development of drug
products have increased in complexity and scope in recent years. This has
resulted in a substantial increase in the time and expense required to bring new
products to market. At the same time, the FDA requirements for approval of
generic drugs (drugs containing the same active chemical as an innovator's
product) have been decreased by the adoption of abbreviated new drug approval
procedures for most generic drugs. Generic versions of many of Warner-Lambert's
products in the Pharmaceutical Products segment are being marketed in the U.S.,
and generic substitution legislation, which permits a pharmacist to substitute a
generic version of a drug for the one prescribed, has been enacted in some form
in all states. These factors have resulted in increased competition from generic
manufacturers in the market for ethical products. For example, LOPID has been
subject to this increased competition following the expiration of its patent on
January 4, 1993, as discussed above under the caption 'Item 1. Business
Segments -- Pharmaceutical Products'.
Federal legislation enacted in late 1990 prohibits the expenditure of
federal Medicaid funds for outpatient drugs of manufacturers that do not agree
to pay specified rebates. Similar legislation has been enacted in several states
extending rebates to state administered non-Medicaid programs. Warner-Lambert
has been adhering to such rebate programs and other related rebate programs and
has incurred rebate expenses of approximately $65 million, $57 million and $37
million in 1994, 1993 and 1992, respectively. However, Warner-Lambert does not
believe such rebate expenses have had, or will have, a material adverse effect
upon its financial position.
As a result of the failure of the Clinton Administration's proposed health
care plan to be adopted during 1994, the immediate threat of health care reform
and related price controls, which would have had negative implications for the
pharmaceutical industry, has diminished. However, as a result of the 1995
phase-in of U.S. tax law changes enacted in 1993 and expected changes in the
Company's global profit composition, Warner-Lambert anticipates that its
effective tax rate will increase in 1995 by several percentage points.
The regulatory agencies under whose purview Warner-Lambert operates have
administrative and legal powers that may subject Warner-Lambert and its products
to seizure actions, product recalls and other civil and criminal actions. They
may also subject the industry to emergency regulatory requirements.
Warner-Lambert's policy is to comply fully with all regulatory requirements. It
is impossible to predict, however, what effect, if any, these matters or any
pending or future legislation, regulations or governmental actions may have on
the conduct of Warner-Lambert's business in the future.
In most of the foreign countries where Warner-Lambert does business, it is
subject to a regulatory and legislative climate similar to or more restrictive
than that described above. The Company can not predict whether or what type of
measures will be encountered in the future.
8
ENVIRONMENT
Warner-Lambert is responsible for compliance with a number of environmental
laws and regulations. Warner-Lambert maintains control systems designed to
assure compliance in all material respects with environmental laws and
regulations, including environmental policies and maintenance of a worldwide
audit program to assure compliance with environmental regulations.
Warner-Lambert is involved in various administrative or judicial
proceedings related to environmental actions initiated by the Environmental
Protection Agency under the Comprehensive Environmental Response, Compensation
and Liability Act (also known as Superfund) or by state authorities under
similar state legislation, or by third parties. For some of the sites, other
parties (defined as potentially responsible parties) may be jointly and
severally responsible, along with Warner-Lambert, to pay remediation and other
related expenses. For other sites -- for example, those sites which
Warner-Lambert currently owns or previously owned -- Warner-Lambert may be the
sole party responsible for clean-up costs. While it is not possible to predict
with certainty the outcome of such matters or the total cost of remediation, the
management of Warner-Lambert believes it is unlikely that their ultimate
disposition will have a material adverse effect on Warner-Lambert's financial
position, liquidity, cash flow or results of operations for any year. Actions
with respect to environmental programs and compliance result in operating
expenses and capital expenditures. Warner-Lambert's capital expenditures with
respect to environmental programs and compliance in 1994 were not, and in 1995
are not expected to be, material to the business of Warner-Lambert.
For additional information relating to environmental matters, see 'Item 3.
Legal Proceedings' and Note 19 to the consolidated financial statements,
'Environmental Liabilities', on pages 46 through 47 of the Warner-Lambert 1994
Annual Report, incorporated herein by reference.
ITEM 2. PROPERTIES.
The executive offices of Warner-Lambert are located in Morris Plains, New
Jersey. In the United States, including Puerto Rico, Warner-Lambert owns
facilities aggregating approximately 6,900,000 square feet and leases facilities
having an aggregate of approximately 853,000 square feet.
Warner-Lambert's U.S. manufacturing plants are located in Lititz,
Pennsylvania (pharmaceuticals and consumer health care); Rockford, Illinois
(confectionery and consumer health care); Rochester, Michigan (pharmaceuticals);
Holland, Michigan (pharmaceuticals); Morris Plains, New Jersey
(pharmaceuticals); Greenwood, South Carolina (capsules); Milford, Connecticut
(razors and blades); Oakland, New Jersey (pet care products); and Blacksburg,
Virginia (pet care products). Warner-Lambert Inc., a wholly-owned subsidiary of
Warner-Lambert operating in Puerto Rico, has plants located in Fajardo
(pharmaceuticals); and Vega Baja (pharmaceuticals, consumer health care and
confectionery).
In connection with the restructuring discussed above under the caption
'Item 1. Business -- Restructuring', Warner-Lambert closed its Carolina, Puerto
Rico confectionery manufacturing plant during 1994, and sold it in February
1995.
In the United States, Warner-Lambert currently distributes its various
products through its manufacturing plants and two primary distribution centers
located in Lititz, Pennsylvania and Elk Grove, Illinois. Principal U.S. research
facilities are located in Ann Arbor, Michigan (pharmaceuticals) and Morris
Plains, New Jersey (pharmaceuticals, consumer health care and confectionery).
Internationally, Warner-Lambert owns, leases or operates, through its
subsidiaries or branches, 72 production facilities in 34 countries. Principal
international manufacturing plants are located in Germany, the United Kingdom,
Belgium, Italy, Canada, Mexico, Hong Kong, Japan, Ireland, Spain, France,
Brazil, Venezuela and Australia. Principal international research facilities are
located in Germany, Japan, the United Kingdom and Canada.
As discussed above under the heading 'Item 1. Business -- International
Operations', Warner-Lambert announced in 1994 that it will make an initial
capital investment of approximately $30 million over the next three years to
establish a confectionery and consumer health care products operation and to
construct a manufacturing facility in Guangzhou, China.
9
In order to increase efficiency and to lower its cost of goods sold,
Warner-Lambert, over a number of years and at significant cost, has consolidated
many of its plants and facilities around the world. This has often resulted in
the production of pharmaceutical products, consumer health care products and/or
confectionery products at a single facility.
Warner-Lambert's facilities are generally in good operating condition and
repair and at present are adequately utilized within reasonable limits. Leases
are not material to the business of Warner-Lambert taken as a whole.
For information regarding the organizational restructuring and plant
rationalization announced by Warner-Lambert in November 1993, see 'Item 1.
Business -- Restructuring' above.
ITEM 3. LEGAL PROCEEDINGS.
For a discussion of Warner-Lambert's consent decree with the U.S. FDA,
covering issues related to compliance with current Good Manufacturing Practices
established by the FDA, and other regulatory matters, see above under 'Item 1.
Business -- Regulation'. For additional information relating to environmental
matters see above under 'Item 1. Business -- Environment'.
Warner-Lambert and certain present and former employees were served with
subpoenas in 1993 by the U.S. Attorney's office in Maryland, which is conducting
an inquiry relating to compliance with FDA regulations, to produce records
and/or appear before a federal grand jury in Baltimore. Warner-Lambert is
cooperating with the inquiry and cannot predict what the outcome of the
investigation will be.
In September 1993, Warner-Lambert received a Complaint and Compliance Order
from the Environmental Protection Agency ('EPA') seeking penalties of $268,000
for alleged violations of the Resource Conservation and Recovery Act, Boilers
and Industrial Furnace regulations. Warner-Lambert is contesting the allegations
contained within the Complaint and has entered into negotiations with the EPA in
an attempt to resolve these issues. Although it is too early to predict the
outcome of this action, Warner-Lambert does not at present expect this
litigation to have a material adverse effect on its financial position,
liquidity, cash flow or results of operations.
Beginning in late 1993, Warner-Lambert, along with numerous other
pharmaceutical manufacturers and wholesalers, has been sued in a number of state
and federal antitrust lawsuits by retail pharmacies seeking treble damages and
injunctive relief. These actions arise from alleged price discrimination by
which the defendant drug companies, acting alone or in concert, are alleged to
have favored institutions, managed care entities, mail order pharmacies and
other buyers with lower prices for brand name prescription drugs than those
afforded to plaintiff retailers. The federal cases have been consolidated by the
Judicial Panel on Multidistrict Litigation and transferred to the U.S. District
Court for the Northern District of Illinois for pre-trial proceedings. The state
cases pending in California have been coordinated in the Superior Court of
California, County of San Francisco. Warner-Lambert has also been named as a
defendant in actions in state courts in Alabama, Minnesota and Wisconsin brought
by classes of pharmacies, each arising from the same allegations of price
discrimination. In addition, the Company is named in a class action complaint in
King County, Washington, brought by a class of consumers who purchased brand
name prescription drugs at retail pharmacies. This case also arises from the
same allegations of price discrimination. Warner-Lambert believes that these
actions are without merit and will defend itself vigorously. Although it is too
early to predict the outcome of these actions, Warner-Lambert does not at
present expect this litigation to have a material adverse effect on its
financial position, liquidity, cash flow or results of operations.
In November 1994, Warner-Lambert received an enforcement action letter and
draft complaint from the Department of Justice alleging violation of the Clean
Water Act with regard to operation of the wastewater treatment plant at its Vega
Baja, Puerto Rico facility. Warner-Lambert is engaged in settlement negotiations
with the Department with respect to this matter and is continuing to work with
the EPA, Region II, to bring the facility into compliance with limits
established in a discharge permit. Although it is too early to predict the
outcome of this action, Warner-Lambert does not expect this action to have a
material adverse effect on its financial position, liquidity, cash flow or
results of operations.
10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the executive officers of Warner-Lambert as of
March 1, 1995 is set forth below:
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- ----------------------------------------- --- -------------------- --------------------------------------
Melvin R. Goodes......................... 59 Chairman of the Chairman of the Board and Chief
Board and Chief Executive Officer (since August
Executive Officer; 1991); President and Chief Operating
Director Officer (July 1985 -- July 1991)
Lodewijk J. R. de Vink................... 50 President and Chief President and Chief Operating Officer
Operating Officer; (since August 1991); Executive Vice
Director President and President, U.S.
Operations (April 1990 -- July
1991); Vice President and President,
International Operations (October
1988 -- March 1990)
John F. Walsh............................ 52 Executive Vice Executive Vice President (since
President January 1991); President, Consumer
Healthcare Sector (since December
1994); President, Consumer Products
Sector (January 1992 -- December
1994); Vice President (November
1986 -- December 1990); President,
International Operations (March
1990 -- December 1991); President,
Canada/Latin America Group (March
1989 -- March 1990)
Ernest J. Larini......................... 52 Vice President and Vice President and Chief Financial
Chief Financial Officer (since November 1992); Vice
Officer President, Financial Administration
(June 1992 -- October 1992); Vice
President and Controller (May
1990 -- May 1992); Treasurer
(February 1988 -- April 1990)
J. Frank Lazo............................ 47 Vice President Vice President (since April 1990);
President, Confectionery Sector
(since December 1994); President,
Latin America/ Asia/Australia/Middle
East/Africa Group (January 1992 --
December 1994); President, Latin
America/Asia/Australia Group (July
1991 -- December 1991); President,
Canada/Latin America Group (April
1990 -- July 1991); Regional
President, Brazil/Chile/Peru/Uruguay
(October 1988 -- March 1990)
(table continued on next page)
11
(table continued from previous page)
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- ----------------------------------------- --- -------------------- --------------------------------------
Ronald M. Cresswell, Ph.D................ 60 Vice President Vice President (since May 1988);
Chairman, Parke-Davis Research
(since November 1989); President,
Parke-Davis Research (May 1988 --
November 1989)
Pedro M. Cuatrecasas, M.D................ 58 Vice President Vice President (since October 1989);
President, Parke-Davis Research
(since October 1989)
Raymond M. Fino.......................... 52 Vice President Vice President, Human Resources (since
January 1985)
George L. Fotiades....................... 41 Vice President Vice President (since November 1992);
President, Warner Wellcome Consumer
Healthcare U.S.A. (since January
1994); President, Consumer Health
Products Group (November 1992 --
January 1994); President, Consumer
Products, Japan, Bristol-Myers
Squibb Company (January
1992 -- November 1992); Senior Vice
President, General Manager, Clairol
U.S., Bristol-Myers Squibb (January
1991 -- January 1992); Senior Vice
President, Boyle-Midway, American
Home Products (August
1988 -- December 1990)
William F. Gilroy........................ 58 Vice President and Vice President (since February 1985);
Controller Controller (since June 1992); Vice
President, Finance Administration
(January 1992 -- June 1992); Vice
President, Finance Administration,
International Operations (February
1988 -- December 1991)
Philip M. Gross.......................... 53 Vice President Vice President (since January 1990);
Vice President, Strategic Management
Processes (since January 1994);
President, Novon Products Group
(January 1990 -- January 1994)
Gregory L. Johnson....................... 48 Vice President and Vice President and General Counsel
General Counsel (since October 1983)
(table continued on next page)
12
(table continued from previous page)
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- ----------------------------------------- --- -------------------- --------------------------------------
Surinder Kumar, Ph.D..................... 50 Vice President Vice President (since October 1993);
President, Consumer Products
Research & Development (since
October 1992); Senior Vice
President, Research & Development,
Pepsico, Inc. (February 1990 --
October 1992); Vice President,
Research & Development, Pepsico,
Inc. (February 1988 -- February
1990)
Bertil R. Lang........................... 53 Vice President Vice President (since January 1992);
President, Parke-Davis, Europe
(since January 1992); Regional
President, Germany/Austria/
Switzerland (March 1989 --
December 1991); Regional
President, Germany (April
1986 -- March 1989)
F. Phillip Milhomme...................... 58 Vice President Vice President (since January 1992);
President, Confectionery Products,
Europe/Middle East/Africa
(since December 1994); President,
Consumer Products, Europe
(January 1992 -- December 1994);
President, Middle East/Africa/Europe
(September 1989 -- December 1991)
S. Morgan Morton......................... 55 Vice President Vice President (since January 1994);
President, Shaving Products Group
(since September 1993); President,
Schick (January 1992 -- September
1993); President, Warner-Lambert
Canada (January 1988 -- January
1992)
Harold F. Oberkfell...................... 48 Vice President Vice President (since January 1992);
President, Latin America/Asia Sector
(since February 1995); President,
Parke-Davis, North America (January
1992 -- February 1995); Vice
President, Parke-Davis Marketing and
Sales (July 1986 -- December 1991)
Joseph E. Smith.......................... 55 Vice President Vice President, External Relations
(since January 1994); Executive Vice
President (January 1991 -- January
1994); President, Pharmaceutical
Sector (January 1992 -- January
1994); Vice President (March
1989 -- December 1990); President,
Parke-Davis Group (March
1989 -- December 1991)
(table continued on next page)
13
(table continued from previous page)
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- ----------------------------------------- --- -------------------- --------------------------------------
Fred G. Weiss............................ 53 Vice President Vice President (since August 1982);
Vice President, Planning, Investment
and Development (since August 1983)
William S. Woodson....................... 60 Vice President and Vice President and Treasurer (since
Treasurer December 1991); Vice President,
Finance, Novon Products Group
(September 1990 -- November 1991);
Vice President, Corporate Control
and Analysis (February 1988 --
September 1990)
Rae G. Paltiel........................... 48 Secretary Secretary (since February 1986)
All of the above-mentioned officers, with the exception of Mr. Fotiades and
Dr. Kumar, have been employed by Warner-Lambert for the past five years.
Mr. Fotiades has been employed by Warner-Lambert since November 1992. Prior
to that time, Mr. Fotiades had been employed by Bristol-Myers Squibb Company.
From January 1992 to November 1992, Mr. Fotiades held the position of President,
Consumer Products, Japan and from January 1991 to January 1992 he served as
Senior Vice President, General Manager, Clairol U.S., Bristol-Myers Squibb
Company, a multinational health care and consumer products company with sales of
approximately $11 billion in 1992. Prior to his employment with Bristol-Myers
Squibb, he held the position of Senior Vice President, Marketing, Boyle-Midway,
American Home Products Corporation, from August 1988 to December 1990. American
Home Products Corporation, a multinational health care and food products
company, had sales of approximately $6.8 billion in 1990.
Dr. Kumar has been employed by Warner-Lambert since October 1992. Prior to
that time, Dr. Kumar had been employed since January 1982 by Pepsico, Inc. From
February 1990 to October 1992 Dr. Kumar held the position of Senior Vice
President, Research & Development, Pepsi Worldwide Beverage, a subsidiary of
Pepsico, Inc. From February 1988 to February 1990 he held the position of Vice
President, Research & Development, Pepsi Worldwide Beverage. Pepsico, Inc. is in
the beverage, snack food and restaurant business, both domestically and
internationally, with sales of approximately $22 billion in 1992.
None of the above officers has any family relationship with any Director or
with any other officer. Officers are elected by the Board of Directors for a
term of office lasting until the next annual organizational meeting of the Board
of Directors or until their successors are elected and have qualified. No
officer listed above was appointed pursuant to any arrangement or understanding
between such officer and the Board of Directors or any member or members
thereof.
14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information set forth under the caption 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Shareholder
Information' on page 31 of the Warner-Lambert 1994 Annual Report is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information set forth under the caption 'Five-Year Summary of Selected
Financial Data' on page 32 of the Warner-Lambert 1994 Annual Report is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information set forth under the caption 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' on pages 25 through
31 of the Warner-Lambert 1994 Annual Report is incorporated herein by reference
and should be read in conjunction with the consolidated financial statements and
the notes thereto contained on pages 34 through 48 of the Warner-Lambert 1994
Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of Warner-Lambert and its
subsidiaries, together with the report thereon of Price Waterhouse LLP dated
January 23, 1995, listed in Item 14(a)1 and included in the Warner-Lambert 1994
Annual Report at pages 34 through 48, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The required information relating to the Warner-Lambert Directors and
nominees is incorporated herein by reference to pages 3 through 7 of the
Warner-Lambert Proxy Statement for the Annual Meeting of Stockholders to be held
on April 25, 1995. Information relating to executive officers of Warner-Lambert
is set forth in Part I of this Form 10-K on pages 11 through 14. Information
relating to compliance with Section 16(a) of the Securities Exchange Act of 1934
is contained in the Proxy Statement, referred to above, at page 9 and such
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to executive compensation is contained in the Proxy
Statement, referred to above in Item 10, at pages 11 through 24 and such
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Information relating to the beneficial ownership of more than five
percent of Warner-Lambert's Common Stock is contained in the Proxy Statement,
referred to above in Item 10, at page 9 and such information is incorporated
herein by reference.
(b) Information relating to security ownership of management is contained
in the Proxy Statement, referred to above in Item 10, at pages 8 through 9 and
such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not Applicable.
16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) 1. ALL FINANCIAL STATEMENTS
The following items are included in Part II of this report through
incorporation by reference to pages 34 through 48 of the Warner-Lambert
1994 Annual Report:
Consolidated Statements of Income for each of the three years in
the period ended December 31, 1994.
Consolidated Statements of Retained Earnings for each of the
three years in the period ended December 31, 1994.
Consolidated Balance Sheets at December 31, 1994 and 1993.
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1994.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
2. FINANCIAL STATEMENT SCHEDULE
Included in Part IV of this report:
Report of Independent Accountants on Financial Statement Schedule.
Schedule II -- Valuation and Qualifying Accounts and Reserves.
Schedules other than those listed above are omitted because they are
either not applicable or the required information is included
through incorporation by reference to pages 34 through 48 of the
Warner-Lambert 1994 Annual Report.
3. EXHIBITS
(3) Articles of Incorporation and By-Laws.
(a) Restated Certificate of Incorporation of Warner-Lambert Company
filed November 10, 1972, as amended to April 24, 1990
(Incorporated by reference to Warner-Lambert's Current Report on
Form 8-K, dated April 24, 1990).
(b) By-Laws of Warner-Lambert Company, as amended to October 25, 1988
(Incorporated by reference to Warner-Lambert's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1988 (File No.
1-3608)).
(4) Instruments defining the rights of security holders, including
indentures.
(a) Rights Agreement, dated as of June 28, 1988, and amended as of
June 27, 1989, between Warner-Lambert Company and First Chicago
Trust Company of New York, as Rights Agent (Incorporated by
reference to Warner-Lambert's Registration Statement on Form 8-A,
dated June 28, 1988, as amended by Form 8, dated July 5, 1989
(File No. 1-3608)).
(b) Warner-Lambert agrees to furnish to the Commission, upon request,
a copy of each instrument with respect to issues of long-term
debt of Warner-Lambert. The principal amount of debt issues
authorized under each such instrument does not exceed 10% of the
total assets of Warner-Lambert.
(10) Material contracts.
(a)* Warner-Lambert Company 1983 Stock Option Plan, as amended to November 26, 1991 (Incorporated
by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
17
(b)* Warner-Lambert Company 1987 Stock Option Plan, as amended to November 26, 1991 (Incorporated
by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(c)* Warner-Lambert Company 1989 Stock Plan, as amended to November 26, 1991 (Incorporated by
reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(d)* Warner-Lambert Company 1992 Stock Plan, as amended to September 27, 1994 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September
30, 1994).
(e)* Warner-Lambert Company Incentive Compensation Plan, as amended to September 27, 1994
(Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994).
(f)* Warner-Lambert Company Supplemental Pension Income Plan, as amended to September 27, 1994
(Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994).
(g)* Group Plan Participation by Non-employee Directors (Incorporated by reference to
Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(h)* Warner-Lambert Company Directors' Retirement Plan, as amended to June 26, 1990 (Incorporated
by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30,
1990).
(i)* Warner-Lambert Excess Savings Plan, formerly Warner-Lambert Supplemental Savings Plan, as
amended to October 1, 1994 (Incorporated by reference to Warner-Lambert's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994).
(j)* Warner-Lambert Company Executive Severance Plan, as amended to September 27, 1994
(Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994).
(k)* Restricted Stock Plan for Directors of Warner-Lambert Company, as amended to January 28, 1992
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December
31, 1991).
(l)* Employment Agreement dated September 24, 1985 between Warner-Lambert Company and Melvin R.
Goodes, Chairman of the Board and Chief Executive Officer, as amended to August 1, 1991
(Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1991).
(m)* Employment Agreement effective as of August 1, 1991 between Warner-Lambert Company and
Lodewijk J. R. de Vink, President and Chief Operating Officer (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991).
(n)* Consulting Agreement, dated as of September 1, 1991, between Warner-Lambert Company and Joseph
D. Williams, Director (Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal
year ended December 31, 1991).
(o)* Consulting Arrangement between Warner-Lambert Company and B. Charles Ames, Director
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December
31, 1991).
(p)* Consulting Arrangement between Warner-Lambert Company and Paul S. Russell, Director
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December
31, 1991).
(q) Global Principles Agreement, dated as of December 10, 1993, between Warner-Lambert Company and
Glaxo Holdings plc (Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal
year ended December 31, 1993).
18
(r) Global Principles Agreement, dated December 17, 1993, between Warner-Lambert Company and
Wellcome plc (Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year
ended December 31, 1993).
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) Copy of the Warner-Lambert Company Annual Report for the year ended
December 31, 1994. Such report, except for those portions thereof
which are expressly incorporated by reference herein, is furnished
solely for the information of the Commission and is not to be deemed
'filed' as part of this filing.
(21) Subsidiaries of the registrant.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule (EDGAR filing only).
- ------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Form 10-K pursuant to Item 14(c).
(B) REPORTS ON FORM 8-K
Warner-Lambert did not file any Current Report(s) on Form 8-K with the
Securities and Exchange Commission during the last quarter of the fiscal
year ended December 31, 1994.
Warner-Lambert will furnish to any holder of its securities, upon request
and at a reasonable cost, copies of the Exhibits listed in Item 14.
19
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of
WARNER-LAMBERT COMPANY
Our audits of the consolidated financial statements referred to in our
report dated January 23, 1995 appearing on page 48 of the 1994 Annual Report to
Shareholders of Warner-Lambert Company (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)2
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
4 Headquarters Plaza North
Morristown, New Jersey
January 23, 1995
20
SCHEDULE II
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND SHAREHOLDERS' AT END
DESCRIPTION OF YEAR EXPENSES EQUITY DEDUCTIONS OF YEAR
- --------------------------------------------------- ---------- ---------- ------------- ---------- -------
(DOLLARS IN MILLIONS)
Year ended December 31, 1994:
Allowance for doubtful accounts............... $ 20.5 $ 4.4 $ -- $ 3.1 $ 21.8
Allowance for deferred tax assets (a)......... 108.9 14.9 -- 32.2 91.6
Unrealized fair market value adjustment for
'available for sale' securities (b)......... -- -- 2.9 -- 2.9
---------- ---------- ----- ---------- -------
$129.4 $ 19.3 $2.9 $35.3 $116.3
---------- ---------- ----- ---------- -------
---------- ---------- ----- ---------- -------
Year ended December 31, 1993:
Allowance for doubtful accounts............... $ 18.6 $ 2.9 $ -- $ 1.0 $ 20.5
Allowance for deferred tax assets (c)......... -- 108.9 -- -- 108.9
---------- ---------- ----- ---------- -------
$ 18.6 $111.8 $ -- $ 1.0 $129.4
---------- ---------- ----- ---------- -------
---------- ---------- ----- ---------- -------
Year ended December 31, 1992:
Allowance for doubtful accounts............... $ 15.3 $ 6.3 $ -- $ 3.0 $ 18.6
---------- ---------- ----- ---------- -------
---------- ---------- ----- ---------- -------
- ------------
(a) Additions primarily represent valuation allowances for foreign capital loss
carryforwards. Deductions are primarily due to improved profitability in
European operations which resulted in the realization of some of the
deferred tax assets associated with the 1991 restructuring (see Note 15 to
the consolidated financial statements).
(b) Reflects a fair market value adjustment for 'available for sale' securities
resulting from the adoption of Statement of Financial Accounting Standards
(SFAS) No. 115, 'Accounting for Certain Investments in Debt and Equity
Securities.'
(c) The addition of $108.9 reflects $92.0 for the adoption of SFAS No. 109,
'Accounting for Income Taxes,' as of January 1, 1993 and $16.9 for 1993
additions (see Note 15 to the consolidated financial statements).
21
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
WARNER-LAMBERT COMPANY
Registrant
Dated as of March 20, 1995 By /s/ MELVIN R. GOODES
.........................................................
Melvin R. Goodes
Chairman of the Board
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
/s/ MELVIN R. GOODES
By ................................................
Melvin R. Goodes
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
and Director
/s/ ERNEST J. LARINI
By ................................................
Ernest J. Larini
Vice President and Chief
Financial Officer
(Principal Financial Officer)
/s/ WILLIAM F. GILROY
By ................................................
William F. Gilroy
Vice President and Controller
(Principal Accounting Officer) March 20, 1995
/s/ B. CHARLES AMES
By ................................................
B. Charles Ames, Director
/s/ DONALD C. CLARK
By ................................................
Donald C. Clark, Director
/s/ LODEWIJK J. R. DE VINK
By ................................................
Lodewijk J. R. de Vink, Director
/s/ JOHN A. GEORGES
By ................................................
John A. Georges, Director
22
/s/ WILLIAM H. GRAY III
By ................................................
William H. Gray III, Director
/s/ WILLIAM R. HOWELL
By ................................................
William R. Howell, Director
/s/ LASALLE D. LEFFALL, JR.
By ................................................
LaSalle D. Leffall, Jr., M.D., Director
/s/ PATRICIA SHONTZ LONGE
By ................................................
Patricia Shontz Longe, Ph.D., Director March 20, 1995
/s/ LAWRENCE G. RAWL
By ................................................
Lawrence G. Rawl, Director
/s/ PAUL S. RUSSELL
By ................................................
Paul S. Russell, M.D., Director
/s/ MICHAEL I. SOVERN
By ................................................
Michael I. Sovern, Director
/s/ JOSEPH D. WILLIAMS
By ................................................
Joseph D. Williams, Director
23
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as ........... 'r'
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
(3) Articles of Incorporation and By-Laws.
(a) Restated Certificate of Incorporation of Warner-Lambert Company filed November 10, 1972, as amended
to April 24, 1990 (Incorporated by reference to Warner-Lambert's Current Report on Form 8-K, dated
April 24, 1990).
(b) By-Laws of Warner-Lambert Company, as amended to October 25, 1988 (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988 (File No.
1-3608)).
(4) Instruments defining the rights of security holders, including indentures.
(a) Rights Agreement, dated as of June 28, 1988, and amended as of June 27, 1989, between
Warner-Lambert Company and First Chicago Trust Company of New York, as Rights Agent (Incorporated
by reference to Warner-Lambert's Registration Statement on Form 8-A, dated June 28, 1988, as
amended by Form 8, dated July 5, 1989 (File No. 1-3608)).
(b) Warner-Lambert agrees to furnish to the Commission, upon request, a copy of each instrument with
respect to issues of long-term debt of Warner-Lambert. The principal amount of debt issues
authorized under each such instrument does not exceed 10% of the total assets of Warner-Lambert.
(10) Material contracts.
(a) Warner-Lambert Company 1983 Stock Option Plan, as amended to November 26, 1991 (Incorporated by
reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(b) Warner-Lambert Company 1987 Stock Option Plan, as amended to November 26, 1991 (Incorporated by
reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(c) Warner-Lambert Company 1989 Stock Plan, as amended to November 26, 1991 (Incorporated by reference
to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(d) Warner-Lambert Company 1992 Stock Plan, as amended to September 27, 1994 (Incorporated by reference
to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994).
(e) Warner-Lambert Company Incentive Compensation Plan, as amended to September 27, 1994 (Incorporated
by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30,
1994).
(f) Warner-Lambert Company Supplemental Pension Income Plan, as amended to September 27, 1994
(Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994).
(g) Group Plan Participation by Non-employee Directors (Incorporated by reference to Warner-Lambert's
Form 10-K for the fiscal year ended December 31, 1991).
(h) Warner-Lambert Company Directors' Retirement Plan, as amended to June 26, 1990 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30, 1990).
(i) Warner-Lambert Excess Savings Plan, formerly Warner-Lambert Supplemental Savings Plan, as amended
to October 1, 1994 (Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994).
(j) Warner-Lambert Company Executive Severance Plan, as amended to September 27, 1994 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30,
1994).
(k) Restricted Stock Plan for Directors of Warner-Lambert Company, as amended to January 28, 1992
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31,
1991).
(l) Employment Agreement dated September 24, 1985 between Warner-Lambert Company and Melvin R. Goodes,
Chairman of the Board and Chief Executive Officer, as amended to August 1, 1991 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30,
1991).
(m) Employment Agreement effective as of August 1, 1991 between Warner-Lambert Company and Lodewijk J.
R. de Vink, President and Chief Operating Officer (Incorporated by reference to Warner-Lambert's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1991).
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
(n) Consulting Agreement, dated as of September 1, 1991, between Warner-Lambert Company and Joseph D.
Williams, Director (Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year
ended December 31, 1991).
(o) Consulting Arrangement between Warner-Lambert Company and B. Charles Ames, Director (Incorporated
by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(p) Consulting Arrangement between Warner-Lambert Company and Paul S. Russell, Director (Incorporated
by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(q) Global Principles Agreement, dated as of December 10, 1993, between Warner-Lambert Company and
Glaxo Holdings plc (Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year
ended December 31, 1993).
(r) Global Principles Agreement, dated December 17, 1993, between Warner-Lambert Company and Wellcome
plc (Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31,
1993).
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) Copy of the Warner-Lambert Company Annual Report for the year ended December 31, 1994. Such report,
except for those portions thereof which are expressly incorporated by reference herein, is furnished
solely for the information of the Commission and is not to be deemed 'filed' as part of this filing.
(21) Subsidiaries of the registrant.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule (EDGAR filing only).