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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, 1997
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)
973-540-2000
(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
- --------------------------------------------------------------- ------------------------------------------------
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.
Junior Participating 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 27, 1998 was approximately $39.9 billion.
The number of shares outstanding of the registrant's Common Stock as of
February 27, 1998 was 272,614,910 shares, Common Stock, par value $1.00 per
share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Warner-Lambert Company Annual Report to Shareholders for
1997 -- 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 28, 1998 -- 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 1997, 1996 and 1995 is presented in
the Warner-Lambert 1997 Annual Report to Shareholders as set forth below.
The summary of Warner-Lambert's industry segments, geographic areas and
related financial information, set forth in Note 18 to the consolidated
financial statements on pages 45 through 46 of the Warner-Lambert 1997 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. ZANTAC, ZANTAC 75, BECONASE and ZOVIRAX are registered
trademarks of Glaxo Wellcome plc ('Glaxo Wellcome'), its affiliates or related
companies. CELESTIAL SEASONINGS and HERBAL COMFORT are registered trademarks of
Celestial Seasonings Inc.
BUSINESS SEGMENTS
A detailed description of Warner-Lambert's industry segments is as follows:
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,
VALORON, VALORON-N, VEGANIN and VALTRAN), anesthetics (KETALAR), anthelmintics
(VANQUIN), anticonvulsants (CELONTIN, CEREBYX, DILANTIN, NEURONTIN and
ZARONTIN), anti-infectives (CHLOROMYCETIN, COLYMYCIN and OMNICEF),
antivaricosities (HEPATHROMBIN), anti-viral agents (VIRA-A), cardiovascular
products (NOVADRAL, DILZEM, ACCUPRIL, ACCURETIC, ACCUZIDE, NITROSTAT, PIRMENOL
and PROCANBID), cognition drugs for treatment of mild-to-moderate Alzheimer's
disease (COGNEX), dermatologics (BEBEN), diabetes drugs for non-insulin
dependent diabetes mellitus patients (REZULIN), prescription hemorrhoidal
preparations (ANUSOL HC), hemostatic agents (THROMBOSTAT), hormonal agents
(PITRESSIN), lipid regulators (LIPITOR and LOPID), oral contraceptives
(ESTROSTEP and LOESTRIN), oxytocics (PITOCIN), psychotherapeutic products (CETAL
RETARD, DEMETRIN and NARDIL) and transdermal estrogen replacement systems
(FEMPATCH).
In December 1996, Warner-Lambert received U.S. Food and Drug Administration
('FDA') clearance to market the cholesterol-lowering agent LIPITOR
(Warner-Lambert's trademark for atorvastatin) and began marketing the product in
February 1997. The Company has also received marketing approval in over twenty
countries for the drug and has begun or will begin to market LIPITOR in those
countries. Atorvastatin is primarily marketed as LIPITOR, SORTIS and ZARATOR in
the various countries. The Company co-promotes LIPITOR through a marketing
agreement with Pfizer Inc.
Warner-Lambert received FDA clearance in January 1997 to market REZULIN
(Warner-Lambert's trademark for troglitazone), a diabetes drug initially used
for non-insulin dependent diabetes mellitus patients currently on insulin who
are inadequately controlled by insulin. The Company also received FDA clearance
in 1997 to market REZULIN as a monotherapy and for use in combination with a
sulfonylurea for non-insulin dependent diabetes mellitus patients. The Company
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markets REZULIN with Sankyo Company, Ltd. ('Sankyo') from whom the Company
licenses the product for North America and certain other areas, including
Central America, South America, Australia, New Zealand and the Philippines. The
Company has rights to co-promote the product with an affiliate of Sankyo in
Brazil and Venezuela.
REZULIN was first marketed in March 1997 in the United States and achieved
worldwide sales of $420 million during 1997. On November 3, 1997, the Company
initiated changes in the prescribing information for REZULIN. These changes were
made in response to rare reports during marketed use of hepatic injuries, which
are usually reversible, and extremely rare reports of hepatic failures, which
could result in liver transplants or death. The Company continued to review the
safety experience with REZULIN (including worldwide reports of adverse events)
following the November 3rd announcement. Based on this review, on December 1,
1997, the Company announced additional labeling changes for REZULIN which
prominently recommend that physicians monitor patients more frequently for signs
of liver dysfunction. While the reports to date (both prior to the December 1st
announcement and thereafter) do not indicate a greater incidence of hepatic
events than was seen in the clinical trials which resulted in priority review
and approval by the FDA, the labeling changes were made to minimize as much as
possible the risk for these very rare but potentially serious adverse liver
events. The Company does not believe that the labeling changes will appreciably
diminish the population of patients eligible for this important medication.
In December 1997, Warner-Lambert received clearance from the FDA to market
OMNICEF, a broad spectrum cephalosporin antibiotic for adult and pediatric use.
OMNICEF, which is licensed from Fujisawa Pharmaceutical Co., Ltd., is the
largest selling cephalosporin in Japan. Warner-Lambert received its first
marketing authorization in the world for OMNICEF in the Philippines in July 1994
and began marketing the product in that country in January 1995. The Company has
also received marketing approval and has launched the product in Indonesia and
Thailand.
On December 26, 1997, the Company filed a New Drug Application ('NDA') with
the FDA for marketing approval for suramin, a treatment for hormone refractory
prostate cancer.
The Company plans to file eight NDAs and supplemental NDAs in 1998. These
filings include one new chemical entity in late stage development, which is
clinafloxacin, a new generation fluoroquinolone antibiotic for the treatment of
serious, life-threatening infections.
In May 1997, Warner-Lambert purchased the remaining 66% of the Jouveinal
group it did not already own. In January 1993, Warner-Lambert initially acquired
a 34% interest in Jouveinal, a privately held French pharmaceutical group.
Warner-Lambert believes its acquisition of the Jouveinal group, which achieved
sales of $220 million in 1996 and is France's 15th largest pharmaceutical group,
will strengthen Warner-Lambert's presence in France. The Jouveinal group
specialized in ethical and OTC pharmaceuticals, as well as fine chemicals and
food flavors. In order to focus on its core pharmaceutical, consumer healthcare
and confectionery businesses, Warner-Lambert sold the fine chemical business and
the food flavors business of the Jouveinal group in December 1997.
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 64% of its
pharmaceutical sales in the United States during 1997 were made to managed care
entities (including government agencies and hospitals). For further discussion
of Warner-Lambert's ethical products, see 'Item 1. Business -- Regulation'
below.
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, SNAP-FIT, V-Cap'tm' and
Press-Fit'tm' gelcaps.
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Other: On February 27, 1998, the Company sold its sterile manufacturing
facility in Rochester, Michigan as well as certain minor prescription products
for $125 million to Parkedale Pharmaceuticals, Inc., a wholly owned subsidiary
of King Pharmaceuticals, Inc.
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: Warner-Lambert manufactures and/or sells, in the
United States and/or internationally, an extensive line of over-the-counter
pharmaceuticals and health care products under trade names such as
Warner-Lambert Consumer Healthcare. Among these products are antacids (ROLAIDS,
Extra Strength ROLAIDS and 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, SUDAFED Non-Drying and
ACTIFED), antihistamines and allergy products (ACTIFED Allergy, SUDAFED PLUS,
BENADRYL, BENADRYL-D, BENADRYL Cold, BENADRYL Chewables, 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, cream, gel and stick and STINGOSE), rubbing alcohol
(LAVACOL), hydrogen peroxide (PROXACOL), self-diagnostic early pregnancy test
kits (e.p.t.'r'), oral antiseptics (LISTERINE, COOLMINT LISTERINE and FRESHBURST
LISTERINE), mouthwash/dental rinses (LISTERMINT), toothpaste (COOLMINT LISTERINE
and COOLMINT LISTERINE Tartar Control), effervescent denture cleaning tablets
and denture cleanser pastes (EFFERDENT, EFFERDENT PLUS and FRESH 'N BRITE),
denture adhesives (EFFERGRIP), head lice treatments (NIX) and diaper rash
preparations (BOROFAX).
In 1993, Warner-Lambert and Glaxo Wellcome formed a joint venture in the
United States, to develop, seek approval of and market over-the-counter ('OTC')
versions of Glaxo Wellcome prescription drugs in the United States. On June 30,
1996 Warner-Lambert and Glaxo Wellcome formed additional joint ventures to
develop and market certain Glaxo Wellcome OTC switch products in other major
markets, including the United Kingdom (the 'Glaxo Wellcome Warner-Lambert joint
venture(s)'). In April 1996, the Glaxo Wellcome Warner-Lambert joint venture in
the United States began marketing ZANTAC 75, an OTC version of Glaxo Wellcome's
prescription drug ZANTAC, for the treatment of episodic heartburn, acid
indigestion and sour stomach. ZANTAC 75 has been marketed for OTC use by the
Glaxo Wellcome Warner-Lambert joint venture in the United Kingdom and Australia
as a treatment for these same symptoms. Glaxo Wellcome and Warner-Lambert have
also been marketing an allergy nasal spray, BECONASE, an OTC version of Glaxo
Wellcome's prescription drug, in the United Kingdom and ZOVIRAX, a cold sore
cream, in Germany, France, the United Kingdom, Australia and certain other
countries.
In 1996, the Company purchased Glaxo Wellcome's United States, European,
Canadian, Australian and New Zealand interests in other joint venture operations
between Warner-Lambert and Glaxo Wellcome relating to nonpresciption consumer
health care products (e.g. ACTIFED, NEOSPORIN and SUDAFED) and certain OTC
assets in Mexico, effectively ending this joint venture with Glaxo Wellcome. The
purchase price for the entire transaction was approximately $1.1 billion.
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
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Canada. Permanent (nondisposable) products are marketed under various trademarks
including FX HYPER, FX PERFORMER, INJECTOR, LADY PROTECTOR, PERSONAL TOUCH,
PROTECTOR, SILK EFFECTS, SUPER II, SUPER II PLUS, TRACER/FX and ULTREX PLUS.
Disposable products are marketed under a variety of trademarks including
COLOURS, EXTRA II, PERSONAL TOUCH, RETRACTOR, SCHICK Disposable, ST and ULTREX
Disposable. In some countries, Warner-Lambert also sells a shaving-related line
of toiletries.
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 to 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 various trademarks
including HILENA, TETRA, TETRA POND, TETRA PRESS, TETRA SECONDNATURE, TETRA
TERRAFAUNA and ZOOMEDICA. 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 SECONDNATURE, TETRA tec and WHISPER trademarks. These
pet care products are promoted to consumers through advertising, direct
marketing and sponsorship programs and to retailers through direct promotion,
advertising in trade publications and TETRA Club membership. 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 cough tablets.
Warner-Lambert manufactures and/or sells, in the United States and/or
internationally, a broad line of chewing gums, bubble gums, breath mints and
cough tablets. Among these products are chewing gums (CHICLETS, CHICLETS TINY
SIZE, CINN*A*BURST, MINT*A*BURST, FRUIT*A*BURST, CLORETS, DENTYNE, DENTYNE
Sugarfree, DENTYNE Ice'tm' and TRIDENT) and bubble gums (BUBBLICIOUS, BUBBALOO
and MOTITAS). The breath mint line includes CERTS, Sugarfree CERTS, CERTS COOL
MINT DROPS, CERTS COOL MINT DROPS Freshmint, CERTS Powerful Mints and CLORETS.
The cough tablet line consists of HALLS, HALLS Juniors, HALLS-PLUS, Sugar Free
HALLS and HALLS Vitamin C. The Company also sells throat drops (CELESTIAL
SEASONINGS SOOTHERS) and dietary supplements (HALLS Zinc Defense'tm' and
CELESTIAL SEASONINGS HERBAL COMFORT). In addition, the Company sells several
specialty candies and mints, including a line of hard candies and mints that are
sold under the SAILA and Koldt'tm' trademarks. The Koldt product is sold as
CLORETS Optimints'tm' in Thailand.
In 1997, Warner-Lambert launched CERTS Powerful Mints, a flavored mint with
RETSYN, CERTS COOL MINT DROPS Freshmint, an oval-shaped breath drop with a
flavored center formula, DENTYNE Ice'tm', a sugar-free pellet-form gum and two
dietary supplements, HALLS Zinc Defense'tm' and CELESTIAL SEASONINGS HERBAL
COMFORT with echinacea in the United States.
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 and
independent pharmacies and mass merchandisers or through candy and tobacco
wholesalers and to other miscellaneous outlets which in turn sell to consumers.
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 27,000
of Warner-Lambert's employees are located outside the United States and Puerto
Rico and only a small number of such employees are United States citizens.
Certain of the products
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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 1997 amounted to
approximately 48% of the Company's worldwide sales. International sales do not
include sales of products exported from the United States, which sales represent
less than 1% of total United States sales. The seven largest markets with
respect to the distribution of Warner-Lambert products sold outside the United
States during 1997 were Germany, Japan, France, Canada, the United Kingdom,
Mexico and Brazil. Sales in these markets accounted for approximately 60% of
Warner-Lambert's international sales, with no one country accounting for more
than 12% of international sales.
On January 1, 1996 the Company's international businesses changed their
reporting period from a fiscal-year basis ending November 30 to a calendar-year
basis ending December 31. See Note 1 to the consolidated financial statements on
page 36 of the Warner-Lambert 1997 Annual Report, incorporated herein by
reference.
In March 1997, Warner-Lambert opened confectionery plants in Guangzhou,
China and Bangalore, India. Both plants are currently manufacturing and selling
HALLS cough tablets and CLORETS and CHICLETS chewing gums.
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, price and exchange controls 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.
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.
YEAR 2000
Discussion on how the Company is addressing year 2000 compliance, set forth
under the caption 'Management's Discussion and Analysis' on page 51 of the
Annual Report, is incorporated herein by reference.
MATERIALS AND SUPPLIES
Warner-Lambert's products, in general, are produced and packaged at its own
facilities. Other than certain products manufactured by Glaxo Wellcome through
its subcontractors, certain pet products and certain other products (including
the active ingredient for REZULIN (troglitazone), which is supplied by Sankyo),
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 outside supply, the Company does not believe that
the loss of any one source of such materials and supplies (other than the supply
of the active ingredient for REZULIN from Sankyo) 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.
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TRADEMARKS AND PATENTS
Warner-Lambert's major trademarks are registered 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 and/or licenses 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. Warner-Lambert anticipates, however, that patents on
LIPITOR and REZULIN may, in the future, become material to Warner-Lambert's
business as a whole.
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 $672 million in research and development in 1997, compared with
$555 million in 1996 and $501 million in 1995. Approximately 85% of
Warner-Lambert's 1997 research and development spending was 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, 1997, approximately 40,000 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.
In the United States, the food, drug and cosmetic industries are 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 address safety, efficacy,
manufacturing and/or regulatory issues, to conduct additional testing or to
modify its advertising and/or labeling.
In 1993, a consent decree with the FDA was entered into by Warner-Lambert
and two of its principal officers, covering issues related to manufacturing and
quality practices and procedures. The decree is a court-approved agreement that
primarily requires Warner-Lambert to certify that laboratory and/or
manufacturing facilities in the United States and Puerto Rico are in compliance
with current Good Manufacturing Practices established by the FDA. Relevant
facility and laboratory certifications have been obtained in all United States
and Puerto Rico plants. The terms of the consent decree are applicable until at
least August 1998.
In October 1996, the United States Congress enacted the Comprehensive
Methamphetamine Control Act of 1996 (the 'Methamphetamine Control Act') which
brought certain of the Company's over-the-counter pharmaceutical products
containing pseudoephedrine hydrochloride under the chemical control provisions
of the Controlled Substances Act through the revocation of an exemption for
listed chemicals contained in drugs lawfully marketed under the Federal Food,
Drug, and Cosmetic Act. The Methamphetamine Control Act, among other things,
imposes new regulatory restrictions on persons handling such products including
recordkeeping and reporting of certain transactions to the Drug Enforcement
Administration. However, the Methamphetamine Control Act creates a 'safe harbor'
for traditional retail outlets which sell pharmaceutical products in designated
packaging containing limited amounts of pseudoephedrine almost exclusively for
personal use to walk-in customers or in face-to-face direct sales. These
retailers will not, in general, be subject to the recordkeeping and reporting
requirements of the Methamphetamine Control Act. Warner-Lambert
6
believes that the Methamphetamine Control Act will not have a material adverse
effect on Warner-Lambert's financial position, liquidity, cash flow or results
of operations for any year.
On July 30, 1997, the European Community Decision 97/534 (the 'Decision')
was adopted prohibiting the use or importation in the European Union market of
any bovine, ovine or caprine products that potentially contain specified risk
materials (including the use of these materials in food, medicinal products and
cosmetics). The Decision was enacted to address the concern over the possible
spread of transmissible spongiform encephalopathy and could have the effect of
banning ruminant materials such as gelatin, glycerin, tallow and tallow
derivatives that are pervasive in the pharmaceutical, over-the-counter drug,
food and other industries. The Decision initially was intended to become
effective on January 1, 1998, but given the potential impact the Decision may
have on the availability of necessary pharmaceutical, over-the-counter drug and
food products, its effective date was delayed until April 1, 1998. European
Community legislators are considering further amendments to the Decision that
would allow for the continued sale and import of a majority of the Company's
affected products in the European Union market. If such amendments are not
enacted, the Decision could have a material adverse impact on Warner-Lambert's
business.
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 reduced as a result of 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 United States, 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.
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 cannot predict whether or what type of
measures will be encountered in the future.
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.
Warner-Lambert is involved in various administrative or judicial
proceedings related to environmental actions initiated by the Environmental
Protection Agency (the 'EPA') 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,
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
7
compliance result in operating expenses and capital expenditures.
Warner-Lambert's capital expenditures with respect to environmental programs and
compliance in 1997 were not, and in 1998 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 17 to the consolidated financial statements on page
45 of the Warner-Lambert 1997 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 6,996,000 square feet and leases facilities
having an aggregate of approximately 408,000 square feet.
Warner-Lambert's United States manufacturing plants are located in Lititz,
Pennsylvania (pharmaceuticals and consumer health care products); Rockford,
Illinois (confectionery products); Holland, Michigan (pharmaceuticals); Morris
Plains, New Jersey (consumer health care products); Greenwood, South Carolina
(capsules); Milford, Connecticut (razors and blades); 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 products). Parke-Davis Pharmaceuticals Limited, a wholly-owned
subsidiary of Warner-Lambert, operating in Puerto Rico, has a plant located in
Vega Baja (pharmaceuticals). On March 1, 1998, Warner-Lambert Inc. and
Warner-Lambert licensed certain intellectual property and transferred certain
tangible assets in Vega Baja to Parke-Davis Pharmaceuticals Limited. For a
discussion on the sale of the manufacturing facility located in Rochester,
Michigan see 'Item 1. Business Segments -- Pharmaceutical Products' above.
In the United States, Warner-Lambert currently distributes its various
products through two distribution centers located in Lititz, Pennsylvania and
Elk Grove, Illinois. Principal United States research facilities are located in
Ann Arbor, Michigan (pharmaceuticals) and Morris Plains, New Jersey
(pharmaceuticals, consumer health care and confectionery products).
Internationally, Warner-Lambert owns, leases or operates, through its
subsidiaries or branches, 69 production facilities in 33 countries. Principal
international manufacturing plants are located in Germany, Canada, Mexico,
Japan, Ireland, France, Brazil, Colombia and Australia. Principal international
research facilities are located in France, Germany, Japan, the United Kingdom
and Canada.
In order to achieve its objectives of increased efficiency and a lower 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. The loss of
one or more of Warner-Lambert's own production and packaging facilities could
have a material adverse effect on certain of Warner-Lambert's industry segments.
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.
ITEM 3. LEGAL PROCEEDINGS.
For a discussion of Warner-Lambert's consent decree with the FDA, covering
issues related to compliance with current Good Manufacturing Practices
established by the FDA, and other regulatory matters, see 'Item 1.
Business -- Regulation' above. For additional information relating to
environmental matters see 'Item 1. Business -- Environment' above.
In late 1993, Warner-Lambert, along with numerous other pharmaceutical
manufacturers and wholesalers, was sued in a number of state and federal
antitrust lawsuits seeking damages (including trebled and statutory damages,
where applicable) and injunctive relief. These actions arose from allegations
that the defendant drug companies, acting alone or in concert, engaged in
differential pricing
8
whereby they favored institutions, managed care entities, mail order pharmacies
and other buyers with lower prices for brand name prescription drugs than those
afforded to retail pharmacies. The federal cases, which were brought by
retailers, 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. In June 1996, the Court approved
Warner-Lambert's agreement to settle part of the consolidated federal cases,
specifically, the class action conspiracy lawsuit, for a total of $15.1 million.
This settlement also contains certain commitments regarding Warner-Lambert's
pricing of brand name prescription drugs. Appeals of the District Court's
approval of this settlement were unsuccessful, and the commitments have become
effective. Certain other rulings of the judge presiding in this case were also
appealed, and the judge was reversed on all rulings. The cases have been
remanded to the District Court, and trial of the class action conspiracy suit
against the non-settling defendant pharmaceutical manufacturers and wholesalers
has been scheduled for September 1998.
In April 1997, after execution of the federal class settlement referred to
above but prior to the formal effectiveness of its pricing commitments, the same
plaintiff-class members brought a new purported class action relating to the
time period subsequent to the execution of the settlement. This new class suit
sought only injunctive relief. At present, Warner-Lambert cannot predict the
outcome of this and the other remaining federal lawsuits in which it is a
defendant.
The state cases pending in California, brought by classes of pharmacies and
consumers, 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 filed in Alabama, Minnesota, Mississippi and Wisconsin brought by
classes of pharmacies, each arising from the same allegations of differential
pricing. With its co-defendants, the Company has agreed to settle the Minnesota
and Wisconsin actions. The Company's share of the Minnesota settlement, which
has been approved and its share of the Wisconsin Settlement, which is still
subject to court approval, are not material. In addition, the Company is named
in class action complaints filed in Alabama, Arizona, Florida, Kansas, Maine,
Michigan, Minnesota, New York, North Carolina, Tennessee, Wisconsin and the
District of Columbia, brought by classes of consumers who purchased brand name
prescription drugs at retail pharmacies. These cases also arise from the same
allegations of differential pricing. It is too early to predict the outcome of
the remaining actions, but 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.
The Federal Trade Commission (the 'FTC') is conducting an investigation to
determine whether Warner-Lambert and twenty-one other pharmaceutical
manufacturers have engaged in concerted activities to raise the prices of
pharmaceutical products in the United States. Warner-Lambert was served with and
responded to two subpoenas from the FTC in 1996 and 1997, respectively, and is
continuing to cooperate with this investigation. Warner-Lambert cannot at
present predict the outcome of this investigation.
In 1993, Warner-Lambert received a Complaint and Compliance Order (the
'Complaint') from the 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. An administrative hearing on all counts of the Complaint
is scheduled for March 1998. 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.
Warner-Lambert Inc. has been named as a defendant in class actions filed in
Puerto Rico Superior Court by current and former employees from the Vega Baja,
Carolina and Fajardo plants, as well as Kelly Services temporary employees
assigned to those plants. The lawsuits seek monetary relief for alleged
violations of local statutes and decrees relating to meal period payments,
minimum wage, overtime and vacation pay. Warner-Lambert believes that these
actions are without merit and will defend these actions vigorously. Although it
is too early to predict the outcome of these actions, Warner-Lambert does not at
present expect these lawsuits to have a material adverse effect on the Company's
financial position, liquidity, cash flow or results of operations.
9
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, 1998 is set forth below:
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- --------------------------------- --- ---------------------- -------------------------------------------
Melvin R. Goodes................. 62 Chairman of the Board Chairman of the Board and Chief Executive
and Chief Executive Officer (since August 1991)
Officer; Director
Lodewijk J. R. de Vink........... 53 President and Chief President and Chief Operating Officer
Operating Officer; (since August 1991)
Director
John F. Walsh.................... 55 Executive Vice Executive Vice President (since January
President 1991); President, Shaving Products Group
(since August 1997); President, Consumer
Healthcare Sector (December 1994 -- July
1997); President, Consumer Products
Sector (January 1992 -- December 1994)
Ernest J. Larini................. 55 Vice President and Vice President and Chief Financial Officer
Chief Financial (since November 1992); Vice President,
Officer Financial Administration (June 1992 --
October 1992); Vice President and
Controller (May 1990 -- May 1992)
J. Frank Lazo.................... 50 Vice President Vice President (since April 1990);
President, Adams (since December 1994);
President, Latin
America/Asia/Australia/Middle East/Africa
Group (January 1992
-- December 1994)
S. Morgan Morton................. 58 Vice President Vice President (since January 1994);
President, Consumer Healthcare Sector
(since August 1997); President,
Warner-Lambert Consumer Healthcare U.S.A.
(June 1996 -- July 1997); President,
Warner Wellcome Consumer Healthcare
U.S.A. (December 1995 -- June 1996);
President, Shaving Products Group
(September 1993 -- December 1995);
President, Schick (January
1992 -- September 1993)
Anthony H. Wild, Ph.D............ 49 Vice President Vice President (since September 1995);
President, Pharmaceutical Sector (since
May 1996); President, Parke-Davis, North
America (February 1995 -- May 1996);
President, Schering-Plough-Japan,
Schering-Plough Corporation (August
1989 -- February 1995)
(table continued on next page)
10
(table continued from previous page)
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- --------------------------------- --- ---------------------- -------------------------------------------
John S. Craig.................... 46 Vice President Vice President (since January 1996);
President, Adams USA (since July 1995);
President and Chief Executive Officer,
Lender's Bagel Bakery division of Kraft
Foods, Inc. (September 1986 -- February
1994)
Ronald M. Cresswell, Ph.D........ 63 Vice President Vice President (since May 1988); Chairman,
Parke-Davis Research (since November
1989)
Raymond M. Fino.................. 55 Vice President Vice President, Human Resources (since
January 1985)
Philip M. Gross.................. 56 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............... 51 Vice President and Vice President and General Counsel (since
General Counsel October 1983)
Richard W. Keelty................ 56 Vice President Vice President (since January 1996); Vice
President, Public Affairs, (since
December 1995); Vice President, Public
Relations (November 1990 -- November
1995)
Joseph E. Lynch.................. 46 Vice President and Vice President and Controller (since June
Controller 1995); Comptroller, American Home
Products Corporation (March 1995 -- June
1995); Director, Corporate Accounting and
Budgets, American Cyanamid Company (June
1991 -- March 1995)
F. Phillip Milhomme.............. 61 Vice President Vice President (since January 1992);
President, Adams, Europe/Middle
East/Africa (since December 1994);
President, Consumer Products, Europe
(January 1992 -- December 1994)
Harold F. Oberkfell.............. 51 Vice President Vice President (since January 1992);
President, Latin America/Asia Sector
(since February 1995); President,
Parke-Davis, North America (January
1992 -- February 1995)
Maurice A. Renshaw............... 51 Vice President Vice President (since January 1997);
President, Parke-Davis, U.S. and Mexico
(since August 1996); President,
Warner-Lambert KK, Japan (December
1989 -- August 1996)
William S. Woodson............... 63 Vice President and Vice President and Treasurer (since
Treasurer December 1991)
Rae G. Paltiel................... 51 Secretary Secretary (since February 1986)
11
All of the above-mentioned officers, with the exception of Mr. Craig, Mr.
Lynch and Dr. Wild, have been employed by Warner-Lambert for the past five
years.
Mr. Craig has been employed by Warner-Lambert since July 1995. Prior to
that time, Mr. Craig had been employed by Kraft Foods, Inc., serving as
President and Chief Executive Officer of Kraft's Lender's Bagel Bakery division
from September 1986 to February 1994. Kraft Foods, Inc., a wholly-owned
subsidiary of Philip Morris Companies Inc., is a multinational producer of
packaged grocery products with sales of approximately $31 billion in 1994.
Mr. Lynch has been employed by Warner-Lambert since June 1995. Prior to
that time and during his last three months with American Cyanamid Company, which
was acquired by American Home Products Corporation in November 1994, Mr. Lynch
performed certain functions of Comptroller at American Home Products Corporation
from March 1995 to June 1995. American Home Products is a multinational health
care and food products company with sales of approximately $9.0 billion in 1994.
From April 1991 to March 1995, Mr. Lynch held the position of Director,
Corporate Accounting and Budgets, American Cyanamid Company. Prior to being
acquired by American Home Products Corporation, American Cyanamid Company was a
multinational medical and agricultural products company with sales of
approximately $4.3 billion in 1993.
Dr. Wild has been employed by Warner-Lambert since February 1995. Prior to
that time, Dr. Wild had been employed by Schering-Plough Corporation. From
August 1989 to February 1995, Dr. Wild held the position of President of
Schering-Plough-Japan. Schering-Plough Corporation, a multinational
pharmaceutical company, had sales of approximately $4.5 billion in 1994.
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.
12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal market on which the Company's stock is traded is the New York
Stock Exchange, but the stock is also listed and traded on the following
domestic and international stock exchanges: Chicago, Pacific, London and Zurich.
Shareholders of record totaled approximately 40,000 as of December 31, 1997.
Cash dividends paid in 1997 totaled $413.1 million. A dividend of $.38 per share
was paid in each quarter of 1997 for an annual total of $1.52 per share. This
was a 10.1% increase over the prior year total of $1.38 per share, paid in four
quarterly dividends of $.345 per share during 1996. The information set forth
under the caption 'Market Prices of Common Stock and Dividends' on page 48 of
the Warner-Lambert 1997 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 1997 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' on pages 49 through 52 of the Warner-Lambert 1997 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 33
through 46 of the Warner-Lambert 1997 Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information set forth under the caption 'Management's Discussion and
Analysis' on page 52 of the Warner-Lambert 1997 Annual Report and in Note 10 to
the consolidated financial statements on pages 39 through 40 of the
Warner-Lambert 1997 Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of Warner-Lambert and its
subsidiaries, listed in Item 14(a)1 and included in the Warner-Lambert 1997
Annual Report on pages 33 through 46, together with the report thereon of Price
Waterhouse LLP dated January 26, 1998 on page 47 of the Warner-Lambert 1997
Annual Report, and quarterly financial information on page 48 of the
Warner-Lambert 1997 Annual Report, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
13
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 from pages 2 through 9 of the
Warner-Lambert Proxy Statement for the Annual Meeting of Stockholders to be held
on April 28, 1998. Information relating to executive officers of Warner-Lambert
is set forth in Part I of this Form 10-K on pages 10 through 12. 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 11 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 13 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 11 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 page 10 and such
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not Applicable.
14
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 33 through 47 of the Warner-Lambert
1997 Annual Report:
Consolidated Statements of Income for each of the three years in
the period ended December 31, 1997.
Consolidated Statements of Retained Earnings for each of the
three years in the period ended December 31, 1997.
Consolidated Balance Sheets at December 31, 1997 and 1996.
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1997.
Notes to Consolidated Financial Statements.
Report by Management.
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.
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 33 through 47 of the Warner-Lambert
1997 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 23, 1996
(Incorporated by reference to Warner-Lambert's Current Report on
Form 8-K, dated April 23, 1996 (File No. 1-3608)).
(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) Amended and Restated Rights Agreement, dated as of March 25,
1997, 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-A/A, dated July 5, 1989 and
by Form 8-A/A, dated March 27, 1997 (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 March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 (File No. 1-3608)).
(b)* Warner-Lambert Company 1987 Stock Option Plan, as amended to March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 (File No. 1-3608)).
15
(c)* Warner-Lambert Company 1989 Stock Plan, as amended to March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 (File No. 1-3608)).
(d)* Warner-Lambert Company 1992 Stock Plan, as amended to March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 (File No. 1-3608)).
(e)* Warner-Lambert Company 1996 Stock Plan, as amended to November 25, 1997.
(f)* 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 (File No. 1-3608)).
(g)* Warner-Lambert Company Supplemental Pension Income Plan, as amended to November 28, 1995
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December
31, 1995 (File No. 1-3608)).
(h)* 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 (File No. 1-3608)).
(i)* Warner-Lambert Company Directors' Retirement Plan, as amended to June 1, 1995 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30,
1995 (File No. 1-3608)).
(j)* Warner-Lambert Excess Savings Plan, formerly Warner-Lambert Supplemental Savings Plan, as
amended to October 1, 1997.
(k)* Warner-Lambert Company Executive Severance Plan, as amended to March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 (File No. 1-3608)).
(l)* 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 (File No. 1-3608)).
(m)* 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 (File No. 1-3608)).
(n)* 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 (File
No. 1-3608)).
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) Copy of the Warner-Lambert Company Annual Report for the year ended
December 31, 1997. 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).
(99) Cautionary Statements Relating to 'Safe Harbor' Provisions of the
Private Securities Litigation Reform Act of 1995.
- ------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Form 10-K pursuant to Item 14(c).
16
(B) REPORTS ON FORM 8-K
(1) A Current Report on Form 8-K, dated March 25, 1997, was filed with the
Securities and Exchange Commission during the quarter ended March 31,
1997, in connection with the amendment by the Board of Directors of
the Company of the Company's preferred share purchase rights
(originally declared as a dividend on June 28, 1988), as more fully
described in the Amended and Restated Rights Agreement dated as of
March 25, 1997, between the Company and First Chicago Trust Company of
New York, as Rights Agent.
(2) A Current Report on Form 8-K, dated December 1, 1997, was filed with
the Securities and Exchange Commission in December 1997, in connection
with new label changes for REZULIN (troglitazone), the Company's drug
for type 2 diabetes.
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.
17
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
WARNER-LAMBERT COMPANY
Our audits of the consolidated financial statements referred to in our
report dated January 26, 1998 appearing on page 47 of the 1997 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 26, 1998
18
SCHEDULE II
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OF YEAR
- ------------------------------------------------------------------ ---------- ---------- ---------- -------
(DOLLARS IN MILLIONS)
Year ended December 31, 1997:
Allowance for doubtful accounts.............................. $ 36.6 $ 3.9 $ 6.0 $34.5
Allowance for deferred tax assets............................ 28.8 .1 -- 28.9
---------- ---------- ---------- -------
$ 65.4 $ 4.0 $ 6.0 $63.4
---------- ---------- ---------- -------
---------- ---------- ---------- -------
Year ended December 31, 1996:
Allowance for doubtful accounts.............................. $ 20.7 $ 22.3 $ 6.4 $36.6
Allowance for deferred tax assets(a)......................... 37.0 -- 8.2 28.8
---------- ---------- ---------- -------
$ 57.7 $ 22.3 $ 14.6 $65.4
---------- ---------- ---------- -------
---------- ---------- ---------- -------
Year ended December 31, 1995:
Allowance for doubtful accounts.............................. $ 21.8 $ 4.3 $ 5.4 $20.7
Allowance for deferred tax assets(b)......................... 44.6 -- 7.6 37.0
---------- ---------- ---------- -------
$ 66.4 $ 4.3 $ 13.0 $57.7
---------- ---------- ---------- -------
---------- ---------- ---------- -------
- ------------
(a) In 1996, the decrease in valuation allowances of $8.2 primarily reflected
the impact of European deferred tax assets related to restructuring reserve
activity.
(b) Deductions in 1995 were due to improved profitability in European
operations which resulted in the realization of some deferred tax assets
associated with the 1991 restructuring.
19
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 24, 1998 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/ JOSEPH E. LYNCH
By ................................................
Joseph E. Lynch
Vice President and Controller
(Principal Accounting Officer)
March 24, 1998
/S/ ROBERT N. BURT
By ................................................
Robert N. Burt, Director
/S/ DONALD C. CLARK
By ................................................
Donald C. Clark, Director
/S/ LODEWIJK J. R. DE VINK
By ................................................
Lodewijk J. R. de Vink, Director
20
/S/ JOHN A. GEORGES
By ................................................
John A. Georges, Director
/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 24, 1998
/S/ GEORGE A. LORCH
By ................................................
George A. Lorch, Director
/S/ ALEX J. MANDL
By ................................................
Alex J. Mandl, Director
/S/ LAWRENCE G. RAWL
By ................................................
Lawrence G. Rawl, Director
/S/ MICHAEL I. SOVERN
By ................................................
Michael I. Sovern, Director
21
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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(3) Articles of Incorporation and By-Laws.
(a) Restated Certificate of Incorporation of Warner-Lambert Company filed November 10, 1972, as amended
to April 23, 1996 (Incorporated by reference to Warner-Lambert's Current Report on Form 8-K, dated
April 23, 1996 (File No. 1-3608)).
(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) Amended and Restated Rights Agreement, dated as of March 25, 1997, 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-A/A,
dated July 5, 1989 and by Form 8-A/A, dated March 27, 1997 (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 March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
(File No. 1-3608)).
(b) Warner-Lambert Company 1987 Stock Option Plan, as amended to March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
(File No. 1-3608)).
(c) Warner-Lambert Company 1989 Stock Plan, as amended to March 25, 1997 (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 (File No.
1-3608)).
(d) Warner-Lambert Company 1992 Stock Plan, as amended to March 25, 1997 (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 (File No.
1-3608)).
(e) Warner-Lambert Company 1996 Stock Plan, as amended to November 25, 1997.
(f) 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 (File No. 1-3608)).
(g) Warner-Lambert Company Supplemental Pension Income Plan, as amended to November 28, 1995
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31,
1995 (File No. 1-3608)).
(h) 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 (File No. 1-3608)).
(i) Warner-Lambert Company Directors' Retirement Plan, as amended to June 1, 1995 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995
(File No. 1-3608)).
(j) Warner-Lambert Excess Savings Plan, formerly Warner-Lambert Supplemental Savings Plan, as amended
to October 1, 1997.
(k) Warner-Lambert Company Executive Severance Plan, as amended to March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
(File No. 1-3608)).
(l) 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 (File No. 1-3608)).
(m) 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 (File No. 1-3608)).
(n) 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 (File No. 1-3608)).
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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(12) Computation of Ratio of Earnings to Fixed Charges.
(13) Copy of the Warner-Lambert Company Annual Report for the year ended December 31, 1997. 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).
(99) Cautionary Statements Relating to 'Safe Harbor' Provisions of the Private Securities Litigation Reform
Act of 1995.