________________________________________________________________________________
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, 1998
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
Junior Participating Preferred Stock The New York Stock Exchange, Inc.
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. [x]
The aggregate market value of the voting stock held by non-affiliates of
Warner-Lambert Company as of February 26, 1999 was approximately $56.6 billion.
The number of shares outstanding of the registrant's Common Stock as of
February 26, 1999 was 822,097,430 shares, Common Stock, par value $1.00 per
share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Warner-Lambert Company Annual Report to Shareholders for
1998 -- 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 27, 1999 -- 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.
Reportable Segment Data and Geographic Data. Financial information by
reportable segment and geographic data for the years 1998, 1997 and 1996 is
presented in the Warner-Lambert 1998 Annual Report to Shareholders as set forth
below.
The summary of Warner-Lambert's reportable segment data, geographic data
and related financial information, set forth in Note 17 to the consolidated
financial statements on pages 44 through 45 of the Warner-Lambert 1998 Annual
Report, is incorporated herein by reference.
Except as otherwise noted below, all product names appearing in capitalized
letters in this report on Form 10-K are 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, related companies or licensors. CELESTIAL SEASONINGS and HERBAL
COMFORT are registered trademarks of Celestial Seasonings Inc. CELEXA is a
trademark of Forest Laboratories, Inc. ('Forest Laboratories'), its affiliates,
related companies or licensors. OMNICEF is a registered trademark of Fujisawa
Pharmaceutical Co., Ltd., its affiliates or related companies. VIRACEPT is a
registered trademark of Agouron Pharmaceuticals, Inc., its affiliates or related
companies.
BUSINESS SEGMENTS
A detailed description of Warner-Lambert's reportable 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,
markets 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), anthelmintics (VANQUIN),
anticonvulsants (CELONTIN, CEREBYX, DILANTIN, NEURONTIN and ZARONTIN),
anti-infectives (OMNICEF), antivaricosities (HEPATHROMBIN), cardiovascular
products (NOVADRAL, DILZEM, ACCUPRIL, ACCURETIC, ACCUZIDE, NITROSTAT and
PIRMENOL), 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), and psychotherapeutic products (CETAL RETARD, DEMETRIN and
NARDIL).
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
fifty-five 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 in certain
countries through a ten-year marketing agreement with Pfizer Inc. ('Pfizer').
The agreement includes a provision giving Warner-Lambert the right to co-promote
one of Pfizer's products.
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
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diabetes mellitus patients currently on insulin who are inadequately controlled
by insulin. The Company also received FDA clearance in 1997 to market REZULIN as
monotherapy and for use in combination with sulfonylureas for non-insulin
dependent diabetes mellitus patients. The Company 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.
REZULIN was first marketed in March 1997 in the United States and achieved
worldwide sales of $420 million during 1997 and $748 million during 1998. 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, but which in extremely
rare cases resulted in liver transplants or death. The changes involved a
recommendation to monitor liver enzymes. 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 recommended that physicians monitor patients more frequently for
signs of liver dysfunction. In July 1998, the Company announced further labeling
changes for REZULIN which recommended additional liver enzyme monitoring and
limited the trial period for monotherapy. The labeling changes were made to
minimize the risk for these 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. The FDA's
Endocrinologic and Metabolic Drugs Advisory Committee will review REZULIN's
post-marketing safety and efficacy data and Warner-Lambert's supplemental New
Drug Application ('sNDA') for combination therapy with metformin and with
sulfonylureas and metformin in its regularly scheduled meeting on March 26,
1999. For further discussion of REZULIN, see 'Item 1. Business -- Regulation'
below.
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. The Company launched the product in the
United States in 1998. 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.
In July 1998, the FDA approved the marketing of CELEXA (citalopram HBr), a
selective serotonin reuptake inhibitor, for treatment of depression. Forest
Laboratories has the U.S. marketing rights to CELEXA and co-promotes it with the
Parke-Davis division of Warner-Lambert. CELEXA was developed in the United
States by Forest Laboratories under license from H. Lundbeck A/S.
In April 1998, the Company entered into a marketing agreement with
Yamanouchi Pharmaceutical Co., Ltd. ('Yamanouchi') giving the Company the
marketing rights in Europe and the Americas to a compound called YM087.
Warner-Lambert and Yamanouchi are developing YM087 for the treatment of
congestive heart failure and hyponatremia. YM087 is currently in Phase II
studies in the United States and Europe.
On December 26, 1997, the Company submitted a New Drug Application ('NDA')
to the FDA for marketing approval for suramin, a treatment for hormone
refractory prostate cancer. The NDA was reviewed and rejected by the FDA
Oncologic Drugs Advisory Committee on September 1, 1998. New information was
submitted to the FDA in November 1998 and, therefore, the NDA remains under
review. The FDA extended the review period to March 1999.
In December 1998, the Company submitted two NDAs to the FDA for marketing
approval for norethindrone acetate and ethinyl estradiol (FemHRT), an oral
single-pill combination estrogen-progestin hormone replacement therapy for
osteoporosis and perimenopausal symptoms, and clinafloxacin, an injectable new
generation fluoroquinolone antibiotic for the treatment of serious, life-
threatening infections. The Company plans to submit a total of six NDAs and
sNDAs to the FDA in 1999.
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In May 1997, Warner-Lambert purchased the remaining 66% it did not already
own of Jouveinal S.A., a French pharmaceutical group. The Jouveinal group
specialized in ethical and over-the-counter ('OTC') pharmaceuticals, as well as
fine chemicals and food flavors. In order to focus on its core pharmaceutical,
consumer health care 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 73% of its
pharmaceutical sales in the United States during 1998 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, VCAPS and
PRESS-FIT gelcaps.
Other: On February 27, 1998, the Company sold its 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. On May 4, 1998, the Company acquired gene/Networks, a
genomics company located in Alameda, California. On January 26, 1999, the
Company announced a definitive agreement to acquire Agouron Pharmaceuticals,
Inc. ('Agouron'), a La Jolla, California based, integrated pharmaceutical
company engaged in the discovery, development and commercialization of drugs for
the treatment of cancer, viral diseases, and diseases of the eye. Agouron
currently has one commercial product, VIRACEPT, which is an HIV protease
inhibitor that has been sold since receiving marketing clearance from the FDA in
1997. As a result of the transaction, each outstanding share of Agouron common
stock will be converted into shares of the Company's common stock at an exchange
rate equal to $60.00 divided by the average of the closing prices of the
Company's common stock on the New York Stock Exchange Composite Transactions
Tape on each of the 10 consecutive trading days up to and including the second
immediately preceding trading day prior to the date of Agouron's stockholders
meeting held to vote on the merger. In no event will the exchange rate be more
than 0.9300, or less than 0.8108, of a share of the Company's common stock for
each share of Agouron common stock. The transaction will be accounted for as a
pooling of interests and is intended to qualify as a tax-free exchange. The
closing of the transaction is subject to certain conditions, including the
approval of the common stockholders of Agouron and the receipt of customary
antitrust clearance. The merger will not require approval of the Company's
shareholders. Under certain circumstances, if the merger agreement is
terminated, the Company has the option to purchase up to 19.9% of Agouron's
common stock and has the right to a termination fee of $60 million.
Consumer Health Care Products
The principal products of Warner-Lambert in its Consumer Health Care
Products segment are OTC health care products, shaving products and pet care
products.
Over-the-Counter Products: Warner-Lambert manufactures, markets 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 Advanced Therapy, LUBRIDERM Daily UV Lotion, ROSKEN SKIN
REPAIR and CORN HUSKERS), topical antibiotic ointments and creams (NEOSPORIN and
POLYSPORIN), cold and sinus preparations (SUDAFED, SINUTAB, SINUTAB Non-Drying,
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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), 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 September 1998, Warner-Lambert introduced the new QUANTERRA line of
standardized herbal supplements in the United States. QUANTERRA Mental
Sharpness, with Ginkgo Biloba, and QUANTERRA Prostate, with Saw Palmetto,
represent the first two products in a new line of clinically proven herbal
supplements introduced in 1998. In January 1999, the Company introduced
QUANTERRA Emotional Balance with St. John's Wort in the United States.
In January 1999, Warner-Lambert launched LISTERINE Tartar Control mouthwash
in the United States.
In 1993, Warner-Lambert and Glaxo Wellcome formed a joint venture in the
United States to develop, seek approval of and market 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)').
On December 31, 1998, Warner-Lambert Company and certain of its affiliates
and Glaxo Wellcome and certain of its affiliates entered into transactions in
various countries whereby Glaxo Wellcome transferred to Warner-Lambert rights to
OTC ZANTAC products in the United States and Canada and Warner-Lambert
principally transferred to Glaxo Wellcome its rights to OTC ZANTAC products in
all other markets and its rights to OTC ZOVIRAX and OTC BECONASE, and future
Glaxo Wellcome prescription to OTC switch products in all markets. These OTC
products had principally been marketed through the Glaxo Wellcome Warner-Lambert
joint ventures. These transactions ended the joint venture relationships between
Warner-Lambert and Glaxo Wellcome.
Over-the-counter products are promoted principally through consumer
advertising and promotional programs and some are promoted via the worldwide web
and 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, hospitals and most recently,
directly to consumers.
Shaving Products: Warner-Lambert manufactures and sells razors and blades,
both domestically and internationally. Shaving products are manufactured and
marketed under the SCHICK trademark and other trademarks worldwide and the
WILKINSON SWORD trademark in Europe, the United States and Canada. Permanent
(nondisposable) products are marketed under various trademarks including
PROTECTOR, PROTECTOR 3D, TRACER/FX, FX HYPER, FX PERFORMER, SILK EFFECTS, LADY
PROTECTOR, PERSONAL TOUCH, SUPER II PLUS and ULTREX PLUS. Disposable products
are marketed under a variety of trademarks including SLIM TWIN ST, EXTRA II,
PERSONAL TOUCH 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, reptiles and other small
pets, as well as books relating to various pets, under various trademarks
including TETRA, TETRA POND, TETRA PRESS, TETRA SECONDNATURE,
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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, markets 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, CLORETS, DENTYNE, DENTYNE Sugarfree,
DENTYNE Ice, TRIDENT, TRIDENT ADVANTAGE and MAX AIR) and bubble gums
(BUBBLICIOUS, BUBBALOO and MOTITAS). The breath mint line includes CERTS,
Sugarfree CERTS, CERTS COOL MINT DROPS, CERTS Powerful Mints, CLORETS, CLORETS
Cool and CLORETS OPTIMINTS. 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 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 trademark.
In 1998, Warner-Lambert launched TRIDENT ADVANTAGE, a plaque reducing and
teeth whitening sugarless gum with baking soda, TRIDENT Cherry, BUBBLICIOUS
LIGHTNING LEMONADE and TWISTED TORNADO in the United States, TRIDENT for Kids in
selected European markets and MAX AIR in Canada.
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
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 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.
Information relating to geographic operating data is contained in Note 17
on page 45 of the Warner-Lambert 1998 Annual Report, incorporated herein by
reference.
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 34 of the Warner-Lambert 1998 Annual Report, incorporated herein by
reference.
In March 1997, Warner-Lambert opened confectionery plants in Guangzhou,
China and Bangalore, India. The plant in China is currently manufacturing and
selling HALLS cough tablets and CLORETS chewing gum. The plant in India is
currently manufacturing and selling HALLS cough tablets and CLORETS and CHICLETS
chewing gums.
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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, 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.
Discussion of the impact of the introduction of the Euro on the Company,
set forth under the caption 'Management's Discussion and Analysis -- Other
Matters -- Euro' on page 53 of the Warner-Lambert 1998 Annual Report, is
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 reportable segments. No material part
of the business of any of Warner-Lambert's reportable 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 -- Other Matters -- Year
2000' on pages 53 through 54 of the Warner-Lambert 1998 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 or
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
adverse effect on the business of any of Warner-Lambert's reportable 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 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. A number of products and product lines have patent
protection that is significant in the marketing of such products. Additionally,
the management of Warner-Lambert considers the patents on LIPITOR and REZULIN to
be material to Warner-Lambert's business as a whole.
RESEARCH AND DEVELOPMENT
Warner-Lambert employs over 2,600 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 $877 million in research and development in 1998, compared
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with $672 million in 1997 and $555 million in 1996. Approximately 87% of
Warner-Lambert's 1998 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, 1998, approximately 41,000 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. Addressing such issues with regulatory
agencies can result in requirements for additional testing of products, removal
of a product or products from the market, modification of labeling (which can
have little effect on the future sales of the product or a significant effect on
such sales), the shut down of plants and/or laboratories, the modification of
operation of plants and/or laboratories (which can entail minor changes from
existing operations or significant changes which can add significant cost to
manufacturing), the seizure of finished goods and/or work in process and/or raw
materials, and similar actions involving the discovery, development, approval,
manufacture, marketing and sale of regulated products.
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.
Warner-Lambert and the FDA have been discussing reports of rare adverse
liver events (including liver-related deaths) associated with REZULIN. The
Company has modified the labeling of the product to provide for the monitoring
of liver enzymes in an effort to reduce the occurrence of these rare events. The
FDA has scheduled a meeting of the Endocrinologic and Metabolic Drugs Advisory
Committee for March 26, 1999 to discuss the REZULIN post-marketing safety data
as well as the Company's sNDA for combination therapy with metformin and with
metformin and sulfonylureas. While the Company remains convinced of the
favorable risk/benefit profile of the drug, it cannot predict the outcome of
that meeting or what action, if any, the FDA may take with respect thereto. Such
action can include further labeling changes, including additional monitoring, or
removal of REZULIN from the market.
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 OTC 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 believes that
the
7
Methamphetamine Control Act will not have a material adverse effect on
Warner-Lambert's financial position, liquidity, cash flows 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, OTC 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 first delayed until April 1, 1998, then to
January 1, 1999, and most recently until January 1, 2000. European Community
legislators are considering further amendments to the Decision that would allow
for the continued sale and import of a vast 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
8
flows 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 1998 were not, and in 1999 are not
expected to be, material to the business of Warner-Lambert.
For additional information relating to environmental matters, see Note 16
to the consolidated financial statements on page 44 of the Warner-Lambert 1998
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 6,684,000 square feet and leases facilities
having an aggregate of approximately 383,000 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);
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 (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 and consumer health care products). 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, 62 production facilities in 30 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 reportable
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 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 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
9
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 action against the non-settling
defendant pharmaceutical manufacturers and wholesalers was concluded in
November, 1998 with a directed verdict for the defendants and dismissal of the
class plaintiffs' case. That decision has been appealed to the 7th Circuit Court
of Appeals. 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.
In addition, the Company has settled the vast majority of the
Robinson-Patman Act lawsuits brought by those retail pharmacies which opted out
of the class action conspiracy lawsuit. The amount of these settlements is not
material.
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. The Company, with the majority of the other drug company
defendants, has agreed to settle the California consumer class action and this
settlement is pending court approval. The amount of this settlement is not
material. 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 settled the Minnesota and Wisconsin
actions. The Company's share of these settlements, which have been approved, are
not material. In addition, the Company was 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. With its co-defendants, the Company has agreed to settle these state
consumer class actions. The Company's share of these settlements, which have
been approved by all of the above courts except Tennessee, where approval is
pending, is not material.
The Company has also been made a party to another class action in
Tennessee, purportedly on behalf of consumers in Alabama, Arizona, Florida,
Kansas, Maine, Michigan, Minnesota, New Mexico, North Carolina, North Dakota,
South Dakota, Tennessee, West Virginia and Wisconsin, who purchased brand name
prescription drugs from retail pharmacies, and in a similar class action in
North Dakota on behalf of North Dakota consumers. Although it is not possible at
this early stage to predict the outcome of these lawsuits, it is unlikely that
their ultimate disposition will have a material adverse effect on
Warner-Lambert's financial position, liquidity, cash flows 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 has
cooperated with this investigation. Warner-Lambert cannot at present predict the
outcome of this investigation.
Warner-Lambert Inc., a wholly-owned subsidiary of Warner-Lambert, 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 flows 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, 1999 is set forth below:
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- --------------------------------- --- ---------------------- -------------------------------------------
Melvin R. Goodes................. 63 Chairman of the Board Chairman of the Board and Chief Executive
and Chief Executive (since August 1991)
Officer; Director
Lodewijk J. R. de Vink........... 54 President and Chief President and Chief Operating Officer
Operating Officer; (since August 1991)
Director
John F. Walsh.................... 56 Executive Vice Executive Vice Executive (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................. 56 Vice President and Vice President and Chief Financial Officer
Chief Financial (since November 1992)
Officer
J. Frank Lazo.................... 51 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................. 59 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)
Anthony H. Wild, Ph.D. .......... 50 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)
John S. Craig.................... 47 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)
(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. ...... 64 Senior Vice President Senior Vice President (since November
and Chief Scientific 1998); Chief Scientific Officer (since
Officer October 1998); Vice President (May
1988 - November 1998); Chairman,
Parke-Davis Research (November 1989 -
November 1998)
Raymond M. Fino.................. 56 Vice President Vice President, Human Resources (since
January 1985)
Philip M. Gross.................. 57 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............... 52 Vice President and Vice President and General Counsel (since
General Counsel October 1983)
Richard W. Keelty................ 57 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.................. 47 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 (April
1991 - March 1995)
F. Phillip Milhomme.............. 62 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.............. 52 Vice President Vice President (since January 1992); Vice
President, Knowledge Management Officer
(since September 1998); President, Latin
America/Asia Sector (February
1995 - September 1998); President,
Parke-Davis, North America (January
1992 - February 1995)
Maurice A. Renshaw............... 52 Vice President Vice President (since January 1997);
President, Parke-Davis, U.S. (since April
1998); President, Parke-Davis, U.S. and
Mexico (August 1996 - December 1996);
President, Warner-Lambert KK, Japan
(December 1989 - August 1996)
(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
- --------------------------------- --- ---------------------- -------------------------------------------
Barbara S. Thomas................ 49 Vice President Vice President (since April 1998);
President, Consumer Healthcare (since
December 1997); President and Chief
Executive Officer, Pillsbury Canada Ltd.
(March 1995 - November 1997); Vice
President/General Manager, Pizza/Snacks;
Breakfast and Dessert Mixes, Pillsbury
Canada Ltd. (October 1993 - March 1995)
William S. Woodson............... 64 Vice President and Vice President and Treasurer (since
Treasurer December 1991)
Rae G. Paltiel................... 52 Secretary Secretary (since February 1986)
All of the above-mentioned officers, with the exception of Ms. Thomas, Mr.
Craig, Mr. Lynch and Dr. Wild, have been employed by Warner-Lambert for the past
five years.
Ms. Thomas has been employed by Warner-Lambert since December 1997. Prior
to that time, Ms. Thomas was employed by The Pillsbury Company serving as
President and Chief Executive Officer of Pillsbury Canada, Ltd., from March 1995
to November 1997. Ms. Thomas joined The Pillsbury Company in October 1993 as
Vice President, General Manager, for the pizza/snack division. The Pillsbury
Company is a multinational consumer company.
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.
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. 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.
Dr. Wild has been employed by Warner-Lambert since February 1995. Prior to
that time, Dr. Wild had been employed by Schering-Plough Corporation, a
multinational pharmaceutical company. From August 1989 to February 1995, Dr.
Wild held the position of President of Schering-Plough-Japan.
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.
13
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 48,000 as of December 31, 1998.
Cash dividends paid in 1998 totaled $525 million. A dividend of $.16 per share
was paid in each quarter of 1998 for an annual total of $.64 per share. This was
a 25.5% increase over the prior year total of $.51 per share, paid in four
quarterly dividends of $.13 per share during 1997. The information set forth
under the caption 'Market Prices of Common Stock and Dividends' on page 47 of
the Warner-Lambert 1998 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 30 of the Warner-Lambert 1998 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 48 through 55 of the Warner-Lambert 1998 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 31
through 45 of the Warner-Lambert 1998 Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information set forth under the caption 'Management's Discussion and
Analysis -- Market Risk' on pages 52 through 53 of the Warner-Lambert 1998
Annual Report and in Note 10 to the consolidated financial statements on pages
37 through 38 of the Warner-Lambert 1998 Annual Report is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of Warner-Lambert and its
subsidiaries and the notes thereto, listed in Item 14(a)1 and included in the
Warner-Lambert 1998 Annual Report on pages 31 through 45, together with the
report thereon of PricewaterhouseCoopers LLP dated January 25, 1999 on page 46
of the Warner-Lambert 1998 Annual Report, and quarterly financial information on
page 47 of the Warner-Lambert 1998 Annual Report, are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
14
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 7 of the
Warner-Lambert Proxy Statement for the Annual Meeting of Stockholders to be held
on April 27, 1999. Information relating to executive officers of Warner-Lambert
is set forth in Part I of this Form 10-K on pages 11 through 13. 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 12 through 22 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 page 8 and such
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not Applicable.
15
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 31 through 46 of the Warner-Lambert
1998 Annual Report:
Consolidated Statements of Income, Retained Earnings and
Comprehensive Income for each of the three years in the period
ended December 31, 1998.
Consolidated Balance Sheets at December 31, 1998 and 1997.
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1998.
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 31 through 46 of the Warner-Lambert
1998 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 28, 1998
(Incorporated by reference to Warner-Lambert's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 (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 1989 Stock Plan, as amended to January 27, 1998 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998 (File No. 1-3608)).
(b)* Warner-Lambert Company 1992 Stock Plan, as amended to January 27, 1998 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998 (File No. 1-3608)).
(c)* Warner-Lambert Company 1996 Stock Plan, as amended to January 27, 1998 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998 (File No. 1-3608)).
16
(d)* 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)).
(e)* 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)).
(f)* 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)).
(g)* 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)).
(h)* Warner-Lambert Excess Savings Plan, formerly Warner-Lambert Supplemental Savings Plan, as
amended to October 1, 1997. (Incorporated by reference to Warner-Lambert's Form 10-K for the
fiscal year ended December 31, 1997 (File No. 1-3608)).
(i)* Warner-Lambert Company Executive Severance Plan, as amended to October 1, 1997.
(j)* 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)).
(k)* 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)).
(l)* 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, 1998. 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).
(b) REPORTS ON FORM 8-K
Warner-Lambert has not filed any reports on Form 8-K for the year ending
December 31, 1998.
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 25, 1999 appearing on page 46 of the 1998 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.
PRICEWATERHOUSECOOPERS LLP
400 Campus Drive
Florham Park, New Jersey
January 25, 1999
18
SCHEDULE II
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
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, 1998:
Allowance for doubtful accounts.............................. $ 34.5 $ 11.4 $ 16.0 $ 29.9
Allowance for discounts and customer claims.................. 59.4 262.9 211.7 110.6
Allowance for deferred tax assets............................ 28.9 14.4 8.9 34.4
---------- ---------- ---------- -------
$122.8 $288.7 $236.6 $174.9
---------- ---------- ---------- -------
---------- ---------- ---------- -------
Year ended December 31, 1997:
Allowance for doubtful accounts.............................. $ 36.6 $ 3.9 $ 6.0 $ 34.5
Allowance for discounts and customer claims.................. 39.5 294.9 275.0 59.4
Allowance for deferred tax assets............................ 28.8 5.4 5.3 28.9
---------- ---------- ---------- -------
$104.9 $304.2 $286.3 $122.8
---------- ---------- ---------- -------
---------- ---------- ---------- -------
Year ended December 31, 1996:
Allowance for doubtful accounts.............................. $ 20.7 $ 22.3 $ 6.4 $ 36.6
Allowance for discounts and customer claims.................. 29.7 257.7 247.9 39.5
Allowance for deferred tax assets............................ 37.0 -- 8.2 28.8
---------- ---------- ---------- -------
$ 87.4 $280.0 $262.5 $104.9
---------- ---------- ---------- -------
---------- ---------- ---------- -------
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 12, 1999 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 12, 1999
/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 March 12, 1999
/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
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 28, 1998 (Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998 (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 1989 Stock Plan, as amended to January 27, 1998 (Incorporated by reference
to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (File No.
1-3608)).
(b) Warner-Lambert Company 1992 Stock Plan, as amended to January 27, 1998 (Incorporated by reference
to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (File No.
1-3608)).
(c) Warner-Lambert Company 1996 Stock Plan, as amended to January 27, 1998. (Incorporated by reference
to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (File No.
1-3608)).
(d) 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)).
(e) 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)).
(f) 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)).
(g) 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)).
(h) Warner-Lambert Excess Savings Plan, formerly Warner-Lambert Supplemental Savings Plan, as amended
to October 1, 1997 (Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year
ended December 31, 1997 (File No. 1-3608)).
(i) Warner-Lambert Company Executive Severance Plan, as amended to October 1, 1997.
(j) 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)).
(k) 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)).
(l) 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, 1998. 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.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------
(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.