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________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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<S> <C>
(MARK ONE)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
</TABLE>
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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<S> <C> <C>
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)
</TABLE>
201-540-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- --------------------------------------------------------------- ------------------------------------------------
<S> <C>
Common Stock (Par Value $1 Per Share) The New York Stock Exchange, Inc.
The Chicago Stock Exchange, Inc.
The Pacific Stock Exchange, Inc.
Rights to Purchase Series A The New York Stock Exchange, Inc.
Participating Cumulative Preferred Stock The Chicago Stock Exchange, Inc.
The Pacific Stock Exchange, Inc.
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [x] NO [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
Warner-Lambert Company as of February 24, 1995 was approximately
$10,140,628,991.
The number of shares outstanding of the registrant's Common Stock as of
February 24, 1995 was 134,642,159 shares, Common Stock, par value $1.00 per
share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Warner-Lambert Company Annual Report to Shareholders for
1994 -- Part I, Part II and Part IV.
Portions of the Proxy Statement for Annual Meeting of Stockholders of
Warner-Lambert Company to be held April 25, 1995 -- Part III.
________________________________________________________________________________
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PART I
ITEM 1. BUSINESS.
The term 'Warner-Lambert' or the 'Company' refers to Warner-Lambert
Company, a Delaware corporation organized in that state in 1920, and its
consolidated subsidiaries, unless otherwise indicated or unless the context
otherwise requires.
Industry Segments and Geographic Areas. Financial information by industry
segment and geographic area for the years 1994, 1993 and 1992 is presented in
the Warner-Lambert 1994 Annual Report to Shareholders as set forth below.
The summary of Warner-Lambert's industry segments, geographic areas and
related financial information, set forth on page 33 of the Warner-Lambert 1994
Annual Report, is incorporated herein by reference.
All product names appearing in capitalized letters in this report on Form
10-K are registered trademarks of Warner-Lambert, its affiliates, related
companies or licensors. ZOVIRAX, SUDAFED, ACTIFED, NEOSPORIN, POLYSPORIN, NIX,
BOROFAX and EMPIRIN are registered trademarks of Wellcome plc ('Wellcome'), its
affiliates or related companies, and ZANTAC and BECONASE are registered
trademarks of Glaxo plc ('Glaxo'), its affiliates or related companies. As
discussed below, Warner-Lambert has entered into separate joint ventures with
Wellcome and Glaxo.
BUSINESS SEGMENTS
A detailed description of Warner-Lambert's industry segments is as follows:
Consumer Health Care Products
The principal products of Warner-Lambert in its Consumer Health Care
Products segment are over-the-counter health care products, shaving products and
pet care products.
Over-the-Counter Products: In December 1993, Warner-Lambert signed separate
agreements with Wellcome and Glaxo governing the establishment of joint ventures
in various countries to develop and market a broad range of nonprescription
consumer health care products.
The alliance between Warner-Lambert and Wellcome calls for both companies
to contribute to joint venture operations being established in various
territories (referred to herein as the 'Warner Wellcome' joint venture
operations) current and future over-the-counter products (excluding HALLS and
ROLAIDS products). Pursuant to the agreements with Wellcome, Warner-Lambert and
Wellcome formed joint venture operations in the United States and Canada, which
commenced in January 1994, joint venture operations in Australia, New Zealand
and certain countries in Europe, which commenced in June 1994, and joint venture
operations in Germany, which commenced in November 1994. Additional joint
venture operations may be established by Warner-Lambert and Wellcome in other
countries throughout the world. Warner-Lambert or its affiliates are the
managing partners of the Warner Wellcome joint venture operations, with
day-to-day operating responsibility.
After a two-year phase-in period following establishment of the U.S. Warner
Wellcome joint venture operations, Warner-Lambert and Wellcome will receive
approximately 70 percent and 30 percent, respectively, of the profits generated
by Warner Wellcome in the U.S. on current products or line extensions of current
products, excluding Wellcome's antiviral drug ZOVIRAX.
Profits on current products will be shared equally between Warner-Lambert
and Wellcome in Canada, Australia, New Zealand and the European countries where
joint venture operations have been established. Profits on certain package sizes
of ZOVIRAX cold sore cream sold over-the-counter outside the United States will
also be shared equally, subject to a royalty to Wellcome if sales exceed a
certain threshold amount. ZOVIRAX cold sore cream has been approved for
over-the-counter use and is being sold over-the-counter in a number of
countries, primarily in Europe. Other future over-the-counter switch products
will be subject to a profit split favoring the innovator.
A New Drug Application ('NDA') for the conversion to over-the-counter use
of ZOVIRAX as a genital herpes medication was filed with the U.S. Food and Drug
Administration ('FDA') in August
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1993. On January 12, 1995, the FDA's Antiviral Drugs and Nonprescription Drugs
Advisory Committees met and issued a non-binding recommendation to the FDA that
the current submission provided insufficient evidence to support conversion of
ZOVIRAX to over-the-counter form. Although Wellcome will continue to pursue
approval, it is not possible to predict the actions the FDA will take, and
approval in the near-term seems unlikely. If the FDA approves conversion of
ZOVIRAX to over-the-counter use, profits on ZOVIRAX sold over-the-counter in the
United States will be shared in favor of Wellcome.
Pursuant to the agreements with Glaxo, a joint venture in the United
States, which commenced operations in December 1993 (referred to herein as the
'Glaxo Warner-Lambert' joint venture or organization), was formed. The United
States joint venture will develop, seek approval of and market over-the-counter
versions of Glaxo prescription drugs in the United States, and will concentrate
initially on developing ZANTAC, Glaxo's pharmaceutical product for ulcer
treatment, for sale as an over-the-counter product for the treatment of episodic
heartburn. Additional joint ventures are expected to be formed with Glaxo in
other major markets, excluding Japan.
Direction of the Glaxo Warner-Lambert joint ventures will be provided by a
management committee of representatives from each company. Day-to-day operations
will be the responsibility of Warner-Lambert, and the joint ventures'
over-the-counter products will be sold by Warner-Lambert's consumer health care
products sales and marketing organization, which in most countries will be a
Warner Wellcome joint venture, as described above. Warner-Lambert (or Warner
Wellcome, as appropriate) and Glaxo will share development costs, profits and
voting control equally, with Glaxo receiving a royalty on sales by the Glaxo
Warner-Lambert joint ventures of over-the-counter versions of Glaxo prescription
drugs.
Warner-Lambert assigned its interest in the U.S. Glaxo Warner-Lambert joint
venture to the U.S. Warner Wellcome joint venture organization. Warner Wellcome
and Glaxo will share development costs and profits equally, with Wellcome
receiving 10 percent of Warner Wellcome's share of the U.S. Glaxo Warner-Lambert
joint venture's profits. On September 30, 1994, Glaxo submitted an NDA to the
FDA for ZANTAC's sale in the U.S. as an over-the-counter product for the
treatment of episodic heartburn.
In the first quarter of 1994, marketing of Glaxo's nasal spray BECONASE for
over-the-counter sale in the United Kingdom commenced. In addition, approval to
market ZANTAC over-the-counter was obtained in the United Kingdom in December
1994 and marketing commenced in January 1995. Warner-Lambert will share in the
profits generated by these brands.
In January 1995, Glaxo announced an offer to acquire all of the shares of
Wellcome, which offer was recommended for acceptance by Wellcome to its
shareholders in March 1995. This offer was declared unconditional in all
respects by Glaxo on March 16, 1995. It is unclear what impact this acquisition
will have on Warner-Lambert.
Warner Wellcome Products: In each country where a Warner Wellcome joint
venture has been established, Warner Wellcome sells a line of over-the-counter
pharmaceuticals and health care products, which may include antacids (GELUSIL),
dermatological products (LUBRIDERM, LUBRIDERM BODY BAR, LUBRIDERM LOOFA BAR,
LUBRIDERM SERIOUSLY SENSITIVE, LUBRIDERM Moisture Recovery, ROSKEN SKIN REPAIR,
CORN HUSKERS and LISTEREX), topical antibiotic ointments (NEOSPORIN and
POLYSPORIN), cold and sinus preparations (SUDAFED, SINUTAB, SINUTAB NON-DRYING
and ACTIFED), antihistamines and allergy products (ACTIFED ALLERGY, SUDAFED
PLUS, BENADRYL, BENADRYL-D, BENADRYL COLD, BENADRYL DAY & NIGHT, BENADRYL
ALLERGY/SINUS/HEADACHE and BENADRYL Dye-Free), hemorrhoidal preparations
(ANUSOL, ANUSOL HC-1 and TUCKS), vaginal moisturizers (REPLENS), laxatives
(AGORAL), cough syrups/suppressants (BENYLIN, BENYLIN-DM, BENYLIN DECONGESTANT,
BENYLIN EXPECTORANT and BENYLIN PEDIATRIC), vitamins (MYADEC), antipruritics
(CALADRYL, BENADRYL spray and cream and STINGOSE), rubbing alcohol (LAVACOL),
hydrogen peroxide (PROXACOL), self-diagnostic early pregnancy test kits
(e.p.t'r'), oral antiseptics (LISTERINE, COOL MINT LISTERINE and FRESHBURST
LISTERINE), mouthwash/anticavity dental rinses (LISTERMINT and ARCTIC MINT
LISTERMINT), effervescent denture cleaning tablets and denture cleanser pastes
(EFFERDENT and FRESH 'N BRITE), denture adhesives (EFFERGRIP), head lice
treatments
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(NIX), diaper rash preparations (BOROFAX) and analgesics (EMPIRIN). SUDAFED,
ACTIFED, ACTIFED ALLERGY, SUDAFED PLUS, NEOSPORIN, POLYSPORIN, NIX, BOROFAX and
EMPIRIN were contributed by Wellcome to the joint venture operations.
Other Over-the-Counter Products: In addition to the Warner Wellcome
products named above, Warner-Lambert manufactures and/or sells, in the United
States and/or internationally, a line of antacids (ROLAIDS, SODIUM FREE ROLAIDS
and EXTRA STRENGTH ROLAIDS), cough tablets (HALLS, HALLS-PLUS and Sugar Free
HALLS), throat drops (CELESTIAL SEASONINGS SOOTHERS) and vitamin C drops
(HALLS). Furthermore, certain products named as Warner Wellcome products above
(except for products that were contributed by Wellcome to the joint venture
operations) are manufactured and/or sold by Warner-Lambert or its affiliates in
countries where Warner Wellcome joint venture operations have not been
established.
Over-the-counter products are promoted principally through consumer
advertising and promotional programs and some are promoted directly to health
care professionals. They are sold principally to drug wholesalers, chain and
retail pharmacies, chain and independent food stores, mass merchandisers,
physician supply houses and hospitals.
Shaving Products: Warner-Lambert manufactures and sells razors and blades,
both domestically and internationally. Shaving products are manufactured and
marketed under the SCHICK and other trademarks worldwide and the WILKINSON SWORD
trademark in Europe, the United States and Canada. Permanent (nondisposable)
products marketed under the SCHICK trademark include TRACER/FX, SUPER II, SUPER
II PLUS, ULTREX PLUS, SILK EFFECTS, SLIM TWIN, ADVANTAGE, PERSONAL TOUCH and
INJECTOR PLUS CHROMIUM. Disposable twin blade products marketed under the SCHICK
trademark include SCHICK DISPOSABLE, SLIM TWIN, PERSONAL TOUCH, PERSONAL TOUCH
SLIM and ULTREX DISPOSABLE. Products marketed under the WILKINSON SWORD
trademark include nondisposable systems such as PROTECTOR, PROFILE, SYSTEM II,
DUPLO and LADY PROTECTOR, and disposable products that include COLOURS, PRONTO,
RETRACTOR, RETRACTOR TWIN, SHAVA II, ULTRA CARESSE LADYSHAVER and EXTRA II.
Warner-Lambert's shaving products are promoted principally through consumer
advertising and promotional programs. They are distributed directly to
wholesalers for sale to smaller retailers, drugstores, pharmacies and retail
outlets, including pharmacies, food stores, variety stores, mass merchandisers
and other miscellaneous outlets.
Pet Care Products: Warner-Lambert manufactures and/or sells various
products on a worldwide basis for ornamental fish and for reptiles and other
small pets, as well as books relating to various pets, under the trademarks
TETRA, TETRA POND, TETRA PRESS, TETRA TERRAFAUNA and TETRA SECONDNATURE. In
addition, Warner-Lambert manufactures and/or distributes aquarium products
(including power filters and replacement cartridges, air pumps, heaters, plastic
plants and other accessories) that are marketed largely under the WHISPER and
SECONDNATURE trademarks. These pet care products are promoted to consumers
through cooperative advertising and to retailers through direct promotion and
advertising in trade publications. They are sold to wholesalers for sale to
smaller retailers and directly to larger chain stores and retailers, in each
case for ultimate sale to consumers.
Confectionery Products
The principal products of Warner-Lambert in its Confectionery Products
segment are chewing gums, breath mints and hard candies.
Warner-Lambert manufactures and/or sells, in the United States and/or
internationally, a broad line of chewing gums and breath mints, as well as
specialty candies. Among these products are slab chewing gums (TRIDENT, DENTYNE
and DENTYNE Sugarfree), chunk bubble gums (BUBBLICIOUS and BUBBLICIOUS MONDO),
center-filled gums (BUBBALOO and FRESHEN-UP), candy-coated gums (CHICLETS,
CHICLETS TINY SIZE and CLORETS) and stick gums (CLORETS, CINN*A*BURST,
MINT*A*BURST and FRUIT*A*BURST). The breath mint line includes CERTS, Sugarfree
CERTS, Sugarfree CERTS Mini-Mints, CERTS Extra Flavor and CLORETS. In 1994,
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Warner-Lambert introduced a line of hard candies called FRUIT WAVES under the
OCEAN SPRAY trademark.
Warner-Lambert's confectionery products are promoted directly to the
consumer primarily through consumer advertising and in-store promotion programs.
They are sold directly to chain and independent food stores, chain pharmacies
and mass merchandisers or through candy and tobacco wholesalers and to other
miscellaneous outlets which in turn sell to consumers.
In June 1994, Warner-Lambert acquired Saila S.p.A., a privately held
confectionery company based in Italy, for a purchase price of approximately $66
million.
Other: In December 1994, Warner-Lambert sold substantially all of the
intellectual property relating to the Novon business, specialty polymers based
upon starch and other fully biodegradable materials. These were virtually all of
the assets remaining after the discontinuation of the operations of the Novon
Products Group in November 1993.
Pharmaceutical Products
The principal products of Warner-Lambert in its Pharmaceutical Products
segment are ethical pharmaceuticals, biologicals and capsules.
Ethical Pharmaceuticals and Biologicals: Warner-Lambert manufactures and/or
sells, in the United States and/or internationally, an extensive line of ethical
pharmaceuticals and biologicals under trademarks and trade names such as
PARKE-DAVIS and GOEDECKE. Among these products are analgesics (PONSTAN, PONSTEL,
EASPRIN, VALORON, VALORON-N, VEGANIN and VALTRAN), anesthetics (KETALAR),
anthelmintics (VANQUIN), anticonvulsants (DILANTIN, ZARONTIN and NEURONTIN),
anti-infectives (CHLOROMYCETIN, COLYMYCIN, DORYX, ERYC, MANDELAMINE and
OMNICEF), antihistamines (BENADRYL), antivaricosities (HEPATHROMBIN), anti-viral
agents (VIRA-A), bronchodilators (CHOLEDYL and CHOLEDYL SA), cardiovascular
products (NOVADRAL, DILZEM, PROCAN SR, ACCUPRIL, ACCUZIDE, ACCURETIC, NITROSTAT
and PIMENOL), cognition drugs for treatment of mild-to-moderate Alzheimer's
disease (COGNEX), dermatologics (BEBEN and UTICORT), prescription hemorrhoidal
preparations (ANUSOL HC), hemostatic agents (THROMBOSTAT), hormonal agents
(PITRESSIN), influenza vaccines (FLUOGEN), lipid regulators (LOPID),
nonsteroidal anti-inflammatories (MECLOMEN), oral contraceptives (LOESTRIN),
oxytocics (PITOCIN), psychotherapeutic products (CETAL RETARD, DEMETRIN and
NARDIL) and urinary analgesics (PYRIDIUM).
Warner-Lambert received approval to market COGNEX (Warner-Lambert's
trademark for tacrine or THA) in the United States in September 1993 and began
to ship the product in late September 1993. During 1994, Warner-Lambert received
marketing approval for COGNEX, the first effective treatment for
mild-to-moderate Alzheimer's disease, in a number of other countries, including
France, Australia and certain countries in South America. Warner-Lambert
received marketing approval of COGNEX in Sweden in February 1995, and
applications for marketing approval of COGNEX in certain other countries are
pending.
Warner-Lambert began marketing NEURONTIN (gabapentin capsules) in the
United States as add-on therapy in the treatment of certain types of adult
epilepsy (i.e., partial seizures, with and without secondary generalization) in
the first quarter of 1994 and in the United Kingdom in the first quarter of
1993. During 1994, Warner-Lambert received marketing approval for NEURONTIN in a
number of other countries, including South Africa, Australia, Sweden, Canada,
France, Ireland, Austria, Switzerland and Germany, and has begun or will begin
to market NEURONTIN in those countries where marketing approval has been
obtained.
Warner-Lambert received its first marketing approval in the world for
OMNICEF in the Philippines in July 1994 and began marketing the product in that
country in January 1995. OMNICEF is a third generation cephalosporin.
PIMENOL (Pirmenol Hydrochloride) was approved by the Ministry of Health in
Japan for the treatment of arrhythmias and was launched in December 1994 in
co-promotion with Dainippon Pharmaceutical Co., Ltd.
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On January 4, 1993, the U.S. patent covering LOPID, a lipid regulator,
expired, subjecting LOPID to generic competition. In December 1992,
Warner-Lambert began marketing gemfibrozil, the generic equivalent of LOPID,
through its Warner Chilcott Laboratories division, as described below. Since
1993, several competitive generic versions of gemfibrozil tablets received
marketing approval in the United States. As a result, combined worldwide sales
of LOPID and gemfibrozil declined substantially in 1993 and 1994, and are
expected to decline further in 1995.
Warner-Lambert's pharmaceutical products are promoted for the most part
directly to health care professionals through personal solicitation of doctors
and other professionals by sales representatives with scientific training,
direct mail contact and advertising in professional journals. They are sold
either directly or through wholesalers to government agencies, chain and
independent retail pharmacies, hospitals, clinics, long-term care facilities,
mail order houses and health maintenance organizations. Sales to managed care
entities have become an increasingly large part of Warner-Lambert's domestic
pharmaceutical sales. The Company estimates that more than 50% of pharmaceutical
sales in the United States during 1994 were made to managed care entities
(including government agencies and hospitals). In 1994, Warner-Lambert also
announced that it would increase its efforts in the managed care market through
the formation of a marketing organization directed toward specific disease and
health care areas. For further discussion of Warner-Lambert's ethical products,
see 'Item 1. Business -- Regulation' below.
Warner-Lambert has a separate division, Warner Chilcott Laboratories, which
is dedicated solely to the generic drug business. Warner Chilcott Laboratories
is a manufacturer and/or marketer of 72 generic drugs, including gemfibrozil,
carbamazapine chewable, hydrocodone bitartrate with acetaminophen, nitroglycerin
patch, potassium chloride ER, sulindac, and a line of generic antibiotics,
including ampicillin, amoxicillin, penicillin, cephalexin and minocycline. These
products are promoted directly to the pharmacy community. They are sold either
directly or through wholesalers to government agencies, chain and independent
retail pharmacies, hospitals, clinics, managed care entities, mail order houses
and health maintenance organizations.
Capsules: Warner-Lambert is the leading worldwide producer of empty
hard-gelatin capsules used by pharmaceutical companies for their production of
encapsulated products. These capsules are used by Warner-Lambert or manufactured
by Warner-Lambert according to the specifications of each of its customers and
are sold under such trademarks as CAPSUGEL, CONI-SNAP and SNAP-FIT.
INTERNATIONAL OPERATIONS
Although Warner-Lambert has globalized most of its organization on a
segment basis, Warner-Lambert's international businesses are carried on
principally through subsidiaries and branches, which are generally staffed and
managed by citizens of the countries in which they operate. Approximately 23,500
of Warner-Lambert's employees are located outside the United States and only a
small number of such employees are United States citizens. Certain of the
products described above are manufactured and marketed solely in the United
States and certain other products are manufactured and marketed solely in one or
more foreign countries.
International sales to unaffiliated customers in 1994 amounted to
approximately 54% of the Company's worldwide sales. International sales do not
include sales of products exported from the U.S., which sales represent less
than 1% of total U.S. sales. The seven largest markets with respect to the
distribution of Warner-Lambert products sold outside the United States during
1994 were Japan, Germany, Canada, the United Kingdom, France, Mexico and Italy.
Sales in these markets accounted for approximately 64% of Warner-Lambert's
international sales, with no one country accounting for more than 17% of
international sales.
In 1994, Warner-Lambert announced that it will make an initial capital
investment of approximately $30 million over the next three years to establish a
confectionery and consumer health care products operation in the Peoples'
Republic of China. Through a joint venture with a Chinese partner, Warner-
Lambert intends to construct and operate a manufacturing facility in Guangzhou.
This facility will initially produce confectionery products which will be sold
both in China and exported.
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In accordance with customary market conditions, sales made outside the
United States are generally made on longer terms of payment than would be
customary in the United States. In addition, international operations are
subject to certain risks inherent in carrying on business abroad, including
possible nationalization, expropriation and other governmental action, as well
as fluctuations in currency exchange rates. The likelihood of such occurrences
varies from country to country and is not predictable. However, the Company
believes that its geographic diversity minimizes exposure to currency
fluctuations resulting in one or more foreign countries. Although the
devaluation of the Mexican peso in December 1994 will have an impact on the
Company's 1995 results of operations, the Company believes that such impact will
not be material.
RESTRUCTURING
In November 1993, Warner-Lambert announced a program covering the
rationalization of manufacturing facilities, principally in North America,
including the eventual closing of seven plants, an organizational restructuring
and related workforce reductions of approximately 2,800 positions over the next
several years. For further discussion of Warner-Lambert's restructuring, see
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Restructuring' and Note 3 to the Company's consolidated financial
statements, contained in Warner-Lambert's 1994 Annual Report and incorporated
herein by reference.
COMPETITION
Most markets in which Warner-Lambert is engaged are highly competitive and
characterized by substantial expenditures in the advertising and promotion of
new and existing products. In addition, there is intense competition in research
and development in all of Warner-Lambert's industry segments. No material part
of the business of any of Warner-Lambert's industry segments is dependent upon
one or a few customers.
MATERIALS AND SUPPLIES
Warner-Lambert's products, in general, are produced and packaged at its own
facilities. Other than certain Warner Wellcome products manufactured by
Wellcome, certain products manufactured by Glaxo, certain generic drug products
and certain pet products, relatively few items are manufactured in whole or in
part by outside suppliers. Raw materials and packaging supplies are purchased
from a variety of outside suppliers. Although the Company, in an effort to
achieve cost savings, is consolidating its sources of supply, the Company does
not believe that the loss of any one source of supply of such materials and
supplies would have a material effect on the business of any of Warner-Lambert's
industry segments. Warner-Lambert seeks to protect against fluctuating costs and
to assure availability of raw materials and packaging supplies by, among other
things, locating alternative sources of supply and, in some instances, making
selective advance purchases.
TRADEMARKS AND PATENTS
Warner-Lambert's major trademarks are protected by registration in the
United States and other countries where its products are marketed.
Warner-Lambert believes these trademarks are important to the marketing of the
related products and acts to protect them from infringement. Warner-Lambert owns
many patents and has many patent applications pending in the patent offices of
the United States and other countries. Although a number of products and product
lines have patent protection that is significant in the marketing of such
products, the management of Warner-Lambert does not consider that any single
patent or related group of patents is material to Warner-Lambert's business as a
whole or any of its industry segments.
Legislation enacted during 1994 in the United States in order to implement
the General Agreement on Tariffs and Trade has changed the term of U.S. patents
filed after June 8, 1995 and has lengthened the term of some granted patents
existing on June 8, 1995. It is not clear what the impact of this legislation on
Warner-Lambert will be.
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RESEARCH AND DEVELOPMENT
Warner-Lambert employs over 2,000 scientific and technical personnel in
research and development activities at various research facilities located in
the United States and in foreign countries. Warner-Lambert invested
approximately $456 million in research and development in 1994, compared with
$465 million in 1993 and $473 million in 1992. Approximately eighty-one percent
(81%) of Warner-Lambert's 1994 research and development spending was for
research and development related to pharmaceutical products. Warner-Lambert
believes research and development activities are essential to its business and
intends to continue such activities.
EMPLOYEES
At December 31, 1994, approximately 36,000 people were employed by
Warner-Lambert throughout the world.
REGULATION
Warner-Lambert's business is subject to varying degrees of governmental
regulation in the countries in which it manufactures and distributes products,
and the general trend in these countries is toward more stringent regulation.
In the United States, the food, drug and cosmetic industries have been
subject to regulation by various federal, state and local agencies with respect
to product safety and effectiveness, manufacturing and advertising and labeling.
Accordingly, from time to time, with respect to particular products under
review, such agencies may require Warner-Lambert to participate in meetings,
whether public or private, to address safety, efficacy, manufacturing and/or
regulatory issues, to conduct additional testing or to modify its advertising
and/or labeling.
During the third quarter of 1993, a consent decree with the FDA was entered
into by Warner-Lambert and two of its principal officers, covering issues
related to compliance with manufacturing and quality procedures. The decree is a
court-approved agreement that primarily requires Warner-Lambert to certify that
laboratory and/or manufacturing procedures at its pharmaceutical manufacturing
facilities in the United States and Puerto Rico meet current Good Manufacturing
Practices established by the FDA. Under the terms of the decree, Warner-Lambert
was permitted to ship inventory existing at the time of entry of the decree of
most of its products, and has been permitted to continue to manufacture and ship
prescription medications deemed medically necessary while the certification
process is ongoing. The manufacture and distribution of its remaining products
was suspended pending completion of certain certification procedures. Relevant
laboratories in all United States plants have been certified and
Warner-Lambert's manufacturing facilities in the mainland United States quickly
resumed substantially full operations. Most prescription products manufactured
at the two Puerto Rico facilities were deemed medically necessary and
experienced no significant interruption in supply, and the production of certain
other products has been transferred from those facilities to mainland U.S.
facilities or sourced from third parties. Although there are several
prescription products that have not yet returned to the market or have been
withdrawn, most of those pharmaceutical products which the Company intends to
continue manufacturing and/or marketing have returned to full manufacture and
distribution. Warner-Lambert continues to make progress in resolving the issues
related to this matter. Warner-Lambert is working with the FDA to complete
facility certification for the Vega Baja and Fajardo plants in Puerto Rico. The
certification for the pharmaceutical portion of Warner-Lambert's manufacturing
facility at Vega Baja, Puerto Rico was accepted by the FDA in February 1995. It
is not possible to predict when certifications for the other manufacturing
facilities in Puerto Rico will be accepted by the FDA, although Warner-Lambert
is actively working with outside experts and the FDA to accomplish this as soon
as possible. Compliance with FDA restrictions, including the consent decree,
resulted in an estimated aggregate loss of sales revenue of approximately $135
million in 1993, which lost sales revenue continued in 1994. Most of these sales
will never be recovered.
The FDA's Application Integrity Policy ('AIP') was applied to
Warner-Lambert's Fajardo and Vega Baja, Puerto Rico facilities in September
1992, due to discrepancies found in data generated at those facilities. Pursuant
to the AIP, Warner-Lambert, through independent experts in pharmaceutical
7
<PAGE>
manufacturing, has conducted validity assessments of certain FDA filings made
with respect to certain products manufactured or to be manufactured at its
facilities in Vega Baja and Fajardo, Puerto Rico. The FDA has deferred
substantive scientific reviews of pending NDA's and Abbreviated New Drug
Applications ('ANDA's') for products to be manufactured at these facilities
(including the oral contraceptive ESTROSTEP), and for supplements to NDA's or
ANDA's for products currently manufactured at these facilities, while the
Company is subject to the AIP. The FDA did not suspend review of two medically
important drugs, COGNEX (tacrine) and NEURONTIN (gabapentin), discussed above
under the caption 'Item 1. Business Segments -- Pharmaceutical Products', both
of which obtained U.S. marketing approval in 1993. Warner-Lambert has pledged
its full cooperation, has actively worked with the FDA and continues to engage
in discussions with the FDA in order to resolve all issues relating to this
matter. In 1994 and 1995, Warner-Lambert filed all the expert validity
assessments that had not yet been filed, except for one supplemental report,
which is expected to be submitted in April 1995. The Company also submitted a
Corrective Action Operating Plan to the FDA in December 1994, which outlines
corrective actions that have been or will be implemented in response to the
validity assessments. The FDA is currently inspecting the Company's Vega Baja,
Puerto Rico pharmaceutical facility and will inspect the other Puerto Rico
pharmaceutical facility prior to lifting the AIP. It is not possible to predict
when or whether the AIP will be lifted or whether the FDA will take additional
action.
Regulatory requirements concerning the research and development of drug
products have increased in complexity and scope in recent years. This has
resulted in a substantial increase in the time and expense required to bring new
products to market. At the same time, the FDA requirements for approval of
generic drugs (drugs containing the same active chemical as an innovator's
product) have been decreased by the adoption of abbreviated new drug approval
procedures for most generic drugs. Generic versions of many of Warner-Lambert's
products in the Pharmaceutical Products segment are being marketed in the U.S.,
and generic substitution legislation, which permits a pharmacist to substitute a
generic version of a drug for the one prescribed, has been enacted in some form
in all states. These factors have resulted in increased competition from generic
manufacturers in the market for ethical products. For example, LOPID has been
subject to this increased competition following the expiration of its patent on
January 4, 1993, as discussed above under the caption 'Item 1. Business
Segments -- Pharmaceutical Products'.
Federal legislation enacted in late 1990 prohibits the expenditure of
federal Medicaid funds for outpatient drugs of manufacturers that do not agree
to pay specified rebates. Similar legislation has been enacted in several states
extending rebates to state administered non-Medicaid programs. Warner-Lambert
has been adhering to such rebate programs and other related rebate programs and
has incurred rebate expenses of approximately $65 million, $57 million and $37
million in 1994, 1993 and 1992, respectively. However, Warner-Lambert does not
believe such rebate expenses have had, or will have, a material adverse effect
upon its financial position.
As a result of the failure of the Clinton Administration's proposed health
care plan to be adopted during 1994, the immediate threat of health care reform
and related price controls, which would have had negative implications for the
pharmaceutical industry, has diminished. However, as a result of the 1995
phase-in of U.S. tax law changes enacted in 1993 and expected changes in the
Company's global profit composition, Warner-Lambert anticipates that its
effective tax rate will increase in 1995 by several percentage points.
The regulatory agencies under whose purview Warner-Lambert operates have
administrative and legal powers that may subject Warner-Lambert and its products
to seizure actions, product recalls and other civil and criminal actions. They
may also subject the industry to emergency regulatory requirements.
Warner-Lambert's policy is to comply fully with all regulatory requirements. It
is impossible to predict, however, what effect, if any, these matters or any
pending or future legislation, regulations or governmental actions may have on
the conduct of Warner-Lambert's business in the future.
In most of the foreign countries where Warner-Lambert does business, it is
subject to a regulatory and legislative climate similar to or more restrictive
than that described above. The Company can not predict whether or what type of
measures will be encountered in the future.
8
<PAGE>
ENVIRONMENT
Warner-Lambert is responsible for compliance with a number of environmental
laws and regulations. Warner-Lambert maintains control systems designed to
assure compliance in all material respects with environmental laws and
regulations, including environmental policies and maintenance of a worldwide
audit program to assure compliance with environmental regulations.
Warner-Lambert is involved in various administrative or judicial
proceedings related to environmental actions initiated by the Environmental
Protection Agency under the Comprehensive Environmental Response, Compensation
and Liability Act (also known as Superfund) or by state authorities under
similar state legislation, or by third parties. For some of the sites, other
parties (defined as potentially responsible parties) may be jointly and
severally responsible, along with Warner-Lambert, to pay remediation and other
related expenses. For other sites -- for example, those sites which
Warner-Lambert currently owns or previously owned -- Warner-Lambert may be the
sole party responsible for clean-up costs. While it is not possible to predict
with certainty the outcome of such matters or the total cost of remediation, the
management of Warner-Lambert believes it is unlikely that their ultimate
disposition will have a material adverse effect on Warner-Lambert's financial
position, liquidity, cash flow or results of operations for any year. Actions
with respect to environmental programs and compliance result in operating
expenses and capital expenditures. Warner-Lambert's capital expenditures with
respect to environmental programs and compliance in 1994 were not, and in 1995
are not expected to be, material to the business of Warner-Lambert.
For additional information relating to environmental matters, see 'Item 3.
Legal Proceedings' and Note 19 to the consolidated financial statements,
'Environmental Liabilities', on pages 46 through 47 of the Warner-Lambert 1994
Annual Report, incorporated herein by reference.
ITEM 2. PROPERTIES.
The executive offices of Warner-Lambert are located in Morris Plains, New
Jersey. In the United States, including Puerto Rico, Warner-Lambert owns
facilities aggregating approximately 6,900,000 square feet and leases facilities
having an aggregate of approximately 853,000 square feet.
Warner-Lambert's U.S. manufacturing plants are located in Lititz,
Pennsylvania (pharmaceuticals and consumer health care); Rockford, Illinois
(confectionery and consumer health care); Rochester, Michigan (pharmaceuticals);
Holland, Michigan (pharmaceuticals); Morris Plains, New Jersey
(pharmaceuticals); Greenwood, South Carolina (capsules); Milford, Connecticut
(razors and blades); Oakland, New Jersey (pet care products); and Blacksburg,
Virginia (pet care products). Warner-Lambert Inc., a wholly-owned subsidiary of
Warner-Lambert operating in Puerto Rico, has plants located in Fajardo
(pharmaceuticals); and Vega Baja (pharmaceuticals, consumer health care and
confectionery).
In connection with the restructuring discussed above under the caption
'Item 1. Business -- Restructuring', Warner-Lambert closed its Carolina, Puerto
Rico confectionery manufacturing plant during 1994, and sold it in February
1995.
In the United States, Warner-Lambert currently distributes its various
products through its manufacturing plants and two primary distribution centers
located in Lititz, Pennsylvania and Elk Grove, Illinois. Principal U.S. research
facilities are located in Ann Arbor, Michigan (pharmaceuticals) and Morris
Plains, New Jersey (pharmaceuticals, consumer health care and confectionery).
Internationally, Warner-Lambert owns, leases or operates, through its
subsidiaries or branches, 72 production facilities in 34 countries. Principal
international manufacturing plants are located in Germany, the United Kingdom,
Belgium, Italy, Canada, Mexico, Hong Kong, Japan, Ireland, Spain, France,
Brazil, Venezuela and Australia. Principal international research facilities are
located in Germany, Japan, the United Kingdom and Canada.
As discussed above under the heading 'Item 1. Business -- International
Operations', Warner-Lambert announced in 1994 that it will make an initial
capital investment of approximately $30 million over the next three years to
establish a confectionery and consumer health care products operation and to
construct a manufacturing facility in Guangzhou, China.
9
<PAGE>
In order to increase efficiency and to lower its cost of goods sold,
Warner-Lambert, over a number of years and at significant cost, has consolidated
many of its plants and facilities around the world. This has often resulted in
the production of pharmaceutical products, consumer health care products and/or
confectionery products at a single facility.
Warner-Lambert's facilities are generally in good operating condition and
repair and at present are adequately utilized within reasonable limits. Leases
are not material to the business of Warner-Lambert taken as a whole.
For information regarding the organizational restructuring and plant
rationalization announced by Warner-Lambert in November 1993, see 'Item 1.
Business -- Restructuring' above.
ITEM 3. LEGAL PROCEEDINGS.
For a discussion of Warner-Lambert's consent decree with the U.S. FDA,
covering issues related to compliance with current Good Manufacturing Practices
established by the FDA, and other regulatory matters, see above under 'Item 1.
Business -- Regulation'. For additional information relating to environmental
matters see above under 'Item 1. Business -- Environment'.
Warner-Lambert and certain present and former employees were served with
subpoenas in 1993 by the U.S. Attorney's office in Maryland, which is conducting
an inquiry relating to compliance with FDA regulations, to produce records
and/or appear before a federal grand jury in Baltimore. Warner-Lambert is
cooperating with the inquiry and cannot predict what the outcome of the
investigation will be.
In September 1993, Warner-Lambert received a Complaint and Compliance Order
from the Environmental Protection Agency ('EPA') seeking penalties of $268,000
for alleged violations of the Resource Conservation and Recovery Act, Boilers
and Industrial Furnace regulations. Warner-Lambert is contesting the allegations
contained within the Complaint and has entered into negotiations with the EPA in
an attempt to resolve these issues. Although it is too early to predict the
outcome of this action, Warner-Lambert does not at present expect this
litigation to have a material adverse effect on its financial position,
liquidity, cash flow or results of operations.
Beginning in late 1993, Warner-Lambert, along with numerous other
pharmaceutical manufacturers and wholesalers, has been sued in a number of state
and federal antitrust lawsuits by retail pharmacies seeking treble damages and
injunctive relief. These actions arise from alleged price discrimination by
which the defendant drug companies, acting alone or in concert, are alleged to
have favored institutions, managed care entities, mail order pharmacies and
other buyers with lower prices for brand name prescription drugs than those
afforded to plaintiff retailers. The federal cases have been consolidated by the
Judicial Panel on Multidistrict Litigation and transferred to the U.S. District
Court for the Northern District of Illinois for pre-trial proceedings. The state
cases pending in California have been coordinated in the Superior Court of
California, County of San Francisco. Warner-Lambert has also been named as a
defendant in actions in state courts in Alabama, Minnesota and Wisconsin brought
by classes of pharmacies, each arising from the same allegations of price
discrimination. In addition, the Company is named in a class action complaint in
King County, Washington, brought by a class of consumers who purchased brand
name prescription drugs at retail pharmacies. This case also arises from the
same allegations of price discrimination. Warner-Lambert believes that these
actions are without merit and will defend itself vigorously. Although it is too
early to predict the outcome of these actions, Warner-Lambert does not at
present expect this litigation to have a material adverse effect on its
financial position, liquidity, cash flow or results of operations.
In November 1994, Warner-Lambert received an enforcement action letter and
draft complaint from the Department of Justice alleging violation of the Clean
Water Act with regard to operation of the wastewater treatment plant at its Vega
Baja, Puerto Rico facility. Warner-Lambert is engaged in settlement negotiations
with the Department with respect to this matter and is continuing to work with
the EPA, Region II, to bring the facility into compliance with limits
established in a discharge permit. Although it is too early to predict the
outcome of this action, Warner-Lambert does not expect this action to have a
material adverse effect on its financial position, liquidity, cash flow or
results of operations.
10
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the executive officers of Warner-Lambert as of
March 1, 1995 is set forth below:
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- ----------------------------------------- --- -------------------- --------------------------------------
<S> <C> <C> <C>
Melvin R. Goodes......................... 59 Chairman of the Chairman of the Board and Chief
Board and Chief Executive Officer (since August
Executive Officer; 1991); President and Chief Operating
Director Officer (July 1985 -- July 1991)
Lodewijk J. R. de Vink................... 50 President and Chief President and Chief Operating Officer
Operating Officer; (since August 1991); Executive Vice
Director President and President, U.S.
Operations (April 1990 -- July
1991); Vice President and President,
International Operations (October
1988 -- March 1990)
John F. Walsh............................ 52 Executive Vice Executive Vice President (since
President January 1991); President, Consumer
Healthcare Sector (since December
1994); President, Consumer Products
Sector (January 1992 -- December
1994); Vice President (November
1986 -- December 1990); President,
International Operations (March
1990 -- December 1991); President,
Canada/Latin America Group (March
1989 -- March 1990)
Ernest J. Larini......................... 52 Vice President and Vice President and Chief Financial
Chief Financial Officer (since November 1992); Vice
Officer President, Financial Administration
(June 1992 -- October 1992); Vice
President and Controller (May
1990 -- May 1992); Treasurer
(February 1988 -- April 1990)
J. Frank Lazo............................ 47 Vice President Vice President (since April 1990);
President, Confectionery Sector
(since December 1994); President,
Latin America/ Asia/Australia/Middle
East/Africa Group (January 1992 --
December 1994); President, Latin
America/Asia/Australia Group (July
1991 -- December 1991); President,
Canada/Latin America Group (April
1990 -- July 1991); Regional
President, Brazil/Chile/Peru/Uruguay
(October 1988 -- March 1990)
</TABLE>
(table continued on next page)
11
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- ----------------------------------------- --- -------------------- --------------------------------------
<S> <C> <C> <C>
Ronald M. Cresswell, Ph.D................ 60 Vice President Vice President (since May 1988);
Chairman, Parke-Davis Research
(since November 1989); President,
Parke-Davis Research (May 1988 --
November 1989)
Pedro M. Cuatrecasas, M.D................ 58 Vice President Vice President (since October 1989);
President, Parke-Davis Research
(since October 1989)
Raymond M. Fino.......................... 52 Vice President Vice President, Human Resources (since
January 1985)
George L. Fotiades....................... 41 Vice President Vice President (since November 1992);
President, Warner Wellcome Consumer
Healthcare U.S.A. (since January
1994); President, Consumer Health
Products Group (November 1992 --
January 1994); President, Consumer
Products, Japan, Bristol-Myers
Squibb Company (January
1992 -- November 1992); Senior Vice
President, General Manager, Clairol
U.S., Bristol-Myers Squibb (January
1991 -- January 1992); Senior Vice
President, Boyle-Midway, American
Home Products (August
1988 -- December 1990)
William F. Gilroy........................ 58 Vice President and Vice President (since February 1985);
Controller Controller (since June 1992); Vice
President, Finance Administration
(January 1992 -- June 1992); Vice
President, Finance Administration,
International Operations (February
1988 -- December 1991)
Philip M. Gross.......................... 53 Vice President Vice President (since January 1990);
Vice President, Strategic Management
Processes (since January 1994);
President, Novon Products Group
(January 1990 -- January 1994)
Gregory L. Johnson....................... 48 Vice President and Vice President and General Counsel
General Counsel (since October 1983)
</TABLE>
(table continued on next page)
12
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- ----------------------------------------- --- -------------------- --------------------------------------
<S> <C> <C> <C>
Surinder Kumar, Ph.D..................... 50 Vice President Vice President (since October 1993);
President, Consumer Products
Research & Development (since
October 1992); Senior Vice
President, Research & Development,
Pepsico, Inc. (February 1990 --
October 1992); Vice President,
Research & Development, Pepsico,
Inc. (February 1988 -- February
1990)
Bertil R. Lang........................... 53 Vice President Vice President (since January 1992);
President, Parke-Davis, Europe
(since January 1992); Regional
President, Germany/Austria/
Switzerland (March 1989 --
December 1991); Regional
President, Germany (April
1986 -- March 1989)
F. Phillip Milhomme...................... 58 Vice President Vice President (since January 1992);
President, Confectionery Products,
Europe/Middle East/Africa
(since December 1994); President,
Consumer Products, Europe
(January 1992 -- December 1994);
President, Middle East/Africa/Europe
(September 1989 -- December 1991)
S. Morgan Morton......................... 55 Vice President Vice President (since January 1994);
President, Shaving Products Group
(since September 1993); President,
Schick (January 1992 -- September
1993); President, Warner-Lambert
Canada (January 1988 -- January
1992)
Harold F. Oberkfell...................... 48 Vice President Vice President (since January 1992);
President, Latin America/Asia Sector
(since February 1995); President,
Parke-Davis, North America (January
1992 -- February 1995); Vice
President, Parke-Davis Marketing and
Sales (July 1986 -- December 1991)
Joseph E. Smith.......................... 55 Vice President Vice President, External Relations
(since January 1994); Executive Vice
President (January 1991 -- January
1994); President, Pharmaceutical
Sector (January 1992 -- January
1994); Vice President (March
1989 -- December 1990); President,
Parke-Davis Group (March
1989 -- December 1991)
</TABLE>
(table continued on next page)
13
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- ----------------------------------------- --- -------------------- --------------------------------------
<S> <C> <C> <C>
Fred G. Weiss............................ 53 Vice President Vice President (since August 1982);
Vice President, Planning, Investment
and Development (since August 1983)
William S. Woodson....................... 60 Vice President and Vice President and Treasurer (since
Treasurer December 1991); Vice President,
Finance, Novon Products Group
(September 1990 -- November 1991);
Vice President, Corporate Control
and Analysis (February 1988 --
September 1990)
Rae G. Paltiel........................... 48 Secretary Secretary (since February 1986)
</TABLE>
All of the above-mentioned officers, with the exception of Mr. Fotiades and
Dr. Kumar, have been employed by Warner-Lambert for the past five years.
Mr. Fotiades has been employed by Warner-Lambert since November 1992. Prior
to that time, Mr. Fotiades had been employed by Bristol-Myers Squibb Company.
From January 1992 to November 1992, Mr. Fotiades held the position of President,
Consumer Products, Japan and from January 1991 to January 1992 he served as
Senior Vice President, General Manager, Clairol U.S., Bristol-Myers Squibb
Company, a multinational health care and consumer products company with sales of
approximately $11 billion in 1992. Prior to his employment with Bristol-Myers
Squibb, he held the position of Senior Vice President, Marketing, Boyle-Midway,
American Home Products Corporation, from August 1988 to December 1990. American
Home Products Corporation, a multinational health care and food products
company, had sales of approximately $6.8 billion in 1990.
Dr. Kumar has been employed by Warner-Lambert since October 1992. Prior to
that time, Dr. Kumar had been employed since January 1982 by Pepsico, Inc. From
February 1990 to October 1992 Dr. Kumar held the position of Senior Vice
President, Research & Development, Pepsi Worldwide Beverage, a subsidiary of
Pepsico, Inc. From February 1988 to February 1990 he held the position of Vice
President, Research & Development, Pepsi Worldwide Beverage. Pepsico, Inc. is in
the beverage, snack food and restaurant business, both domestically and
internationally, with sales of approximately $22 billion in 1992.
None of the above officers has any family relationship with any Director or
with any other officer. Officers are elected by the Board of Directors for a
term of office lasting until the next annual organizational meeting of the Board
of Directors or until their successors are elected and have qualified. No
officer listed above was appointed pursuant to any arrangement or understanding
between such officer and the Board of Directors or any member or members
thereof.
14
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information set forth under the caption 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Shareholder
Information' on page 31 of the Warner-Lambert 1994 Annual Report is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information set forth under the caption 'Five-Year Summary of Selected
Financial Data' on page 32 of the Warner-Lambert 1994 Annual Report is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information set forth under the caption 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' on pages 25 through
31 of the Warner-Lambert 1994 Annual Report is incorporated herein by reference
and should be read in conjunction with the consolidated financial statements and
the notes thereto contained on pages 34 through 48 of the Warner-Lambert 1994
Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of Warner-Lambert and its
subsidiaries, together with the report thereon of Price Waterhouse LLP dated
January 23, 1995, listed in Item 14(a)1 and included in the Warner-Lambert 1994
Annual Report at pages 34 through 48, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
15
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The required information relating to the Warner-Lambert Directors and
nominees is incorporated herein by reference to pages 3 through 7 of the
Warner-Lambert Proxy Statement for the Annual Meeting of Stockholders to be held
on April 25, 1995. Information relating to executive officers of Warner-Lambert
is set forth in Part I of this Form 10-K on pages 11 through 14. Information
relating to compliance with Section 16(a) of the Securities Exchange Act of 1934
is contained in the Proxy Statement, referred to above, at page 9 and such
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to executive compensation is contained in the Proxy
Statement, referred to above in Item 10, at pages 11 through 24 and such
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Information relating to the beneficial ownership of more than five
percent of Warner-Lambert's Common Stock is contained in the Proxy Statement,
referred to above in Item 10, at page 9 and such information is incorporated
herein by reference.
(b) Information relating to security ownership of management is contained
in the Proxy Statement, referred to above in Item 10, at pages 8 through 9 and
such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not Applicable.
16
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) 1. ALL FINANCIAL STATEMENTS
The following items are included in Part II of this report through
incorporation by reference to pages 34 through 48 of the Warner-Lambert
1994 Annual Report:
Consolidated Statements of Income for each of the three years in
the period ended December 31, 1994.
Consolidated Statements of Retained Earnings for each of the
three years in the period ended December 31, 1994.
Consolidated Balance Sheets at December 31, 1994 and 1993.
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1994.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
2. FINANCIAL STATEMENT SCHEDULE
Included in Part IV of this report:
Report of Independent Accountants on Financial Statement Schedule.
Schedule II -- Valuation and Qualifying Accounts and Reserves.
Schedules other than those listed above are omitted because they are
either not applicable or the required information is included
through incorporation by reference to pages 34 through 48 of the
Warner-Lambert 1994 Annual Report.
3. EXHIBITS
(3) Articles of Incorporation and By-Laws.
(a) Restated Certificate of Incorporation of Warner-Lambert Company
filed November 10, 1972, as amended to April 24, 1990
(Incorporated by reference to Warner-Lambert's Current Report on
Form 8-K, dated April 24, 1990).
(b) By-Laws of Warner-Lambert Company, as amended to October 25, 1988
(Incorporated by reference to Warner-Lambert's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1988 (File No.
1-3608)).
(4) Instruments defining the rights of security holders, including
indentures.
(a) Rights Agreement, dated as of June 28, 1988, and amended as of
June 27, 1989, between Warner-Lambert Company and First Chicago
Trust Company of New York, as Rights Agent (Incorporated by
reference to Warner-Lambert's Registration Statement on Form 8-A,
dated June 28, 1988, as amended by Form 8, dated July 5, 1989
(File No. 1-3608)).
(b) Warner-Lambert agrees to furnish to the Commission, upon request,
a copy of each instrument with respect to issues of long-term
debt of Warner-Lambert. The principal amount of debt issues
authorized under each such instrument does not exceed 10% of the
total assets of Warner-Lambert.
(10) Material contracts.
<TABLE>
<S> <C>
(a)* Warner-Lambert Company 1983 Stock Option Plan, as amended to November 26, 1991 (Incorporated
by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
(b)* Warner-Lambert Company 1987 Stock Option Plan, as amended to November 26, 1991 (Incorporated
by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(c)* Warner-Lambert Company 1989 Stock Plan, as amended to November 26, 1991 (Incorporated by
reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(d)* Warner-Lambert Company 1992 Stock Plan, as amended to September 27, 1994 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September
30, 1994).
(e)* Warner-Lambert Company Incentive Compensation Plan, as amended to September 27, 1994
(Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994).
(f)* Warner-Lambert Company Supplemental Pension Income Plan, as amended to September 27, 1994
(Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994).
(g)* Group Plan Participation by Non-employee Directors (Incorporated by reference to
Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(h)* Warner-Lambert Company Directors' Retirement Plan, as amended to June 26, 1990 (Incorporated
by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30,
1990).
(i)* Warner-Lambert Excess Savings Plan, formerly Warner-Lambert Supplemental Savings Plan, as
amended to October 1, 1994 (Incorporated by reference to Warner-Lambert's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994).
(j)* Warner-Lambert Company Executive Severance Plan, as amended to September 27, 1994
(Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994).
(k)* Restricted Stock Plan for Directors of Warner-Lambert Company, as amended to January 28, 1992
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December
31, 1991).
(l)* Employment Agreement dated September 24, 1985 between Warner-Lambert Company and Melvin R.
Goodes, Chairman of the Board and Chief Executive Officer, as amended to August 1, 1991
(Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1991).
(m)* Employment Agreement effective as of August 1, 1991 between Warner-Lambert Company and
Lodewijk J. R. de Vink, President and Chief Operating Officer (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991).
(n)* Consulting Agreement, dated as of September 1, 1991, between Warner-Lambert Company and Joseph
D. Williams, Director (Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal
year ended December 31, 1991).
(o)* Consulting Arrangement between Warner-Lambert Company and B. Charles Ames, Director
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December
31, 1991).
(p)* Consulting Arrangement between Warner-Lambert Company and Paul S. Russell, Director
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December
31, 1991).
(q) Global Principles Agreement, dated as of December 10, 1993, between Warner-Lambert Company and
Glaxo Holdings plc (Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal
year ended December 31, 1993).
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
(r) Global Principles Agreement, dated December 17, 1993, between Warner-Lambert Company and
Wellcome plc (Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year
ended December 31, 1993).
</TABLE>
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) Copy of the Warner-Lambert Company Annual Report for the year ended
December 31, 1994. Such report, except for those portions thereof
which are expressly incorporated by reference herein, is furnished
solely for the information of the Commission and is not to be deemed
'filed' as part of this filing.
(21) Subsidiaries of the registrant.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule (EDGAR filing only).
- ------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Form 10-K pursuant to Item 14(c).
(B) REPORTS ON FORM 8-K
Warner-Lambert did not file any Current Report(s) on Form 8-K with the
Securities and Exchange Commission during the last quarter of the fiscal
year ended December 31, 1994.
Warner-Lambert will furnish to any holder of its securities, upon request
and at a reasonable cost, copies of the Exhibits listed in Item 14.
19
<PAGE>
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of
WARNER-LAMBERT COMPANY
Our audits of the consolidated financial statements referred to in our
report dated January 23, 1995 appearing on page 48 of the 1994 Annual Report to
Shareholders of Warner-Lambert Company (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)2
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
4 Headquarters Plaza North
Morristown, New Jersey
January 23, 1995
20
<PAGE>
SCHEDULE II
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND SHAREHOLDERS' AT END
DESCRIPTION OF YEAR EXPENSES EQUITY DEDUCTIONS OF YEAR
- --------------------------------------------------- ---------- ---------- ------------- ---------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Allowance for doubtful accounts............... $ 20.5 $ 4.4 $ -- $ 3.1 $ 21.8
Allowance for deferred tax assets (a)......... 108.9 14.9 -- 32.2 91.6
Unrealized fair market value adjustment for
'available for sale' securities (b)......... -- -- 2.9 -- 2.9
---------- ---------- ----- ---------- -------
$129.4 $ 19.3 $2.9 $35.3 $116.3
---------- ---------- ----- ---------- -------
---------- ---------- ----- ---------- -------
Year ended December 31, 1993:
Allowance for doubtful accounts............... $ 18.6 $ 2.9 $ -- $ 1.0 $ 20.5
Allowance for deferred tax assets (c)......... -- 108.9 -- -- 108.9
---------- ---------- ----- ---------- -------
$ 18.6 $111.8 $ -- $ 1.0 $129.4
---------- ---------- ----- ---------- -------
---------- ---------- ----- ---------- -------
Year ended December 31, 1992:
Allowance for doubtful accounts............... $ 15.3 $ 6.3 $ -- $ 3.0 $ 18.6
---------- ---------- ----- ---------- -------
---------- ---------- ----- ---------- -------
</TABLE>
- ------------
(a) Additions primarily represent valuation allowances for foreign capital loss
carryforwards. Deductions are primarily due to improved profitability in
European operations which resulted in the realization of some of the
deferred tax assets associated with the 1991 restructuring (see Note 15 to
the consolidated financial statements).
(b) Reflects a fair market value adjustment for 'available for sale' securities
resulting from the adoption of Statement of Financial Accounting Standards
(SFAS) No. 115, 'Accounting for Certain Investments in Debt and Equity
Securities.'
(c) The addition of $108.9 reflects $92.0 for the adoption of SFAS No. 109,
'Accounting for Income Taxes,' as of January 1, 1993 and $16.9 for 1993
additions (see Note 15 to the consolidated financial statements).
21
<PAGE>
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
<TABLE>
<S> <C>
Dated as of March 20, 1995 By /s/ MELVIN R. GOODES
.........................................................
Melvin R. Goodes
Chairman of the Board
and Chief Executive Officer
</TABLE>
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.
<TABLE>
<S> <C> <C>
/s/ MELVIN R. GOODES
By ................................................
Melvin R. Goodes
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
and Director
/s/ ERNEST J. LARINI
By ................................................
Ernest J. Larini
Vice President and Chief
Financial Officer
(Principal Financial Officer)
/s/ WILLIAM F. GILROY
By ................................................
William F. Gilroy
Vice President and Controller
(Principal Accounting Officer) March 20, 1995
/s/ B. CHARLES AMES
By ................................................
B. Charles Ames, Director
/s/ DONALD C. CLARK
By ................................................
Donald C. Clark, Director
/s/ LODEWIJK J. R. DE VINK
By ................................................
Lodewijk J. R. de Vink, Director
/s/ JOHN A. GEORGES
By ................................................
John A. Georges, Director
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C>
/s/ WILLIAM H. GRAY III
By ................................................
William H. Gray III, Director
/s/ WILLIAM R. HOWELL
By ................................................
William R. Howell, Director
/s/ LASALLE D. LEFFALL, JR.
By ................................................
LaSalle D. Leffall, Jr., M.D., Director
/s/ PATRICIA SHONTZ LONGE
By ................................................
Patricia Shontz Longe, Ph.D., Director March 20, 1995
/s/ LAWRENCE G. RAWL
By ................................................
Lawrence G. Rawl, Director
/s/ PAUL S. RUSSELL
By ................................................
Paul S. Russell, M.D., Director
/s/ MICHAEL I. SOVERN
By ................................................
Michael I. Sovern, Director
/s/ JOSEPH D. WILLIAMS
By ................................................
Joseph D. Williams, Director
</TABLE>
23
<PAGE>
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as ........... 'r'
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C> <C>
(3) Articles of Incorporation and By-Laws.
(a) Restated Certificate of Incorporation of Warner-Lambert Company filed November 10, 1972, as amended
to April 24, 1990 (Incorporated by reference to Warner-Lambert's Current Report on Form 8-K, dated
April 24, 1990).
(b) By-Laws of Warner-Lambert Company, as amended to October 25, 1988 (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988 (File No.
1-3608)).
(4) Instruments defining the rights of security holders, including indentures.
(a) Rights Agreement, dated as of June 28, 1988, and amended as of June 27, 1989, between
Warner-Lambert Company and First Chicago Trust Company of New York, as Rights Agent (Incorporated
by reference to Warner-Lambert's Registration Statement on Form 8-A, dated June 28, 1988, as
amended by Form 8, dated July 5, 1989 (File No. 1-3608)).
(b) Warner-Lambert agrees to furnish to the Commission, upon request, a copy of each instrument with
respect to issues of long-term debt of Warner-Lambert. The principal amount of debt issues
authorized under each such instrument does not exceed 10% of the total assets of Warner-Lambert.
(10) Material contracts.
(a) Warner-Lambert Company 1983 Stock Option Plan, as amended to November 26, 1991 (Incorporated by
reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(b) Warner-Lambert Company 1987 Stock Option Plan, as amended to November 26, 1991 (Incorporated by
reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(c) Warner-Lambert Company 1989 Stock Plan, as amended to November 26, 1991 (Incorporated by reference
to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(d) Warner-Lambert Company 1992 Stock Plan, as amended to September 27, 1994 (Incorporated by reference
to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994).
(e) Warner-Lambert Company Incentive Compensation Plan, as amended to September 27, 1994 (Incorporated
by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30,
1994).
(f) Warner-Lambert Company Supplemental Pension Income Plan, as amended to September 27, 1994
(Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994).
(g) Group Plan Participation by Non-employee Directors (Incorporated by reference to Warner-Lambert's
Form 10-K for the fiscal year ended December 31, 1991).
(h) Warner-Lambert Company Directors' Retirement Plan, as amended to June 26, 1990 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30, 1990).
(i) Warner-Lambert Excess Savings Plan, formerly Warner-Lambert Supplemental Savings Plan, as amended
to October 1, 1994 (Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994).
(j) Warner-Lambert Company Executive Severance Plan, as amended to September 27, 1994 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30,
1994).
(k) Restricted Stock Plan for Directors of Warner-Lambert Company, as amended to January 28, 1992
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31,
1991).
(l) Employment Agreement dated September 24, 1985 between Warner-Lambert Company and Melvin R. Goodes,
Chairman of the Board and Chief Executive Officer, as amended to August 1, 1991 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30,
1991).
(m) Employment Agreement effective as of August 1, 1991 between Warner-Lambert Company and Lodewijk J.
R. de Vink, President and Chief Operating Officer (Incorporated by reference to Warner-Lambert's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1991).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C> <C>
(n) Consulting Agreement, dated as of September 1, 1991, between Warner-Lambert Company and Joseph D.
Williams, Director (Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year
ended December 31, 1991).
(o) Consulting Arrangement between Warner-Lambert Company and B. Charles Ames, Director (Incorporated
by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(p) Consulting Arrangement between Warner-Lambert Company and Paul S. Russell, Director (Incorporated
by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991).
(q) Global Principles Agreement, dated as of December 10, 1993, between Warner-Lambert Company and
Glaxo Holdings plc (Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year
ended December 31, 1993).
(r) Global Principles Agreement, dated December 17, 1993, between Warner-Lambert Company and Wellcome
plc (Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31,
1993).
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) Copy of the Warner-Lambert Company Annual Report for the year ended December 31, 1994. Such report,
except for those portions thereof which are expressly incorporated by reference herein, is furnished
solely for the information of the Commission and is not to be deemed 'filed' as part of this filing.
(21) Subsidiaries of the registrant.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule (EDGAR filing only).
</TABLE>
<PAGE>
EXHIBIT 12
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1994 1993 1992 1991 1990
-------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings before income taxes and accounting changes.... $ 913.1 $318.5 $858.2 $221.5 $680.7
Add:
Interest on indebtedness -- excluding amount
capitalized 93.7 64.2 80.8 58.2 68.7
Amortization of debt expense...................... .4 .5 .6 .4 .3
Interest factor in rent expense(a)................ 26.2 25.4 23.4 22.3 20.6
-------- ------ ------ ------ ------
Adjusted Earnings............................ $1,033.4 $408.6 $963.0 $302.4 $770.3
-------- ------ ------ ------ ------
-------- ------ ------ ------ ------
Fixed Charges:
Interest on indebtedness.......................... $ 93.7 $ 64.2 $ 80.8 $ 58.2 $ 68.7
Capitalized interest.............................. 9.4 8.6 8.1 9.4 5.2
Amortization of debt expense...................... .4 .5 .6 .4 .3
Interest factor in rent expense(a)................ 26.2 25.4 23.4 22.3 20.6
-------- ------ ------ ------ ------
Total Fixed Charges.......................... $ 129.7 $ 98.7 $112.9 $ 90.3 $ 94.8
-------- ------ ------ ------ ------
-------- ------ ------ ------ ------
Ratio of earnings to fixed charges..................... 8.0 4.1(b) 8.5 3.3(c) 8.1
-------- ------ ------ ------ ------
-------- ------ ------ ------ ------
</TABLE>
- ------------
(a) Represents one third of rental expense, which the company believes is a
reasonable approximation.
(b) The company's ratio of earnings to fixed charges for 1993 would have been
9.5 excluding the restructuring charge of $525.2 million.
(c) The company's ratio of earnings to fixed charges for 1991 would have been
9.4 excluding the restructuring charge of $544.0 million.
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Net Sales
- ---------
Worldwide sales for 1994 were $6,417 million compared to $5,794
million in 1993, an 11 percent increase. Sales growth of
approximately 7 percent was from the full-year reporting impact
of businesses acquired in 1993 and sales of approximately $320
million in 1994 from products contributed by Wellcome plc
("Wellcome") to the Warner Wellcome joint venture operations
(described below), partly offset by the absence of the
chocolate/caramel business (which was sold in October 1993).
Unit volume growth accounted for the remaining 4 percent increase
in 1994 sales. Price increases and foreign exchange rate changes
did not have an impact on worldwide sales growth in 1994. In
1993, sales grew 4 percent; unit volume gains and price increases
were each 3 percent and foreign exchange rate changes had an
unfavorable impact of 2 percent.
[Sales, presented in graphic format, were $4.7 billion in 1990,
$5.1 billion in 1991, $5.6 billion in 1992, $5.8 billion in 1993
and $6.4 billion in 1994.]
On a geographic basis, U.S. sales in 1994 were $2,954 million, an
increase of $207 million or 8 percent over 1993. Growth was
primarily attributable to the inclusion of the Wellcome products
and the full-year reporting of 1993 acquisitions. International
sales increased $416 million or 14 percent to $3,463 million.
The full-year reporting of 1993 acquisitions and the inclusion of
Wellcome products increased international sales by approximately
5 percent. In 1993, U.S. sales fell $67 million or 2 percent to
$2,747 million, while international sales rose $263 million or 9
percent to $3,047 million. After adjusting for exchange rate
changes, 1993 international sales increased 14 percent over 1992
levels.
<TABLE>
<CAPTION>
Consumer Health Care Products
- -----------------------------
1994 1993 1992
------------ ------------ -------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Net Sales $ 2,970 +25% $ 2,374 +12% $ 2,129
</TABLE>
Worldwide sales of consumer health care products increased 25
percent over 1993. Warner-Lambert acquired several businesses in
this segment in 1993, including the European, U.S. and Canadian
operations of WILKINSON SWORD. The full-year recognition of
sales from these businesses coupled with approximately $320
million in 1994 sales of products contributed by Wellcome to the
Warner Wellcome joint venture operations increased this segment's
sales by approximately 17 percent in 1994.
<PAGE>
U.S. consumer health care product sales in 1994 grew 26 percent
to $1,466 million. The full-year reporting of businesses acquired
in 1993 and the inclusion of Wellcome products, including SUDAFED
and ACTIFED cold medications and NEOSPORIN topical anti-
infective, increased sales by approximately 23 percent. Products
achieving growth in the U.S. during 1994 included LISTERINE
Antiseptic mouthwash (resulting from the introduction of
FRESHBURST LISTERINE), BENADRYL antihistamine (benefiting from
the introduction of BENADRYL Dye-Free antihistamine) and sales
from the introduction of SILK EFFECTS women's wet-shave system.
International consumer health care product sales rose 24 percent
to $1,504 million. Sales growth of 12 percent resulted from the
inclusion of the Wellcome products in Canada, certain countries
in Europe, Australia and New Zealand, and the full-year reporting
of acquired businesses. Products with international sales growth
included HALLS cough tablets, TETRA aquarium products and SCHICK
wet-shaving products.
In December 1993, Warner-Lambert signed separate agreements with
both Wellcome and Glaxo Holdings plc ("Glaxo") governing the
establishment of joint ventures in various countries to develop
and market a broad range of nonprescription consumer health care
products.
Warner-Lambert's agreement with Wellcome calls for both companies
to contribute to the joint venture operations current and future
over-the-counter (OTC) products. Joint venture operations formed
pursuant to a global principles agreement began in the U.S. and
Canada in January 1994, in Australia, New Zealand and certain
countries in Europe in June 1994 and in Germany in November 1994.
Warner-Lambert consolidates the financial results of the joint
venture operations. Additional joint venture operations may be
established by Warner-Lambert and Wellcome in other countries
throughout the world. A New Drug Application (NDA) for the
conversion to OTC use of Wellcome's antiviral drug ZOVIRAX as a
genital herpes medication was filed with the U.S. Food and Drug
Administration (FDA) in August 1993. On January 12, 1995, the
FDA's Antiviral Drugs and Nonprescription Drugs Advisory
Committees met and recommended not to approve ZOVIRAX as an OTC
treatment. Although Wellcome will continue to pursue approval,
it is not possible to predict the actions the FDA will take
relating to this Rx-to-OTC switch and approval in the near term
seems unlikely. ZOVIRAX cold sore cream has been approved for OTC
use and is being sold by Warner Wellcome in several countries.
Warner-Lambert and Glaxo formed a joint venture in the U.S. that
commenced operations in December 1993. The joint venture will
develop, seek approval of and market OTC versions of Glaxo
prescription drugs in the U.S., including ZANTAC, its
pharmaceutical product for ulcer treatment. Additional joint
ventures are expected to be formed with Glaxo in other major
markets outside the U.S., excluding Japan.
<PAGE>
On September 30, 1994, Glaxo submitted a NDA filing to the FDA
for the sale in the U.S. of ZANTAC as an OTC product for the
treatment of episodic heartburn. In December 1994, ZANTAC
gained OTC marketing approval in the U.K. as a treatment for
episodic heartburn and is expected to be launched in March 1995.
In addition, in the first quarter of 1994, BECONASE, an OTC
allergy nasal spray from Glaxo was marketed in the U.K. Warner-
Lambert will share in the profits generated by these brands as
well as other OTC products sold by the joint venture.
In January 1995, Glaxo announced an offer to acquire all of the
shares of Wellcome. It is unclear what impact this acquisition
(if completed) will have on Warner-Lambert.
In 1993, worldwide sales of consumer health care products
increased 12 percent over 1992. The growth was partly due to the
March 1993 acquisition of the European, U.S. and Canadian
operations of WILKINSON SWORD that increased the year-to-year
comparison by 6 percent. U.S. sales grew 3 percent and
international sales rose 21 percent. Major contributors to U.S.
sales growth were HALLS, BENADRYL and E.P.T. pregnancy test kits.
Products with international sales growth were HALLS, TETRA and
SCHICK.
<TABLE>
<CAPTION>
Confectionery Products
- ----------------------
1994 1993 1992
------------- ------------- -------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Net Sales $ 1,368 +5% $ 1,306 +10% $ 1,189
</TABLE>
Worldwide sales of confectionery products increased 5 percent in
1994. U.S. sales declined 5 percent to $479 million due to the
sale of the chocolate/caramel business in the fourth quarter of
1993. Excluding chocolate/caramel sales, U.S. sales grew 5
percent from 1993, led by MINT*A*BURST chewing gum (introduced in
December 1993), FRUIT WAVES hard candy and MIGHTY MORPHIN POWER
RANGERS gum (both introduced in 1994). International sales were
$889 million, an increase of 11 percent, 12 percent at constant
exchange rates. Products with international sales growth included
TRIDENT sugarless gum and CLORETS gums and mints.
In 1993, worldwide sales of confectionery products increased 10
percent over 1992, with U.S. sales up 3 percent and international
sales increasing 14 percent. U.S. sales growth was led by
TRIDENT, MINT*A*BURST and CINN*A*BURST chewing gum.
International sales growth was led by TRIDENT, CLORETS and
CINN*A*BURST.
<PAGE>
<TABLE>
<CAPTION>
Pharmaceutical Products
- -----------------------
1994 1993 1992
------------ ------------- -------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Net Sales $ 2,079 -2% $ 2,114 -7% $ 2,280
</TABLE>
Worldwide sales of pharmaceutical products in 1994 were 2 percent
lower than in 1993. U.S. sales were down $74 million or 7
percent to $1,009 million, while international sales were up 4
percent to $1,070 million. The decline in U.S. sales was from
sales erosion and price reductions of both the lipid-regulator
LOPID and its generic equivalent, gemfibrozil, as a result of
generic competition. Sales of the two products fell $197 million
in 1994 and are anticipated to fall further by approximately $65
million in 1995.
Partly offsetting the sales decline of LOPID and gemfibrozil in
the U.S. was sales growth from the cardiovascular drug ACCUPRIL
(which benefited from expanded labeling as a treatment for
congestive heart failure), the anticonvulsant DILANTIN, sales
from COGNEX, the company's drug for the treatment of Alzheimer's
disease (which was introduced in the third quarter of 1993), and
the add-on epilepsy therapy NEURONTIN (which was launched during
the first quarter of 1994). Products with international sales
growth were ACCUPRIL, CAPSUGEL empty hard-gelatin capsules and
NEURONTIN (which by the end of 1994 had gained marketing approval
in sixteen countries). Although there were no significant
international sales of COGNEX in 1994, by year-end Warner-Lambert
had received marketing approval for COGNEX in seven countries
outside the U.S.
Warner-Lambert continues to make progress in resolving the issues
related to the consent decree that the company entered into with
the FDA in 1993. The consent decree with the FDA is a court-
approved agreement that primarily requires the company to certify
that laboratory and/or manufacturing procedures at its
pharmaceutical manufacturing facilities in the U.S. and Puerto
Rico meet current Good Manufacturing Practices established by the
FDA. Most of those pharmaceutical products which the company
intends to continue manufacturing and/or marketing have returned
to full manufacture and distribution, and laboratories in all
U.S. pharmaceutical plants have received certification. The
company is working with the FDA to complete facility
certification for the Vega Baja and Fajardo plants in Puerto
Rico.
In 1993, worldwide sales of pharmaceutical products were 7
percent lower than 1992, with U.S. and international sales
falling 10 percent and 4 percent, respectively. In the U.S.,
sales fell due to the loss of patent protection on LOPID and the
FDA regulatory issues connected to the company's pharmaceutical
manufacturing. Compliance with FDA restrictions resulted in an
estimated loss of sales revenue of approximately $135 million in
1993. International sales were lower due to the negative impact
of foreign exchange rates and 1993 health care reform measures in
Germany. At constant exchange rates, international sales
increased 2 percent from 1992.
<PAGE>
Cost and Expenses
- -----------------
Cost of goods sold increased 12 percent to $2,155 million in
1994. In addition to higher sales volume, the increase was due to
the full-year reporting impact of companies acquired in 1993 and
the Warner Wellcome joint venture operations. Cost of goods sold
increased 6 percent in 1993 to $1,918 million. Cost of goods
sold as a percentage of net sales increased to 33.6% in 1994 from
33.1% in 1993 and 32.4% in 1992. The increases in the ratio were
primarily due to higher cost of goods ratios in the
pharmaceutical segment, resulting from both an unfavorable
product mix and higher costs related to regulatory compliance
issues.
Marketing expense rose 7 percent to $2,351 million in 1994
compared with a 5 percent increase to $2,196 million in 1993.
The increase in marketing expense in 1994 was due to the full-
year inclusion of acquired businesses and the Warner Wellcome
joint venture operations, partially offset by reductions in the
U.S. pharmaceutical sales force. In 1993, marketing expense
increased due to the inclusion of acquired companies' results,
the introduction of new products and sales force expansions in
international markets. As a percentage of net sales, marketing
expense was 36.6% compared with 37.9% in 1993 and 37.5% in 1992,
as sales growth outpaced the company's investment in marketing in
1994.
Administrative and general expense of $444 million increased 11
percent from $400 million in 1993, primarily reflecting the full-
year inclusion of the acquired businesses and costs related to
the Warner Wellcome joint venture operations. Expenses in 1993
were 6 percent higher than 1992, mainly due to costs associated
with corrective actions aimed at regulatory compliance at certain
manufacturing facilities, coupled with the inclusion of acquired
companies' results. As a percentage of net sales, administrative
and general expense was 6.9% in both 1994 and 1993 and 6.7% in
1992.
Research and development expense totaled $456 million in 1994, 2
percent lower than $465 million in 1993, due to reduced spending
on selected pharmaceutical programs. In 1993, research and
development expense also fell 2 percent, reflecting the absence
of spending on the Novon specialty polymer business and more
focused R&D spending on selected pharmaceutical projects. As a
percentage of net sales, research and development expense was
7.1% versus 8.0% in 1993 and 8.5% in 1992. These decreases are
attributable to the reductions in R&D spending and the higher
percentage of company sales being generated by consumer health
care products (which require a lower level of R&D spending than
pharmaceutical products).
Other expense (income), net of $6 million was $34 million
unfavorable compared to 1993, primarily due to higher interest
expense (resulting from increased debt levels from the company's
1993 and 1994 acquisitions and an increase in interest rates).
For 1993, other expense (income), net of $(29) million was $2
million favorable compared to 1992, partially reflecting lower
financial expenses in Brazil due to improved cash flow.
<PAGE>
With the commencement of the Warner Wellcome joint venture
operations in 1994, minority interests increased to $92 million.
Restructuring
- -------------
In 1993, the company recorded a net restructuring charge of $525
million pretax ($360 million after tax or $2.67 per share), that
included a $70 million charge in the first quarter for the
disposition of the Novon specialty polymers business, a $13
million gain in October on the sale of the chocolate/caramel
business and a $468 million charge in the fourth quarter covering
the rationalization of manufacturing facilities, principally in
North America, including the eventual closing of seven plants,
and for organizational restructuring and related workforce
reductions of about 2,800 positions. The program was prompted by
the combined impact of rapid and profound changes in the
company's competitive environment. These changes included the
growing impact of managed health care and other cost-containment
efforts in the U.S., cost regulations in Europe and changes in
U.S. tax law. During 1994, the company closed two manufacturing
sites (Carolina, Puerto Rico and Harbin, China) and reduced the
workforce by approximately 1,300 positions, primarily consisting
of U.S. sales force, Puerto Rico manufacturing and European
administrative positions. The restructuring activities are
proceeding as planned and are expected to be substantially
completed by 1997. (See Note 3 to the consolidated financial
statements for the detailed provisions and subsequent utilization
of reserves).
In 1993 the company estimated that on completion of the 1993
restructuring actions it would generate average annual pretax
savings (compared with pre-restructuring spending levels)
of approximately $150 million by 1997. The company is unaware of
any event that would significantly change spending or anticipated
savings with respect to the 1993 restructuring actions. The
company will invest the savings in its core businesses to further
strengthen its overall competitive position and enhance its long-
term profitability.
A restructuring charge of $544 million pretax ($418 million after
tax or $3.11 per share) was included in 1991 results. The pretax
charge included a provision for the worldwide rationalization of
manufacturing and distribution facilities to take advantage of
the elimination of trade barriers primarily in Europe, North
America and the Andean region, for a worldwide staff reduction
program of approximately 2,700 positions, including a voluntary
retirement incentive program, and for other issues. As a result
of this program, the company has already closed twelve
manufacturing facilities, mainly in Europe and South America,
completed two additional partial facility rationalizations and
reduced the workforce by more than 1,800 positions, primarily
consisting of worldwide administrative, European and South
American manufacturing and European research positions. The
restructuring activities are proceeding generally as planned and
are expected to be substantially completed by 1997. The major
remaining planned action is a pharmaceutical manufacturing
rationalization program that includes the closing of several
additional facilities.
<PAGE>
[Sales per employee, presented in graphic format, were $134
thousand in 1990, $142 thousand in 1991, $159 thousand in 1992,
$159 thousand in 1993 and $179 thousand in 1994.]
In 1991 the company estimated that on completion of the 1991
restructuring actions it would generate approximately $1 billion
in cumulative pretax savings through 1998. The company is unaware
of any event that would significantly change spending or
anticipated savings with respect to the 1991 restructuring
actions. Similar to the savings resulting from the 1993
restructuring activity, the company will also invest these
savings in its core businesses to further strengthen its overall
competitive position and enhance its long-term profitability.
The company anticipates that the remaining spending for the 1993
and 1991 restructuring activities will be funded from cash
provided by operations.
Accounting Changes
- ------------------
The company adopted, effective January 1, 1993, Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes," which increased net income in 1993 by $63 million
or $.47 per share; and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which decreased net income in 1993 by
$17 million ($27 million pretax) or $.13 per share.
<TABLE>
<CAPTION>
Income Taxes
- ------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Effective tax rate before
accounting changes:
As reported 21.8% 10.5% 25.0%
Excluding restructuring
and after minority interests 24.0% 23.5% 25.0%
</TABLE>
The 1994 reported tax rate of 21.8 percent was higher than the
1993 reported tax rate of 10.5 percent principally due to the
effect of a 31.4 percent tax benefit rate associated with the
1993 restructuring actions.
The 1994 effective tax rate (calculated on income before taxes
less minority interests) was 24.0 percent. The 1993 effective
tax rate, excluding the impact of accounting changes and the net
restructuring charge, was 23.5 percent. The increase in the
company's tax rate was partially due to the tax consequences
associated with research expense, including the comparison with
an unusually high effective tax rate benefit on research expense
in 1993 resulting from the August 1993 retroactive extension of
the U.S. research tax credit. Another factor contributing to the
rise in the 1994 tax rate was the lowered tax benefit from
operations in Puerto Rico. These increases were partially offset
by the company's ability to recognize additional deferred tax
assets.
<PAGE>
The 1993 effective tax rate of 23.5 percent, excluding the impact
of accounting changes and the net restructuring charge, was lower
than the 1992 effective tax rate of 25.0 percent largely due to
the August 1993 retroactive extension of the U.S. research tax
credit.
The company anticipates that its effective tax rate will increase
several percentage points in 1995 as a consequence of the 1995
phase-in of U.S. tax law changes enacted in 1993 and expected
changes in the company's global profit composition.
Net Income
- ----------
Net income in 1994 was $694 million or $5.17 per share compared
to $331 million or $2.45 per share in 1993. Excluding the 1993
net restructuring charge of $360 million or $2.67 per share and
the net impact of the accounting changes adopted in 1993 of $46
million or $.34 per share, 1994 net income and earnings per share
both increased 8 percent. Net income in 1993 of $645 million,
excluding restructuring and accounting changes, was in line with
1992. Earnings per share of $4.78 was unchanged from 1992,
principally due to the pharmaceutical segment, where regulatory
issues related to the company's pharmaceutical manufacturing had
a negative impact on both sales and profits.
Inflation
- ---------
Inflation has not been a significant factor in Warner-Lambert's
business because of the modest rates of inflation in the U.S. and
the principal foreign countries in which the company maintains
operations.
Liquidity and Capital Resources
- -------------------------------
Selected financial data presented below:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Return on average shareholders'
equity:
As reported 43% 23% 48%
Excluding restructuring and
accounting changes 43% 40% 48%
Return on average total assets:
As reported 13% 7% 17%
Excluding restructuring and
accounting changes 13% 14% 17%
</TABLE>
<PAGE>
Cash and cash equivalents amounted to $218 million at December
31, 1994, a decrease of $223 million from December 31, 1993. The
company also holds $401 million in short-term investments and
other nonequity securities (included in investments and other
assets) that do not qualify as cash equivalents, representing an
increase of $240 million since 1993. Combined, cash and cash
equivalents, short-term investments and other nonequity
securities increased $17 million compared to 1993. Net debt
(total debt less cash and cash equivalents, short-term
investments and other nonequity securities) of $841 million at
December 31, 1994 increased $243 million from $598 million at
December 31, 1993. This increase is primarily attributable to
spending related to the 1993 and 1991 restructuring activities
(including purchases of property, plant and equipment) and the
acquisition of businesses.
At December 31, 1993, cash and cash equivalents amounted to $441
million, a decrease of $278 million from 1992. Short-term
investments and other nonequity securities of $161 million at
December 31, 1993 were $66 million higher than 1992. Combined,
cash and cash equivalents, short-term investments and other
nonequity securities declined $212 million. Net debt of $598
million at December 31, 1993 changed from a net cash position of
$77 million at December 31, 1992. The change to a net debt
position is primarily attributable to the acquisitions of
businesses in 1993.
Trade receivables days sales outstanding (DSO) increased to 47
days in 1994 compared to 45 days in 1993. The increase was
primarily attributable to a higher proportion of international
sales, which traditionally have a higher DSO than the company
overall. The inventory turnover rate decreased to 3.7 from the
previous year's 3.9, reflecting higher inventory levels in all
segments.
Expenditures for property, plant and equipment were $406 million
in 1994, $347 million in 1993 and $334 million in 1992. Capital
spending commitments planned by the company over the next several
years include the consolidation and upgrading of manufacturing,
distribution and research facilities, and for organizational
restructuring in connection with the company's restructuring
plans announced in 1993 and 1991. In 1994, the company announced
plans to make an initial capital investment of approximately $30
million during the next three years to establish a confectionery
and consumer health care products operation in the People's
Republic of China. The company estimates that 1995 expenditures
for property, plant and equipment will be approximately $410
million.
In June 1994, Warner-Lambert acquired Saila S.p.A., a privately
held confectionery company based in Italy. The total purchase
price was approximately $66 million. The company completed
several acquisitions and investments in 1993 for a total cash
consideration of $429 million (see Note 4 to the consolidated
financial statements).
The company has unused available lines of credit from banks
totaling $1.0 billion. The company's bond ratings by Standard
and Poor's Corporation (AA) and Moody's Investor Services (Aa3)
did not change during 1994.
<PAGE>
As of December 31, 1994, less than two million shares of common
stock remain to be repurchased under current authorization from
the Board of Directors.
Insurance
- ---------
Consistent with trends in the pharmaceutical industry, the
company self-insures, up to certain threshold amounts, against
certain types of risk. The company also has in place risk
management programs to minimize exposure to loss. Management
believes its overall risk management programs are adequate to
protect its assets and earnings against significant loss.
Environment
- -----------
The company is involved in various environmental matters,
including actions initiated by the Environmental Protection
Agency. It is not possible to predict with certainty the outcome
of such matters or the total cost of remediation. In
management's opinion, such proceedings will not result in a
material adverse effect on the company's financial position,
liquidity, cash flow or results of operations for any year. (For
additional information see Note 19 to the consolidated financial
statements.)
Other
- -----
The devaluation of the Mexican peso in December of 1994 had no
effect on the company's 1994 results, since its Mexican
subsidiary is consolidated on the basis of a fiscal year ending
on November 30. Although the devaluation will have an impact on
the company's 1995 results, management believes that such impact
will not be material. Management also believes that the
company's geographic diversity minimizes exposure to currency
fluctuations resulting in one or more foreign countries.
Shareholder Information
- -----------------------
Book value per share of common stock at year-end 1994 was $13.50
compared with $10.36 in 1993, which reflected the 1993
restructuring charge.
Cash dividends paid in 1994 totaled $327 million. A dividend of
$.61 per share was paid in each quarter of 1994 for an annual
total of $2.44 per share. This was a 7 percent increase over the
prior year total of $2.28 per share, paid in four quarterly
dividends of $.57 per share during 1993. In January 1995, the
Board of Directors approved a 7 percent increase in the quarterly
dividend rate to $.65 cents per share payable in the first
quarter of 1995.
Dividends have been paid on Warner-Lambert's common stock since
its listing on the New York Stock Exchange in 1951. Annual
dividend payments per share have increased for 43 consecutive
years.
<PAGE>
[Dividends per share, presented in graphic format, were $1.52 in
1990, $1.76 in 1991, $2.04 in 1992, $2.28 in 1993 and $2.44 in
1994.]
Warner-Lambert's common stock ticker symbol is WLA. The principal
market on which the 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. The average number of common shares
outstanding in 1994 and 1993 was 134,112,000 and 135,000,000,
respectively. Shareholders of record totaled approximately 43,000
as of December 31, 1994 and 46,000 as of December 31, 1993.
The high and low prices for Warner-Lambert's common stock were as
follows:
<TABLE>
<CAPTION>
1994 1993
----------------- ------------------
High Low High Low
------- ------- ------- -------
<S> <C> <C> <C> <C>
First quarter $68 3/4 $60 1/4 $70 3/4 $59 3/4
Second quarter 72 1/2 60 76 3/8 67
Third quarter 86 3/4 64 71 3/4 62 1/2
Fourth quarter 82 1/4 73 72 63 3/8
</TABLE>
The 1994 year-end closing price of Warner-Lambert common stock
was $77 per share.
<PAGE>
Warner-Lambert Company and Subsidiaries
Five-year Summary of Selected Financial Data
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------
(Dollars in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
RESULTS FOR YEAR:
Net sales $6,417 $5,794 $5,598 $5,059 $4,687
Cost of goods sold 2,155 1,918 1,814 1,626 1,515
Research and development
expense 456 465 473 423 379
Income before income taxes,
minority interests and
accounting changes 1,005 318 (a) 860 223 (c) 682
Income before accounting
changes 694 285 (a) 644 141 (c) 485
Net income 694 331 (a,b) 644 35 (c,d) 485
Per common share:
Income before accounting
changes 5.17 2.11 (a) 4.78 1.05 (c) 3.61
Net income 5.17 2.45 (a,b) 4.78 .26 (c,d) 3.61
- ------------------------------------------------------------------------------------------
YEAR-END FINANCIAL POSITION:
Current assets $2,515 $2,219 $2,176 $1,844 $1,559
Current liabilities 2,353 2,016 1,333 1,250 1,101
Working capital 162 203 843 594 458
Property, plant and
equipment 1,846 1,599 1,507 1,350 1,301
Total assets 5,533 4,828 4,077 3,602 3,261
Long-term debt 535 546 565 448 307
Total debt 1,460 1,199 736 576 537
Shareholders' equity 1,816 1,390 1,528 1,171 1,402
- ------------------------------------------------------------------------------------------
COMMON STOCK INFORMATION:
Average number of common
shares outstanding
(in millions) 134.1 135.0 134.7 134.4 134.3
Common stock price per share:
High $86 3/4 $76 3/8 $79 1/4 $82 1/4 $70 3/8
Low 60 59 3/4 58 3/8 61 3/4 49 5/8
Year-end 77 67 1/2 69 1/8 77 5/8 67 1/2
Book value per common share 13.50 10.36 11.29 8.70 10.44
Cash dividends per
common share 2.44 2.28 2.04 1.76 1.52
- ------------------------------------------------------------------------------------------
OTHER DATA:
Number of employees
(in thousands) 36 35 34 34 34
Capital expenditures $ 406 $ 347 $ 334 $ 326 $ 240
Cash dividends paid 327 308 275 237 204
Depreciation and amortization 181 170 156 135 120
- ------------------------------------------------------------------------------------------
(a) Includes a net restructuring charge of $525 pretax ($360 after tax or $2.67 per
share).
(b) Includes a credit of $63 or $.47 per share for the adoption of SFAS No. 109,
"Accounting for Income Taxes" and a charge of $17 after tax or $.13 per share to
adopt SFAS No. 112, "Employers' Accounting for Postemployment Benefits."
(c) Includes a restructuring charge of $544 pretax ($418 after tax or $3.11 per share).
(d) Includes a charge of $106 after tax or $.79 per share to adopt SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
</TABLE>
<PAGE>
Warner-Lambert Company and Subsidiaries
Segment Information
<TABLE>
<CAPTION>
Industry Segments
- -----------------------------------------------------------------------------------------------
Research and
Net Sales (1) Operating Profit (3) Development Expense
- -----------------------------------------------------------------------------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
- -----------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Consumer Health Care $2,970 $2,374 $2,129 $ 714 $ 440 $ 460 $ (65) $ (61) $ (70)
Confectionery 1,368 1,306 1,189 264 201 227 (23) (22) (20)
Pharmaceutical 2,079 2,114 2,280 716 384 843 (368) (382) (383)
-------------------------
Research and develop-
ment expense (456) (465) (473) $(456) $(465) $(473)
- -----------------------------------------------------------------------------------------------
Net sales and
operating profit $6,417 $5,794 $5,598 1,238 560 1,057
- --------------------------------------------
Corporate expense (2) (233) (242) (197)
- --------------------- ----------------------
Income before income
taxes, minority
interests and
accounting changes $1,005 $ 318 $ 860
- --------------------- ----------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Depreciation and
Identifiable Assets Amortization Capital Expenditures
- ----------------------------------------------------------------------------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
- ----------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Consumer Health Care $1,837 $1,491 $1,088 $ 61 $ 61 $ 53 $129 $115 $109
Confectionery 872 680 620 31 29 26 83 60 54
Pharmaceutical 1,991 1,769 1,476 80 72 67 183 160 151
- ----------------------------------------------------------------------------------------------
Subtotal 4,700 3,940 3,184 172 162 146 395 335 314
Corporate 833 888 893 9 8 10 11 12 20
- ----------------------------------------------------------------------------------------------
Total $5,533 $4,828 $4,077 $181 $170 $156 $406 $347 $334
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Geographic Areas
- -----------------------------------------------------------------------------------------------
Net Sales (1) Operating Profit (3) Identifiable Assets
- -----------------------------------------------------------------------------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
- -----------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $2,954 $2,747 $2,814 $ 844 $ 441 $ 871 $1,915 $1,705 $1,616
Europe, Middle East
and Africa 1,618 1,390 1,339 428 231 322 1,649 1,305 826
Americas and Far
East 1,845 1,657 1,445 422 353 337 1,136 930 742
- -----------------------------------------------------------------------------------------------
Subtotal 6,417 5,794 5,598 1,694 1,025 1,530 4,700 3,940 3,184
Research and develop-
ment expense (456) (465) (473)
- -----------------------------------------------------------------------------------------------
Total $6,417 $5,794 $5,598 $1,238 $ 560 $1,057 $4,700 $3,940 $3,184
- -----------------------------------------------------------------------------------------------
(1) Export sales, intersegment sales and intergeographic area sales were not material.
(2) Corporate expense included general corporate income and expense, corporate investment
income, interest expense and net foreign currency adjustments.
(3) Operating profit by industry segments and geographic areas included restructuring
charges (see Note 3 to the consolidated financial statements) as follows:
</TABLE>
<TABLE>
<CAPTION>
Restructuring
- -----------------------------------------------------------------------------------------------
Industry Segments Geographic Areas
- ---------------------------------- ------------------------------------
1993 1993
- ---------------------------------- ------------------------------------
(Millions of dollars) (Millions of dollars)
<S> <C> <C> <C>
Consumer Health Care $(105) United States $(314)
Confectionery (46) Europe, Middle East
Pharmaceutical (314) and Africa (119)
- ---------------------------------- Americas and Far East (32)
Operating loss (465) ------------------------------------
Corporate expense (60) Operating loss $(465)
- ---------------------------------- ------------------------------------
Loss before
income taxes $(525)
- ----------------------------------
</TABLE>
<PAGE>
Warner-Lambert Company and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------
(Millions of dollars,
except per share amounts)
<S> <C> <C> <C>
Net sales $6,416.8 $5,793.7 $5,597.6
- ---------------------------------------------------------------------
Costs and expenses:
Cost of goods sold 2,155.1 1,918.1 1,814.3
Marketing 2,351.0 2,196.5 2,099.1
Administrative and general 443.6 399.6 377.4
Research and development 456.0 464.9 473.5
Other expense (income), net 5.8 (28.6) (26.5)
Restructuring - 525.2 -
- ---------------------------------------------------------------------
Total costs and expenses 5,411.5 5,475.7 4,737.8
- ---------------------------------------------------------------------
Income before income taxes, minority
interests and accounting changes 1,005.3 318.0 859.8
Provision for income taxes 219.1 33.5 214.5
Minority interests 92.2 (.5) 1.6
- ---------------------------------------------------------------------
Income before accounting changes 694.0 285.0 643.7
Accounting changes (net of tax) - 46.0 -
- ---------------------------------------------------------------------
Net income $ 694.0 $ 331.0 $ 643.7
- ---------------------------------------------------------------------
Per common share:
Income before accounting changes $ 5.17 $ 2.11 $ 4.78
Accounting changes - .34 -
- ---------------------------------------------------------------------
Net income $ 5.17 $ 2.45 $ 4.78
- ---------------------------------------------------------------------
Consolidated Statements of Retained Earnings
- ---------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------
(Millions of dollars,
except per share amounts)
Retained earnings at beginning
of year $2,287.7 $2,264.6 $1,895.7
Net income 694.0 331.0 643.7
Cash dividends paid
on common shares (327.2) (307.9) (274.8)
- ---------------------------------------------------------------------
Retained earnings at end of year $2,654.5 $2,287.7 $2,264.6
- ---------------------------------------------------------------------
Cash dividends per common share $ 2.44 $ 2.28 $ 2.04
- ---------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Warner-Lambert Company and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1994 1993
- ---------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C>
Assets:
Cash and cash equivalents $ 217.9 $ 440.5
Short-term investments 247.2 61.2
Receivables, less allowances of
$21.8 in 1994 and $20.5 in 1993 1,096.0 890.8
Inventories 636.2 476.5
Prepaid expenses and other current
assets 318.0 349.7
- ---------------------------------------------------------------------
Total current assets 2,515.3 2,218.7
Investments and other assets 557.6 487.4
Equity investments in
affiliated companies 234.2 208.6
Property, plant and equipment 1,846.0 1,599.3
Intangible assets 379.7 314.1
- ---------------------------------------------------------------------
$5,532.8 $4,828.1
- ---------------------------------------------------------------------
Liabilities and shareholders' equity:
Short-term debt $ 925.1 $ 652.8
Accounts payable, trade 517.7 427.1
Accrued compensation 150.6 141.2
Other current liabilities 601.8 614.5
Federal, state and foreign income taxes 158.2 180.3
- ---------------------------------------------------------------------
Total current liabilities 2,353.4 2,015.9
Long-term debt 535.2 546.2
Deferred income taxes 88.0 69.2
Other noncurrent liabilities 718.5 798.6
Minority interests 21.3 8.6
Shareholders' equity:
Preferred stock - none issued - -
Common stock - 160,330,268 shares
issued 160.3 160.3
Capital in excess of par value 152.2 120.1
Retained earnings 2,654.5 2,287.7
Cumulative translation adjustments (181.0) (224.8)
Treasury stock, at cost:
1994 - 25,734,568 shares;
1993 - 26,190,513 shares (969.6) (953.7)
- ---------------------------------------------------------------------
Total shareholders' equity 1,816.4 1,389.6
- ---------------------------------------------------------------------
$5,532.8 $4,828.1
- ---------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Warner-Lambert Company and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
- ----------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C>
Operating Activities:
Net income $ 694.0 $ 331.0 $ 643.7
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and amortization 181.4 170.4 155.6
Minority interests 92.2 (.5) 1.6
Restructuring - 525.2 -
Accounting changes (net of tax) - (46.0) -
Deferred income taxes 44.3 (129.6) 5.6
Changes in assets and liabilities,
net of effects from acquisitions/
dispositions of businesses:
Receivables (167.9) (134.1) (172.6)
Inventories (140.6) (70.3) (19.8)
Accounts payable and accrued
liabilities (77.5) (79.2) 24.6
Pension contributions (22.1) (100.0) (18.5)
Other items, net 41.2 (.2) 16.4
- ----------------------------------------------------------------------
Net cash provided by operating
activities 645.0 466.7 636.6
- ----------------------------------------------------------------------
Investing Activities:
Purchases of investments (656.1) (236.5) (76.0)
Proceeds from sales of investments 415.7 166.2 56.6
Purchases of property, plant and equipment (406.4) (347.1) (334.3)
Acquisitions of businesses (66.3) (429.0) -
Proceeds from dispositions of businesses - 83.4 -
Other 13.2 4.4 18.2
- ----------------------------------------------------------------------
Net cash used by investing activities (699.9) (758.6) (335.5)
- ----------------------------------------------------------------------
Financing Activities:
Proceeds from borrowings 762.7 627.6 332.8
Principal payments on borrowings (527.6) (192.1) (161.9)
Purchases of treasury stock (41.7) (112.4) (22.8)
Cash dividends paid (327.2) (307.9) (274.8)
Distributions paid to minority interests (79.4) (.5) (.2)
Proceeds from exercise of stock options 43.1 14.5 22.7
- ----------------------------------------------------------------------
Net cash (used) provided by
financing activities (170.1) 29.2 (104.2)
- ----------------------------------------------------------------------
Effect of exchange rate changes on
cash and cash equivalents 2.4 (15.2) (14.2)
- ----------------------------------------------------------------------
Net (decrease) increase in cash and
cash equivalents (222.6) (277.9) 182.7
Cash and cash equivalents at beginning
of year 440.5 718.4 535.7
- ----------------------------------------------------------------------
Cash and cash equivalents at end of year $ 217.9 $ 440.5 $ 718.4
- ----------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Warner-Lambert Company and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in millions, except per share amounts)
Note 1 - Significant Accounting Policies:
Basis of consolidation - The consolidated financial statements include
the accounts of Warner-Lambert Company and all controlled,
majority-owned subsidiaries ("Warner-Lambert" or the "company").
Substantially all foreign subsidiaries and branches are consolidated
on the basis of fiscal years ending on November 30. Investments in
companies in which Warner-Lambert's interest is between 20 percent and
50 percent are accounted for using the equity method. Certain prior
year amounts have been reclassified to conform with the current year
presentation.
Cash equivalents - Cash equivalents include nonequity short-term
investments with original maturity dates of 90 days or less.
Inventories - Inventories are valued at the lower of cost or market.
Cost is determined principally on the basis of first-in, first-out or
standards which approximate average cost.
Property, plant and equipment - Property, plant and equipment are
recorded at cost. The cost of maintenance, repairs, minor renewals
and betterments and minor equipment items is charged to income; the
cost of major renewals and betterments is capitalized. Depreciation
is calculated generally on the straight-line method over the estimated
useful lives of the various classes of assets.
Intangible assets - Intangible assets are recorded at cost and are
amortized on the straight-line method over appropriate periods not
exceeding 40 years.
Advertising costs - Advertising costs are expensed as incurred and
amounted to $601.3 in 1994, $598.4 in 1993 and $591.4 in 1992.
Income taxes - Statement of Financial Accounting Standards (SFAS) No.
109 was adopted effective January 1, 1993. Under SFAS No. 109,
deferred taxes are based on temporary differences between assets and
liabilities for financial reporting purposes and for tax purposes.
Deferred taxes are measured using the enacted tax rates expected to
apply when temporary differences are settled or are realized. Prior
to 1993, deferred taxes were computed based on Accounting Principles
Board Opinion No. 11.
Net income per share - Net income per share is computed based on the
average number of common shares outstanding during the year. The
dilutive effect of common stock equivalents is immaterial. The
average number of shares used in the determination of net income per
share was 134,112,000 in 1994, 135,000,000 in 1993 and 134,717,000 in
1992.
<PAGE>
Note 2 - Interest Income and Interest Expense:
Interest income and interest expense are included in other expense
(income), net. Interest income totaled $49.7, $39.7 and $53.1 and
interest expense totaled $93.7, $64.2 and $80.8 in 1994, 1993 and
1992, respectively. Total interest paid was $86.2, $65.4 and $78.4 in
1994, 1993 and 1992, respectively. Interest costs of $9.4, $8.6 and
$8.1 in 1994, 1993 and 1992, respectively, have been capitalized and
included in property, plant and equipment.
<PAGE>
Note 3 - Restructuring:
In 1993 and 1991, the company recorded restructuring charges of $525.2
($360.4 after tax or $2.67 per share) and $544.0 ($418.0 after tax or
$3.11 per share), respectively, for the worldwide rationalization of
manufacturing and distribution facilities and for organizational
restructuring. Details of individual provisions are as follows:
In the first quarter of 1993, the company recorded a one-time charge
of $70.0 relating to the disposition of its Novon Products Group. The
charge included $26.0 for the write-down of property, plant and
equipment to its net realizable value and $44.0 for operating losses
and other expenses anticipated to be incurred during the phase-out
period. In November 1993, the company discontinued the operations of
the Novon Products Group.
In October 1993, Warner-Lambert sold the assets of its
chocolate/caramel business in Cambridge, Massachusetts to Chicago-
based Tootsie Roll Industries, Inc. for approximately $82.0, resulting
in a pre-tax gain of $13.1. The sale included the Junior'r' Mints, Sugar
Daddy'r', Sugar Babies'r', Charleston Chew!'r' and Pom Poms'r' product
lines.
In November 1993, a restructuring charge of $468.3 was recorded for
the rationalization of manufacturing facilities, principally in North
America, including the eventual closing of seven plants, and for
organizational restructuring and related workforce reductions of about
2,800 positions. The program was prompted by the combined impact of
rapid and profound changes in the company's competitive environment,
including the growing impact of managed health care and other cost
containment efforts in the U.S., cost regulations in Europe and
changes in U.S. tax law. During 1994, two manufacturing sites were
closed (Carolina, Puerto Rico and Harbin, China) and workforce
reductions of approximately 1,300 positions have been made, primarily
consisting of U.S. sales force, Puerto Rico manufacturing and European
administrative positions.
In the fourth quarter of 1991, a restructuring charge of $544.0 was
recorded primarily for the rationalization of manufacturing and
distribution facilities to take advantage of the elimination of trade
barriers, primarily in Europe, North America and the Andean Region,
and for a worldwide staff reduction program, including a voluntary
retirement incentive program, resulting in a planned workforce
reduction of approximately 2,700 positions. As of December 31, 1994,
the company has closed 12 manufacturing facilities, mainly in Europe
and South America, completed two partial facility rationalizations and
reduced the workforce by more than 1,800 positions, primarily
consisting of worldwide administrative, European and South American
manufacturing and European research positions. Major activities still
to be completed include the closing of several additional facilities
as part of a pharmaceutical manufacturing rationalization program.
<PAGE>
Initial 1993 and 1991 provisions and the subsequent utilization by
major components are summarized in the table below:
<TABLE>
<CAPTION>
Amounts Reserve
1993 & 1991 Utilized Balance at
Restructuring Through December
Provisions 1994 31, 1994
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Severance and related costs $ 468.0 $234.6 $233.4
Plant closures and related costs 161.5 82.7 78.8
Work-systems redesign 71.5 9.0 62.5
Operating losses during 35.3 35.3 -
phase-out period
Other 107.3 79.3 28.0
Asset write-offs 225.6 225.6 -
- ---------------------------------------------------------------------
Total $1,069.2 $666.5 $402.7
- ---------------------------------------------------------------------
</TABLE>
The company records restructuring charges based on available
information at the time the decision is made and approval is received
to proceed with the plan. Reserves are considered utilized when
specific restructuring criteria are completed or benefits paid. The
company continues to expense normal operating costs against current
operations while production is being phased out of facilities to be
closed. There were no material realignments of reserves by major
category from amounts estimated in the original restructuring plans.
As of December 31, 1994, other current liabilities included $146.2 and
other noncurrent liabilities included $256.5 of the remaining
restructuring reserve balance to be utilized. Restructuring
provisions include pharmaceutical manufacturing rationalizations,
which include extensive product relocations requiring regulatory site
and process approvals. The product relocations are being phased in
with the related approval processes anticipated to take a minimum of
two years each. The company has determined that the restructuring
reserve balance is adequate to cover the remaining restructuring
actions, which are anticipated to be substantially completed by 1997.
<PAGE>
Note 4 - Investments, Acquisitions and Alliances:
In June 1994, Warner-Lambert acquired Saila S.p.A., a privately held
confectionery company based in Italy.
In January 1993, Warner-Lambert purchased a 34 percent equity interest
in Jouveinal S.A., a French pharmaceutical company, and entered into a
license option agreement which grants Warner-Lambert the right of
first refusal to license future Jouveinal products outside of France,
Canada and French-speaking Africa. Warner-Lambert also acquired the
remaining 51 percent interest in a previously formed Italian
confectionery joint venture. Total consideration approximated $225
for these transactions.
In March 1993, Warner-Lambert acquired the European, U.S. and Canadian
operations of WILKINSON SWORD, an international manufacturer and
marketer of razors and blades, for approximately $145 including debt
assumed.
In July 1993, Warner-Lambert acquired the assets of the consumer
health products business of Fisons plc in Australia and New Zealand
for $23. The Fisons operations include the ROSKEN line of therapeutic
skin care products.
In September 1993, two acquisitions were completed. Warner-Lambert
acquired Willinger Bros., Inc., a manufacturer of aquarium products
marketed under the WHISPER and SECONDNATURE trademarks. In addition,
Warner-Lambert acquired CACHOU LAJAUNIE, a French manufacturer of
breath freshening confectioneries. Total consideration, including
debt assumed for these acquisitions, approximated $67.
Cash consideration, excluding cash acquired and debt assumed, for the
above acquisitions approximated $66 in 1994 and $429 in 1993. Except
for the equity investment in Jouveinal, the above acquisitions have
been accounted for under the purchase method and accordingly, the net
assets and results of operations have been included in the
consolidated financial statements since the dates of acquisition. The
excess of purchase price over the estimated fair values of the net
tangible and intangible assets acquired has been treated as goodwill.
The pro forma full-year effect of the above acquisitions on
consolidated earnings would not have been material in the respective
years of acquisitions.
In December 1993, Warner-Lambert signed separate agreements with Glaxo
Holdings plc ("Glaxo") and Wellcome plc ("Wellcome") governing the
establishment of joint ventures in various countries to develop and
market nonprescription consumer health care products.
<PAGE>
Warner-Lambert established the first of these joint ventures in the
U.S. with Glaxo, whereby the two parties have formed Glaxo Warner-
Lambert OTC G.P. The joint venture will develop, seek approval of and
market over-the-counter (OTC) versions of Glaxo prescription drugs in
the U.S., including ZANTAC, a prescription ulcer treatment product.
Additional joint ventures are expected to be formed in other major
markets outside the U.S., excluding Japan. Development costs, profits
and losses and voting control will be shared equally. Glaxo will
receive a royalty on sales of OTC versions of Glaxo prescription drugs
by the joint ventures. Warner-Lambert uses the equity method of
accounting to record its share of profits and losses.
Warner-Lambert and Wellcome formed a joint venture to develop and
market nonprescription consumer health care products pursuant to a
global principles agreement. The U.S. and Canadian joint venture
operations commenced in January 1994. Joint venture operations in
Australia, New Zealand and certain countries in Europe became
operational during 1994. The alliance calls for both companies to
contribute OTC products, excluding HALLS and ROLAIDS, to the joint
venture. After a two-year phase-in period following establishment of
the U.S. Warner Wellcome joint venture, Warner-Lambert and Wellcome,
respectively, will receive approximately 70 percent and 30 percent of
the profits generated in the U.S. on current products, excluding
ZOVIRAX. Future OTC switch products will be subject to a profit split
favoring the innovator. Warner-Lambert has voting control and has
consolidated the financial results of the joint venture, reflecting
Wellcome's share as minority interest. Warner-Lambert's consolidated
net sales included products contributed by Wellcome of approximately
$320 for 1994.
In the U.S., Warner-Lambert assigned its interest in the Glaxo Warner-
Lambert joint venture to the U.S. Warner Wellcome joint venture.
Warner Wellcome and Glaxo will share development costs and profits
equally, with Wellcome receiving ten percent of Warner Wellcome's
share of the U.S. joint venture's profits.
<PAGE>
Note 5 - International Operations:
In translating foreign currency financial statements, local currencies
of foreign subsidiaries and branches have generally been determined to
be the functional currencies, except for those in hyperinflationary
economies (principally Brazil and Venezuela). Net aggregate exchange
losses (gains) resulting from foreign currency transactions and
translation adjustments related to subsidiaries operating in highly
inflationary countries amounted to $15.3, $9.8 and $(1.1) in 1994,
1993 and 1992, respectively.
<PAGE>
Note 6 - Inventories:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C>
Raw materials $112.3 $ 88.6
Finishing supplies 54.2 38.6
Goods in process 93.2 79.3
Finished goods 376.5 270.0
- ---------------------------------------------------------------------
$636.2 $476.5
- ---------------------------------------------------------------------
</TABLE>
<PAGE>
Note 7 - Property, Plant and Equipment:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C>
Land $ 34.7 $ 33.8
Buildings 1,016.1 915.0
Machinery, furniture and fixtures 2,116.8 1,885.4
- ---------------------------------------------------------------------
3,167.6 2,834.2
Less accumulated depreciation (1,321.6) (1,234.9)
- ---------------------------------------------------------------------
$ 1,846.0 $ 1,599.3
- ---------------------------------------------------------------------
</TABLE>
Depreciation expense totaled $168.9, $159.0 and $148.7 in 1994, 1993
and 1992, respectively.
<PAGE>
Note 8 - Intangible Assets:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C>
Purchased patents, trademarks and other
intangibles $236.7 $179.9
Goodwill 205.3 181.5
- ---------------------------------------------------------------------
442.0 361.4
Less accumulated amortization (62.3) (47.3)
- ---------------------------------------------------------------------
$379.7 $314.1
- ---------------------------------------------------------------------
</TABLE>
The increase in purchased patents, trademarks and other intangibles
was primarily attributable to the acquisition of Saila S.p.A.
discussed in Note 4.
Amortization expense totaled $12.5, $11.4 and $6.9 in 1994, 1993 and
1992, respectively.
<PAGE>
Note 9 - Debt:
The components of short-term debt were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C>
Commercial paper $641.4 $507.5
Notes payable - bank and other 250.6 123.5
Current portion of long-term debt 33.1 21.8
- ---------------------------------------------------------------------
$925.1 $652.8
- ---------------------------------------------------------------------
</TABLE>
The weighted average interest rate was 6.3 percent and 4.6 percent for
commercial paper and notes payable outstanding at December 31, 1994
and 1993, respectively. The company has lines of credit arrangements
with numerous banks with interest rates generally equal to the prime
rate for domestic banks and the best prevailing rate for foreign
banks. At December 31, 1994, worldwide unused short-term lines of
credit amounted to $1.0 billion.
The components of long-term debt were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C>
6 5/8% notes due 2002 $199.6 $199.6
8% notes due 1998 150.0 150.0
8 1/8% notes due 1996 100.0 100.0
Industrial revenue bonds due 2014 24.6 24.7
Other 61.0 71.9
- ---------------------------------------------------------------------
$535.2 $546.2
- ---------------------------------------------------------------------
</TABLE>
The industrial revenue bonds due 2014 have a stated interest rate of
7.6 percent and an effective interest rate of 7.2 percent.
The aggregate annual maturities of long-term debt at December 31,
1994, payable in each of the years 1996 through 1999, are $116.3,
$6.3, $165.4 and $2.5, respectively.
The company has entered into interest rate swap agreements to reduce
its interest expense on long-term debt, see Note 10.
<PAGE>
Note 10 - Financial Instruments:
The estimated fair values of financial instruments were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1994 1993
- ---------------------------------------------------------------------
Carrying Fair Carrying Fair
( ) = Liability Amount Value Amount Value
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities $ 482.8 $ 479.2 $ 341.5 $ 345.8
Long-term debt (535.2) (513.8) (546.2) (575.9)
Interest rate swaps .3 (17.3) 5.1 8.8
Foreign exchange contracts .1 (19.2) - (16.1)
- ---------------------------------------------------------------------
</TABLE>
Investment securities and long-term debt are valued at quoted market
prices for similar instruments. The fair values of the remaining
financial instruments in the above table are based on dealer quotes
and reflect the estimated amounts that the company would pay or
receive to terminate the contracts. The carrying values of all other
financial instruments in the consolidated balance sheets approximate
fair values.
The company adopted the provisions of SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," effective January
1, 1994. Adoption of SFAS No. 115 had no impact on earnings since all
nonequity securities are categorized as "held-to-maturity" and,
accordingly, continue to be carried at amortized cost. At December
31, 1994 and 1993, respectively, gross unrealized gains were $.4 and
$4.3. Gross unrealized losses were $4.0 at December 31, 1994. The
investment securities portfolio was comprised of negotiable
certificates of deposit, Puerto Rico government bonds, guaranteed
collateralized mortgage obligations and Ginnie Mae certificates,
repurchase agreements and short-term U.S. dollar-linked Mexican
government bonds. Equity securities, categorized as "available-for-
sale," were immaterial.
The investment securities (mentioned above) were reported in the
following balance sheet categories:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
December 31, 1994 1993
- -------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 74.6 $173.1
Short-term investments 247.2 61.2
Investments and other assets 161.0 107.2
- -------------------------------------------------------------------
$482.8 $341.5
- -------------------------------------------------------------------
</TABLE>
As of December 31, 1994, the long-term investments of $161.0 included
$71.2 of interest-bearing, mortgage-backed securities maturing beyond
ten years.
<PAGE>
Financial instruments that potentially subject the company to
concentrations of credit risk are trade receivables and interest-
bearing investments. The company sells a broad range of products in
the consumer health care, confectionery and pharmaceutical businesses
worldwide. Due to the large number and diversity of the company's
customer base, concentrations of credit risk with respect to trade
receivables are limited. The company does not normally require
collateral. The company places substantially all of its interest-
bearing investments in high-quality liquid instruments, such as
certificates of deposit issued by major banks or securities issued or
guaranteed by the U.S. or other governments and limits the amount of
credit exposure to any one issuer.
The company does not hold or issue financial instruments for trading
purposes nor is it a party to leveraged derivatives. The company uses
derivatives, particularly interest rate swaps and forward or purchased
option foreign exchange contracts, that are relatively straightforward
and involve little complexity as hedge instruments to manage interest
rate and foreign currency risk.
The counterparties to the company's derivatives consist of major
international financial institutions. Because of the number of these
institutions and their high credit ratings, management believes
derivatives do not present significant credit risk to the company.
The following table summarizes interest rate swap agreements:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Notional Amounts Weighted
--------------- Average Weighted Average
December 31, Fixed Floating Pay Rate
--------------- Maturity Receive -----------------
1994 1993 Date Rate 1994 1993
---- ---- ---- -------- ---- ----
<S> <C> <C> <C> <C> <C>
$250 $250 1996 8.1% 7.7% 5.5%
200 200 2002 6.6 5.1 3.8
- -------------------------------------------------------------------
</TABLE>
Interest rate swap agreements effectively convert fixed rates on long-
term debt to floating rates. Interest to be paid or received is
accrued over the life of the agreements as an adjustment to interest
expense. The company's intent is to reduce overall interest expense
while maintaining an acceptable level of risk to interest rate
fluctuations. As a result of these swap agreements, interest expense
was reduced by $3.7, $12.4 and $1.5 in 1994, 1993 and 1992,
respectively. The impact of a 100 basis point change in market
interest rates would change annual net income by approximately $3.4.
The swap agreements specifically hedge $450 of long-term notes which
are disclosed in Note 9. As market interest rates fluctuate, the
unrealized gain or loss on the swap portfolio moves in an inverse
relationship to the fair value of the underlying debt. The company
had an unrealized loss on the interest rate swap portfolio of $17.6 as
of December 31, 1994 and an unrealized gain of $3.7 as of December 31,
1993.
<PAGE>
The company's foreign exchange risk management objectives are to
stabilize cash flows and reported income from the effects of foreign
currency fluctuations. Extensive international business activities
result in a variety of foreign currency exposures including foreign
currency denominated assets and liabilities, firm commitments,
anticipated intercompany sales and purchases of goods and services,
dividend and royalty remittances and anticipated net income of foreign
affiliates, which is hedged on an intra-quarter basis. The company's
strategy in managing these currency risks is to selectively hedge
exposures by entering into forward or purchased option foreign
exchange contracts for periods of up to two years. The company
believes the risks associated with its unhedged exposures are not
significant.
Gains and losses related to effective hedges, including hedges of
anticipated transactions, are recognized in income as part of, and
concurrent with, the hedged transaction.
The table below summarizes the contractual amounts of forward or
purchased option foreign exchange contracts:
<TABLE>
<CAPTION>
Contractual Amounts
-------------------
December 31,
Currency Currency -------------------
Sold Purchased 1994 1993
------------ ------------- ------ ------
<S> <C> <C> <C>
Japanese yen U.S. dollars $112.9 $167.8
U.S. dollars British pounds 34.3 69.4
French francs U.S. dollars 10.0 18.5
German marks U.S. dollars - 81.2
Other Other 6.9 11.3
</TABLE>
The cash flows associated with derivative financial instruments are
classified as operating in the consolidated statements of cash flows.
<PAGE>
Note 11 - Leases:
The company rents various facilities and equipment. Rental costs
charged to income under all operating leases totaled $78.5, $76.3 and
$70.1 in 1994, 1993 and 1992, respectively.
The future minimum rental commitments under noncancellable capital and
operating leases at December 31, 1994 are summarized below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Capital Operating
- ---------------------------------------------------------------------
<S> <C> <C>
1995 $ 4.8 $ 27.2
1996 4.2 20.4
1997 3.8 13.2
1998 3.1 10.6
1999 3.1 9.5
Remaining years 21.1 91.6
- --------------------------------------------------------------------
Total minimum lease payments 40.1 172.5
Less minimum sublease income (.2) (29.9)
---------------------
Net minimum lease payments 39.9 $142.6
-------
Less amount representing interest (15.8)
- -----------------------------------------------------
Present value of minimum lease payments $ 24.1
- -----------------------------------------------------
</TABLE>
Property, plant and equipment included capitalized leases of $34.4,
less accumulated depreciation of $13.0, at December 31, 1994 and
$33.0, less accumulated depreciation of $11.7, at December 31, 1993.
Long-term debt included capitalized lease obligations of $21.9 and
$22.3 at those respective dates.
<PAGE>
Note 12 - Pensions:
The company has various noncontributory pension plans covering
substantially all of its employees in the U.S. Benefits covering most
employees are based on years of service and average compensation
during the last years of employment. Current policy is to fund these
plans in an amount that ranges from the minimum contribution required
by ERISA to the maximum tax deductible contribution. Certain foreign
subsidiaries also have various plans, which are funded in accordance
with the statutory requirements of the particular countries.
Pension costs for the plans included the following components:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the year $ 50.9 $ 44.9 $ 42.0
Interest cost on projected
benefit obligation 134.3 130.1 122.6
Return on assets (24.2) (199.2) (127.2)
Net amortization and deferral (124.5) 59.4 (5.5)
- ----------------------------------------------------------------------
Net pension expense $ 36.5 $ 35.2 $ 31.9
- ----------------------------------------------------------------------
</TABLE>
Net pension expense attributable to foreign plans and included in the
above was $21.4, $17.9 and $18.2 in 1994, 1993 and 1992, respectively.
The 1993 restructuring charge, discussed in Note 3, included a $4.6
curtailment loss representing a decrease in unrecognized prior service
costs resulting from a reduction in domestic plan participants.
<PAGE>
The plans' funded status at December 31 was as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Plans in Which
Plans in Accumulated
Which Assets Exceed Benefits
Accumulated Benefits Exceed Assets
- ----------------------------------------------------------------------
1994 1993 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plan assets at fair value $1,583.9 $1,605.9 $ 70.5 $ 80.6
- ----------------------------------------------------------------------
Actuarial present value of
accumulated benefit
obligation:
Vested 1,421.5 1,464.9 140.3 141.6
Nonvested 45.4 30.3 9.4 10.4
- ----------------------------------------------------------------------
1,466.9 1,495.2 149.7 152.0
Estimated future
salary increases 138.5 171.5 27.6 35.7
- ----------------------------------------------------------------------
Projected benefit
obligation 1,605.4 1,666.7 177.3 187.7
- ----------------------------------------------------------------------
Excess of projected
benefit obligation over
plan assets (21.5) (60.8) (106.8) (107.1)
Unrecognized net
(asset) obligation (22.0) (38.1) 7.2 7.8
Unrecognized prior
service cost 36.2 41.8 2.7 3.0
Unrecognized net
actuarial loss 150.8 208.5 21.5 28.7
Minimum liability
adjustment - - (18.6) (19.0)
- ----------------------------------------------------------------------
Net pension asset
(liability) included
in consolidated
balance sheets $ 143.5 $ 151.4 $ (94.0) $ (86.6)
- ----------------------------------------------------------------------
</TABLE>
Plan assets are composed primarily of investments in equities and
bonds.
Foreign plan assets at fair value included in the preceding table were
$570.1 in 1994 and $524.1 in 1993. The foreign plan projected benefit
obligation was $596.4 in 1994 and $536.2 in 1993.
<PAGE>
The assumptions for the U.S. plans were:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Expected long-term rate of
return on plan assets 10.5% 10.5% 10.5%
Expected increase in
salary levels 4.0 4.0 5.0
Weighted average discount
rate 8.8 7.5 8.8
- ----------------------------------------------------------------------
</TABLE>
Assumptions for foreign plans did not vary significantly from the U.S.
plans.
<PAGE>
Note 13 - Postemployment Benefits:
The company adopted the provisions of SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," effective January 1, 1993.
This accounting change resulted in a cumulative effect adjustment
which decreased net income upon adoption by $17.0 ($27.0 pretax) or
$.13 per share. SFAS No. 112 requires employers to recognize an
obligation for postemployment benefits to former or inactive employees
after employment but before retirement. This one-time charge
primarily represented the present value of medical and life insurance
costs for employees receiving long-term disability benefits.
<PAGE>
Note 14 - Other Postretirement Benefits:
The company provides other postretirement benefits, primarily health
insurance, for domestic employees who retired prior to January 1, 1992
and their dependents. Although the plans are currently
noncontributory, the company has implemented a cap which limits future
contributions for medical and dental coverage under these plans. The
company is generally self-insured for these costs and the plans are
funded on a pay-as-you-go basis. Domestic employees retiring after
December 31, 1991 will receive additional pension benefits based on
years of service in lieu of these benefits.
The annual cost of providing other postretirement benefits for
domestic retirees amounted to $15.0, $14.0 and $13.4 in 1994, 1993 and
1992, respectively. These amounts primarily represent the accrual of
interest on the present value obligation.
A reconciliation from the plans' benefit obligation to the liabilities
recognized in the consolidated balance sheets as of the latest
actuarial valuations was as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation $179.3 $180.2
Unrecognized prior service cost 1.8 2.0
Unrecognized net actuarial loss (49.4) (45.9)
- ---------------------------------------------------------------------
Accrued postretirement benefit cost
recognized in the consolidated
balance sheets $131.7 $136.3
- ---------------------------------------------------------------------
</TABLE>
The health care cost trend rate used to develop the accumulated
postretirement benefit obligation for those retirees under age 65 was
12.3 percent in 1994 declining to 6 percent over 12 years. For those
65 and over, a rate of 8 percent was used in 1994 declining to 6
percent over 7 years. A one percentage point increase in the health
care cost trend rate in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1994 by $5.8 and
the interest cost component of the postretirement benefit cost for
1994 by $.5. The weighted average discount rate used to develop the
accumulated postretirement benefit obligation was 8.8 percent, 7.5
percent and 8.8 percent for 1994, 1993 and 1992, respectively.
Other postretirement benefit costs for foreign plans expensed under
the cash method in 1994, 1993 and 1992 were not material.
<PAGE>
Note 15 - Income Taxes:
Effective January 1, 1993, the company changed its method of
accounting for income taxes from the deferred method to the liability
method required by SFAS No. 109, "Accounting for Income Taxes." This
accounting change resulted in a cumulative effect adjustment which
increased net income upon adoption by $63.0 or $.47 per share.
The components of income before income taxes, minority interests and
accounting changes were:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------
<S> <C> <C> <C>
U.S. and Puerto Rico $ 469.2 $ 15.8 $473.6
Foreign 536.1 302.2 386.2
- ---------------------------------------------------------------------
$1,005.3 $318.0 $859.8
- ---------------------------------------------------------------------
</TABLE>
The 1993 income before income taxes and accounting changes included a
restructuring charge of $374.6 for U.S. and Puerto Rico and $150.6 for
foreign, see Note 3.
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Liability Liability Deferred
Method Method Method
- ---------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 22.7 $ 22.0 $ 54.2
Foreign 143.4 123.4 127.3
State and Puerto Rico 8.7 17.7 27.4
- ---------------------------------------------------------------------
174.8 163.1 208.9
- ---------------------------------------------------------------------
Deferred:
Federal 38.0 (95.0) (14.5)
Foreign .8 (19.6) 14.4
State and Puerto Rico 5.5 (15.0) 5.7
- ---------------------------------------------------------------------
44.3 (129.6) 5.6
- ---------------------------------------------------------------------
Provision for income taxes $219.1 $ 33.5 $214.5
- ---------------------------------------------------------------------
</TABLE>
The principal timing difference included in the deferred tax provision
for 1992 was $26.7 related to the 1991 restructuring actions.
Taxes credited to shareholders' equity for employee benefit plans were
$11.9 and $4.3 for years ended December 31, 1994 and 1993,
respectively.
The tax effects of significant temporary differences which comprise
the deferred tax assets and liabilities were as follows:
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
December 31, 1994 1993
- ----------------------------------------------------------------------
Assets Liabilities Assets Liabilities
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restructuring reserves $196.3 $ - $ 287.9 $ -
Compensation/benefits 64.2 - 61.3 -
Postretirement/post-
employment obligations 62.1 - 64.6 -
Property, plant and equip-
ment 47.9 164.4 47.8 162.4
Foreign tax loss and
other carryforwards 37.5 - 22.0 -
Research tax credit carry-
forwards 37.0 - 27.0 -
Inventory 22.7 - 20.7 -
Pensions 12.6 44.9 25.2 55.9
Other 87.9 28.2 61.1 13.0
- ---------------------------------------------------------------------
568.2 237.5 617.6 231.3
Valuation allowances (91.6) - (108.9) -
- ---------------------------------------------------------------------
$476.6 $237.5 $ 508.7 $231.3
- ---------------------------------------------------------------------
</TABLE>
The research tax credit carryforwards of $37.0 will be available until
the years 2007 through 2009.
Valuation allowances as of January 1, 1993 of $92.0 were primarily
related to the potential inability to utilize foreign operating loss
and capital loss carryforwards and the inability to realize some
deferred tax assets associated with the 1991 restructuring. During
1993, valuation allowances increased $16.9 principally due to the
potential inability to realize deferred tax assets associated with the
1993 restructuring. During 1994, valuation allowances decreased $17.3
primarily due to improved profitability in European operations which
resulted in the realization of some deferred tax assets associated
with the 1991 restructuring actions offset by the recognition of $13.1
of valuation allowances for acquired foreign capital loss
carryforwards. If these capital loss carryforwards are realized in
the future, the related valuation allowance will reduce acquisition
goodwill.
Income taxes of $186.1, $155.0 and $211.8 were paid during 1994, 1993
and 1992, respectively. Prepaid expenses and other current assets
included deferred income taxes of $173.9 and $218.0 at December 31,
1994 and 1993, respectively. Investments and other assets included
deferred income taxes of $157.2 and $135.8 at December 31, 1994 and
1993, respectively.
The earnings of Warner-Lambert's subsidiary operating in Puerto Rico
are subject to tax pursuant to a grant, effective through December
2003. The grant provides for certain tax relief and reduced
withholding tax rates upon repatriation of Puerto Rico earnings
provided that certain conditions are met. The company continued to be
in compliance with these conditions at December 31, 1994.
Earnings of foreign subsidiaries considered to be reinvested for an
indefinite period at December 31, 1994 totaled approximately $488. No
additional U.S. income taxes or foreign withholding taxes have been
provided on these earnings. It would be impractical to compute the
estimated deferred tax liability on these reinvested earnings.
<PAGE>
As of December 31, 1994, Warner-Lambert's U.S. federal income tax
returns through 1986 had been examined and settled with the Internal
Revenue Service.
The company's effective income tax rate before accounting changes
differed from the U.S. statutory tax rate as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Liability Liability Deferred
Method Method Method
- ---------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory tax rate 35.0% 35.0% 34.0%
Income earned in Puerto Rico (5.0) (5.5) (6.8)
Foreign income subject to
reduced tax rates including
taxes on repatriation (7.1) (4.6) (1.4)
U.S. research tax credit, net (.6) (1.8) (.5)
State and local taxes, net .7 .9 1.3
Other items, net 1.0 (.5) (1.6)
Effect of restructuring - (13.0) -
Effect of minority interests (2.2) - -
- ---------------------------------------------------------------------
Effective tax rate before
accounting changes 21.8% 10.5% 25.0%
- ---------------------------------------------------------------------
</TABLE>
The 1993 effective tax rate of 10.5 percent included the effect of a
31.4 percent tax benefit rate on the restructuring charge discussed in
Note 3. Excluding the effect of the restructuring charge, the
effective tax rate was 23.5 percent. The lower effective tax rate for
1993 also reflected the retroactive extension of the research tax
credit enacted as part of The Omnibus Budget Reconciliation Act of
1993 and a decrease in the overall international tax rate, due to
changes in certain affiliates' operating results, coupled with a $3.0
tax effect of applying the one percentage point increase in the U.S.
statutory tax rate to existing net deferred tax assets. There was a
separate 37.0 percent tax benefit rate on the $27.0 charge for the
change in accounting principle regarding SFAS No. 112, discussed in
Note 13.
<PAGE>
Note 16 - Shareholders' Equity:
The authorized preferred stock of Warner-Lambert Company is 5 million
shares with a par value of $1.00 per share, of which there are no shares issued.
The authorized common stock of Warner-Lambert Company is 300 million shares with
a par value of $1.00 per share.
Changes in certain components of shareholders' equity are summarized as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Capital in Cumulative Treasury Stock
Common Excess of Translation -----------------------
Stock Par Value Adjustments Shares Cost
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 $160.3 $ 92.6 $(128.9) (25,736,008) $(849.0)
Shares repurchased, at cost - - - (325,118) (22.8)
Employee benefit plans - 21.9 - 1,070,956 20.6
Translation adjustment - - (30.8) - -
- -----------------------------------------------------------------------------------------------
Balance at December 31, 1992 160.3 114.5 (159.7) (24,990,170) (851.2)
Shares repurchased, at cost - - - (1,680,290) (112.4)
Employee benefit plans - 5.6 - 479,947 9.9
Translation adjustment - - (65.1) - -
- -----------------------------------------------------------------------------------------------
Balance at December 31, 1993 160.3 120.1 (224.8) (26,190,513) (953.7)
Shares repurchased, at cost - - - (647,001) (41.7)
Employee benefit plans - 35.0 - 1,102,946 25.8
Translation adjustment - - 43.8 - -
Unrealized market value adjust-
ments on equity securities - (2.9) - - -
- -----------------------------------------------------------------------------------------------
Balance at December 31, 1994 $160.3 $152.2 $(181.0) (25,734,568) $(969.6)
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Pursuant to the company's Stockholder Rights Plan, a right is attached
to each outstanding share of common stock. In the event that any
person or group acquires 20 percent or more of the outstanding common
shares, or acquires the company in a merger or other business
combination, or engages in certain self-dealing transactions, each
right (other than those held by the "Acquiring Person") will entitle
its holder to purchase, for a specified purchase price, stock of the
company or the Acquiring Person having a market value of twice such
purchase price. The rights expire on July 8, 1998 and can be redeemed
for $.005 per right by the Board of Directors prior to the time the
rights become exercisable.
<PAGE>
Note 17 - Stock Options and Awards:
Warner-Lambert has stock plans established in 1992, 1989, 1987 and
1983 which provide for the granting of options to employees to
purchase shares of common stock within prescribed periods at a price
equal to fair market value on the date of the grant. There are
outstanding options under all plans; however, additional options may
be granted only under the 1992 plan.
The 1992 Stock Plan also provides for the granting of restricted stock
and performance awards. Restricted stock granted to employees is
delivered upon the expiration of restricted periods established at the
time of grant. The value of the shares at the date of the grant is
being amortized to compensation expense over the restricted periods,
with the unamortized portion representing unearned compensation
reflected as a reduction of shareholders' equity. Performance awards
provide for the recipient to receive payment in shares, cash or any
combination thereof equivalent to the award being granted.
The aggregate number of shares of common stock which may be awarded
under the 1992 Stock Plan in any year during its five-year term is not
more than 1.75 percent of the issued shares of common stock on January
1 of the year of grant. In any year in which stock awards are granted
for less than the maximum permissible number of shares, the balance of
unused shares will be added to the number of shares permitted to be
granted during the following year. No stock awards may be granted
under the 1992 Stock Plan after April 28, 1997.
The 1992 Stock Plan also contains provisions for the granting of
rights which permit the optionee to receive an amount equal to the
excess of the market price of the common stock over the option price
when the rights are exercised and receive payment in shares of common
stock, cash or a combination of both. Options and rights granted
generally become exercisable after one year in annual 25 percent
increments and expire ten years from the date of grant. The value of
rights granted is charged to income over the vesting period from the
date the market price first exceeds the option price, with adjustments
made based on market fluctuations to the date of exercise. At December
31, 1994, rights with respect to 650,600 shares of common stock were
outstanding.
<PAGE>
Transactions involving stock options, rights and awards are summarized
as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Number Price
of Shares Per Share
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Stock options, rights and awards
outstanding, December 31, 1992 8,747,333 $14.81 - $77.75
Stock options and rights:
Granted 1,519,725 65.06 - 75.25
Exercised (439,454) 14.81 - 73.69
Cancelled (282,951) 14.81 - 77.75
Stock awards:
Granted 51,270 65.69 - 75.75
Delivered (55,875) 44.56 - 77.06
Cancelled (13,453) 44.16 - 77.75
- ---------------------------------------------------------------------
Stock options, rights and awards
outstanding, December 31, 1993 9,526,595 17.00 - 76.98
Stock options and rights:
Granted 1,611,205 63.25 - 80.50
Exercised (1,129,564) 17.00 - 73.69
Cancelled (406,203) 17.00 - 73.69
Stock awards:
Granted 38,110 62.94 - 80.19
Delivered (61,001) 44.16 - 76.38
Cancelled (6,860) 54.47 - 75.81
- ---------------------------------------------------------------------
Stock options, rights and awards
outstanding, December 31, 1994 9,572,282 18.03 - 80.50
- ---------------------------------------------------------------------
Stock options and rights
exercisable, December 31, 1994 4,293,736 $18.03 - $76.38
- ---------------------------------------------------------------------
Shares available for annual grants at:
December 31, 1993 5,913,951
December 31, 1994 7,040,375
- ------------------------------------------------
</TABLE>
<PAGE>
Note 18 - Contingencies:
Various claims, suits and complaints, such as those involving
government regulations, patents and trademarks and product liability,
arise in the ordinary course of Warner-Lambert's business. In the
opinion of Warner-Lambert, all such pending matters are without merit
or are of such kind, or involve such amounts, as would not have a
material adverse effect on the consolidated financial position,
liquidity, cash flow or results of operations for any year.
<PAGE>
Note 19 - Environmental Liabilities:
The company is involved in various environmental matters including
actions initiated by the Environmental Protection Agency under the
Comprehensive Environmental Response, Compensation and Liability Act
(i.e., CERCLA or Superfund legislation and similar legislation),
various state environmental organizations and other parties. The
company is presently remediating environmental problems at certain
sites, including sites previously owned.
The company accrues costs for estimated environmental liabilities
when management becomes aware that a liability exists and is able to
reasonably estimate the amount, generally no later than the completion
of studies to determine the feasibility and cost of remedial
techniques. Outside consultants are generally used to assess the
costs of remediation. For most sites, there are other potentially
responsible parties (PRPs); for these sites, all PRPs may be jointly
and severally liable to pay all cleanup costs. In developing the
accrual, the company considers the extent to which other PRPs can be
expected to contribute. Accruals are established based on current
technology and are not discounted.
Some portion of the liabilities associated with the company's
environmental actions may be covered by insurance. The company is
currently in litigation with respect to the scope and extent of
liability coverage from certain insurance companies; however,
recoveries will not be recorded as income until there is assurance
that recoveries are forthcoming.
In management's opinion, the liabilities for all matters mentioned
above which are probable and reasonably estimable are adequately
accrued for. Management believes that the amount accrued for
environmental liabilities is not material and that it is remote that
costs significantly in excess of such accrual will be incurred. While
it is not possible to predict with certainty the outcome of the
matters described above or the ultimate costs of remediation,
management believes it is unlikely that their ultimate disposition
will have a material adverse effect on the company's consolidated
financial position, liquidity, cash flow or results of operations for
any year.
<PAGE>
Note 20 - Segment Information:
Financial information by industry segment and geographic area for
1994, 1993 and 1992 is presented on page 33 of this report under the
caption "Segment Information."
Industry segments are comprised as follows: Consumer Health Care -
consisting of OTC products, razors and blades, pet care products and
the Novon Products Group which was discontinued in 1993, see Note 3;
Confectionery - consisting of chewing gums, breath mints and, until
disposition in the fourth quarter of 1993, chocolate/caramel brands,
see Note 3; Pharmaceutical - consisting of ethical pharmaceuticals,
biologicals and empty hard-gelatin capsules.
<PAGE>
Note 21 - Quarterly Financial Information - Unaudited:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1994 Quarters 1993 Quarters
- -----------------------------------------------------------------------------------------------
First Second Third Fourth First Second Third Fourth
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $1,472.9 $1,552.2 $1,671.0 $1,720.7 $1,331.7 $1,449.7 $1,478.5 $1,533.8
Gross profit 993.9 1,042.9 1,101.6 1,123.3 920.8 977.8 980.2 996.8
Income (loss)
before accounting
changes 190.4 196.7 169.2 137.7 136.1 189.9 155.9 (196.9)
Net income (loss) 190.4 196.7 169.2 137.7 182.1 189.9 155.9 (196.9)
Per common share:
Income (loss)
before accounting
changes 1.42 1.47 1.26 1.02 1.01 1.40 1.16 (1.46)
Net income (loss) 1.42 1.47 1.26 1.02 1.35 1.40 1.16 (1.46)
- -----------------------------------------------------------------------------------------------
First quarter 1993 results included a pretax restructuring charge of $70.0 or $45.0 after tax
for the disposition of the Novon Products Group as discussed in Note 3, a charge of $17.0 after
tax or $.13 per share to adopt SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," and a credit of $63.0 or $.47 per share for the adoption of SFAS No. 109,
"Accounting for Income Taxes." The third quarter 1993 effective tax rate was 19.6 percent
compared with 23.3 percent for the first half of 1993 due to the retroactive extension of the
research tax credit enacted in August 1993. Fourth quarter 1993 results included a net pretax
restructuring charge of $455.2 or $315.4 after tax, see Note 3.
</TABLE>
<PAGE>
Report by Management
The management of Warner-Lambert Company has prepared the accompanying
consolidated financial statements and related information in
conformity with generally accepted accounting principles and is
responsible for the information and representations in such financial
statements, including estimates and judgments required for their
preparation. Price Waterhouse LLP, independent accountants, has
audited the consolidated financial statements and their report appears
herein.
In order to meet its responsibilities, management maintains a system
of internal controls designed to provide reasonable assurance that
assets are safeguarded and that financial records properly reflect all
transactions. The internal control system is augmented by an ongoing
internal audit program, an organizational structure that provides for
appropriate division of responsibility and communication programs that
explain the company's policies and standards.
The Audit Committee of the Board of Directors, composed entirely of
nonemployee directors, meets periodically with the independent
accountants, management and internal auditors to review auditing,
internal accounting controls and other financial reporting matters.
Both the independent accountants and internal auditors have full
access to the Audit Committee.
Management also recognizes its responsibility for fostering a strong
ethical climate so that the company's affairs are conducted according
to the highest standards of personal and corporate conduct. This
responsibility is characterized and reflected in the company's Creed,
which summarizes Warner-Lambert's commitment to its customers,
colleagues, shareholders, business partners and society.
<PAGE>
Report of Independent Accountants
PRICE WATERHOUSE LLP
To the Board of Directors and Shareholders of Warner-Lambert Company
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and retained earnings and of
cash flows present fairly, in all material respects, the financial
position of Warner-Lambert Company and its subsidiaries at December
31, 1994 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for the opinion expressed above.
As discussed in Notes 13 and 15 to the financial statements, effective
January 1, 1993 the company changed its accounting for postemployment
benefits and income taxes.
Price Waterhouse LLP
- --------------------
4 Headquarters Plaza North
Morristown, New Jersey
January 23, 1995
<PAGE>
EXHIBIT 21
The following is a list of subsidiaries of Warner-Lambert showing the
state or country of organization and the percentage of voting securities owned
by Warner-Lambert or by subsidiaries of Warner-Lambert as of December 31,
1994. Except as otherwise indicated, such subsidiaries are included in the
consolidated financial statements.
<TABLE>
<CAPTION>
STATE OR COUNTRY
NAME OF SUBSIDIARY OF ORGANIZATION PERCENTAGE OF OWNERSHIP
------------------ ----------------- -----------------------
<S> <C> <C>
Adams, S.A............................. Spain 100
Adams Brands, Inc...................... Philippines 100
American Chicle Company................ Delaware 100
Chicle Adams, S.A...................... Venezuela 100
Euronett, Inc.......................... Delaware 100
International Affiliated Corporation... Delaware 100
Warner-Lambert GmbH.................. Germany 100 International Affiliated
Corporation
Parke, Davis GmbH............ Germany 100 Warner-Lambert GmbH
Goedecke Aktiengesellschaft.. Germany 100 Warner-Lambert GmbH
Adenylchemie GmbH....... Germany 100 Goedecke Aktiengesellschaft
Goedecke
Gesellschaft m.b.H.... Austria 100 Goedecke Aktiengesellschaft
International Company for Gum
and Confectionery (INCOGUM)
S.A.E...................... Egypt 57 Warner-Lambert GmbH
PanServ - Anzeigen -
Service GmbH............... Germany 100 Warner-Lambert GmbH
Warner-Lambert Consumer
Products GmbH, Berlin...... Germany 100 Warner-Lambert GmbH
Warner-Lambert
Consumer Products
GmbH, Frankfurt....... Germany 100 Warner-Lambert Consumer Products
GmbH, Berlin
Wilkinson Sword GmbH.... Austria 100 Warner-Lambert Consumer Products
GmbH, Berlin
NV Wilkinson Sword
S.A................... Belgium 100 Warner-Lambert Consumer Products
GmbH, Berlin
Wilkinson Sword SpA..... Italy 99 Warner-Lambert Consumer Products
GmbH, Berlin
1 Wilkinson Sword Limited
Wilkinson Sword
S.A.E................. Spain 85 Warner-Lambert Consumer Products
GmbH, Berlin
Wilkinson Sword
Verwaltungs GmbH...... Germany 100 Warner-Lambert Consumer Products
GmbH, Berlin
W&A
Grundstucksverwaltungs
GbR.............. Germany 97 Wilkinson Sword Verwaltungs GmbH
3 Warner-Lambert Consumer Products
GmbH, Berlin
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE OR COUNTRY
NAME OF SUBSIDIARY OF ORGANIZATION PERCENTAGE OF OWNERSHIP
------------------ ----------------- -----------------------
<S> <C> <C>
Warner-Lambert Europaische
Beteiligungs GmbH.......... Germany 100 Warner-Lambert GmbH
Parke-Davis GmbH........ Austria 100 Warner-Lambert Europaische
Beteiligungs GmbH
Warner-Lambert
(Schweiz) AG.......... Switzerland 100 Warner-Lambert Europaische
Beteiligungs GmbH
Parke-Davis Sendirian Berhad...... Malaysia 100 International Affiliated
Corporation
Latin American Holdings Inc............ Delaware 100
Laboratorios Laprofa, Sociedad
Anonima......................... Guatemala 100 Latin American Holdings Inc.
Warner-Lambert Industria e
Comercio Limitada............... Brazil 100 Latin American Holdings Inc.
Keystone Chemurgic Corp................ Delaware 100
Exchic C.A. Limited............... Bermuda 57.4
42.6 Keystone Chemurgic Corp.
Warner-Lambert Guatemala,
S.A............................. Guatemala 100 Keystone Chemurgic Corp.
Laboratorios Substantia, C.A........... Venezuela 80
Lambert & Feasley, Inc................. New York 100
Med-Tech Ventures, Inc................. Delaware 100
Meito Adams Co., Ltd.*................. Japan 50
Parke-Davis Sales Corporation.......... Virgin Islands 100
Parke, Davis & Company
('Parke-Davis')...................... Michigan 100
Parke-Davis Korea Limited........ Korea 100 Parke-Davis
Warner-Lambert de Puerto Rico,
Corp............................ Puerto Rico 100 Parke-Davis
P-D Co., Inc...................... Delaware 100 Parke-Davis
Warner-Lambert (Belgium)
N.V........................ Belgium 100 P-D Co., Inc.
Capsugel AG.................. Switzerland 100 P-D Co., Inc.
Empresas Warner Lambert
S.A........................ Chile 90 P-D Co., Inc.
10 Tabor Corporation
Parke-Davis (Thailand)
Limited.................... Thailand 100 P-D Co., Inc.
Parke-Davis ('Parke-Davis
France')................... France 84.1 P-D Co., Inc.
14 Warner-Lambert Ireland Limited
1.9 Warner-Lambert Consumer Products
GmbH, Berlin
Adams France............ France 100 Parke-Davis France
Cachou Lajaunie......... France 100 Parke-Davis France
Capsugel France......... France 100 Parke-Davis France
Societe Nouvelle des
Pastilles de Vichy.... France 100 Parke-Davis France
C.M.S. Diffusion... France 99 Societe Nouvelle des Pastilles de
Vichy
1 Parke-Davis France
Wilkinson Sword S.A..... France 100 Parke-Davis France
</TABLE>
* Subsidiary not consolidated
<PAGE>
<TABLE>
<CAPTION>
STATE OR COUNTRY
NAME OF SUBSIDIARY OF ORGANIZATION PERCENTAGE OF OWNERSHIP
- --------------------------------------- --------------------------- ---------------------------------------
<S> <C> <C>
Warner-Lambert Company
AG......................... Switzerland 100 P-D Co., Inc.
Adams (Thailand)
Limited............... Thailand 100 Warner-Lambert Company AG
Warner-Lambert (East
Africa) Limited....... Kenya 100 Warner-Lambert Company AG
Warner-Lambert
Pottery Road
Limited............... Ireland 100 Warner-Lambert Company AG
Parke, Davis & Company, Inc....... Philippines 100 Parke-Davis
Parke, Davis & Company, Limited... Pakistan 75.6 Parke-Davis
Parke Davis International
Limited......................... Bahamas 100 Parke-Davis
Parke Davis Pty. Limited.......... Australia 100 Parke-Davis
Warner-Lambert Pty.
Limited.................... Australia 100 Parke-Davis Pty. Limited
Warner-Lambert (UK) Limited....... United Kingdom 100 Parke-Davis
Lambert Chemical Company
Limited.................... United Kingdom 100 Warner-Lambert (UK) Limited
Parke Davis & Co. Limited.... Jersey, Channel Islands 100 Warner-Lambert (UK) Limited
Wilkinson Sword Limited...... United Kingdom 100 Warner-Lambert (UK) Limited
Warner-Lambert Canada Inc......... Canada 100 Parke-Davis
Chilcott Laboratories Canada
Inc........................ Canada 100 Warner-Lambert Canada Inc.
Parke-Davis Afrique de
l'Ouest.................... Senegal 100 Warner-Lambert Canada Inc.
Renrall K.K.................. Japan 100 Warner-Lambert Canada Inc.
Parke Davis, S.A....................... Spain 65
35 Warner-Lambert Company AG
Parke-Davis S.p.A...................... Italy 100 (Indirect)
Parke-Davis Scandinavia AB............. Sweden 100
Suzhou Capsugel'R' Ltd.*............... People's Republic of China 50
Tabor Corporation...................... Delaware 100
Tetra-Werke Dr. rer. nat. Ulrich
Baensch GmbH......................... Germany 100 (Indirect)
Tetra Heimtierbedarf GmbH......... Germany 100 Tetra-Werke Dr. rer. nat. Ulrich
Baensch GmbH
Biorell GmbH................. Germany 100 Tetra Heimtierbedarf GmbH
HILENA Biologische und
Chemische Erzeugnisse
GmbH.................. Germany 100 Biorell GmbH
Zoomedica Frickhinger
GmbH...................... Germany 100 Tetra Heimtierbedarf GmbH
Wilkinson Sword GmbH.............. Germany 51 Tetra-Werke Dr. rer. nat. Ulrich
Baensch GmbH
49 Warner-Lambert Consumer Products
GmbH, Berlin
Warner-Chilcott Inc.................... Delaware 100
Warner-Lambert de Mexico, S.A. de
C.V.................................. Mexico 100
Chicle Adams, S.A. de C.V......... Mexico 100 Warner-Lambert de Mexico, S.A.
de C.V.
Compania Medicinal La Campana,
S.A. de C.V..................... Mexico 100 Warner-Lambert de Mexico, S.A.
de C.V.
Warner-Lambert de Venezuela S.A........ Venezuela 72.4
27.6 Parke-Davis
</TABLE>
* Subsidiary not consolidated
<PAGE>
<TABLE>
<CAPTION>
STATE OR COUNTRY
NAME OF SUBSIDIARY OF ORGANIZATION PERCENTAGE OF OWNERSHIP
------------------ ----------------- -----------------------
<S> <C> <C>
Warner-Lambert Europe N.V.............. Belgium 100
Warner-Lambert Holland B.V............. Netherlands 100
Parke-Davis B.V................... Netherlands 100 Warner-Lambert Holland B.V.
Substantia - Produtos
Farmaceuticos, Limitada.... Portugal 97.5 Parke-Davis B.V.
2.5 Parke-Davis France
Schick Nederland B.V.............. Netherlands 100 Warner-Lambert Holland B.V.
Warner-Lambert A.E........... Greece 99 Schick Nederland B.V.
1 Warner-Lambert Holland B.V.
W-L Distributie N.V.......... Belgium 100 Schick Nederland B.V.
Wilkinson Sword B.V............... Netherlands 100 Warner-Lambert Holland B.V.
Warner-Lambert Inc..................... Nevada 100
Warner-Lambert Ireland Limited......... Ireland 100 (Indirect)
Warner-Lambert Distributors
(Ireland) Ltd................... Ireland 100 Warner-Lambert Ireland Limited
Warner-Lambert Export
Limited......................... Ireland 100 Warner-Lambert Ireland Limited
Warner-Lambert KK...................... Japan 100
Warner-Lambert Ltd..................... Delaware 100
Warner-Lambert de Panama,
Sociedad Anonima................ Panama 100 Warner-Lambert Ltd.
Warner-Lambert Manufacturing
(Ireland) Ltd........................ Cayman Islands, 100
British West Indies
Warner Lambert (NZ) Limited............ New Zealand 100
Warner-Lambert Philippines, Inc........ Philippines 100
Warner-Lambert (Portugal) Comercio e
Industria, Limitada.................. Portugal 100
Warner-Lambert S.A. (Proprietary)
Limited.............................. South Africa 100
Wilcox Sweets (Proprietary)
Limited......................... South Africa 100 Warner-Lambert S.A.
(Proprietary) Limited
Warner-Lambert (Thailand) Limited...... Thailand 100 (Indirect)
Willinger Bros., Inc................... Delaware 100
JWI............................... New Jersey 100 Willinger Bros., Inc.
Warner Wellcome Consumer Healthcare.... New York 70 (Profit share)
</TABLE>
The foregoing list omits 9 domestic subsidiaries and 75 foreign subsidiaries
which, considered in the aggregate, would not constitute a significant
subsidiary.
<PAGE>
EXHIBIT 23
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Registration Nos.
2-53423, 33-21123, 2-86826, 33-17584, 33-28375, 33-12209, 33-49244 and 33-57918)
and on Form S-3 (Registration Nos. 33-4049, 33-38725 and 33-55692) of
Warner-Lambert Company of our report dated January 23, 1995 appearing on page 48
of Warner-Lambert Company's 1994 Annual Report to Shareholders which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page 20 of this Form 10-K.
PRICE WATERHOUSE LLP
4 Headquarters Plaza North
Morristown, New Jersey 07962
March 20, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1994 AND FROM THE RELATED
CONSOLIDATED STATEMENT OF INCOME FOR THE 12 MONTH PERIOD ENDED DECEMBER
31, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000,000
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 218
<SECURITIES> 247
<RECEIVABLES> 1,118
<ALLOWANCES> 22
<INVENTORY> 636
<CURRENT-ASSETS> 2,515
<PP&E> 3,168
<DEPRECIATION> 1,322
<TOTAL-ASSETS> 5,533
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<COMMON> 160
0
0
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</TABLE>
