<PAGE>
<PAGE>
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-3608
------------------------
WARNER-LAMBERT COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<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 22, 1996 was approximately
$13,797,180,851.
The number of shares outstanding of the registrant's Common Stock as of
February 22, 1996 was 135,704,221 shares, Common Stock, par value $1.00 per
share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Warner-Lambert Company Annual Report to Shareholders for
1995 -- 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 23, 1996 -- Part III.
________________________________________________________________________________
<PAGE>
<PAGE>
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 1995, 1994 and 1993 is presented in
the Warner-Lambert 1995 Annual Report to Shareholders as set forth below.
The summary of Warner-Lambert's industry segments, geographic areas and
related financial information, set forth in Note 20 to the consolidated
financial statements on page 40 of the Warner-Lambert 1995 Annual Report, is
incorporated herein by reference.
All product names appearing in capitalized letters in this report on Form
10-K are registered trademarks of Warner-Lambert, its affiliates, related
companies or licensors. ZANTAC, ZANTAC 75, BECONASE, ZOVIRAX, SUDAFED, ACTIFED,
NEOSPORIN, POLYSPORIN, NIX, BOROFAX and EMPIRIN are registered trademarks of
Glaxo Wellcome plc ('Glaxo Wellcome'), its affiliates or related companies. As
discussed below, Warner-Lambert entered into separate joint ventures with
Wellcome plc ('Wellcome') and Glaxo Holdings plc ('Glaxo') prior to the
acquisition by Glaxo of Wellcome, see 'Item 1. Business -- Business
Segments -- Consumer Health Care Products' below. Glaxo is now known as Glaxo
Wellcome.
BUSINESS SEGMENTS
A detailed description of Warner-Lambert's industry segments is as follows:
Pharmaceutical Products
The principal products of Warner-Lambert in its Pharmaceutical Products
segment are ethical pharmaceuticals, biologicals and capsules.
Ethical Pharmaceuticals and Biologicals: Warner-Lambert manufactures and/or
sells, in the United States and/or internationally, an extensive line of ethical
pharmaceuticals and biologicals under trademarks and trade names such as
PARKE-DAVIS and GOEDECKE. Among these products are analgesics (PONSTAN, PONSTEL,
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
(cefdinir)), antivaricosities (HEPATHROMBIN), anti-viral agents (VIRA-A),
bronchodilators (CHOLEDYL SA), cardiovascular products (NOVADRAL, DILZEM, PROCAN
SR, ACCUPRIL, ACCUZIDE, NITROSTAT and PIMENOL), cognition drugs for treatment of
mild-to-moderate Alzheimer's disease (COGNEX), dermatologics (BEBEN),
prescription hemorrhoidal preparations (ANUSOL HC), hemostatic agents
(THROMBOSTAT), hormonal agents (PITRESSIN), influenza vaccines (FLUOGEN), lipid
regulators (LOPID), oral contraceptives (LOESTRIN), oxytocics (PITOCIN),
psychotherapeutic products (CETAL RETARD, DEMETRIN and NARDIL) and urinary
analgesics (PYRIDIUM).
Warner-Lambert received its first marketing authorization in the world for
OMNICEF in the Philippines in July 1994 and began marketing the product in that
country in January 1995. 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 the first quarter of
1995 in co-promotion with Dainippon Pharmaceutical Co., Ltd.
The Company plans to file 8 New Drug Applications ('NDA's') and
supplemental NDA's in 1996. These filings include 3 new chemical entities, all
of which are in late stage development and are anticipated to be commercially
significant. They are atorvastatin, a lipid regulator, troglitazone, an insulin
enhancing medication for Type II diabetes, and cefdinir, an anti-infective.
1
<PAGE>
<PAGE>
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 1995 were made to managed care entities
(including government agencies and hospitals). For further discussion of
Warner-Lambert's ethical products, see 'Item 1. Business -- Regulation' below.
Capsules: Warner-Lambert is the leading worldwide producer of empty
hard-gelatin capsules used by pharmaceutical companies for their production of
encapsulated products. These capsules are used by Warner-Lambert or manufactured
by Warner-Lambert according to the specifications of each of its customers and
are sold under such trademarks as CAPSUGEL, CONI-SNAP, SNAP-FIT and Press-
Fit'tm' gelcaps.
Other: In February 1996, Warner-Lambert entered into an agreement to sell
Warner Chilcott Laboratories, its generic drug division. The sale is subject to
receipt of necessary regulatory approvals and is expected to occur before the
end of the first quarter of 1996. The decision to sell the generic drug business
reflects the Company's intention to focus its resources more fully on its core
pharmaceutical, consumer health care products and confectionery businesses.
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 (which acquired Wellcome in 1995 and is
referred to as 'Glaxo Wellcome') governing the establishment of joint ventures
in various countries to develop and market a broad range of nonprescription
consumer health care products.
On December 18, 1995, Warner-Lambert signed a letter of intent to purchase
Glaxo Wellcome's interests in the Warner Wellcome over-the-counter joint venture
operations and related assets for a purchase price of $1.05 billion and to
restructure Warner-Lambert's joint venture arrangements with Glaxo Wellcome with
respect to the marketing of certain Glaxo Wellcome prescription drugs which
become over-the-counter products. This restructured joint venture will also
include Wellcome's over-the-counter switch products. The wholly-owned
over-the-counter business of Warner-Lambert, which will include the products
originally contributed by Wellcome to the Warner Wellcome joint venture
operations as described below (other than ZOVIRAX products), will be referred to
as Warner-Lambert Consumer Healthcare. The transactions are subject to
negotiation and completion of a final agreement and the receipt of necessary
regulatory approvals. During the negotiation period, Warner-Lambert will retain
its rights under the original Warner Wellcome joint venture agreement, including
those rights related to the Wellcome acquisition by Glaxo.
Warner-Lambert's joint venture agreement with Wellcome, prior to Wellcome's
acquisition by Glaxo, called for both companies to contribute to the joint
venture operations (referred to herein as the 'Warner Wellcome' joint venture
operations) current and future over-the-counter products (excluding HALLS and
ROLAIDS products). Joint venture operations formed pursuant to a global
principles agreement began in the United States 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 or its affiliates are the managing
partners of the Warner Wellcome joint venture operations, with day-to-day
operating responsibility.
Warner-Lambert and Glaxo Wellcome receive approximately 70 percent and 30
percent, respectively, of the profits generated by the current products of the
Warner Wellcome joint venture operations in the United States. Profits on
current products marketed through the Warner Wellcome joint venture are shared
equally between Warner-Lambert and Glaxo Wellcome in Canada, Australia,
2
<PAGE>
<PAGE>
New Zealand and the European countries where joint venture operations have been
established. During the negotiation period for the transactions described above,
the provisions of the existing agreements relating to profit sharing will
continue.
ZOVIRAX cold sore cream has been approved for over-the-counter use and is
being sold over-the-counter in a number of countries in Europe. ZOVIRAX cold
sore cream, previously marketed through the Warner Wellcome joint venture
operations, will be marketed, upon completion of the transactions described
above, under the terms of the over-the-counter switch joint venture operations
between Warner-Lambert and Glaxo Wellcome.
A NDA for the conversion to over-the-counter use of the oral form of
ZOVIRAX as a genital herpes medication was filed with the U.S. Food and Drug
Administration ('FDA') in August 1993. The FDA's Antiviral Drugs and
Nonprescription Drugs Advisory Committee has recommended that the current
submission for conversion of ZOVIRAX to over-the-counter form not be approved.
At this time, the Company cannot predict whether Glaxo Wellcome will continue to
pursue approval.
Warner-Lambert and Glaxo, prior to its acquisition of Wellcome, formed a
joint venture in the United States, which commenced operations in December 1993
(referred to herein as the 'Glaxo Warner-Lambert' joint venture operations or
organization). The Glaxo Warner-Lambert joint venture operations will develop,
seek approval of and market over-the-counter versions of certain Glaxo Wellcome
prescription drugs in the United States, including ZANTAC, Glaxo Wellcome'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 Wellcome in other major markets, excluding
Japan.
In the United Kingdom, Warner Wellcome is currently marketing ZANTAC 75, an
over-the-counter treatment for episodic heartburn and BECONASE, an
over-the-counter allergy nasal spray manufactured by Glaxo Wellcome.
Warner-Lambert shares in the profits generated by these brands.
Direction of the Glaxo Warner-Lambert joint venture operations is provided
by management committee representatives from each company. Day-to-day operations
are the responsibility of Warner-Lambert, and the joint venture operations'
over-the-counter products will be sold by Warner-Lambert's consumer health care
products sales and marketing organization, which in most countries is the Warner
Wellcome organization and, following completion of the transactions described
above, will be a Warner-Lambert organization. Warner-Lambert and Glaxo Wellcome
share development costs, profits and voting control equally, with Glaxo Wellcome
receiving a royalty on sales by the Glaxo Warner-Lambert joint venture
operations of certain current over-the-counter versions of Glaxo Wellcome
prescription drugs.
On September 30, 1994, Glaxo submitted a NDA to the FDA for the sale in the
United States of a product for the treatment of episodic heartburn called ZANTAC
75. On December 19, 1995, ZANTAC 75 received marketing clearance from the FDA.
Warner Wellcome Products: In each country where a Warner Wellcome joint
venture has been established, Warner Wellcome sells a line of over-the-counter
pharmaceutical 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,
SUDAFED NON-DRYING and ACTIFED), antihistamines and allergy products (ACTIFED
Allergy, SUDAFED PLUS, BENADRYL, BENADRYL-D, BENADRYL Cold, BENADRYL CHEWABLES,
BENADRYL Allergy/Sinus/Headache and BENADRYL Dye-Free), hemorrhoidal
preparations (ANUSOL, ANUSOL HC-1 and TUCKS), vaginal moisturizers (REPLENS),
laxatives (AGORAL), cough syrups/suppressants (BENYLIN, BENYLIN-DM, BENYLIN
DECONGESTANT, BENYLIN EXPECTORANT and BENYLIN PEDIATRIC), vitamins (MYADEC),
antipruritics (CALADRYL, BENADRYL spray, cream, gel and stick and STINGOSE),
rubbing alcohol (LAVACOL), hydrogen peroxide (PROXACOL), self-diagnostic early
pregnancy test kits (e.p.t'r'), oral antiseptics (LISTERINE, COOL MINT LISTERINE
and FRESHBURST LISTERINE), mouthwash/dental rinses (LISTERMINT), toothpaste
(COOLMINT LISTERINE),
3
<PAGE>
<PAGE>
effervescent denture cleaning tablets and denture cleanser pastes (EFFERDENT,
EFFERDENT PLUS and FRESH 'N BRITE), denture adhesives (EFFERGRIP), head lice
treatments (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 Warner Wellcome joint
venture operations. Upon completion of the purchase by Warner-Lambert of Glaxo
Wellcome's interests in the Warner Wellcome joint venture operations,
Warner-Lambert Consumer Healthcare will sell each of those products contributed
by Wellcome in those countries which were included in the original Warner
Wellcome 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 and Extra Strength
ROLAIDS), cough tablets (HALLS, HALLS Juniors, HALLS-PLUS and Sugar Free HALLS)
and throat drops (CELESTIAL SEASONINGS SOOTHERS and HALLS Vitamin C).
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, SCHICK
PROTECTOR, 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 and ULTREX DISPOSABLE. Products marketed under the
WILKINSON SWORD trademark include nondisposable systems such as PROTECTOR, FX
PERFORMER, PROFILE, SYSTEM II, DUPLO and LADY PROTECTOR, and disposable products
that include COLOURS, PRONTO, RETRACTOR, RETRACTOR TWIN 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 to retail
outlets, including pharmacies, food stores, variety stores, mass merchandisers
and other miscellaneous outlets.
Pet Care Products: Warner-Lambert manufactures and/or sells various
products on a worldwide basis for ornamental fish and for reptiles and other
small pets, as well as books relating to various pets, under various trademarks
including TETRA, TETRA POND, TETRA PRESS, TETRA TERRAFAUNA, HILENA, ZOOMEDICA
FRICKINGER 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.
Other: In the third quarter of 1995, Warner-Lambert sold the assets of its
PRO toothbrush business in order to refocus its resources on its core
pharmaceutical, consumer health care products and confectionery businesses.
During 1996 the Company plans to sell other non-strategic businesses and
undervalued and non-productive assets in order to permit the Company to invest
more heavily in its core businesses.
4
<PAGE>
<PAGE>
Confectionery Products
The principal products of Warner-Lambert in its Confectionery Products
segment are chewing gums and breath mints.
Warner-Lambert manufactures and/or sells, in the United States and/or
internationally, a broad line of chewing gums and breath mints. 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, CERTS Cool Mint Drops'tm' and
CLORETS. In addition, the Company sells several specialty candies. The specialty
candies line includes a line of hard candies called FRUIT WAVES that is sold
under the OCEAN SPRAY trademark and also those sold under the SAILA and
Koldt'tm' trademarks.
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.
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 25,000
of Warner-Lambert's employees are located outside the United States and Puerto
Rico and only a small number of such employees are U.S. 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 1995 amounted to
approximately 57% of the Company's worldwide sales. International sales do not
include sales of products exported from the United States, which sales represent
less than 1% of total U.S. sales. The seven largest markets with respect to the
distribution of Warner-Lambert products sold outside the United States during
1995 were Japan, Germany, the United Kingdom, France, Canada, Brazil and Italy.
Sales in these markets accounted for approximately 62% of Warner-Lambert's
international sales, with no one country accounting for more than 18% of
international sales.
In 1994, Warner-Lambert announced its intention to construct and operate,
through a joint venture with a Chinese partner, a manufacturing facility in
Guangzhou, China. This facility will produce confectionery products which will
be sold in China and exported. The Company now estimates that its initial
investment in the joint venture through the end of 1996 will be approximately
$35 million. The construction of this facility is on schedule and completion and
commission of the plant is expected by December 1996.
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. The devaluation of the
Mexican peso in December 1994 resulted in an adverse impact on the Company's
sales of $137 million in 1995.
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
5
<PAGE>
<PAGE>
next several years. For further discussion of Warner-Lambert's restructuring,
see 'Management's Discussion and Analysis -- Costs and Expenses' and Note 3 to
the consolidated financial statements, contained in Warner-Lambert's 1995 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 Glaxo
Wellcome, certain pet products and certain other 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 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. Warner-Lambert anticipates, however, that
patents on certain future products, such as atorvastatin and troglitazone, may
become material to Warner-Lambert's business as a whole if such products are
approved.
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 and
pending applications existing on June 8, 1995. It is not clear what the impact
of this legislation on Warner-Lambert will be.
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 $501 million in research and development in 1995, compared with
$456 million in 1994 and $465 million in 1993. Approximately 81% of
Warner-Lambert's 1995 research and development spending was related to
pharmaceutical products. Warner-Lambert believes research and development
activities are essential to its business and intends to continue such
activities.
EMPLOYEES
At December 31, 1995, approximately 37,000 people were employed by
Warner-Lambert throughout the world.
6
<PAGE>
<PAGE>
REGULATION
Warner-Lambert's business is subject to varying degrees of governmental
regulation in the countries in which it manufactures and distributes products.
In the United States, the food, drug and cosmetic industries are subject to
regulation by various federal, state and local agencies with respect to product
safety and effectiveness, manufacturing and advertising and labeling.
Accordingly, from time to time, with respect to particular products under
review, such agencies may require Warner-Lambert to address safety, efficacy,
manufacturing and/or regulatory issues, to conduct additional testing or to
modify its advertising and/or labeling.
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 manufacturing and quality practices and procedures. The decree is a
court-approved agreement that primarily requires Warner-Lambert to certify that
laboratory and/or manufacturing facilities in the United States and Puerto Rico
are in compliance with current Good Manufacturing Practices established by the
FDA. Under the terms of the decree, the manufacture and distribution of some
products was temporarily suspended pending completion of certain certification
activities. Relevant facility and laboratory certifications have been obtained
in all U.S. and Puerto Rico plants. Warner-Lambert's manufacturing facilities in
the mainland United States and Puerto Rico have now resumed full operations.
Although there are several prescription products which have not yet returned to
the market or which have been withdrawn, most of those pharmaceutical products
which the Company intends to continue manufacturing and/or marketing have
returned to full manufacture and/or distribution. The terms of the consent
decree are applicable until at least August 1998.
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
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 some 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 drugs,
COGNEX (tacrine) and NEURONTIN (gabapentin), discussed above under the caption
'Item 1. Business Segments -- Pharmaceutical Products', both of which obtained
United States marketing approval in 1993. Warner-Lambert has pledged 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 the AIP. In
1994 and 1995, Warner-Lambert filed all the expert validity assessments that had
not yet been filed. The Company also submitted a Corrective Action Operating
Plan to the FDA in December 1994, which outlines corrective actions which have
been or will be implemented in response to the validity assessments. By letter
dated September 22, 1995, the FDA stated that it had completed its review of the
Vega Baja, Puerto Rico pharmaceutical facility and confirmed that the facility
is no longer subject to the AIP. The FDA has completed its inspection of the
Fajardo, Puerto Rico facility. It is not possible to predict when or whether the
AIP will be lifted with respect to the Fajardo facility or whether the FDA will
take additional action.
On October 31, 1995, the Drug Enforcement Administration (the 'DEA')
published a proposed rule which would bring certain of the Company's
over-the-counter pharmaceutical products containing pseudoephedrine
hydrochloride under the chemical control provisions of the Controlled Substances
Act through the revocation of an exemption for listed chemicals lawfully
marketed under the Food, Drug and Cosmetic Act. In addition, in March 1996
legislation was introduced in the U.S. Senate to remove such legal drug
exemption for single ingredient pseudoephedrine products. The rule and
legislation, if enacted in their present forms, would among other things impose
new regulatory restrictions on persons handling such products including
recordkeeping and reporting of certain transactions to the DEA. The Company is
concerned that such restrictions could induce pharmacies and other retail
outlets which carry such products to keep such products 'behind the counter' or
no longer to carry such products. The Company has opposed the rule and
legislation in their present forms. While it is not possible to
7
<PAGE>
<PAGE>
predict with certainty whether the rule or legislation will be finalized or
enacted, as the case may be, in their present forms, Warner-Lambert believes
that neither would have a material adverse effect on Warner-Lambert's financial
position, liquidity, cash flow or results of operations for any year.
Regulatory requirements concerning the research and development of drug
products have increased in complexity and scope in recent years. This has
resulted in a substantial increase in the time and expense required to bring new
products to market. At the same time, the FDA requirements for approval of
generic drugs (drugs containing the same active chemical as an innovator's
product) have been reduced as a result of the adoption of abbreviated new drug
approval procedures for most generic drugs. Generic versions of many of
Warner-Lambert's products in the Pharmaceutical Products segment are being
marketed in the United States, and generic substitution legislation, which
permits a pharmacist to substitute a generic version of a drug for the one
prescribed, has been enacted in some form in all states. These factors have
resulted in increased competition from generic manufacturers in the market for
ethical products.
The regulatory agencies under whose purview Warner-Lambert operates have
administrative and legal powers that may subject Warner-Lambert and its products
to seizure actions, product recalls and other civil and criminal actions. They
may also subject the industry to emergency regulatory requirements.
Warner-Lambert's policy is to comply fully with all regulatory requirements. It
is impossible to predict, however, what effect, if any, these matters or any
pending or future legislation, regulations or governmental actions may have on
the conduct of Warner-Lambert's business in the future.
In most of the foreign countries where Warner-Lambert does business, it is
subject to a regulatory and legislative climate similar to or more restrictive
than that described above. The Company cannot predict whether or what type of
measures will be encountered in the future.
ENVIRONMENT
Warner-Lambert is responsible for compliance with a number of environmental
laws and regulations. Warner-Lambert maintains control systems designed to
assure compliance in all material respects with environmental laws and
regulations, including environmental policies and maintenance of a worldwide
audit program.
Warner-Lambert is involved in various administrative or judicial
proceedings related to environmental actions initiated by the Environmental
Protection Agency under the Comprehensive Environmental Response, Compensation
and Liability Act (also known as Superfund) or by state authorities under
similar state legislation, or by third parties. For some of the sites, other
parties (defined as potentially responsible parties) may be jointly and
severally responsible, along with Warner-Lambert, to pay remediation and other
related expenses. For other sites, for example, those sites which Warner-Lambert
currently owns or previously owned, Warner-Lambert may be the sole party
responsible for clean-up costs. While it is not possible to predict with
certainty the outcome of such matters or the total cost of remediation,
Warner-Lambert believes it is unlikely that their ultimate disposition will have
a material adverse effect on Warner-Lambert's financial position, liquidity,
cash flow or results of operations for any year. Actions with respect to
environmental programs and compliance result in operating expenses and capital
expenditures. Warner-Lambert's capital expenditures with respect to
environmental programs and compliance in 1995 were not, and in 1996 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 on page
39 of the Warner-Lambert 1995 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 6,993,000 square feet and leases facilities
having an aggregate of approximately 394,000 square feet.
8
<PAGE>
<PAGE>
Warner-Lambert's U.S. manufacturing plants are located in Lititz,
Pennsylvania (pharmaceuticals and consumer health care products); Rockford,
Illinois (confectionery products); Rochester, Michigan (pharmaceuticals);
Holland, Michigan (pharmaceuticals); Morris Plains, New Jersey (pharmaceuticals
and consumer health care products); 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 products).
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
products).
Internationally, Warner-Lambert owns, leases or operates, through its
subsidiaries or branches, 70 production facilities in 35 countries. Principal
international manufacturing plants are located in Germany, the United Kingdom,
Belgium, Italy, Canada, Mexico, Hong Kong, Japan, Ireland, Spain, France,
Brazil, Colombia 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 expects that construction of the confectionery
products manufacturing facility in Guangzhou, China will be completed and
commissioned by December 1996.
In order to achieve its objectives of increased efficiency and a lower cost
of goods sold, Warner-Lambert, over a number of years and at significant cost,
has consolidated many of its plants and facilities around the world. This has
often resulted in the production of pharmaceutical products, consumer health
care products and/or confectionery products at a single facility.
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 FDA, covering
issues related to compliance with current Good Manufacturing Practices
established by the FDA, and other regulatory matters, see 'Item 1.
Business -- Regulation' above. For additional information relating to
environmental matters see 'Item 1. Business -- Environment' above.
Warner-Lambert and certain present and former employees were served with
subpoenas in 1993 by the U.S. Attorney's office in Maryland, which was
conducting an inquiry relating to compliance with FDA regulations, to produce
records and/or appear before a federal grand jury in Baltimore. On November 28,
1995, Warner-Lambert waived indictment and pled guilty to a one count
information charging failure in 1991 to file certain reports with the FDA of
drug stability failures on distributed batches of the drug DILANTIN.
Warner-Lambert agreed to pay a fine of $10 million. At the same time, Allan H.
Doane, former vice president for corporate quality assurance and environmental
compliance at Warner-Lambert, was indicted by the Maryland grand jury in a five
count indictment alleging conspiracy, distributing adulterated drugs and
obstruction of justice based on conduct in 1991.
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.
9
<PAGE>
<PAGE>
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.
Warner-Lambert has agreed to settle part of the consolidated federal cases,
specifically, the class action conspiracy lawsuit, for a total of $15.1 million,
to be paid in four equal installments of $3.775 million in February of 1996,
1997, 1998 and 1999, respectively. This settlement is subject to final approval
by the U.S. District Court for the Northern District of Illinois.
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 class action
complaints in the states of Alabama, Arizona, Colorado, Maine, Michigan, New
York and Washington, brought by classes of consumers who purchased brand name
prescription drugs at retail pharmacies. These cases also arise 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 the remaining 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 a civil enforcement action letter
and draft complaint from the Department of Justice (the 'Department') alleging
violation of the Clean Water Act with regard to the operation of the wastewater
treatment plant at its Vega Baja, Puerto Rico facility. Warner-Lambert is
negotiating a resolution of this matter with the Department and is continuing to
work with the EPA, Region II, to maintain the facility's compliance with the
Clean Water Act. The Company cannot predict the outcome of this matter at this
time.
In addition, Warner-Lambert has received an inquiry from the Environmental
Crimes Section of the Department relating to compliance with the Clean Water Act
and the discharge permit issued to the facility. The Company is cooperating
fully with this inquiry and cannot predict its outcome at this time.
Warner-Lambert Inc., a wholly-owned subsidiary of Warner-Lambert, has been
named as a defendant in class actions filed in Puerto Rico Superior Court by
current and former employees from the Vega Baja, Carolina and Fajardo plants, as
well as Kelly Services temporary employees assigned to those plants. The
lawsuits seek monetary relief for alleged violations of local statutes and
decrees relating to meal period payments, minimum wage, overtime and vacation
pay. Warner-Lambert believes that these actions are without merit and will
defend these actions vigorously. Although it is too early to predict the outcome
of these actions, Warner-Lambert does not at present expect these lawsuits to
have a material adverse effect on its financial position, liquidity, cash flow
or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
10
<PAGE>
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the executive officers of Warner-Lambert as of
March 1, 1996 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......................... 60 Chairman of the Board Chairman of the Board and Chief
and Chief Executive Executive Officer (since August
Officer; Director 1991) President and Chief
Operating Officer (July
1985 -- July 1991)
Lodewijk J. R. de Vink................... 51 President and Chief President and Chief Operating
Operating Officer; Officer (since August 1991);
Director Executive Vice President and
President, U.S. Operations
(April 1990 -- July 1991)
John F. Walsh............................ 53 Executive Vice Executive Vice President (since
President January 1991); President,
Consumer Healthcare Sector
(since December 1994);
President, Consumer Products
Sector (January 1992 -- December
1994); President, International
Operations (March
1990 -- December 1991)
Ernest J. Larini......................... 53 Vice President and Vice President and Chief Financial
Chief Financial Officer (since November 1992);
Officer Vice President, Financial
Administration (June
1992 -- October 1992); Vice
President and Controller (May
1990 -- May 1992)
J. Frank Lazo............................ 48 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)
John S. Craig............................ 44 Vice President Vice President (since January
1996); President, American
Chicle Group (since July 1995);
President and Chief Executive
Officer, Lender's Bagel Bakery
division of Kraft Foods, Inc.
(September 1986 -- February
1994)
</TABLE>
(table continued on next page)
11
<PAGE>
<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................ 61 Vice President Vice President (since May 1988);
Chairman, Parke-Davis Research
(since November 1989)
Pedro M. Cuatrecasas, M.D................ 59 Vice President Vice President (since October
1989); President, Parke-Davis
Research (since October 1989)
Raymond M. Fino.......................... 53 Vice President Vice President, Human Resources
(since January 1985)
Philip M. Gross.......................... 54 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....................... 49 Vice President and Vice President and General Counsel
General Counsel (since October 1983)
Richard W. Keelty........................ 54 Vice President Vice President (since January
1996); Vice President, Public
Affairs, (since December 1995);
Vice President, Public Relations
(November 1990 -- November 1995)
Joseph E. Lynch.......................... 44 Vice President and Vice President and Controller
Controller (since June 1995); Comptroller,
American Home Products
Corporation (March 1995 -- June
1995); Director, Corporate
Accounting, American Cyanamid
Company (April 1991 -- March
1995); Controller, Latin
American Group, American
Cyanamid Company (March
1988 -- April 1991)
F. Phillip Milhomme...................... 59 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)
</TABLE>
(table continued on next page)
12
<PAGE>
<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>
S. Morgan Morton......................... 56 Vice President Vice President (since January
1994); President, Warner
Wellcome Consumer Healthcare
U.S.A. (since December 1995);
President, Shaving Products
Group (September 1993 --
December 1995); President,
Schick (January 1992 --
September 1993); President,
Warner-Lambert Canada (January
1988 -- January 1992)
Harold F. Oberkfell...................... 49 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.......................... 56 Vice President Vice President (since January
1994); Chairman, Tetra Group
(since August 1995); President,
Shaving Products Group (since
December 1995); Vice President,
External Relations (January
1994 -- December 1995);
Executive Vice President
(January 1991 -- January 1994);
President, Pharmaceutical Sector
(January 1992 -- January 1994);
President, Parke-Davis Group
(March 1989 -- December 1991)
Fred G. Weiss............................ 54 Vice President Vice President (since August
1982); Vice President, Planning,
Investment and Development
(since August 1983)
Anthony H. Wild, Ph.D.................... 47 Vice President Vice President (since September
1995); President, Parke-Davis,
North America (since February
1995); President,
Schering-Plough-Japan,
Schering-Plough Corporation
(August 1989 -- February 1995)
</TABLE>
(table continued on next page)
13
<PAGE>
<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>
William S. Woodson....................... 61 Vice President and Vice President and Treasurer
Treasurer (since December 1991); Vice
President, Finance, Novon
Products Group (September
1990 -- November 1991)
Rae G. Paltiel........................... 49 Secretary Secretary (since February 1986)
</TABLE>
All of the above-mentioned officers, with the exception of Mr. Craig, Mr.
Lynch and Dr. Wild, have been employed by Warner-Lambert for the past five
years.
Mr. Craig has been employed by Warner-Lambert since July 1995. Prior to
that time, Mr. Craig had been employed by Kraft Foods, Inc., serving as
President and Chief Executive Officer of Kraft's Lender's Bagel Bakery division
from September 1986 to February 1994. Kraft Foods, Inc., a wholly-owned
subsidiary of Philip Morris Companies Inc., is a multinational producer of
packaged grocery products with sales of approximately $31 billion in 1994.
Mr. Lynch has been employed by Warner-Lambert since June 1995. Prior to
that time and during his last three months with American Cyanamid Company, which
was acquired by American Home Products Corporation in November 1994, Mr. Lynch
performed certain functions of Comptroller at American Home Products Corporation
from March 1995 to June 1995. American Home Products is a multinational health
care and food products company with sales of approximately $9.0 billion in 1994.
From April 1991 to March 1995, Mr. Lynch held the position of Director,
Corporate Accounting, American Cyanamid Company and from March 1988 to April
1991 he served as Controller of American Cyanamid's Latin America Group. Prior
to being acquired by American Home Products Corporation, American Cyanamid
Company was a multinational medical and agricultural products company with sales
of approximately $4.2 billion in 1993.
Dr. Wild has been employed by Warner-Lambert since February 1995. Prior to
that time, Dr. Wild had been employed by Schering-Plough Corporation. From
August 1989 to February 1995, Dr. Wild held the position of President of
Schering-Plough-Japan. Schering-Plough Corporation, a multinational
pharmaceutical company, had sales of approximately $4.7 billion in 1994.
None of the above officers has any family relationship with any Director or
with any other officer. Officers are elected by the Board of Directors for a
term of office lasting until the next annual organizational meeting of the Board
of Directors or until their successors are elected and have qualified. No
officer listed above was appointed pursuant to any arrangement or understanding
between such officer and the Board of Directors or any member or members
thereof.
14
<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal market on which the Company's stock is traded is the New York
Stock Exchange, but the stock is also listed and traded on the following
domestic and international stock exchanges: Chicago, Pacific, London and Zurich.
Shareholders of record totaled approximately 41,000 as of December 31, 1995.
Cash dividends paid in 1995 totaled $351 million. A dividend of $.65 per share
was paid in each quarter of 1995 for an annual total of $2.60 per share. This
was a 7 percent increase over the prior year total of $2.44 per share, paid in
four quarterly dividends of $.61 per share during 1994. The information set
forth under the caption 'Market Prices of Common Stock and Dividends' on page 42
of the Warner-Lambert 1995 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 26 of the Warner-Lambert 1995 Annual Report is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information set forth under the caption 'Management's Discussion and
Analysis' on pages 43 through 47 of the Warner-Lambert 1995 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 27
through 41 of the Warner-Lambert 1995 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of Warner-Lambert and its
subsidiaries, listed in Item 14(a)1 and included in the Warner-Lambert 1995
Annual Report at pages 27 through 40, together with the report thereon of Price
Waterhouse LLP dated January 22, 1996 on page 41 of the Warner-Lambert 1995
Annual Report, and quarterly financial information on page 42 of the
Warner-Lambert 1995 Annual Report, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
15
<PAGE>
<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 9 of the
Warner-Lambert Proxy Statement for the Annual Meeting of Stockholders to be held
on April 23, 1996. 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 11 and such
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to executive compensation is contained in the Proxy
Statement, referred to above in Item 10, at pages 13 through 26 and such
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Information relating to the beneficial ownership of more than five
percent of Warner-Lambert's Common Stock is contained in the Proxy Statement,
referred to above in Item 10, at page 11 and such information is incorporated
herein by reference.
(b) Information relating to security ownership of management is contained
in the Proxy Statement, referred to above in Item 10, at pages 10 through 11 and
such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not Applicable.
16
<PAGE>
<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 27 through 41 of the Warner-Lambert
1995 Annual Report:
Consolidated Statements of Income for each of the three years in
the period ended December 31, 1995.
Consolidated Statements of Retained Earnings for each of the
three years in the period ended December 31, 1995.
Consolidated Balance Sheets at December 31, 1995 and 1994.
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1995.
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.
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 27 through 41 of the Warner-Lambert
1995 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 (File No. 1-3608)).
(b) By-Laws of Warner-Lambert Company, as amended to October 25, 1988
(Incorporated by reference to Warner-Lambert's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1988 (File No.
1-3608)).
(4) Instruments defining the rights of security holders, including
indentures.
(a) 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>
<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 November 28, 1995.
(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 1, 1995 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30,
1995).
(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) 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).
(q) 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.
18
<PAGE>
<PAGE>
(13) Copy of the Warner-Lambert Company Annual Report for the year ended
December 31, 1995. 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
A Current Report on Form 8-K, dated December 19, 1995, was filed with the
Securities and Exchange Commission in connection with the announcement of
Warner-Lambert's signing of a letter of intent (i) to purchase Glaxo
Wellcome plc's interests in the Warner-Wellcome over-the-counter joint
venture operations (formed in 1994 with Wellcome plc) for a purchase price
of $1.05 billion and (ii) to restructure Warner-Lambert's joint venture
arrangements with Glaxo Wellcome to market Glaxo Wellcome's Rx to
over-the-counter switch products, which will include Wellcome's Rx to
over-the-counter products.
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>
<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 22, 1996 appearing on page 41 of the 1995 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 22, 1996
20
<PAGE>
<PAGE>
SCHEDULE II
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO ADJUSTMENTS 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, 1995:
Allowance for doubtful accounts............. $ 21.8 $ 4.3 $ -- $ 5.4 $20.7
Allowance for deferred tax assets (a)....... 44.6 -- -- 7.6 37.0
Unrealized fair market value adjustment for
'available for sale' securities (b)....... 2.9 -- (11.2) -- (8.3)
---------- ---------- ------- ---------- -------
$ 69.3 $ 4.3 $(11.2) $ 13.0 $49.4
---------- ---------- ------- ---------- -------
---------- ---------- ------- ---------- -------
Year ended December 31, 1994:
Allowance for doubtful accounts............. $ 20.5 $ 4.4 $ -- $ 3.1 $21.8
Allowance for deferred tax assets (c)....... 61.9 14.9 -- 32.2 44.6
Unrealized fair market value adjustment for
'available for sale' securities (b)....... -- -- 2.9 -- 2.9
---------- ---------- ------- ---------- -------
$ 82.4 $ 19.3 $ 2.9 $ 35.3 $69.3
---------- ---------- ------- ---------- -------
---------- ---------- ------- ---------- -------
Year ended December 31, 1993:
Allowance for doubtful accounts............. $ 18.6 $ 2.9 $ -- $ 1.0 $20.5
Allowance for deferred tax assets (d)....... -- 61.9 -- -- 61.9
---------- ---------- ------- ---------- -------
$ 18.6 $ 64.8 $ -- $ 1.0 $82.4
---------- ---------- ------- ---------- -------
---------- ---------- ------- ---------- -------
- ------------
<FN>
(a) Deductions in 1995 are due to improved profitability in European operations
which resulted in the realization of some deferred tax assets associated
with the 1991 restructuring (see Note 15 to the consolidated financial
statements). Certain prior year amounts have been reclassified to conform
with the current year presentation. As a result, $47.0 of the allowance for
deferred tax assets was netted against the related asset.
(b) Reflects fair market value adjustments for 'available for sale' securities
in accordance with Statement of Financial Accounting Standards (SFAS) No.
115, 'Accounting for Certain Investments in Debt and Equity Securities.'
(c) Additions in 1994 primarily represent valuation allowances for foreign
capital loss carryforwards. Deductions in 1994 are primarily due to
improved profitability in European operations which resulted in realization
of some of the deferred tax assets associated with the 1991 restructuring
(see Note 15 to the consolidated financial statements).
(d) The addition of $61.9 reflects $45.0 for the adoption of SFAS No. 109,
'Accounting for Income Taxes,' as of January 1, 1993, and $16.9 for 1993
additions. Valuation allowances as of January 1, 1993 of $45.0 were
primarily related to the potential inability to utilize foreign operating
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.
</FN>
</TABLE>
21
<PAGE>
<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
Dated as of March 21, 1996 By /s/ MELVIN R. GOODES
...................................
Melvin R. Goodes
Chairman of the Board
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<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/ JOSEPH E. LYNCH
By ................................................
Joseph E. Lynch
Vice President and Controller
(Principal Accounting Officer) March 21, 1996
/s/ B. CHARLES AMES
By ................................................
B. Charles Ames, Director
/s/ ROBERT N. BURT
By ................................................
Robert N. Burt, Director
/s/ DONALD C. CLARK
By ................................................
Donald C. Clark, Director
/s/ LODEWIJK J. R. DE VINK
By ................................................
Lodewijk J. R. de Vink, Director
</TABLE>
22
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ JOHN A. GEORGES
By ................................................
John A. Georges, Director
/s/ WILLIAM H. GRAY III
By ................................................
William H. Gray III, Director
/s/ WILLIAM R. HOWELL
By ................................................
William R. Howell, Director
/s/ LASALLE D. LEFFALL, JR.
By ................................................
LaSalle D. Leffall, Jr., M.D., Director
/s/ PATRICIA SHONTZ LONGE
By ................................................
Patricia Shontz Longe, Ph.D., Director March 21, 1996
/s/ ALEX J. MANDL
By ................................................
Alex J. Mandl, Director
/s/ LAWRENCE G. RAWL
By ................................................
Lawrence G. Rawl, Director
/s/ MICHAEL I. SOVERN
By ................................................
Michael I. Sovern, Director
/s/ JOSEPH D. WILLIAMS
By ................................................
Joseph D. Williams, Director
</TABLE>
23
<PAGE>
<PAGE>
STATEMENT OF DIFFERENCES
------------------------
The trademark symbol shall be expressed as 'tm'
The registered trademark symbol shall be expressed as 'r'
<PAGE>
<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 (File No. 1-3608)).
(b) By-Laws of Warner-Lambert Company, as amended to October 25, 1988 (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988 (File No.
1-3608)).
(4) Instruments defining the rights of security holders, including indentures.
(a) 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 November 28, 1995.
(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 1, 1995 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995).
(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).
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C> <C>
(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) 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).
(q) 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, 1995. 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>
<PAGE>
--------------------------------------------------------------
WARNER-LAMBERT COMPANY
* * *
Supplemental Pension Income Plan
As Amended to November 28, 1995
<PAGE>
<PAGE>
WARNER-LAMBERT COMPANY
SUPPLEMENTAL PENSION INCOME PLAN
ARTICLE I
Purpose
SECTION 1.1. There is hereby established a Supplemental Pension Income
Plan in order to attract and hold officers and key employees in senior
managerial and other important positions with the Company and its Affiliates by
providing such executives compensation in the form of supplemental pension and
retirement income in amounts reasonably related to their compensation and the
length of their service with the Company.
ARTICLE II
Definitions
SECTION 2.1. Whenever used herein, unless the context otherwise
indicates, the following terms shall have the respective meanings set forth
below:
Affiliate: any person directly or indirectly controlling,
controlled by, or under direct or indirect common control with another
Person. A Person shall be deemed to control another Person if such
Person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such other Person,
whether through the ownership of voting securities, by contract or
otherwise.
Average Final Compensation: the total amount of an Employee's
Compensation for the three calendar years during which his Compensation
was the highest of the five year period of Service ending with his
Retirement Date, divided by 3. The determination of any currency
exchange rate shall be made as of the Retirement Date.
Average Final Salary: the total amount of an Employee's Salary
for the three calendar years during which his salary was the highest of
the five year period of Service ending with his Retirement Date, divided
by 3. The determination of any currency exchange rate shall be made as
of the Retirement Date.
Basic Pension Income: the amount of annual pension
benefits determined in accordance with Article V hereof.
- 1 -
<PAGE>
<PAGE>
Board of Directors: the Board of Directors of the
Company or the Executive Committee thereof.
Committee: the Committee authorized to administer the
Plan pursuant to Article IX hereof.
Company: Warner-Lambert Company, its predecessors, or
any successor to it in ownership of substantially all of
its assets, whether by merger, consolidation or otherwise.
Compensation: An Employee's Salary during the calendar year plus
the amount, if any, allocated to the Employee as additional incentive
compensation with respect to the preceding year pursuant to Section 3.4
of the Warner- Lambert Company Incentive Compensation Plan, not
including any amount allocated subject to restrictions dependent upon
future per share earnings of the Company.
Early Retirement Date: the first day of the calendar
month coincident with or next following any date, prior to
a Participant's Normal Retirement Date and on or after his
55th birthday, on which his employment shall terminate.
Employee: any person in the employ of the Company or
its domestic Affiliates.
Internal Revenue Code: Internal Revenue Code of 1986,
as amended.
Normal Retirement Date: the first day of the calendar
month coincident with or next following a Participant's
65th birthday.
Participant: a person who shall have met the require-
ments for participation in the Retirement Plan as provided
in Article III thereof and whose participation in the
Retirement Plan shall not have terminated as provided in
said Article.
Pension Income Objective: the annual amount
determined in accordance with Article IV hereof.
Person: an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization,
and a government or any department or agency thereof.
Plan: the Supplemental Pension Income Plan as set
forth herein and as amended from time to time.
Postponed Retirement Date: the first day of the
calendar month coincident with or next following any date,
- 2 -
<PAGE>
<PAGE>
subsequent to a Participant's Normal Retirement Date, on which his
employment with the Company shall terminate.
Retired Senior Executive: a person who has met the
requirements of Article III or XIII, as the case may be.
Retirement Date: an individual's Retirement Date
shall be his Normal, Early or Postponed Retirement Date,
whichever is coincident with or next follows his
termination of Service.
Retirement Plan: the Warner-Lambert Retirement Plan
as in effect on the date hereof and as subsequently amended.
Retirement Plan Benefit: the amount of the annual benefit that a
Retired Senior Executive is eligible to receive under the Retirement
Plan (determined without regard to the flat dollar benefit of Section 9
of Article VI of the Retirement Plan) and under Article VII of this
Plan, determined as of and commencing on his Retirement Date or, if
greater, the amount of such benefit that he would have been eligible to
receive if he had begun to participate in the Retirement Plan when he
first became eligible to do so and thereafter neither voluntarily ceased
to make contributions to, nor elected a refund of contributions under,
the Retirement Plan.
Salary: effective January 1, 1990, an Employee's
annualized basic rate of remuneration as of the first day
of the calendar year for services performed for the
Company or its Affiliates, excluding any bonuses or other
compensation.
Salary/Age Minimum: a number, representing the combination of
Salary, expressed in $1,000 units, and age required for eligibility for
a Supplemental Pension Income, which shall equal 200 on the effective
date of the Plan. For each calendar year subsequent to calendar year
1975, the Salary/Age Minimum shall equal
(i) the Salary/Age Minimum for the preceding
year; plus or minus
(ii) one-fourth of the percentage increase or decrease in
the Bureau of Labor Statistics Consumer Price Index for Urban
Wage Earners and Clerical Workers: U.S. City Average, All Items,
1967=100, for such preceding year multiplied by the difference
between such preceding year's Salary/Age Minimum and 65.
- 3 -
<PAGE>
<PAGE>
Service: a period of service with the Company or its
Affiliates determined in accordance with service rules
applicable to the Retirement Plan in effect at the time
when the determination shall be made.
Spouse's Supplemental Pension Income: the annual
amount of benefits to be paid to a Surviving Spouse under
Article VI hereof.
Supplemental Pension Income: the annual amount of
benefits to be paid to a Retired Senior Executive under
Article VI hereof.
Supplemental Retirement Plan Income: the benefits to
be paid to a Participant (or his spouse, contingent
annuitant or other person) under Article VII hereof.
Surviving Spouse: the person to whom an Employee or Retired
Senior Executive was married on the date of his death if the marriage
occurred (a) on or before the date on which the Retired Senior
Executive's retirement income shall have commenced or (b) at least one
year prior to the death of the Employee who dies prior to commencing
receipt of benefits.
ARTICLE III
Eligibility for Supplemental Pension Income
SECTION 3.1. An Employee shall be eligible to receive a Supplemental
Pension Income in an amount determined in accordance with Article VI hereof if
he meets the following requirements as of his Early or Normal Retirement Date:
(a) he has attained age fifty-five (55) or, for
executives hired on or after January 1, 1996, age sixty-two (62);
(b) he has completed at least five (5) years of
Service;
(c) the sum of his Average Final Salary divided by
$1,000 plus his age in years equals or exceeds the
Salary/Age Minimum;
(d) he is not entitled to receive Equity Annuity
Retirement Income pursuant to Article VII of the
Retirement Plan;
(e) he is at salary grade 17 or higher; and
(f) if his employment with the Company terminates on an Early
Retirement Date prior to age 62, the Committee has approved his
eligibility.
SECTION 3.2. The Committee, acting within its discretion, may designate
an Employee who meets all of the requirements of
4
<PAGE>
<PAGE>
Section 3.1 hereof as of his Early or Normal Retirement Date except (c) and/or
(e) as being eligible to receive a Supplemental Pension Income provided:
(a) with respect to Section 3.1(c), the sum referred to therein
equals or exceeds 90% of the Salary/Age Minimum as of his Early or
Normal Retirement Date; and
(b) with respect to Section 3.1(e), the Employee was at salary
grade 17 or higher during at least 24 months of the five year period of
Service ending with his Early or Normal Retirement Date.
SECTION 3.3. For the purposes of Section 3.1 and Section 3.2, an
Employee whose Service is terminated by his death shall be deemed to have
retired immediately prior to the date of his death. If he would have qualified
as a Retired Senior Executive at that time, his Surviving Spouse, if any, shall
be eligible for a Spouse's Supplemental Pension Income in accordance with
Section 6.2.
ARTICLE IV
Pension Income Objective
SECTION 4.1. For each Retired Senior Executive whose employment
terminates on a Normal or Postponed Retirement Date, his Pension Income
Objective shall be:
(a) Executives Hired Before January 1, 1996:
(i) 3.36% for each year of his Service after he
attains age 45, up to 10 years; plus
(ii) 2.24% for each year of his Service after he attains
age 45, in excess of 10 and up to 20 years times his
Average Final Compensation. No period of Service after
Normal Retirement Date shall be taken into account in
determining a Pension Income Objective, except as
otherwise required by law.
A person is considered to have attained age 45 on the first day
on the month coincident with or next following his 45th birthday.
(b) Executives Hired On Or After January 1, 1996
The Pension Income Objective shall be determined in
accordance with the schedule attached hereto as Appendix
I.
5
<PAGE>
<PAGE>
SECTION 4.2. For each Retired Senior Executive hired before January 1,
1996 whose employment with the Company terminates on an Early Retirement Date, a
Pension Income Objective shall be calculated in the amount provided in Section
4.1 hereof, reduced by the amount obtained by multiplying the sum of:
(i) 6% for each year, if any, between the date payments commence
under this Plan and his 60th birthday; plus
(ii) 3% for each year, if any, between the later of the date
payments commence under this Plan or his 60th birthday and his
62nd birthday.
SECTION 4.3. Periods of Service of less than a year shall be included in
the calculations required by this Article IV as the number of months in such
period divided by 12. Credit shall be given for each month through the first of
the month coincident with or next following the completion of such period.
ARTICLE V
Basic Pension Income
SECTION 5.1. For each Retired Senior Executive there shall be computed a
Basic Pension Income as of his Retirement Date. The Basic Pension Income shall
equal the sum of the amounts of annual pension benefit determined in accordance
with Section 5.2 or Section 5.3, whichever is applicable.
SECTION 5.2. The Basic Pension Income for each Retired Senior Executive
whose employment with the Company terminates on a Normal or Postponed Retirement
Date shall be the sum of the following amounts determined as of his Normal
Retirement Date and converted as hereinafter described:
(a) his Retirement Plan Benefit;
(b) the amount of any pension benefit that he is eligible to
receive or has previously received under a pension plan
maintained by any Affiliate of the Company or any other company;
(c) for executives hired on or after January 1, 1996, the pension
equivalent of the amount of the company provided benefit that he
is eligible to receive or has previously received under a defined
contribution plan maintained by any Affiliate of the Company or
any other company if such plan is the primary retirement income
plan of such company;
(d) the amount of any annual pension benefit that he is eligible
to receive or has previously received under the Social Security
Act or would be eligible to
6
<PAGE>
<PAGE>
receive if he were to realize no net earnings from self-
employment and no wages for services rendered after his
Retirement Date;
(e) the amount of any pension, retirement income, severance or
termination pay (or similar benefit) that he is eligible to
receive or has previously received which is required under the
law of any country other than the United States of America or
under the law of any territory or possession of the United
States of America; and
(f) the amount of any other pension benefit that he is eligible
to receive or has previously received under any other pension
plan, contract or program, including a pension plan established
by the Retired Senior Executive with respect to periods of
self-employment.
Amounts of Basic Pension Income shall be determined before any reduction
which may have resulted from an election by the Retired Senior Executive to
receive a lump-sum benefit in lieu of a pension benefit, whether or not related
to his own contributions. The amount of any annual pension benefit payments
which commence prior or subsequent to Normal Retirement Date shall be determined
as if the payment of such benefits commenced on Normal Retirement Date
irrespective of the date on which the pension actually commenced. The amount of
any annual pension (not including Section 5.2(d) amounts) determined at Normal
Retirement Date other than on the basis of a single life annuity for a Retired
Senior Executive who is not married or on a 50% joint and survivor basis for a
Retired Senior Executive who is married shall be converted actuarially to a
pension payable on such basis, respectively, using the actuarial assumptions
specified in Section 7 of Appendix B of the Retirement Plan.
Any amount of Basic Pension Income which is payable from a plan under
which the normal form of benefit is not a pension benefit shall be converted
using the actuarial assumptions specified in Section 7 of Appendix B of the
Retirement Plan to a pension payable at age 65 on the basis of a single life
annuity for a Participant who is not married or on a 50% joint and survivor
basis for a Participant who is married. The conversion shall be based upon the
age of the person and value of such benefit when the executive terminated
employment with the company maintaining such plan.
For purposes of this Article V, the marital status of a Retired Senior
Executive shall be determined at the Retirement Date and the actual date of
birth of the current spouse will be used.
The determination of any currency exchange rate for any amount of Basic
Pension Income payable in other than U.S.
7
<PAGE>
<PAGE>
dollars shall be made at the last day of the second month preceding the
Retirement Date. If the exchange rate on such date is not representative of the
exchange rate in effect over a representative period, then the Company may
select an average exchange rate in effect over a representative period of time.
SECTION 5.3. The Basic Pension Income for a Retired Senior Executive who
terminates employment on an Early Retirement Date shall be the sum of the
amounts of annual pension benefits listed in Section 5.2 hereof, determined as
if the payment of such benefits commenced on the Retired Senior Executive's
Normal Retirement Date. Each component of Basic Pension Income shall be
actuarially reduced (based upon the factors of the plan under which the benefit
is being provided or, if such factors are not available or applicable, under the
factors applicable to the Retirement Plan in effect on the Retirement Date) to
the later of the Early Retirement Date or the earliest date such pension
benefits are actually available. In the event that the payment of any annual
pension benefit listed in Section 5.2 hereof shall first become available on a
date following the Early Retirement Date of such Retired Senior Executive, the
amount of such annual pension benefit shall be included in the Basic Pension
Income of such Retired Senior Executive only from and after the first date on
which the benefit is available. As applied to Social Security benefits, the
preceding sentence shall be applied to a Retired Senior Executive (1) whose
Retirement Date is prior to age 62 by estimating the amount of Social Security
benefits that will be available at age 62 based upon the law in effect at the
Retirement Date, with such amount being included in the Basic Pension Income of
such Retired Senior Executive commencing at age 62, and (2) whose Retirement
Date is at or after age 62 by including the amount of Social Security benefits
available at the Retirement Date based on the law in effect at such Retirement
Date in the Basic Pension Income of the Retired Senior Executive commencing at
the Retirement Date.
SECTION 5.4. Notwithstanding the foregoing, payments to or other amounts
realized by the Retired Senior Executive pursuant to a deferred compensation
agreement, a profit sharing plan (except as provided in Section 5.2(c) hereof),
a stock option or alternate stock plan or any other incentive compensation plan
or agreement shall not be included in computing his Basic Pension Income.
ARTICLE VI
Supplemental Pension Income
SECTION 6.1. There shall be paid to each Retired Senior Executive who
commences payment of benefits hereunder, a Supplemental Pension Income which
shall be an annual amount
8
<PAGE>
<PAGE>
equal to the excess, if any, of his Pension Income Objective computed in
accordance with Article IV hereof over his Basic Pension Income computed in
accordance with Article V hereof, except as provided in Section 6.2.
SECTION 6.2. With respect to executives hired by the Company on or after
January 1, 1996, the Pension Income Objective based upon service (as provided in
Section 4.1(b)) shall be reduced by another employer's benefit in accordance
with Section 5.2(b) only to the extent that total annual pension income from all
sources (including this Plan) exceeds the maximum objective set forth in
Appendix I for the age at which the executive terminates employment with the
Company.
SECTION 6.3. If a Retired Senior Executive shall die survived by a
Surviving Spouse, such Surviving Spouse shall be paid a Spouse's Supplemental
Pension Income which shall be an amount equal to one-half of the amount of the
Supplemental Pension Income which otherwise would have been payable to the
Retired Senior Executive.
ARTICLE VII
Supplemental Retirement Plan Income
SECTION 7.1. There shall be paid to each Participant (or his spouse,
contingent annuitant or other person), in accordance with Section 7.2 hereof, a
Supplemental Retirement Plan Income which shall be the additional amount which
would have been payable to him or her from the Retirement Plan if the
limitations of the Internal Revenue Code were not applicable. For this purpose,
the limitations of the Internal Revenue Code include, but are not limited to,
Sections 415, 401(a)(17) and 401(a)(4), and therefore, this Section 7.1 shall
include, but not be limited to, the additional amount that would be payable to
him or her if Compensation as defined in the Retirement Plan was to include
deferred annual bonuses (but not long term bonuses) and Compensation in excess
of $150,000 (as adjusted)).
SECTION 7.2. Payment of Supplemental Retirement Plan Income to a
Participant or to his spouse, contingent annuitant or other person shall be
governed by the provisions of the Retirement Plan in all respects (including
payment commencement date), except that any amounts otherwise payable as Equity
Annuity Retirement Income as referred to in Article VII of the Retirement Plan
shall be payable hereunder as Dollar Annuity Retirement Income as referred to in
Article VI of the Retirement Plan.
ARTICLE VIII
Absence of Funding
9
<PAGE>
<PAGE>
SECTION 8.1. The sole obligation of the Company hereunder to a Retired
Senior Executive, Surviving Spouse, Participant, or any other person claiming
through or under any such individual, is a contractual obligation to make
payments in accordance with the terms hereof. No amount of cash or other
property shall be set aside as a separate trust for the payment of any
Supplemental Pension Income or Supplemental Retirement Plan Income under the
Plan, except that the Company may, in its sole discretion, establish a trust for
the purpose of paying benefits under the Plan, the assets of which shall remain
subject to the claims of the general creditors of the Company in the event of
the Company's bankruptcy or insolvency, in accordance with the provisions of any
such trust. Any amounts payable under the Plan shall be paid by the Company
directly only out of the general assets of the Company, or shall be paid from
such a trust.
SECTION 8.2. No Retired Senior Executive or other Employee shall
acquire, or otherwise be vested with, any rights under Article VI of the Plan
prior to his Retirement Date.
SECTION 8.3. Participation in the Plan shall not confer upon any
Employee the right to remain in the employ of the Company or its Affiliates, and
the right and power of the Company or its Affiliates to dismiss or discharge any
Employee is specifically reserved.
ARTICLE IX
Administration
SECTION 9.1. The Plan shall be administered by a Committee of not
less than three members to be appointed by the Board of Directors from among
its own members, none of whom shall be Employees. The membership
of the Committee may be reduced, changed or increased from time to time in
the absolute discretion of the Board of Directors. The Committee shall
select a Chairman from among its members and designate any person as
Secretary, who need not be a member of the Committee and who may be an Employee.
The Secretary shall keep all records of meetings of the Committee and of any
actions taken by the Committee. A majority of the Committee shall constitute a
quorum and the decision of a majority of the members of the Committee present at
any meeting at which a quorum is present, expressed from time to time by a vote
at a meeting (including a meeting held by telephone conference call or in which
one or more members of the Committee participate by telephone), or the decision
of a majority of the members expressed in writing without a meeting, shall
govern and control the exercise of the authority of the Committee.
10
<PAGE>
<PAGE>
SECTION 9.2. The Committee shall have full discretionary power to
construe and interpret the Plan, to determine any and all questions arising
under the Plan, including the right to remedy possible ambiguities,
inconsistencies and omissions, and to establish and amend rules and regulations
for its administration. All such determinations, constructions, interpretations,
rules and regulations made pursuant to this Section 9.2 shall be conclusive and
binding upon all Employees and on all persons claiming under or through any
Employee.
SECTION 9.3. The Committee shall determine, within its discretion, the
actuarial methods and assumptions to be used in determining any amount payable
under the Plan. The Committee may rely on the advice of such independent
actuaries or other persons as it may deem proper in making such determination.
SECTION 9.4. No member of the Board of Directors or of the Committee
shall be liable for any act or action, whether of commission or omission, taken
by any other member, or by any officer, agent or employee or by any investment
advisor or financial institution appointed by any such person; nor, except in
circumstances involving his bad faith, for anything done or omitted to be done
by himself.
SECTION 9.5. The Committee may require, as a condition to the payment of
any amounts under this Plan, that a Retired Senior Executive or Surviving Spouse
disclose such information as the Committee shall deem necessary to determine the
Basic Pension Income of such Retired Senior Executive. All such information
shall be held in confidence by the Committee. In the event that the Committee
shall determine that all such necessary information shall not have been
provided, it shall redetermine the Basic Pension Income and the amount of the
Supplemental Pension Income to be paid thereafter, and it may, on a finding of
an intentional omission or misrepresentation by a Retired Senior Executive or
Surviving Spouse, reduce subsequent payments by the amount of any such prior
payments in excess of amounts actually due or terminate payments under the Plan
to such Retired Senior Executive or Surviving Spouse.
ARTICLE X
Manner of Payment of Supplemental Pension Income
SECTION 10.1. An amount equal to one-twelfth of the Supplemental Pension
Income shall be paid to a Retired Senior Executive commencing on the date
payments begin from the Retirement Plan and on the first day of each calendar
month thereafter, but not after the first day of the calendar month in which the
Retired Senior Executive shall die.
SECTION 10.2. An amount equal to one-twelfth of the
11
<PAGE>
<PAGE>
Spouse's Supplemental Pension Income provided in accordance with Section 6.2
hereof shall be paid to a Surviving Spouse on the first day of the calendar
month next following the month in which the Retired Senior Executive shall die,
and on the first day of each calendar month thereafter, but not after the first
day of the month in which the Surviving Spouse shall die.
ARTICLE XI
Miscellaneous
SECTION 11.1. Neither the establishment of this Plan, nor any
modification thereof, nor the payment of any benefits, shall be construed as
giving to any Employee, Participant, Retired Senior Executive, Surviving Spouse
or other person any legal or equitable right against the Company, or any officer
or employee thereof, except as herein provided. Under no circumstances shall the
terms of employment of any Employee, Participant, Retired Senior Executive or
any other person be modified or in any way affected thereby.
SECTION 11.2. No benefit payable under the Plan shall, except as
otherwise specifically provided by law, be subject in any manner to
anticipation, alienation, attachment, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to anticipate, alienate, attach, sell,
transfer, assign, pledge, encumber or charge any such benefit shall be void, and
any such benefit shall not in any manner be liable for or subject to the debts,
contracts, liabilities, engagements or torts of any person who shall be entitled
to such benefit, nor shall it be subject to attachment or legal process for or
against such person.
SECTION 11.3. If any person entitled to a benefit hereunder shall be
adjudicated a bankrupt or shall attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge such benefit, or if any attempt is made to
subject any such benefit to the debts, contracts, liabilities, engagements or
torts of any person entitled to such benefit, then such benefit shall, in the
discretion of the Committee, cease and terminate, and in that event the
Committee may cause such benefit, or any part thereof, to be held or applied for
the benefit of such person, his spouse, children or other dependents, or any of
them, or other beneficiary, in such manner and in such proportion as the
Committee shall determine.
SECTION 11.4. If, for any reason, the Committee shall determine that it
is not desirable because of the incapacity of the person who shall be entitled
to receive any payments hereunder, to make such payments directly to such
person, the Committee may apply such payment for the benefit of such person in
any way that the Committee shall deem advisable or may make
12
<PAGE>
<PAGE>
any such payment to any third person who, in the judgment of the Committee, will
apply such payment for the benefit of the person entitled thereto. In the event
of such payment the Company and the Committee shall be discharged from all
further liability for such payment.
SECTION 11.5. Each Retired Senior Executive shall, after his Retirement
Date, make himself available for such consultative and advisory services as the
Company may reasonably request, taking fairly into consideration the age,
health, residence, and individual circumstances of the Retired Senior Executive
and the total amount of his Supplemental Pension Income. If such Retired Senior
Executive shall unreasonably refuse to render such services, the Company's
obligation to make further payments under the Plan shall forthwith terminate.
SECTION 11.6. This Plan shall be governed by the law of the State of New
Jersey (regardless of the law that might otherwise govern under applicable New
Jersey principles of conflicts of laws).
SECTION 11.7. Wherever any words are used herein in the masculine gender
they shall be construed as though they were also used in the feminine gender in
all cases where they would so apply, and wherever any words are used herein in
the singular form they shall be construed as though they were also used in the
plural form in all cases where they would so apply.
SECTION 11.8. No loan shall be made by the Company to any person of any
amount of his benefit hereunder or of any amount the security for which is his
benefit hereunder.
SECTION 11.9. Any benefit hereunder which is unclaimed, including
outstanding checks, may, as determined by the Committee, be forfeited.
ARTICLE XII
Amendment and Effective Date
SECTION 12.1. The Board of Directors shall have the right at any time or
from time to time to modify, amend or terminate the Plan in whole or in part;
provided, however, that no such modification, amendment or termination shall
reduce the amount of any benefits payable under the Plan on the date thereof;
and further provided, that following a Change in Control of the Company (as
defined in Section 13.2 hereof), no modification or amendment shall be made,
directly or indirectly, to the provisions of Article XIII hereof without the
consent of 90% of the individuals described therein.
SECTION 12.2. Notwithstanding anything in Section 12.1 to
13
<PAGE>
<PAGE>
the contrary, the Committee may adopt any amendment to the Plan which (a)(i)
does not increase Plan liabilities by an amount in excess of five million
dollars ($5,000,000) and does not increase Plan expense by an amount in excess
of five hundred thousand dollars ($500,000) or (ii) is required by an applicable
law, regulation or ruling, (b) can be undertaken by the Board of Directors under
the terms of the Plan, (c) does not involve a termination or suspension of the
Plan, and (d) does not affect the limitations contained in this sentence and
does not affect the composition or compensation of the Committee.
SECTION 12.3. This document restates the Plan in its entirety, as
adopted by the Board of Directors, effective January 1, 1975, and as amended by
all amendments to the Plan since that date. In the case of Employees who
terminate employment with the Company after January 1, 1980, the determination
of Salary and Compensation for all years shall be in accordance with the terms
of the Plan as then in effect.
SECTION 12.4 Subject to the restriction of Section 12.2 or action by the
Board of Directors or the Committee to the contrary, this Plan shall be deemed
amended or modified at the time of amendment or modification of the Retirement
Plan to the extent necessary to (i) provide consistency in the provisions of
this Plan and the Retirement Plan with respect to definitions and their related
operational provisions, and (ii) maintain the relationship between the benefits
provided by this Plan and the Retirement Plan. Amendments or modifications to
the Plan made pursuant to this section shall be effective as of the effective
date of the related amendment or modification to the Retirement Plan unless the
Board of Directors or Committee declare otherwise.
SECTION 12.5. All actions, including Plan amendments, which are
undertaken by the Board of Directors or the Committee shall be authorized by a
duly adopted resolution approved by the respective body.
ARTICLE XIII
Effect of Certain Events
SECTION 13.1. Notwithstanding anything to the contrary contained in this
Plan, the provisions set forth in this Section shall apply following a Change in
Control of the Company (as defined in Section 13.2 hereof):
(a) an Employee shall be eligible to receive a Supplemental
Pension Income in an amount determined in accordance with Article
VI hereof if he was at salary grade 17 or higher prior to such
Change in Control of the Company and an "Activation Event" (as
defined in
14
<PAGE>
<PAGE>
the Executive Severance Plan) shall have occurred with
respect to such Employee;
(b) the provisions of Sections 9.5 and 11.5 shall no
longer apply; and
(c) as soon as practicable after an Employee has satisfied the
requirements set forth in (a) above (whether or not such Employee
has terminated his Service), or with respect to a Retired Senior
Executive, as soon as practicable upon such Change in Control of
the Company, the Company shall furnish to such Employee or
Retired Senior Executive (or, if applicable, his Surviving
Spouse) a letter which acknowledges the right of such Employee or
Retired Senior Executive (or Surviving Spouse) to receive, and
the obligation of the Company to provide, benefits in accordance
with the provisions of this Plan. The Company shall furnish a
similar letter to each Participant (or his spouse, contingent
annuitant or other person) who is receiving or is entitled to
receive Supplemental Retirement Plan Income pursuant to Article
VII hereof. The aforementioned letters shall constitute an
enforceable contract with the Company.
SECTION 13.2. For purposes hereof, a "Change in Control of the Company"
shall be deemed to have occurred if (i) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Act")) is or becomes the beneficial owner (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Company representing 20%
or more of the combined voting power of the Company's then outstanding
securities, (ii) the stockholders of the Company approve a merger,
consolidation, sale or disposition of all or substantially all of the Company's
assets or plan of liquidation, or (iii) the composition of the Board of
Directors of Warner-Lambert Company (for purposes of this paragraph, the
"Board") at any time during any consecutive twenty-four (24) month period
changes such that the Continuity Directors (as hereinafter defined) cease for
any reason to constitute at least fifty-one percent (51%) of the Board. For
purposes of the foregoing clause (iii), "Continuity Directors" means those
members of the Board who either (a) were directors at the beginning of such
consecutive twenty-four (24) month period, or (b)(1) filled a vacancy during
such twenty-four (24) month period created by reason of (x) death, (y) a
medically determinable physical or mental impairment which renders the director
substantially unable to function as a director or (z) retirement at the last
mandatory retirement age in effect for at least two (2) years, and (2) were
elected, nominated or voted for by at least fifty-one percent (51%) of the
current directors
15
<PAGE>
<PAGE>
who were also directors at the commencement of such twenty-four (24) month
period.
SECTION 13.3. To the extent that implementation of the Warner-Lambert
Enhanced Severance Plan and the Warner-Lambert Executive Severance Plan requires
the accrual of amounts hereunder, this Plan is hereby amended to include such
amounts as Supplemental Retirement Plan Income under Article VII hereof.
ARTICLE XIV
Lump Sum Payment
SECTION 14.1. Notwithstanding any other provisions hereof, in the event
that (x) an Employee receives a lump sum payment from the Retirement Plan in
lieu of all other benefits under such plan or (y) the benefit under this Plan
which is payable to the Employee is less than $50 per month at normal retirement
age or at any earlier date in which benefits are payable hereunder (regardless
of the amount payable to such employee from the Retirement Plan), then the
Employee shall receive a lump sum payment of the benefit which is payable from
this Plan with the amount thereof determined in accordance with Section 6 of
Appendix B of the Retirement Plan.
WARNER-LAMBERT COMPANY
16
<PAGE>
<PAGE>
APPENDIX I
PENSION INCOME OBJECTIVES
(FOR EXECUTIVES HIRED ON OR AFTER JANUARY 1, 1996)
PENSION INCOME OBJECTIVE BASED ON SERVICE
<TABLE>
<CAPTION>
AGE YEARS OF SERVICE
- -------------------------------------------------------------------------------------------------------------------
15 OR > 14 13 12 11 10 9 8 7 6 5
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
65 56.0% 52.4% 48.8% 45.2% 41.6% 38.0% 34.4% 30.8% 27.2% 23.6% 20.0%
64 54.4% 51.2% 47.9% 44.5% 41.0% 37.6% 34.0% 30.4% 26.8% 23.3% 19.7%
63 52.8% 50.0% 46.9% 43.8% 40.5% 37.1% 33.6% 30.0% 26.5% 22.9% 19.4%
62 51.2% 48.8% 46.0% 43.0% 39.9% 36.7% 33.1% 29.6% 26.1% 22.6% 19.0%
</TABLE>
MAXIMUM ATTAINABLE PENSION INCOME OBJECTIVE BY RETIREMENT AGE
<TABLE>
<CAPTION>
RETIREMENT AGE MAXIMUM OBJECTIVE
<S> <C>
65 56.0%
64 54.4%
63 52.8%
62 51.2%
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 12
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Earnings before income taxes and accounting changes
(less minority interests)............................. $1,018.6 $ 913.1 $318.5 $858.2 $221.5
Add:
Interest on indebtedness -- excluding amount
capitalized...................................... 122.7 93.7 64.2 80.8 58.2
Amortization of debt expense....................... .4 .4 .5 .6 .4
Interest factor in rent expense(a)................. 26.9 26.2 25.4 23.4 22.3
-------- -------- ------ ------ ------
Adjusted earnings............................. $1,168.6 $1,033.4 $408.6 $963.0 $302.4
-------- -------- ------ ------ ------
-------- -------- ------ ------ ------
Fixed Charges:
Interest on indebtedness........................... $ 122.7 $ 93.7 $ 64.2 $ 80.8 $ 58.2
Capitalized interest............................... 10.1 9.4 8.6 8.1 9.4
Amortization of debt expense....................... .4 .4 .5 .6 .4
Interest factor in rent expense(a)................. 26.9 26.2 25.4 23.4 22.3
-------- -------- ------ ------ ------
Total fixed charges........................... $ 160.1 $ 129.7 $ 98.7 $112.9 $ 90.3
-------- -------- ------ ------ ------
-------- -------- ------ ------ ------
Ratio of earnings to fixed charges...................... 7.3 8.0 4.1(b) 8.5 3.3(c)
-------- -------- ------ ------ ------
-------- -------- ------ ------ ------
<FN>
(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 charges 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.
</FN>
</TABLE>
<PAGE>
<PAGE>
Warner-Lambert Company and Subsidiaries
Five-year Summary of Selected Financial Data
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------
(Dollars in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
RESULTS FOR YEAR:
Net sales $7,040 $6,417 $5,794 $5,598 $5,059
Cost of goods sold 2,428 2,155 1,918 1,814 1,626
Research and development
expense 501 456 465 473 423
Income before income taxes,
minority interests and
accounting changes 1,149 1,005 318 (a) 860 223 (c)
Income before accounting
changes 740 694 285 (a) 644 141 (c)
Net income 740 694 331 (a,b) 644 35 (c,d)
Per common share:
Income before accounting
changes 5.48 5.17 2.11 (a) 4.78 1.05 (c)
Net income 5.48 5.17 2.45 (a,b) 4.78 .26 (c,d)
- ------------------------------------------------------------------------------------------
YEAR-END FINANCIAL POSITION:
Current assets $2,778 $2,515 $2,219 $2,176 $1,844
Current liabilities 2,425 2,353 2,016 1,333 1,250
Working capital 353 162 203 843 594
Property, plant and
equipment 2,006 1,846 1,599 1,507 1,350
Total assets 6,101 5,533 4,828 4,077 3,602
Long-term debt 634 535 546 565 448
Total debt 1,529 1,460 1,199 736 576
Shareholders' equity 2,246 1,816 1,390 1,528 1,171
- ------------------------------------------------------------------------------------------
COMMON STOCK INFORMATION:
Average number of common
shares outstanding
(in millions) 135.0 134.1 135.0 134.7 134.4
Common stock price per share:
High $ 98 $86 3/4 $76 3/8 $79 1/4 $82 1/4
Low 73 3/8 60 59 3/4 58 3/8 61 3/4
Year-end 97 1/8 77 67 1/2 69 1/8 77 5/8
Book value per common share 16.56 13.50 10.36 11.29 8.70
Cash dividends per
common share 2.60 2.44 2.28 2.04 1.76
- ------------------------------------------------------------------------------------------
OTHER DATA:
Number of employees
(in thousands) 37 36 35 34 34
Capital expenditures $387 $406 $347 $334 $326
Cash dividends paid 351 327 308 275 237
Depreciation and amortization 202 181 170 156 135
- ------------------------------------------------------------------------------------------
<FN>
(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."
</FN>
</TABLE>
26
<PAGE>
<PAGE>
Warner-Lambert Company and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------
(Dollars in millions,
except per share amounts)
<S> <C> <C> <C>
Net sales $7,039.8 $6,416.8 $5,793.7
- ---------------------------------------------------------------------
Costs and expenses:
Cost of goods sold 2,427.5 2,155.1 1,918.1
Marketing 2,559.4 2,351.0 2,196.5
Administrative and general 484.5 443.6 399.6
Research and development 501.2 456.0 464.9
Other (income) expense, net (81.4) 5.8 (28.6)
Restructuring - - 525.2
- ---------------------------------------------------------------------
Total costs and expenses 5,891.2 5,411.5 5,475.7
- ---------------------------------------------------------------------
Income before income taxes, minority
interests and accounting changes 1,148.6 1,005.3 318.0
Provision for income taxes 279.1 219.1 33.5
Minority interests 130.0 92.2 (.5)
- ---------------------------------------------------------------------
Income before accounting changes 739.5 694.0 285.0
Accounting changes, net of tax - - 46.0
- ---------------------------------------------------------------------
Net income $ 739.5 $ 694.0 $ 331.0
- ---------------------------------------------------------------------
Per common share:
Income before accounting changes $ 5.48 $ 5.17 $ 2.11
Accounting changes - - .34
- ---------------------------------------------------------------------
Net income $ 5.48 $ 5.17 $ 2.45
- ---------------------------------------------------------------------
</TABLE>
Consolidated Statements of Retained Earnings
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------
(Dollars in millions,
except per share amounts)
<S> <C> <C> <C>
Retained earnings at beginning
of year $2,654.5 $2,287.7 $2,264.6
Net income 739.5 694.0 331.0
Cash dividends paid
on common shares (351.1) (327.2) (307.9)
- ---------------------------------------------------------------------
Retained earnings at end of year $3,042.9 $2,654.5 $2,287.7
- ---------------------------------------------------------------------
Cash dividends per common share $ 2.60 $ 2.44 $ 2.28
- ---------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
<PAGE>
Warner-Lambert Company and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1995 1994
- ---------------------------------------------------------------------
(Dollars in millions)
<S> <C> <C>
Assets:
Cash and cash equivalents $ 295.8 $ 217.9
Short-term investments 267.4 247.2
Receivables, less allowances of
$20.7 in 1995 and $21.8 in 1994 1,239.5 1,096.0
Inventories 645.7 636.2
Prepaid expenses and other current
assets 329.6 318.0
- ---------------------------------------------------------------------
Total current assets 2,778.0 2,515.3
Investments and other assets 654.3 557.6
Equity investments in
affiliated companies 257.5 234.2
Property, plant and equipment 2,006.3 1,846.0
Intangible assets 404.8 379.7
- ---------------------------------------------------------------------
$6,100.9 $5,532.8
- ---------------------------------------------------------------------
Liabilities and shareholders' equity:
Short-term debt $ 894.6 $ 925.1
Accounts payable, trade 523.8 517.7
Accrued compensation 166.3 150.6
Other current liabilities 671.2 601.8
Federal, state and foreign income taxes 169.3 158.2
- ---------------------------------------------------------------------
Total current liabilities 2,425.2 2,353.4
Long-term debt 634.5 535.2
Deferred income taxes 128.4 88.0
Other noncurrent liabilities 612.0 718.5
Minority interests 54.7 21.3
Shareholders' equity:
Preferred stock - none issued - -
Common stock - 160,330,268 shares
issued 160.3 160.3
Capital in excess of par value 217.5 152.2
Retained earnings 3,042.9 2,654.5
Cumulative translation adjustments (216.3) (181.0)
Treasury stock, at cost:
1995 - 24,731,378 shares;
1994 - 25,734,568 shares (958.3) (969.6)
- ---------------------------------------------------------------------
Total shareholders' equity 2,246.1 1,816.4
- ---------------------------------------------------------------------
$6,100.9 $5,532.8
- ---------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
28
<PAGE>
<PAGE>
Warner-Lambert Company and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------
(Dollars in millions)
<S> <C> <C> <C>
Operating Activities:
Net income $ 739.5 $ 694.0 $ 331.0
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and amortization 201.9 181.4 170.4
Gain on sale of PRO toothbrush business (117.0) - -
Minority interests 130.0 92.2 (.5)
Restructuring - - 525.2
Accounting changes, net of tax - - (46.0)
Deferred income taxes 91.5 44.3 (129.6)
Changes in assets and liabilities,
net of effects from acquisitions/
dispositions of businesses:
Receivables (171.9) (167.9) (134.1)
Inventories (20.0) (140.6) (70.3)
Accounts payable and accrued
liabilities (23.1) (77.5) (79.2)
Pension contributions (34.0) (22.1) (100.0)
Other 2.3 41.2 (.2)
- ----------------------------------------------------------------------
Net cash provided by operating activities 799.2 645.0 466.7
- ----------------------------------------------------------------------
Investing Activities:
Purchases of investments (438.5) (656.1) (236.5)
Proceeds from sales of investments 340.8 415.7 166.2
Capital expenditures (387.3) (406.4) (347.1)
Acquisitions of businesses (34.3) (66.3) (429.0)
Proceeds from dispositions of businesses 136.1 - 83.4
Other 15.6 13.2 4.4
- ----------------------------------------------------------------------
Net cash used by investing activities (367.6) (699.9) (758.6)
- ----------------------------------------------------------------------
Financing Activities:
Proceeds from borrowings 1,828.6 762.7 627.6
Principal payments on borrowings (1,766.6) (527.6) (192.1)
Purchases of treasury stock (17.6) (41.7) (112.4)
Cash dividends paid (351.1) (327.2) (307.9)
Distributions paid to minority interests (96.5) (79.4) (.5)
Proceeds from exercise of stock options 61.2 43.1 14.5
- ----------------------------------------------------------------------
Net cash (used) provided by
financing activities (342.0) (170.1) 29.2
- ----------------------------------------------------------------------
Effect of exchange rate changes on
cash and cash equivalents (11.7) 2.4 (15.2)
- ----------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 77.9 (222.6) (277.9)
Cash and cash equivalents at beginning
of year 217.9 440.5 718.4
- ----------------------------------------------------------------------
Cash and cash equivalents at end of year $ 295.8 $ 217.9 $ 440.5
- ----------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
<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"). In conformity with generally
accepted accounting principles, management has made estimates and assumptions
that affect the reported amounts of assets, liabilities, sales and expenses.
Actual results could differ from those estimates. 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.
Newly issued accounting standard - In March 1995, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which became effective on January 1, 1996. The
adoption of SFAS No. 121 is not expected to have a material impact on the
company's consolidated financial position, liquidity, cash flow or results of
operations.
Advertising costs - Advertising costs are expensed as incurred and amounted to
$644.0 in 1995, $601.3 in 1994 and $598.4 in 1993.
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 135,021,000 in 1995, 134,112,000 in
1994 and 135,000,000 in 1993.
Note 2 - Interest Income and Interest Expense:
Interest income and interest expense are included in other (income) expense,
net. Interest income totaled $49.7, $49.7 and $39.7 and interest expense totaled
$122.7, $93.7 and $64.2 in 1995, 1994 and 1993, respectively. Total interest
paid was $112.8, $86.2 and $65.4 in 1995, 1994 and 1993, respectively. Interest
costs of $10.1, $9.4 and $8.6 in 1995, 1994 and 1993, respectively, have been
capitalized and included in property, plant and equipment.
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 for approximately $82.0, resulting in a
pretax 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,
30
<PAGE>
<PAGE>
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. As of December 31, 1995,
two manufacturing sites were closed (Carolina, Puerto Rico and Harbin, China)
and workforce reductions of more than 1,400 positions have been made, primarily
consisting of U.S. sales force, Puerto Rico manufacturing and European
administrative positions. In addition to the remaining five facility closures,
the major activities to be completed relate to worldwide work-systems redesign.
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,
1995, the company has closed 13 manufacturing facilities, mainly in Europe and
South America, completed two partial facility rationalizations and reduced the
workforce by approximately 1,900 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.
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 1995 * 31, 1995
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Severance and related costs $ 468.0 $ 315.5 $ 152.5
Plant closures and related costs 161.5 120.5 41.0
Work-systems redesign 71.5 9.9 61.6
Operating losses during 35.3 35.3 -
phase-out period
Other 107.3 95.0 12.3
Asset write-offs 225.6 225.6 -
- ---------------------------------------------------------------------
Total $1,069.2 $ 801.8 $ 267.4
- ---------------------------------------------------------------------
<FN>
*Includes redistribution among categories, described as follows:
</FN>
</TABLE>
Based on actual restructuring actions and project forecasts, the company
redistributed among categories $43.6 of the $1,069.2 originally provided. The
company reduced reserve balances designated for severance and related costs by
$43.6 and increased balances for plant closures and related costs by $15.0,
work-systems redesign by $18.6 and other costs by $10.0. These redistributions
were necessary due to delays in completion and higher projected costs for plant
closures and the acceleration of the work-systems redesign projects enabling
some positions to be eliminated through attrition rather than severance. The
original scopes of the projects and the number of positions to be eliminated
remain unchanged.
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.
As of December 31, 1995, other current liabilities included $140.0 and other
noncurrent liabilities included $127.4 of the remaining restructuring reserve
balance to be utilized. The restructuring provisions encompass pharmaceutical
manufacturing rationalizations, which include 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 expected to be
substantially completed by 1997.
Note 4 - Acquisitions, Divestiture and Alliances:
In April 1995, Warner-Lambert acquired Adams S.A., a privately held manufacturer
of confectionery products in Argentina. In June 1994, Warner-Lambert acquired
Saila S.p.A., a privately held confectionery company based in Italy.
Cash consideration, excluding cash acquired and debt assumed, for the above
acquisitions was $34.3 in 1995 and $66.3 in 1994. 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 above acquisitions did not have a material pro
forma impact on consolidated earnings.
31
<PAGE>
<PAGE>
Warner-Lambert had several purchase acquisitions during 1993 for total
consideration of $429.0, the effect of which individually and in the aggregate
was not material to the consolidated financial position or results of operations
for 1993.
In 1995, the company sold its PRO toothbrush business. Net proceeds were $136.1
resulting in a pretax gain of $117.0, which is included in other (income)
expense, net. On an after tax basis, the gain was $82.4 or $.61 per share.
Warner-Lambert has separate agreements with both Wellcome plc ("Wellcome") and
Glaxo plc ("Glaxo") (which acquired Wellcome in 1995 and is referred to as
"Glaxo Wellcome") to establish joint ventures in various countries to develop
and market a broad range of nonprescription consumer health care products.
In December 1995, Warner-Lambert signed a letter of intent to purchase Glaxo
Wellcome's interests in the Warner Wellcome joint venture operations described
below for $1.05 billion. The transaction is subject to negotiation and
completion of a final agreement and the receipt of necessary regulatory
approvals. During the negotiation period, Warner-Lambert retains its rights
under the original Wellcome joint venture agreement, including those relating to
the Wellcome acquisition by Glaxo.
Warner-Lambert's agreement with Wellcome, signed in December 1993, called 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,
Australia, New Zealand and certain countries in Europe in June 1994 and Germany
in November 1994. Warner-Lambert and Wellcome, respectively, receive
approximately 70 percent and 30 percent of the profits generated in the U.S. and
split profits evenly outside the U.S. Warner-Lambert has voting control and has
consolidated the financial results of the Warner Wellcome joint venture
operations reflecting Wellcome's share as minority interest.
Warner-Lambert and Glaxo, prior to its acquisition of Wellcome, formed
a joint venture (Glaxo Warner-Lambert) in the U.S. that commenced
operations in December 1993. The Glaxo Warner-Lambert joint venture
was formed to develop, seek approval of and market OTC versions of Glaxo
Wellcome prescription drugs in the U.S. Development costs, profits and losses
and voting control are shared equally. Glaxo Wellcome will receive a royalty on
sales of OTC versions of Glaxo Wellcome prescription drugs by the joint
ventures. Warner-Lambert uses the equity method of accounting to record its
share of profits and losses in the Glaxo Warner-Lambert joint venture.
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, Venezuela and Peru). Net aggregate exchange losses
resulting from foreign currency transactions and translation adjustments related
to subsidiaries operating in highly inflationary countries amounted to $14.3,
$15.3 and $9.8 in 1995, 1994 and 1993, respectively. The cumulative translation
adjustments component of shareholders' equity was charged with $35.3 in 1995,
credited with $43.8 in 1994 and charged with $65.1 in 1993.
Note 6 - Inventories:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Raw materials $110.0 $112.3
Finishing supplies 48.0 54.2
Work in process 89.1 93.2
Finished goods 398.6 376.5
- ---------------------------------------------------------------------
$645.7 $636.2
- ---------------------------------------------------------------------
</TABLE>
Note 7 - Property, Plant and Equipment:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Land $ 39.4 $ 34.7
Buildings 1,098.5 1,016.1
Machinery, furniture and fixtures 2,278.7 2,116.8
- ---------------------------------------------------------------------
3,416.6 3,167.6
Less accumulated depreciation (1,410.3) (1,321.6)
- ---------------------------------------------------------------------
$ 2,006.3 $ 1,846.0
- ---------------------------------------------------------------------
</TABLE>
Depreciation expense totaled $186.3, $168.9 and $159.0 in 1995, 1994 and 1993,
respectively.
Note 8 - Intangible Assets:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Intangible assets $484.8 $442.0
Less accumulated amortization (80.0) (62.3)
- ---------------------------------------------------------------------
$404.8 $379.7
- ---------------------------------------------------------------------
</TABLE>
Amortization expense totaled $15.6, $12.5 and $11.4 in 1995, 1994 and 1993,
respectively.
32
<PAGE>
<PAGE>
Note 9 - Debt:
The components of short-term debt were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Commercial paper $473.0 $641.4
Notes payable - bank and other 305.0 250.6
Current portion of long-term debt 116.6 33.1
- ---------------------------------------------------------------------
$894.6 $925.1
- ---------------------------------------------------------------------
</TABLE>
The weighted average interest rate was 6.2 percent and 6.3 percent for
commercial paper and notes payable outstanding at December 31, 1995 and 1994,
respectively. The company has lines-of-credit arrangements with numerous banks
with interest rates generally equal to the best prevailing rate. At December 31,
1995, worldwide unused short-term lines of credit amounted to $1.4 billion.
The components of long-term debt were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Commercial paper $200.0 $ -
6 5/8% notes due 2002 199.7 199.6
8% notes due 1998 150.0 150.0
8 1/8% notes due 1996 - 100.0
Industrial revenue bonds due 2014 24.6 24.6
Other 60.2 61.0
- ---------------------------------------------------------------------
$634.5 $535.2
- ---------------------------------------------------------------------
</TABLE>
At December 31, 1995, the company classified as long-term debt $200.0 of
commercial paper for which the company has the intent and ability to refinance
on a long-term basis. This commercial paper is supported by lines of credit.
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, 1995, payable
in each of the years 1997 through 2000 are $209.9, $168.6, $5.7 and $5.9,
respectively.
During 1995 and 1994 the company used interest rate swap agreements to hedge
interest expense on notes due in 1996, 1998 and 2002, see Note 10.
Note 10 - Financial Instruments:
The estimated fair values of financial instruments were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1995 1994
- ---------------------------------------------------------------------
Carrying Fair Carrying Fair
( ) = Liability Amount Value Amount Value
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities $ 534.6 $ 536.5 $ 482.8 $ 479.2
Long-term debt (634.5) (655.1) (535.2) (513.8)
Interest rate swaps (1.2) (2.1) .3 (17.3)
Foreign exchange contracts - 7.1 .1 (19.2)
- ---------------------------------------------------------------------
</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 preceding 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 were
categorized as "held-to-maturity." At December 31, 1995 and 1994, respectively,
gross unrealized gains were $.9 and $.4 and gross unrealized losses were $2.8
and $4.0. The investment securities portfolio was comprised of negotiable
certificates of deposit, Puerto Rico government bonds, guaranteed collateralized
mortgage obligations, Ginnie Mae certificates and repurchase agreements as of
year-end 1995 and 1994 and short-term U.S. dollar-linked Mexican government
bonds as of year-end 1994. Equity securities, categorized as
"available-for-sale," were immaterial.
The investment securities were reported in the following balance sheet
categories:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
December 31, 1995 1994
- -------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 34.1 $ 74.6
Short-term investments 256.8 247.2
Investments and other assets 243.7 161.0
- -------------------------------------------------------------------
$534.6 $482.8
- -------------------------------------------------------------------
</TABLE>
As of December 31, 1995, the long-term investments of $243.7 included $48.1 of
interest-bearing, mortgage-backed securities maturing beyond ten years.
33
<PAGE>
<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 pharmaceutical, consumer health care and
confectionery businesses worldwide. The company's products are distributed to
wholesalers and directly or indirectly to pharmacies, chain food stores, mass
merchandisers, smaller independent retailers, hospitals, government agencies,
health maintenance organizations and other managed care entities. 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 company has used interest rate swap agreements that converted fixed rates on
long-term debt to floating rates with the intent of reducing interest expense.
As of December 31, 1994, the company had $450.0 notional amount of interest rate
swap agreements outstanding; during 1995, $200.0 due to mature in 2002 were
terminated and $250.0 maturing in 1996 were fixed at a weighted average interest
pay rate of 8.7 percent and a receive rate of 8.1 percent. As a result of
interest rate swap agreements, interest expense increased $3.2 in 1995, and
decreased $3.7 and $12.4 in 1994 and 1993, respectively. The company had
unrealized losses on its interest rate swap agreements of $.9 and $17.6 as of
December 31, 1995 and 1994, respectively.
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.
At December 31, 1995 and 1994, the company had forward or purchased option
foreign exchange contracts with contractual amounts of $158.6 and $164.1 to
exchange foreign currencies, principally Japanese yen for U.S. dollars in 1995
and Japanese yen for U.S. dollars and U.S. dollars for British pounds in 1994.
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. Cash flows associated with derivative financial instruments
are classified as operating in the consolidated statements of cash flows.
Note 11 - Leases:
The company rents various facilities and equipment. Rental costs charged to
income under all operating leases totaled $80.8, $78.5 and $76.3 in 1995, 1994
and 1993, respectively.
The future minimum rental commitments under noncancelable capital and operating
leases at December 31, 1995 are summarized below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Capital Operating
- ---------------------------------------------------------------------
<C> <C> <C>
1996 $ 3.6 $ 33.8
1997 3.2 26.3
1998 2.5 18.0
1999 2.5 14.6
2000 2.4 13.3
Remaining years 13.9 80.7
- --------------------------------------------------------------------
Total minimum lease payments 28.1 186.7
Less minimum sublease income - (27.5)
---------------------
Net minimum lease payments 28.1 $159.2
-------
Less amount representing interest (10.1)
- -----------------------------------------------------
Present value of minimum lease payments $ 18.0
- -----------------------------------------------------
</TABLE>
34
<PAGE>
<PAGE>
Property, plant and equipment included capitalized leases of $23.4, less
accumulated depreciation of $3.9, at December 31, 1995 and $34.4, less
accumulated depreciation of $13.0, at December 31, 1994. Long-term debt included
capitalized lease obligations of $16.1 and $21.9 at those respective dates.
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.
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
- ----------------------------------------------------------------------
1995 1994 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plan assets at fair value $1,812.9 $1,583.9 $ 75.1 $ 70.5
- ----------------------------------------------------------------------
Actuarial present value of
accumulated benefit
obligation:
Vested 1,671.5 1,421.5 155.5 140.3
Nonvested 43.2 45.4 13.9 9.4
- ----------------------------------------------------------------------
1,714.7 1,466.9 169.4 149.7
Estimated future
salary increases 176.2 138.5 32.0 27.6
- ----------------------------------------------------------------------
Projected benefit
obligation 1,890.9 1,605.4 201.4 177.3
- ----------------------------------------------------------------------
Excess of projected
benefit obligation over
plan assets (78.0) (21.5) (126.3) (106.8)
Unrecognized net
(asset) obligation (5.7) (22.0) 6.5 7.2
Unrecognized prior
service cost 55.2 36.2 5.2 2.7
Unrecognized net
actuarial loss 189.7 150.8 31.0 21.5
Minimum liability
adjustment - - (23.8) (18.6)
- ----------------------------------------------------------------------
Net pension asset
(liability) included
in consolidated
balance sheets $ 161.2 $ 143.5 $(107.4) $ (94.0)
- ----------------------------------------------------------------------
</TABLE>
Plan assets are composed primarily of investments in equities and bonds.
Foreign plan assets at fair value included in the preceding table were $629.8 in
1995 and $570.1 in 1994. The foreign plan projected benefit obligation was
$666.6 in 1995 and $596.4 in 1994.
The assumptions for the U.S. plans included a 10.5 percent expected long-term
rate of return on plan assets and an expected 4 percent increase in salary
levels for each of the years ended December 31, 1995, 1994 and 1993. The assumed
weighted average discount rate was 7.75 percent, 8.75 percent and 7.5 percent
for the years ended 1995, 1994 and 1993, respectively. Assumptions for foreign
plans did not vary significantly from the U.S. plans.
Pension costs for the plans included the following components:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the year $ 49.3 $ 50.9 $ 44.9
Interest cost on projected
benefit obligation 144.4 134.3 130.1
Return on assets (276.7) (24.2) (199.2)
Net amortization and deferral 108.8 (124.5) 59.4
- ----------------------------------------------------------------------
Net pension expense $ 25.8 $ 36.5 $ 35.2
- ----------------------------------------------------------------------
</TABLE>
Net pension expense attributable to foreign plans included in the above was
$22.2, $21.4 and $17.9 in 1995, 1994 and 1993, 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.
35
<PAGE>
<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.
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. U.S. employees retiring
after December 31, 1991 will receive additional pension benefits based on years
of service in lieu of these benefits.
The net periodic postretirement benefit cost for domestic retirees amounted to
$17.4, $15.0 and $14.0 in 1995, 1994 and 1993, 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, 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation $187.7 $179.3
Unrecognized prior service cost 1.6 1.8
Unrecognized net actuarial loss (59.3) (49.4)
- ---------------------------------------------------------------------
Accrued postretirement benefit cost
recognized in the consolidated
balance sheets $130.0 $131.7
- ---------------------------------------------------------------------
</TABLE>
The health care cost trend rate used to develop the accumulated postretirement
benefit obligation for those retirees under age 65 was 11.7 percent in 1995
declining to 6 percent over 11 years. For those 65 and over, a rate of 7.7
percent was used in 1995 declining to 6 percent over 6 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, 1995 by
$6.2 and the net periodic postretirement benefit cost for 1995 by $.6. The
weighted average discount rate used to develop the accumulated postretirement
benefit obligation was 7.75 percent, 8.75 percent and 7.5 percent for 1995, 1994
and 1993, respectively.
Other postretirement benefits for foreign plans expensed under the cash method
in 1995, 1994 and 1993 were not material.
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, 1995 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C>
U.S. and Puerto Rico $ 485.6 $ 469.2 $ 15.8
Foreign 663.0 536.1 302.2
- ---------------------------------------------------------------------
$1,148.6 $1,005.3 $318.0
- ---------------------------------------------------------------------
</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>
- ---------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 17.6 $ 22.7 $ 22.0
Foreign 163.5 143.4 123.4
State and Puerto Rico 6.5 8.7 17.7
- ---------------------------------------------------------------------
187.6 174.8 163.1
- ---------------------------------------------------------------------
Deferred:
Federal 30.5 38.0 (95.0)
Foreign 55.3 .8 (19.6)
State and Puerto Rico 5.7 5.5 (15.0)
- ---------------------------------------------------------------------
91.5 44.3 (129.6)
- ---------------------------------------------------------------------
Provision for income taxes $279.1 $219.1 $ 33.5
- ---------------------------------------------------------------------
36
<PAGE>
<PAGE>
Tax benefits credited to shareholders' equity for employee benefit plans were
$17.2 and $11.9 for years ended December 31, 1995 and 1994, respectively.
The tax effects of significant temporary differences which comprise the deferred
tax assets and liabilities were as follows:
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
December 31, 1995 1994
- ----------------------------------------------------------------------
Assets Liabilities Assets Liabilities
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restructuring reserves $129.2 $ - $196.3 $ -
Compensation/benefits 75.6 - 64.2 -
Postretirement/post-
employment obligations 62.2 - 62.1 -
Foreign tax loss and
other carryforwards 38.3 - 27.5 -
Inventory 25.3 10.1 22.7 -
Pensions 25.3 56.0 12.6 44.9
Research tax credit
carryforwards 17.7 - 37.0 -
Property, plant and
equipment 7.6 180.3 10.9 164.4
Other 101.2 41.3 87.9 28.2
- ---------------------------------------------------------------------
482.4 287.7 521.2 237.5
Valuation allowances (37.0) - (44.6) -
- ---------------------------------------------------------------------
$445.4 $287.7 $476.6 $237.5
- ---------------------------------------------------------------------
</TABLE>
The research tax credit carryforwards of $17.7 will be available through 2010.
During 1995, the decrease in valuation allowances of $7.6 primarily reflected
improved profitability in European operations which resulted in the realization
of some deferred tax assets associated with the 1991 restructuring.
Income taxes of $173.6, $186.1 and $155.0 were paid during 1995, 1994 and 1993,
respectively. Prepaid expenses and other current assets included deferred income
taxes of $168.2 and $173.9 at December 31, 1995 and 1994, respectively.
Investments and other assets included deferred income taxes of $131.7 and $157.2
at December 31, 1995 and 1994, 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, 1995.
Earnings of foreign subsidiaries considered to be reinvested for an indefinite
period at December 31, 1995 were approximately $641.6. No additional U.S. income
taxes or foreign withholding taxes have been provided on the earnings. It
would be impractical to compute the estimated deferred tax liability on these
earnings.
As of December 31, 1995, Warner-Lambert's U.S. federal income tax returns
through 1989 have 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>
- ---------------------------------------------------------------------
Years Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory tax rate 35.0% 35.0% 35.0%
Income earned in Puerto Rico (4.6) (5.0) (5.5)
Foreign income subject to
reduced tax rates including
taxes on repatriation (1.9) (7.1) (4.6)
U.S. research tax credit, net (.5) (.6) (1.8)
State and local taxes, net .7 .7 .9
Other items, net (1.3) 1.0 (.5)
Effect of restructuring - - (13.0)
Effect of minority interests (3.1) (2.2) -
- ---------------------------------------------------------------------
Effective tax rate before
accounting changes 24.3% 21.8% 10.5%
- ---------------------------------------------------------------------
</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. 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.
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. Common stock issued in the amount of $160.3 was
unchanged for each of the three years ended December 31, 1995.
37
<PAGE>
<PAGE>
Changes in certain components of shareholders' equity are summarized as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Treasury Stock
Capital in ----------------------
Excess of Shares in
Par Value Thousands Cost
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1992 $114.5 (24,990) $(851.2)
Shares repurchased, at cost - (1,681) (112.4)
Employee benefit plans 5.6 480 9.9
- ---------------------------------------------------------------------
Balance at December 31, 1993 120.1 (26,191) (953.7)
Shares repurchased, at cost - (647) (41.7)
Employee benefit plans 35.0 1,103 25.8
Unrealized market value adjust-
ments on equity securities (2.9) - -
- ---------------------------------------------------------------------
Balance at December 31, 1994 152.2 (25,735) (969.6)
Shares repurchased, at cost - (229) (17.6)
Employee benefit plans 54.1 1,233 28.9
Unrealized market value adjust-
ments on equity securities 11.2 - -
- ---------------------------------------------------------------------
Balance at December 31, 1995 $217.5 (24,731) $(958.3)
- ---------------------------------------------------------------------
</TABLE>
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.
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, 1995, rights with
respect to 511,300 shares of common stock were outstanding.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation" which requires companies to measure employee stock compensation
plans based on the fair value method of accounting or to continue to apply APB
No. 25, "Accounting for Stock Issued to Employees" and provide pro forma
footnote disclosures under the fair value method in SFAS No. 123. The company
has decided to adopt SFAS No. 123 through disclosure only, and accordingly, pro
forma fair value disclosures will be made in the 1996 Annual Report.
38
<PAGE>
<PAGE>
Transactions involving stock options, rights and awards are summarized as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Number Price
of Shares Per Share
- ---------------------------------------------------------------------
<S> <C> <C>
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:
Granted 2,042,025 75.50 - 95.75
Exercised (1,214,310) 18.03 - 75.25
Cancelled (360,111) 18.03 - 87.75
Stock awards:
Granted 48,705 74.38 - 94.88
Delivered (27,347) 51.91 - 80.19
Cancelled (11,946) 54.47 - 84.88
- ---------------------------------------------------------------------
Stock options, rights and awards
outstanding, December 31, 1995 10,049,298 28.25 - 95.75
- ---------------------------------------------------------------------
Stock options and rights
exercisable, December 31, 1995 5,026,783 $28.25 - $80.50
- ---------------------------------------------------------------------
Shares available for annual grants at:
December 31, 1994 7,040,375
December 31, 1995 7,878,756
- ------------------------------------------------
</TABLE>
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 company's consolidated
financial position, liquidity, cash flow or results of operations for any year.
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 and similar legislation), various state environmental organizations
and other parties. The company is presently engaged in environmental remediation
at certain sites, including sites previously owned.
The company accrues costs for an estimated environmental liability when
management becomes aware that a liability exists and is able to reasonably
estimate the company's share. Generally, that occurs no later than when
feasibility studies and related cost assessments of remedial techniques are
completed, and the extent to which other potentially responsible parties (PRPs)
can be expected to contribute is determined. For most sites, there are other
PRPs that may be jointly and severally liable to pay all cleanup costs. Outside
consultants are generally used to assess the costs of remediation. 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. Although 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.
39
<PAGE>
<PAGE>
Note 20 - Segment Information:
Industry segments are comprised as follows: Pharmaceutical - consisting of
ethical pharmaceuticals, biologicals and empty hard-gelatin capsules; Consumer
Health Care - consisting of OTC, shaving and pet care products; Confectionery -
consisting of chewing gums, breath mints and, until disposition in the fourth
quarter of 1993, chocolate/caramel brands, see Note 3.
In 1995, nearly one half of Pharmaceutical and Consumer Health Care sales were
from the U.S. and one half of Confectionery sales were from the Americas and Far
East. The seven largest markets outside the U.S. were Japan, Germany, the United
Kingdom, France, Canada, Brazil and Italy. Sales in these markets accounted for
approximately 62 percent of international sales in 1995, with no one country
accounting for more than 18 percent of international sales.
<TABLE>
Industry Segments
<CAPTION>
- --------------------------------------------------------------------------------------------------
Research and
Net Sales (a) Operating Profit Development Expense
- --------------------------------------------------------------------------------------------------
1995 1994 1993 1995 1994 1993(d) 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pharmaceutical $2,356 $2,079 $2,114 $ 822 $ 716 $ 384 $(408) $(368) $(382)
Consumer Health Care 3,293 2,970 2,374 858(c) 714 440 (67) (65) (61)
Confectionery 1,391 1,368 1,306 202 264 201 (26) (23) (22)
-------------------------
Research and develop-
ment expense (501) (456) (465) $(501) $(456) $(465)
- --------------------------------------------------------------------------------------------------
Net sales and
operating profit $7,040 $6,417 $5,794 1,381 1,238 560
- --------------------------------------------
Corporate expense (b) (232) (233) (242)
- --------------------- -------------------------
Income before income
taxes, minority
interests and
accounting changes $1,149 $1,005 $ 318
- --------------------- -------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------
Depreciation and
Identifiable Assets Amortization Capital Expenditures
- --------------------------------------------------------------------------------------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pharmaceutical $2,274 $1,991 $1,769 $ 95 $ 80 $ 72 $176 $183 $160
Consumer Health Care 1,942 1,837 1,491 67 61 61 116 129 115
Confectionery 924 872 680 30 31 29 72 83 60
- --------------------------------------------------------------------------------------------------
Subtotal 5,140 4,700 3,940 192 172 162 364 395 335
Corporate 961 833 888 10 9 8 23 11 12
- --------------------------------------------------------------------------------------------------
Total $6,101 $5,533 $4,828 $202 $181 $170 $387 $406 $347
- --------------------------------------------------------------------------------------------------
Geographic Areas
<CAPTION>
- --------------------------------------------------------------------------------------------------
Net Sales (a) Operating Profit Identifiable Assets
- --------------------------------------------------------------------------------------------------
1995 1994 1993 1995 1994 1993(d) 1995 1994 1993
- --------------------------------------------------------------------------------------------------
United States $3,023 $2,954 $2,747 $ 912(c)$ 844 $ 441 $2,090 $1,915 $1,705
Europe, Middle East
and Africa 1,980 1,618 1,390 538 428 231 1,897 1,649 1,305
Americas and Far
East 2,037 1,845 1,657 432 422 353 1,153 1,136 930
- --------------------------------------------------------------------------------------------------
Subtotal 7,040 6,417 5,794 1,882 1,694 1,025 5,140 4,700 3,940
Research and develop-
ment expense (501) (456) (465)
- --------------------------------------------------------------------------------------------------
Total $7,040 $6,417 $5,794 $1,381 $1,238 $ 560 $5,140 $4,700 $3,940
- --------------------------------------------------------------------------------------------------
<FN>
(a) Export sales, intersegment sales and intergeographic area sales were not
material.
(b) Corporate expense includes general corporate income and expense, corporate
investment income, interest expense and net foreign currency adjustments.
(c) Includes a $117 million pretax gain on the sale of the company's PRO
toothbrush business.
(d) The 1993 operating profit by industry segments includes restructuring
charges as follows: Pharmaceutical - $314; Consumer Health Care - $105;
Confectionery - $46 and corporate expense - $60. The 1993 operating profit
by geographic areas includes restructuring charges as follows: United
States - $314; Europe, Middle East and Africa - $119 and Americas and Far
East - $32, see Note 3.
</FN>
</TABLE>
40
<PAGE>
<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, and the creation of a worldwide corporate compliance
program, which is a formal system designed to oversee compliance with applicable
laws, regulations, policies and procedures on a worldwide basis.
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, 1995 and 1994, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, 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 22, 1996
41
<PAGE>
<PAGE>
Quarterly Financial Information:
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
1995 Quarters
- ---------------------------------------------------------------------------
First Second Third Fourth
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $1,604.6 $1,799.6 $1,775.7 $1,859.9
Gross profit 1,072.3 1,188.0 1,153.6 1,198.4
Net income 201.4 201.0 214.0 123.1
Net income per
common share 1.50 1.49 1.58 .91
- ---------------------------------------------------------------------------
</TABLE>
Third quarter 1995 results include a gain from sale of the PRO toothbrush
business of $82.4 after tax or $.61 per share, see Note 4.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
1994 Quarters
- ---------------------------------------------------------------------------
First Second Third Fourth
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $1,472.9 $1,552.2 $1,671.0 $1,720.7
Gross profit 993.9 1,042.9 1,101.6 1,123.3
Net income 190.4 196.7 169.2 137.7
Net income per
common share 1.42 1.47 1.26 1.02
- ---------------------------------------------------------------------------
</TABLE>
Market Prices of Common Stock and Dividends:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
1995 Range of Prices 1994 Range of Prices
- ---------------------------------------------------------------------------
Dividends Dividends
High Low Per Share High Low Per Share
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First quarter $81 1/2 $73 3/8 $.65 $68 3/4 $60 1/4 $.61
Second quarter 86 1/2 77 1/2 .65 72 1/2 60 .61
Third quarter 98 82 5/8 .65 86 3/4 64 .61
Fourth quarter 97 1/8 84 5/8 .65 82 1/4 73 .61
- ---------------------------------------------------------------------------
</TABLE>
Dividends per share, presented in graphic format, were $1.76 in 1991, $2.04 in
1992, $2.28 in 1993, $2.44 in 1994 and $2.60 in 1995.
The 1995 quarterly closing stock prices, presented in graphic format, were $78
1/4 in the first quarter, $86 3/8 in the second quarter, $95 1/4 in the third
quarter and $97 1/8 in the fourth quarter.
42
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
- ---------------------
NET SALES
Sales in 1995 of $7,040 million were 10 percent higher than in 1994. Unit volume
growth was 7 percent, price increases added 2 percent and foreign exchange rate
changes had a favorable impact of 1 percent. Unit volume growth of 2 percent was
attributable to the inclusion of products contributed by Wellcome plc to the
international Warner Wellcome joint venture operations that were not in
existence for the full year in 1994 (described on page 44), and from businesses
acquired in 1995 and 1994. Glaxo plc acquired Wellcome plc in 1995 and changed
the name of the combined company to Glaxo Wellcome. Throughout this Discussion
"Wellcome" refers to Wellcome plc prior to its acquisition by Glaxo plc and
"Glaxo" refers to Glaxo plc prior to its acquisition of Wellcome and name change
to Glaxo Wellcome.
In 1994 sales of $6,417 million were 11 percent higher than in 1993. Sales
growth of 7 percent resulted from the full-year reporting impact of businesses
acquired in 1993 and sales of products from the then newly established Warner
Wellcome joint venture operations, 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.
Sales, presented in graphic format, were $5.1 billion in 1991, $5.6 billion in
1992, $5.8 billion in 1993, $6.4 billion in 1994 and $7.0 billion in 1995.
On a geographic basis, U.S. sales in 1995 were $3,023 million, an increase of
$69 million, or 2 percent over 1994. International sales increased $554 million,
or 16 percent to $4,017 million. At constant exchange rates, international sales
increased 14 percent from 1994. The devaluation of the Mexican peso in December
1994 adversely impacted sales by $137 million in 1995. International sales
growth of 4 percent in 1995 resulted from the full-year inclusion of Wellcome
products and from businesses acquired in 1995 and 1994. In 1994 U.S. sales
increased $207 million, or 8 percent to $2,954 million and international sales
increased $416 million, or 14 percent to $3,463 million.
<TABLE>
<CAPTION>
Pharmaceutical Products
- -----------------------
1995 1994 1993
------------ ------------- -------
(Dollars in millions)
<S> <C> <C> <C>
Net Sales $ 2,356 +13% $ 2,079 -2% $ 2,114
</TABLE>
U.S. sales increased 7 percent to $1,077 million despite the sales erosion
and price reductions of the lipid-regulator LOPID and its generic
equivalent, gemfibrozil, as a result of generic competition. Sales of the
two products declined $72 million in 1995. U.S. sales growth was led by the
add-on epilepsy therapy NEURONTIN, the cardiovascular drug ACCUPRIL, the
oral contraceptive LOESTRIN, the anticonvulsant DILANTIN and CAPSUGEL empty
hard-gelatin capsules. International sales increased 20 percent to $1,279
million, or 13 percent at constant rates of exchange. Sales growth was led by
ACCUPRIL, CAPSUGEL and the analgesic VALORON. In the first quarter of 1995 the
company launched PIMENOL, an antiarrhythmic drug, in Japan and OMNICEF, an oral
cephalosporin antibiotic, in the Philippines.
In 1994 U.S. sales declined 7 percent as the combined sales of LOPID and
gemfibrozil fell $197 million as a result of generic competition. International
sales increased 4 percent led by ACCUPRIL, CAPSUGEL and NEURONTIN.
Warner-Lambert plans to file 8 New Drug Applications (NDA) or Supplements with
the U.S. Food and Drug Administration (FDA) in 1996. These filings include 3 new
chemical entities, all of which are in late-stage development and are
anticipated to be commercially significant. They are atorvastatin, a lipid
regulator, troglitazone, an insulin-enhancing medication for Type II diabetes
and OMNICEF.
43
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Consumer Health Care Products
- -----------------------------
1995 1994 1993
------------ ------------- -------
(Dollars in millions)
S> <C> <C> <C>
Net Sales $ 3,293 +11% $ 2,970 +25% $ 2,374
</TABLE>
In 1995 sales growth in this segment of 3 percent was attributable to the
full-year inclusion of Wellcome products, including SUDAFED and ACTIFED cold
medications, NEOSPORIN topical anti-infective and ZOVIRAX cold sore cream in the
international Warner Wellcome joint venture operations. U.S. sales increased 4
percent in 1995 to $1,525 million. Sales benefited from the introduction of COOL
MINT LISTERINE toothpaste in August 1995. Products with U.S. sales growth
included the company's wet-shaving products (benefiting from the introduction of
TRACER FX), SUDAFED, NEOSPORIN and BENADRYL allergy medication. International
sales increased 18 percent to $1,768 million, or 15 percent at constant exchange
rates. International sales growth of 6 percent was attributable to the full-year
inclusion of Wellcome products. Products with strong international growth
included the company's wet-shaving products, HALLS cough tablets, TETRA aquarium
products and LISTERINE Antiseptic mouthwash.
In December 1993 Warner-Lambert signed separate agreements with both 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.
Warner-Lambert's agreement with Wellcome called for both companies to contribute
to the Warner Wellcome 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 has consolidated the financial results
of the Warner Wellcome joint venture operations.
In December 1995 Warner-Lambert signed a letter of intent to purchase Glaxo
Wellcome's interest in the Warner Wellcome joint venture operations for a
purchase price of $1.05 billion. The transaction is subject to negotiation and
completion of a final agreement and the receipt of necessary regulatory
approvals. During the negotiation period Warner-Lambert retains its rights under
the original Wellcome joint venture agreement, including those relating to the
Wellcome acquisition by Glaxo.
Warner-Lambert and Glaxo formed a joint venture in the U.S. (referred to as
Glaxo Warner-Lambert) that commenced operations in December 1993. The Glaxo
Warner-Lambert joint venture was formed to develop, seek approval of and market
OTC versions of Glaxo prescription drugs in the U.S., including ZANTAC, Glaxo
Wellcome's pharmaceutical product for ulcer treatment.
As part of the letter of intent that Warner-Lambert and Glaxo Wellcome signed in
December 1995, the Glaxo Warner-Lambert joint venture will be restructured so
that in addition to developing and marketing OTC versions of Glaxo prescription
drugs, it will also develop and market Wellcome's OTC switch products, including
ZOVIRAX.
On September 30, 1994 Glaxo submitted a NDA filing for the sale in the U.S. of
an OTC product for the treatment of episodic heartburn, called ZANTAC 75. On
December 19, 1995 ZANTAC 75 received marketing clearance from the FDA. ZANTAC 75
is being marketed for OTC use in the U.K. by Warner Wellcome as a treatment for
episodic heartburn. Warner Wellcome is also marketing BECONASE, an OTC allergy
nasal spray from Glaxo in the U.K. Warner-Lambert shares in the profits
generated by these brands.
In 1994 sales growth of 17 percent was due to the full-year recognition of sales
from several businesses Warner-Lambert acquired in 1993 and from products
contributed by Wellcome to the joint venture operations. U.S. sales increased 26
percent primarily due to the joint venture operations. International sales
increased 24 percent with approximately half of the sales growth attributable to
the impact of the acquisitions and joint venture operations.
<TABLE>
<CAPTION>
Confectionery Products
- ----------------------
1995 1994 1993
------------ ------------- -------
(Dollars in millions)
<S> <C> <C> <C>
Net Sales $ 1,391 +2% $ 1,368 +5% $ 1,306
</TABLE>
In 1995 confectionery product sales in the U.S. declined 12 percent to $421
million. The decline was the result of an overall softness in the gum market, a
reduction in trade inventory levels and significant competitive activity, as
well as the timing and extent of trade incentives and promotional programs. The
company has brought in a new management team for its confectionery business and
expects that U.S. sales will increase in 1996. International confectionery sales
were $970 million, an increase of 9 percent, or 14 percent at constant
44
<PAGE>
<PAGE>
exchange rates. The devaluation of the Mexican peso in December 1994 adversely
impacted sales by $74 million in 1995. In April 1995 Warner-Lambert acquired
Adams S.A., a privately held confectionery company based in Argentina and in
June 1994 Warner-Lambert acquired Saila S.p.A. The acquisition of these
businesses increased this segment's international sales by approximately 5
percent in 1995. International sales growth was led by BUBBALOO bubble gum and
TRIDENT sugarless gum.
In 1994 U.S. sales declined 5 percent due to the sale of the
chocolate/caramel business in October 1993. Excluding chocolate/caramel
sales, U.S. sales increased 5 percent from 1993. International sales
increased 11 percent.
COSTS AND EXPENSES
Cost of goods sold in 1995 and 1994 increased 13 percent and 12 percent,
respectively. Cost of goods sold as a percentage of net sales increased to 34.5%
from 33.6% in 1994 and 33.1% in 1993. The increase in the company's ratio in
1995 was primarily attributable to the confectionery segment. This segment's
ratio increased due to a greater proportion of sales that were generated in
countries that have higher cost ratios combined with a higher cost ratio in the
U.S. resulting from lower volume. In 1994, the company's ratio reflected a
higher cost ratio in the pharmaceutical segment, resulting from both an
unfavorable product mix and higher costs related to regulatory compliance
issues.
Marketing expense in 1995 and 1994 increased 9 percent and 7 percent,
respectively. The increase in marketing expense in 1995 was primarily due to the
full-year inclusion of the international Warner Wellcome joint venture
operations. In 1994 marketing expense increased due to the full-year reporting
of acquired businesses and the Warner Wellcome joint venture operations. As a
percentage of net sales, marketing expense was 36.4% compared with 36.6% in 1994
and 37.9% in 1993, reflecting the company's efforts to contain expenses
associated with marketing combined with strong sales growth during these
periods.
Administrative and general expense in 1995 and 1994 increased 9 percent and 11
percent, respectively. Expenses in 1995 increased primarily due to the full-year
inclusion of the international Warner Wellcome joint venture operations.
Expenses in 1994 increased due to the full-year reporting of the acquired
businesses and the Warner Wellcome joint venture operations. As a percentage of
net sales, administrative and general expense was 6.9%, consistent with 1994 and
1993.
Research and development expense increased 10 percent in 1995 due to higher
spending on Phase III clinical trials. In 1994 research and development expense
declined 2 percent, reflecting reduced spending on selected pharmaceutical
programs. As a percentage of net sales, research and development expense was
7.1% in 1995 and 1994 and 8.0% in 1993. For 1996 the company plans to invest
$553 million in research and development, a projected increase of 10 percent
compared with 1995.
Other (income) expense, net in 1995 included a gain of $117 million from the
sale of the company's PRO toothbrush business. Partially offsetting the gain was
increased interest expense, resulting from both a higher level of average debt
outstanding throughout 1995 and higher interest rates. Other (income) expense,
net in 1994 was unfavorable compared to 1993 due to increased interest expense,
resulting from higher debt levels from the company's 1993 acquisitions and
higher interest rates.
In 1993 the company recorded a net restructuring charge of $525 million pretax
($360 million after tax or $2.67 per share) and in 1991 the company recorded a
net restructuring charge of $544 million pretax ($418 million after tax or $3.11
per share). See Note 3 to the consolidated financial statements for the detailed
provisions and subsequent utilization of reserves. In 1993 the company estimated
that the 1993 restructuring actions would generate average annual pretax savings
compared with pre-restructuring spending levels of approximately $150 million
by 1997. Similarly, in 1991 the company estimated that the 1991 restructuring
actions 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 1993 and 1991
restructuring actions. The restructuring activities are proceeding generally as
planned and are expected to be substantially completed by the end of
45
<PAGE>
<PAGE>
1997. The company will invest the 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.
INCOME TAXES
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Effective tax rate before
accounting changes:
As reported 24.3% 21.8% 10.5%
After minority interests
and excluding net 1993
restructuring charge 27.4% 24.0% 23.5%
</TABLE>
In 1995 the increases in the company's effective tax rates on a reported basis
and after minority interests were principally due to a greater proportion of the
company's taxable earnings being derived from international businesses located
in higher tax rate jurisdictions. In addition, the rates increased due to the
phase-in of a U.S. tax law enacted in 1993 that changed the way research and
development expenses are charged to foreign source income. These increases were
partially offset by the company's ability to recognize additional deferred tax
assets.
The reported tax rate in 1994 was higher than the reported tax rate in 1993
principally due to the effect in 1993 of a 31.4 percent tax benefit rate
associated with the 1993 restructuring actions. In 1994 the increase in the
company's effective tax rate was due to the tax consequences associated with
research expense and a lower tax benefit from operations in Puerto Rico. These
increases were partially offset by the company's ability to recognize additional
deferred tax assets.
The company anticipates an increase in its effective tax rate in 1996 of
approximately 2 percentage points primarily due to expected changes in the
company's global profit composition.
NET INCOME
In 1995 net income of $740 million and earnings per share of $5.48 increased 7
percent and 6 percent, respectively. Net income in 1995 included a gain of $82
million or $.61 per share on the sale of the PRO toothbrush business. The
devaluation of the Mexican peso in December 1994 lowered earnings per share in
1995 by $.18 per share. 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
accounting changes adopted in 1993 of $46 million or $.34 per share, 1994 net
income and earnings per share both increased 8 percent.
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 Financial Condition
- ---------------------------------
Selected financial data presented below:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Return on average shareholders'
equity:
As reported 36% 43% 23%
Excluding restructuring and
accounting changes 36% 43% 40%
Return on average total assets:
As reported 13% 13% 7%
Excluding restructuring and
accounting changes 13% 13% 14%
</TABLE>
Cash and cash equivalents amounted to $296 million at December 31, 1995, an
increase of $78 million from December 31, 1994. The company also holds $492
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 $91 million since 1994. Combined, cash and cash
equivalents, short-term investments and other nonequity securities increased
$169 million compared to 1994. Net debt (total debt less cash and cash
equivalents, short-term investments and other nonequity securities) of $741
million at December 31, 1995 decreased $100 million from December 31, 1994.
At December 31, 1994, cash and cash equivalents amounted to $218 million, a
decrease of $223 million from 1993. Short-term investments and other nonequity
securities of $401 million at December 31, 1994 were $240 million higher than
1993. Combined, cash and cash equivalents, short-term
46
<PAGE>
<PAGE>
investments and other nonequity securities increased $17 million.
Net debt of $841 million at December 31, 1994 increased $243 million from $598
million at December 31, 1993.
Expenditures for property, plant and equipment were $387 million in 1995, $406
million in 1994 and $347 million in 1993. Capital spending commitments planned
by the company for 1996 include the consolidation and upgrading of
manufacturing, distribution and research facilities and organizational
restructuring in connection with the company's restructuring plans announced in
1993 and 1991.
Warner-Lambert continues to have readily available financial resources. The
company has unused available lines of credit from banks totaling $1.4 billion.
In addition, the company's bond ratings by Standard and Poor's Corporation (AA)
and Moody's Investor Services (Aa3) did not change during 1995. The company
expects to finalize its purchase of Glaxo Wellcome's interests in the Warner
Wellcome joint venture operations for $1.05 billion in mid-1996. Management
anticipates that it will borrow the funds to complete this transaction.
Management is confident that the company's cash flow will be adequate to repay
this financing without requiring the disposition of any significant strategic
core business or asset and still allow the company to continue to pay dividends
and maintain its ongoing commitment to research and development, marketing and
capital expenditures.
In January 1996 the Board of Directors approved a 6 percent increase in the
quarterly dividend to $.69 per share payable in the first quarter of 1996. The
Board of Directors also voted in favor of a two-for-one split of Warner-Lambert
common stock, subject to shareholder approval of an increase in the number of
authorized common shares from 300 million to 500 million.
Other
- -----
Continuing its strategy initiated in 1995 the company plans to revitalize its
core businesses through the sale of selected products, non-strategic businesses
and undervalued and nonproductive assets. The asset sales will allow the company
to invest more heavily in its core businesses and to spend more on its Phase III
pharmaceutical compounds, strategic market development, new product launches and
marketing of ZANTAC 75, and will have a positive impact on the company's
reported earnings per share. In February 1996 the company entered into an
agreement to sell Warner Chilcott Laboratories, its generic drug division. The
sale is subject to receipt of necessary regulatory approvals and is expected to
occur before the end of the first quarter of 1996.
47
<PAGE>
<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, 1995.
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 Brands, Inc...............................................Philippines 100
American Chicle Company.........................................Delaware 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 100 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
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
Warner Lambert Company (M) Sdn Bhd........................Malaysia 100 International Affiliated Corporation
</TABLE>
<PAGE>
<PAGE>
Page 2 of 4
<TABLE>
<CAPTION>
STATE OR COUNTRY
NAME OF SUBSIDIARY OF ORGANIZATION PERCENTAGE OF OWNERSHIP
<S> <C> <C>
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.
Quantum Investments S.A.........................Uruguay 100 Warner-Lambert Industria e Comercio Limitada
Adams S.A..................................Argentina 100 Quantum Investments S.A.
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.
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
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
<FN>
* Subsidiary not consolidated
</FN>
</TABLE>
<PAGE>
<PAGE>
Page 3 of 4
<TABLE>
<CAPTION>
STATE OR COUNTRY
NAME OF SUBSIDIARY OF ORGANIZATION PERCENTAGE OF OWNERSHIP
<S> <C> <C>
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 86
14 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
Chicle Adams, S.A..........................................Colombia 80.3 Tabor Corporation
19.7 Latin American Holdings Inc.
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 Distribuidora, S.A. de C.V..................Mexico 100 Warner Lambert de Mexico, S.A. de C.V.
<FN>
* Subsidiary not consolidated
</FN>
</TABLE>
<PAGE>
<PAGE>
Page 4 of 4
<TABLE>
<CAPTION>
STATE OR COUNTRY
NAME OF SUBSIDIARY OF ORGANIZATION PERCENTAGE OF OWNERSHIP
<S> <C> <C>
Warner-Lambert de Venezuela S.A.................................Venezuela 93.2
6.8 Parke-Davis
Chicle Adams, S.A..........................................Venezuela 100 Warner-Lambert de Venezuela S.A.
Laboratorios Substantia, C.A...............................Venezuela 80 Warner-Lambert de Venezuela S.A.
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.
Wilkinson Sword B.V.....................................Netherlands 100 Warner-Lambert Holland B.V.
Warner-Lambert Inc..............................................Nevada 100
Warner-Lambert India Private Limited............................India 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,
British West
Indies 100
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
Warner Wellcome Consumer Healthcare .............................New York 70 (Profit share)
</TABLE>
The foregoing list omits 9 domestic subsidiaries and 76 foreign subsidiaries
which, considered in the aggregate, would not constitute a significant
subsidiary.
<PAGE>
<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.
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 22, 1996 appearing on page 41 of
Warner-Lambert Company's 1995 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 21, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1995 AND FROM THE RELATED
CONSOLIDATED STATEMENT OF INCOME FOR THE 12 MONTH PERIOD ENDED
DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 296
<SECURITIES> 267
<RECEIVABLES> 1,240
<ALLOWANCES> 0
<INVENTORY> 646
<CURRENT-ASSETS> 2,778
<PP&E> 3,416
<DEPRECIATION> 1,410
<TOTAL-ASSETS> 6,101
<CURRENT-LIABILITIES> 2,425
<BONDS> 635
<COMMON> 160
0
0
<OTHER-SE> 2,086
<TOTAL-LIABILITY-AND-EQUITY> 6,101
<SALES> 7,040
<TOTAL-REVENUES> 7,040
<CGS> 2,428
<TOTAL-COSTS> 2,428
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123
<INCOME-PRETAX> 1,149
<INCOME-TAX> 279
<INCOME-CONTINUING> 740
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 740
<EPS-PRIMARY> 5.48
<EPS-DILUTED> 0
</TABLE>
