FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 1996
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)
Delaware 22-1598912
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 Tabor Road, Morris Plains, New Jersey
(Address of principal executive offices)
07950
(Zip Code)
Registrant's telephone number, including area code: (201) 540-2000
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, and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of
the issuer's classes of Common Stock, as of the latest
practicable date.
CLASS Outstanding at April 30, 1996
----- -----------------------------
Common Stock, $1 par value 271,231,634*
*Adjusted to reflect a two-for-one stock split of the Registrant's
Common Stock for stockholders of record as of May 3, 1996.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WARNER-LAMBERT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1996 1995
----------- ------------
(Dollars in millions)
ASSETS:
Cash and cash equivalents $ 443.7 $ 295.8
Short-term investments 282.8 267.4
Receivables 1,256.3 1,239.5
Inventories 640.1 645.7
Prepaid expenses and other current assets 351.0 329.6
-------- --------
Total current assets 2,973.9 2,778.0
Investments and other assets 595.1 654.3
Equity investments in affiliated companies 253.5 257.5
Property, plant and equipment 1,999.1 2,006.3
Intangible assets 400.7 404.8
-------- --------
Total assets $6,222.3 $6,100.9
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Commercial paper $ 540.5 $ 473.0
Notes payable - banks and other 447.5 421.6
Accounts payable, trade 506.1 523.8
Accrued compensation 147.1 166.3
Other current liabilities 625.5 671.2
Federal, state and foreign income taxes 191.0 169.3
-------- --------
Total current liabilities 2,457.7 2,425.2
Long-term debt 630.9 634.5
Other noncurrent liabilities 723.8 740.4
Minority interests 53.6 54.7
Shareholders' equity:
Preferred stock - none issued - -
Common stock issued: (1996 - 320,660,536
shares; 1995 - 160,330,268 shares) 320.7 160.3
Capital in excess of par value 91.7 217.5
Retained earnings 3,180.0 3,042.9
Cumulative translation adjustments (237.4) (216.3)
Treasury stock, at cost: (1996 - 49,590,766
shares; 1995 - 24,731,378 shares) (998.7) (958.3)
-------- --------
Total shareholders' equity 2,356.3 2,246.1
-------- --------
Total liabilities and shareholders'
equity $6,222.3 $6,100.9
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
WARNER-LAMBERT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months
Ended March 31,
----------------
1996 1995
---- ----
(Dollars in millions, except
per share amounts)
NET SALES $1,829.2 $1,604.6
COSTS AND EXPENSES:
Cost of goods sold 589.6 532.3
Marketing 644.3 539.1
Administrative and general 126.7 103.0
Research and development 129.7 114.3
Other(income)expense, net (50.0) 7.0
-------- --------
Total costs and expenses 1,440.3 1,295.7
-------- --------
INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS 388.9 308.9
Provision for income taxes 106.9 77.2
Minority interests 32.5 30.3
-------- --------
NET INCOME $ 249.5 $ 201.4
======== ========
PER COMMON SHARE:
Net income* $ .92 $ .75
======== ========
Cash dividends paid* $ .345 $ .325
======== ========
Average number of common shares
outstanding (thousands)* 271,178 269,250
*Restated for two-for-one stock split as described in Note I.
See accompanying notes to consolidated financial statements.
<PAGE>
WARNER-LAMBERT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months
Ended March 31,
------------------
1996 1995
------------------
(Dollars in millions)
OPERATING ACTIVITIES:
Net income $ 249.5 $ 201.4
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 51.5 48.3
Minority interests 32.5 30.3
Gain on sale of business (75.2) -
Changes in assets and liabilities, net of
effects from acquisitions/dispositions
of businesses:
Receivables (140.2) (38.8)
Inventories (12.0) (72.2)
Accounts payable and
accrued liabilities 59.5 (135.1)
Other, net (47.5) (46.2)
-------- -------
Net cash provided (used)
by operating activities 118.1 (12.3)
-------- -------
INVESTING ACTIVITIES:
Purchases of investments (112.1) (119.9)
Proceeds from sales of investments 154.0 57.5
Capital expenditures (59.6) (67.0)
Proceeds from disposition of business 142.4 -
Other, net (5.6) 1.3
-------- -------
Net cash provided (used)
by investing activities 119.1 (128.1)
-------- -------
FINANCING ACTIVITIES:
Proceeds from borrowings 328.9 238.0
Principal payments on borrowings (263.2) (48.4)
Purchases of treasury stock (51.3) (17.1)
Cash dividends paid (93.6) (87.5)
Distributions paid to minority interests (28.4) (15.2)
Proceeds from exercise of stock options 20.7 12.7
-------- -------
Net cash (used) provided by
financing activities (86.9) 82.5
-------- -------
Effect of exchange rate changes on cash
and cash equivalents (2.4) (6.0)
-------- -------
Net increase (decrease) in cash and cash
equivalents 147.9 (63.9)
Cash and cash equivalents at beginning of year 295.8 217.9
-------- -------
Cash and cash equivalents at end of period $ 443.7 $ 154.0
======== =======
See accompanying notes to consolidated financial statements.
<PAGE>
WARNER-LAMBERT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A: The interim financial statements presented herein should be read
in conjunction with Warner-Lambert Company's 1995 Annual Report.
NOTE B: The results of operations for the interim periods are not
necessarily indicative of the results for the full year.
NOTE C: In the opinion of management, all adjustments considered
necessary for a fair presentation of the results for the interim
periods have been included in the consolidated financial
statements.
NOTE D: Effective January 1, 1996 the company's international operations
that previously reported financial results on a fiscal-year basis
ending November 30 changed to a calendar-year basis ending
December 31. The change was made primarily to reflect the
results of these operations on a more timely basis. The results
of operations for those subsidiaries for the month of December
1995 are included as a charge of $18.8 million against retained
earnings.
NOTE E: Major classes of inventories were as follows:
March 31, 1996 December 31, 1995
-------------- -----------------
(In millions)
Raw materials $101.9 $110.0
Finishing supplies 48.0 48.0
Work in process 99.3 89.1
Finished goods 390.9 398.6
------ ------
$640.1 $645.7
====== ======
<PAGE>
NOTE F: Property, plant and equipment balances were as follows:
March 31, 1996 December 31, 1995
-------------- -----------------
(In millions)
Property, plant and equipment $ 3,434.3 $ 3,416.6
Less accumulated depreciation (1,435.2) (1,410.3)
--------- ---------
Net $ 1,999.1 $ 2,006.3
========= =========
NOTE G: Intangible asset balances were as follows:
March 31, 1996 December 31, 1995
-------------- -----------------
(In millions)
Patents, trademarks,
goodwill and other
intangibles $484.5 $484.8
Less accumulated amortization (83.8) (80.0)
------ ------
Net $400.7 $404.8
====== ======
NOTE H: Included in Other (income) expense, net was interest expense of
$29.2 million for the first quarters of 1996 and 1995.
NOTE I: On April 23, 1996 the stockholders approved an increase in the
number of authorized shares of common stock from 300 million to
500 million in order to effectuate a two-for-one stock split.
The additional shares will be distributed on or about May 17,
1996 to stockholders of record on May 3, 1996. Par value
remained at $1.00 per share. The stock split was reflected in
the March 31, 1996 balance sheet by increasing Common stock
issued and reducing Capital in excess of par value by $160.3
million. In addition, the average number of common shares
outstanding and all per share information has been restated to
reflect the stock split.
NOTE J: In March 1996, Warner-Lambert sold Warner Chilcott Laboratories,
its generic pharmaceutical business. Proceeds were approximately
$142.4 million subject to a final working capital valuation to be
settled in May 1996. The sale resulted in a pretax gain of $75.2
million, which is included in Other (income) expense, net. On an
after tax basis, the gain was $45.7 million or $.17 per share.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FIRST QUARTER ENDED MARCH 31, 1996
- -----------------------------------
COMPARED WITH CORRESPONDING PERIOD IN 1995
- ------------------------------------------
NET SALES
- ---------
Sales for the first quarter of 1996 of $1,829 million were 14 percent
higher than 1995 first quarter sales. Unit volume growth was 12
percent, price increases added 4 percent and foreign exchange rate
changes had an unfavorable impact of 2 percent. U.S. sales increased
$104 million or 15 percent to $783 million. International sales
increased $120 million or 13 percent to $1,046 million. At constant
exchange rates, international sales increased 16 percent from the same
period last year.
Effective January 1, 1996 the company's international operations
changed their reporting period from a fiscal-year basis ending
November 30 to a calendar-year basis ending December 31. (See Note D.)
All references to the first quarter include the calendar three-month
period ended March 31, 1996 and the fiscal three-month period ended
February 28, 1995 for international operations.
SEGMENT SALES
- -------------
THREE MONTHS ENDED MARCH 31,
----------------------------
Percent
(Dollars in Millions) 1996 1995 Increase
------ ------ --------
Pharmaceutical $ 659 $ 583 13 %
Consumer Health Care 701 615 14
Confectionery 469 407 15
------- -------
Consolidated Net Sales $1,829 $1,605 14 %
======= =======
Pharmaceutical sales in the U.S. increased 17 percent to $323 million
in the first quarter of 1996. The company believes that sales
benefited from inventory stocking in anticipation of a price increase
effective March 1 and that sales growth will not be as strong for the
remainder of 1996. Products with significant sales growth included
the add-on epilepsy therapy NEURONTIN, the anticonvulsant DILANTIN,
the oral contraceptive LOESTRIN, the cardiovascular drug ACCUPRIL and
CAPSUGEL empty hard-gelatin capsules. In March, Warner-Lambert sold
its Warner Chilcott generic pharmaceutical business. (See Note J.)
Sales of this business for the twelve months of 1995 were
approximately $125 million. <PAGE>
Warner-Lambert plans to file 8 New Drug Applications (NDA) or
Supplements with the US 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, an
anti-infective. In April, the company announced that it had signed a
letter of intent with Pfizer Inc. to co-promote atorvastatin in the
U.S. and on a broad basis in the international marketplace.
International pharmaceutical sales for the first quarter of 1996 were
$336 million, a 10 percent increase, or 9 percent at constant exchange
rates. Major contributors to international sales growth were
ACCUPRIL, CAPSUGEL and NEURONTIN.
Consumer health care segment sales reflect the reclassification of
HALLS cough tablets to the confectionery segment in both 1996 and
1995. HALLS is primarily marketed as a confectionery product outside
the U.S. and is managed by the company's confectionery team throughout
the world. With sales overseas more than double the sales in the U.S.,
management believes that it is more representative to report HALLS as
a confectionery product.
Consumer health care product sales in the U.S. increased 16 percent to
$330 million in the first quarter of 1996. Sales growth of 4 percent
is attributable to sales of COOL MINT LISTERINE toothpaste, which was
introduced in August 1995. Products with U.S. sales growth included
LISTERINE Antiseptic mouthwash, SUDAFED cold medication, BENADRYL
allergy medication, the company's wet-shaving products and NEOSPORIN
topical anti-infective. International sales increased 12 percent to
$371 million, or 13 percent at constant exchange rates. Major
contributors to international sales growth included the company's wet-
shaving products, TETRA aquarium products and LISTERINE.
In December 1993 Warner-Lambert signed separate agreements with both
Wellcome plc (Wellcome) and Glaxo plc (Glaxo) governing the
establishment of joint ventures in various countries to develop and
market a broad range of nonprescription consumer health care products.
Glaxo acquired Wellcome in 1995 and changed the name of the combined
company to Glaxo Wellcome.
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 1994 in the
U.S., Canada, Australia, New Zealand and certain countries in Europe.
Warner-Lambert has consolidated the financial results of the Warner
Wellcome joint venture operations.<PAGE>
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) 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 cold sore cream.
In April 1996 Warner Wellcome began U.S. marketing of ZANTAC 75, an
OTC version of Glaxo Wellcome's prescription drug ZANTAC, for the
treatment of episodic heartburn, acid indigestion and sour stomach.
ZANTAC 75 has been marketed for OTC use in the U.K. by Warner Wellcome
as a treatment for these same symptoms. Warner Wellcome has also been
marketing in the U.K. an allergy nasal spray, BECONASE, an OTC version
of Glaxo Wellcome's prescription drug. Warner-Lambert uses the equity
method of accounting to record its share of profits and losses in the
Glaxo Warner-Lambert joint venture. Due to the substantial marketing
expenses that will be incurred with the U.S. launch of ZANTAC 75 the
company anticipates recording a loss from the joint venture in 1996.
First quarter 1996 and 1995 confectionery sales reflect the
reclassification of HALLS from the consumer health care segment.
Confectionery sales in the U.S. increased 11 percent to $129 million
in the first quarter of 1996. Products with U.S. sales growth included
HALLS, CERTS breath mints and BURST gums (benefiting from the
introduction of FRUIT*A*BURST in August 1995). International sales
were $340 million, an increase of 17 percent, or 26 percent at
constant exchange rates. The decline in the value of the Mexican peso
adversely impacted this segment's sales by $19 million. Products with
strong international sales growth included HALLS, TRIDENT, BUBBALOO
bubble gum, CLORETS gums and mints and CHICLETS candy-coated gum.
COSTS AND EXPENSES
- ------------------
Cost of goods sold was 11 percent higher than the first quarter of
1995. Cost of goods sold as a percentage of net sales fell to 32.2%
from 33.2% in 1995. The improvement in the company's ratio is
attributable to the decline in the cost of goods ratio in the U.S.
pharmaceutical business. This business's ratio was lower due to a
favorable product mix and higher volume. <PAGE>
Marketing expense in the first quarter of 1996 increased 19 percent
from the prior-year quarter, with spending increasing faster than
sales growth in each reporting segment. Marketing expense increased
in the consumer health care segment in the U.S. primarily to support
COOLMINT LISTERINE toothpaste and worldwide to support the company's
new wet-shaving products. In the pharmaceutical segment most of the
spending increase was in the U.S. with greater support for NEURONTIN,
ACCUPRIL and LOESTRIN. In the confectionery segment spending
increased throughout the world. As a percentage of net sales,
marketing expense in the first quarter of 1996 was 35.2% compared with
33.6% in 1995.
Administrative and general expense in the first quarter of 1996
increased 23 percent from the first quarter of 1995. Major components
of this increase included higher pension expense, primarily as a
result of a lower discount rate and higher expenses for certain
employee benefits. As a percentage of net sales, administrative and
general expense in the first quarter of 1996 was 6.9% compared with
6.4% for the first quarter of 1995. For the full year of 1995,
administrative and general expense as a percentage of net sales was
6.9%.
Research and development expense increased 14 percent in the first
quarter of 1996 reflecting higher spending on Phase III clinical
trials. As a percentage of net sales, research and development
expense was 7.1% in both the first quarters of 1996 and 1995.
Other (income) expense, net in the first quarter of 1996 included a
gain on the sale of the Warner Chilcott business of $75 million.
In 1993 the company recorded a net restructuring charge of $525
million pretax ($360 million after tax) and in 1991 the company
recorded a net restructuring charge of $544 million pretax ($418
million after tax). The company had reserve balances related to these
programs of $228 million at March 31, 1996. The company is unaware of
any event that would significantly change spending or anticipated
savings with respect to the 1993 and 1991 restructuring actions.
INCOME TAXES
- ------------
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1995
---- ----
Effective tax rate:
As reported 27.5% 25.0%
After minority interests 30.0% 27.7%
The increases in the company's effective tax rates on a reported basis
and after minority interests in the first quarter of 1996 compared
with the same period in 1995 were principally due to the 39.4 percent
effective tax rate on the gain on the sale of Warner Chilcott. In
addition, the rates increased due to the expiration of the research
and development tax credit.<PAGE>
NET INCOME
- ----------
Net income and earnings per share for the first quarter of 1996
increased 24 percent and 23 percent, respectively. Excluding the gain
on the sale of the Warner Chilcott business and provisions for certain
legal matters, earnings per share increased 5 percent.
Liquidity and Financial Condition
- ---------------------------------
Cash and cash equivalents amounted to $444 million at March 31, 1996,
an increase of $148 million from December 31, 1995. The company also
holds $446 million in short-term investments and other nonequity
securities (included in investments and other assets) that do not
qualify as cash equivalents, representing a decrease of $46 million
since December 31, 1995. Net debt (total debt less cash and cash
equivalents, short-term investments and other nonequity securities) of
$729 million at March 31, 1996 fell $12 million from December 31,
1995.
Planned capital expenditures for 1996 are estimated to be $450
million. These expenditures include the consolidation and upgrading
of manufacturing facilities in connection with the company's
restructuring plans announced in 1993 and 1991, plant expansions and
improvements.
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.
In April 1996, company stockholders approved an increase in the number
of authorized common shares from 300 million to 500 million in order
to effectuate a two-for-one stock split. The split will apply to all
shares of record held on May 3, 1996. (See Note I.)
Other
- -----
During the first quarter of 1996 the company continued its strategy
initiated in 1995 to revitalize its core businesses through the sale
of selected products, non-strategic businesses and nonproductive
assets. These sales would allow the company to support its core
businesses, Phase III pharmaceutical compounds, strategic market
development, new product launches and marketing of ZANTAC 75, and
would have a positive impact on the company's reported earnings per
share. The company sold its PRO toothbrush business in 1995 and its
Warner Chilcott business in the first quarter of 1996. Following a
comprehensive, strategic review of the TETRA pet care and aquarium
products operations, the company is no longer seeking a buyer for this
business.
All product names appearing in capital letters are registered
trademarks of Warner-Lambert Company, its affiliates, related
companies or its licensors. BECONASE, NEOSPORIN, SUDAFED, ZANTAC,
ZANTAC 75 and ZOVIRAX are registered trademarks of Glaxo Wellcome or
its affiliates.<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
In September 1993, Warner-Lambert received a Complaint
and Compliance Order from the Environmental Protection Agency (the
"EPA") seeking penalties of $268,000 for alleged violations of the
Resource Conservation and Recovery Act, Boilers and Industrial
Furnace regulations. Warner-Lambert is contesting the allegations
contained within the Complaint and has entered into negotiations
with the EPA in an attempt to resolve these issues. Although it is
too early to predict the outcome of this action, Warner-Lambert does
not at present expect this litigation to have a material adverse
effect on its financial position, liquidity, cash flow or results of
operations.
Beginning in late 1993, Warner-Lambert, along with
numerous other pharmaceutical manufacturers and wholesalers, has
been sued in a number of state and federal antitrust lawsuits by
retail pharmacies seeking treble damages and injunctive relief.
These actions arise from alleged price discrimination by which the
defendant drug companies, acting alone or in concert, are alleged to
have favored institutions, managed care entities, mail order
pharmacies and other buyers with lower prices for brand name
prescription drugs than those afforded to plaintiff retailers. The
federal cases have been consolidated by the Judicial Panel on
Multidistrict Litigation and transferred to the U.S. District Court
for the Northern District of Illinois for pre-trial proceedings.
Warner-Lambert 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 was denied approval by the U.S.
District Court for the Northern District of Illinois because the
settlement did not include injunctive relief. Warner-Lambert has
agreed to an amendment of the original settlement agreement. This
amendment provides for the same payments, namely $15.1 million, and
obligates Warner-Lambert, among other things, not to refuse to
discount its drugs to retail pharmacies solely based on their status
as retailers. At present, Warner-Lambert cannot predict the outcome
of the remaining federal lawsuits.
<PAGE>
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 filed in the states of Alabama, Arizona, Colorado,
Maine, Michigan, Minnesota, New York, Washington and Wisconsin and
in the District of Columbia, brought by classes of consumers who
purchased brand name prescription drugs at retail pharmacies. These
cases also arise from the same allegations of 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 1994, Warner-Lambert received an 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, the Environmental Crimes Section of the
Department is conducting an inquiry of Warner-Lambert and certain
present and former employees, relating to historical compliance of
the Vega Baja, Puerto Rico wastewater treatment facility with the
Clean Water Act and the discharge permit issued to the facility.
Warner-Lambert is cooperating fully with this inquiry and cannot
predict its outcome at this time.
Warner-Lambert is also involved in various administrative
or judicial proceedings related to environmental actions initiated
by the EPA under the Comprehensive Environmental Response,
Compensation and Liability Act (also known as Superfund) or by state
authorities under similar state legislation, or by third parties.
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.
<PAGE>
Warner-Lambert Inc., a wholly-owned subsidiary of
Warner-Lambert, has been named as a defendant in class actions filed
in Puerto Rico Superior Court by current and former employees from
the Vega Baja, Carolina and Fajardo plants, as well as Kelly
Services temporary employees assigned to those plants. The lawsuits
seek monetary relief for alleged violations of local statutes and
decrees relating to meal period payments, minimum wage, overtime and
vacation pay. Warner-Lambert believes that these actions are
without merit and will defend these actions vigorously. Although it
is too early to predict the outcome of these actions, Warner-Lambert
does not at present expect these lawsuits to have a material adverse
effect on the Company's financial position, liquidity, cash flow or
results of operations.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Annual Meeting of Shareholders of Warner-
Lambert was held on April 23, 1996.
(b) Proxies for such meeting were solicited pursuant to
the definitive Proxy Statement of Warner-Lambert relating to the
Annual Meeting of Shareholders held on April 23, 1996, which was
filed with the Securities and Exchange Commission via EDGARLINK
software on March 7, 1996.
(c) The following describes the matters voted upon at
such meeting and sets forth the number of votes cast for, against or
withheld and the number of abstentions as to each such matter.
Except with respect to Item (ii), there were no broker non-votes.
(i) Election of Directors:
Number of Shares
Number of Shares Withheld From
Nominee Voted For Voting For
- -------------------- ---------------- ----------------
Robert N. Burt 118,073,725 702,827
Donald C. Clark 118,069,147 707,405
Lodewijk J. R. de Vink 118,058,066 718,486
John A. Georges 118,054,271 722,281
Melvin R. Goodes 117,990,388 786,164
William H. Gray III 117,975,705 800,847
William R. Howell 118,044,992 731,560
LaSalle D. Leffall, Jr. 118,066,910 709,642
Patricia Shontz Longe 118,070,069 706,483
Alex J. Mandl 118,071,540 705,012
Lawrence G. Rawl 118,012,900 763,652
Michael I. Sovern 118,044,120 732,432
Joseph D. Williams 117,937,473 839,079
<PAGE>
(ii) Warner-Lambert Company 1996 Stock Plan:
Number Number Number of Shares Number
of Shares of Shares Abstaining of Broker
Voted For Voted Against From Voting Non-Votes
- ---------- ------------- ----------- ---------
62,549,241 47,452,764 927,276 7,847,271
(iii) Appointment of Independent Accountants for 1996:
Number of Shares
Number of Shares Number of Shares Abstaining From
Voted For Voted Against Voting
----------- ------------- ----------
118,282,416 235,733 258,403
(iv) Amendment to Warner-Lambert's Certificate of
Incorporation to increase the authorized shares of Common Stock to
effect a two-for-one stock split:
Number of Shares
Number of Shares Number of Shares Abstaining From
Voted For Voted Against Voting
----------- ------------- ----------
116,211,262 1,954,961 610,329
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
(10) Material Contracts
(a) Warner-Lambert Excess Savings Plan,
formerly Warner-Lambert Supplemental
Savings Plan, as amended to January 22,
1996.
(b) Form of Stock Option Agreement,
effective as of February 27, 1996.
(12) Computation of Ratio of Earnings to Fixed
Charges.
(27) Financial Data Schedule (EDGAR filing only).
(b) Reports on Form 8-K
-------------------
A Current Report on Form 8-K, dated January 23,
1996, was filed with the Securities and Exchange
Commission in connection with a proposal to effect
a two-for-one stock split of Warner-Lambert's
Common Stock, contingent upon stockholder approval
of a proposed amendment to Warner-Lambert's
Certificate of Incorporation to increase the
authorized shares of Common Stock.
<PAGE>
S I G N A T U R E S
-------------------
Pursuant to the requirements 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)
Date: May 10, 1996 By: Ernest J. Larini
----------------
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 10, 1996 By: Joseph E. Lynch
---------------
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Exhibit Page No.
- ----------- ------- --------
(10) (a) Warner-Lambert Excess Savings
Plan, formerly Warner-Lambert
Supplemental Savings Plan, as
amended to January 22, 1996.
(10) (b) Form of Stock Option Agreement,
effective as of February 27, 1996.
(12) Computation of Ratio of Earnings
to Fixed Charges.
(27) Financial Data Schedule (filed
electronically).
WARNER-LAMBERT EXCESS SAVINGS PLAN
Effective November 1, 1987
As Amended to January 22, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE SECTION PAGE
1 Purpose of Plan
1.1 Establishment of Plan 1-1
2 Definitions
2.1 Accounts 2-1
2.2 Affiliated Company 2-1
2.3 After-Tax Contributions 2-1
2.4 Annual Reported Earnings Per Share 2-1
2.5 Beneficiary 2-1
2.6 Board of Directors 2-1
2.7 Company 2-2
2.8 Company Matching Contributions 2-1
2.9 Company Matching Contributions
Account 2-2
2.10 Compensation 2-2
2.11 Compensation Reduction Agreement 2-2
2.12 Effective Date 2-2
2.13 Election Change Date 2-2
2.14 Employee 2-2
2.15 Hardship 2-2
2.16 Investment Committee 2-3
2.17 Participant 2-3
2.18 Participating Company or Companies 2-3
2.19 Plan 2-3
2.20 Plan Year 2-3
2.21 Pre-Tax Contributions 2-3
2.22 Pre-Tax Contributions Account 2-4
2.23 Regular Contributions 2-4
2.24 Retirement Committee 2-4
2.25 Savings and Stock Plan 2-4
2.26 Savings Contributions 2-4
2.27 Savings Contributions Account 2-4
2.28 Total Disability 2-4
2.29 Valuation Date 2-4
3 Requirements for Participation
3.1 Eligibility 3-1
3.2 Requirements 3-1
3.3 Establishing an Account 3-1
3.4 Collective Bargaining Units 3-2
<PAGE>
TABLE OF CONTENTS, CONTINUED
ARTICLE SECTION PAGE
4 Participant Contributions
4.1 Elections 4-1
4.2 Savings Contributions 4-1
4.3 Savings and Stock Plan
Discontinuations 4-2
4.4 Valuations 4-3
5 Company Contributions
5.1 Company Matching Contributions 5-1
5.2 Valuations 5-3
6 Vesting
6.1 Savings Contributions Accounts 6-1
6.2 Company Matching Contributions 6-1
7 Absence of Funding 7-1
8 Distributions After Termination of
Employment
8.1 Termination of Employment 8-1
8.2 Death 8-1
8.3 Disability 8-1
8.4 Valuation of Accounts Upon
Distribution 8-1
9 Withdrawals While Employed
9.1 Hardship Withdrawals 9-1
9.2 Suspensions 9-1
9.3 Third Withdrawals 9-1
9.4 Section 16(b) Transactions 9-2
10 Administration of the Plan 10-1
11 Amendment of the Plan
11.1 Amendments 11-1
11.2 Collective Bargaining Units 11-2
11.3 Investment Committee Actions 11-2
11.4 Deemed Amendments 11-2
12 Termination or Suspension of the Plan
12.1 Termination 12-1
12.2 Suspension 12-1<PAGE>
TABLE OF CONTENTS, CONTINUED
ARTICLE SECTION PAGE
13 General Provisions
13.1 Plan Not a Contract 13-1
13.2 Nonalienation, etc. 13-1
13.3 Incapacity 13-2
13.4 Applicable Law 13-3
13.5 Quarterly Statements 13-3
13.6 Distributions 13-3
13.7 Waivers 13-3
13.8 Similar Treatment 13-3
13.9 Claims 13-3
13.10 Indemnifications 13-4
<PAGE>
ARTICLE 1
Purpose of Plan
1.1 Establishment of Plan. The Warner-Lambert Excess
Savings Plan is established and maintained by the Company
primarily for the purpose of providing deferred compensation
for a select group of management or highly-compensated
employees. The Plan is exempt from the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA"),
relating to participation, vesting, funding and fiduciary
responsibilities. The Company intends that the portion of
this Plan that provides benefits in excess of the limitations
on contributions imposed by section 415 of the Code shall be
treated as a separate plan which is an excess benefit plan as
defined in ERISA Section 3(36).
<PAGE>
ARTICLE 2
Definitions
Whenever used herein, unless the context otherwise
indicates, the masculine pronoun shall include the feminine
pronoun and the feminine pronoun shall include the masculine
and the singular shall include the plural and the plural shall
include the singular.
2.1 "Accounts." The aggregate of a Participant's
Savings Contributions Account and Company Matching
Contributions Account.
2.2 "Affiliated Company." An entity as defined in
Article 2 of the Savings and Stock Plan.
2.3 "After-Tax Contributions." The contributions of an
Employee made pursuant to Article 4 of the Savings and Stock
Plan and without regard to a Compensation Reduction Agreement.
2.4 "Annual Reported Earnings Per Share." The annual
earnings per share as reported to the Investment Committee by
the Company's independent auditor for purposes of the
Company's annual report. Notwithstanding the foregoing, any
extraordinary, unusual or nonrecurring gains or losses shall
be disregarded by the Investment Committee.
2.5 "Beneficiary." The person or persons determined in
accordance with Article 16 of the Savings and Stock Plan,
entitled to a distribution upon the death of a Participant.
2.6 "Board of Directors." The Board of Directors of the
Company, or the Executive Committee thereof.
2.7 "Company." Warner-Lambert Company or any successor
to it in ownership of substantially all of its assets, whether
by merger, consolidation or otherwise.
2.8 "Company Matching Contributions." The contributions
of a Participating Company on behalf of a Participant, as
provided in Section 5.1.
2.9 "Company Matching Contributions Account." An
individual account established under the Plan to which Company
Matching Contributions are credited.
2.10 "Compensation." The amount defined in Article 2 of
the Savings and Stock Plan, except that Compensation shall not
be limited as provided in Section 401(a)(17) of the Internal
Revenue Code of 1986, as amended (the "Code").
2.11 "Compensation Reduction Agreement." The agreement
to make contributions to this Plan between an Employee and the
Participating Company by which he is employed.
2.12 "Effective Date." November 1, 1987.
2.13 "Election Change Date." The dates set forth in
Article 2 of the Savings and Stock Plan.
2.14 "Employee." All persons as defined in Article 2 of
the Savings and Stock Plan.
2.15 "Hardship." A severe financial hardship to the
Participant resulting from a sudden and unexpected illness or
accident of the Participant or of a dependent (as defined in
Section 152 of the Code) of the Participant, loss of the
Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant. A
Hardship does not exist to the extent that a financial
condition is or may be relieved (i) through reimbursement or
compensation by insurance or otherwise, (ii) by liquidation of
the Participant's assets, to the extent that liquidation of
such assets would not itself cause severe financial hardship,
or (iii) by cessation of deferrals under the Plan. The need
to send a Participant's child to college or the desire to
purchase a home do not constitute Hardships.
2.16 "Investment Committee." The Investment Committee as
appointed by the Retirement Committee pursuant to Article 10
of this Plan.
2.17 "Participant." A person who shall have met the
requirements for participation in the Plan as provided in
Article 3 and whose participation shall not have terminated as
provided in such Article.
2.18 "Participating Company or Companies." Those
companies whose employees are authorized by the Board of
Directors to participate in the Savings and Stock Plan, as
provided for in Article 2 of such plan.
2.19 "Plan." The Warner-Lambert Excess Savings Plan, as
in effect from time to time.
2.20 "Plan Year." The calendar year. However, the first
Plan Year shall begin November 1, 1987 and end December 31,
1987.
2.21 "Pre-Tax Contributions." The contributions
authorized by a Participant pursuant to Article 4 of the
Savings and Stock Plan and made by a Participating Company.
2.22 "Pre-Tax Contributions Account." The account
described in Article 2 of the Savings and Stock Plan.
2.23 "Regular Contributions." With respect to each
Participant, the After-Tax Contributions and the Pre-Tax
Contributions made pursuant to Article 4 of the Savings and
Stock Plan.
2.24 "Retirement Committee." The Retirement and Savings
Plan Committee (U.S.), as appointed by the Board of Directors,
pursuant to Article 10 of the Plan.
2.25 "Savings and Stock Plan" The Warner-Lambert Savings
and Stock Plan, as it may be amended from time to time.
2.26 "Savings Contributions." The contributions,
sometimes referred to as Excess Savings Contributions,
authorized by a Participant pursuant to Article 4.
2.27 "Savings Contributions Account." An individual
account established under the Plan to which a Participant's
Savings Contributions, and the earnings thereon, are credited.
2.28 "Total Disability." A Total Disability as defined
in Article 2 of the Savings and Stock Plan.
2.29 "Valuation Date." The valuation date or dates
established under the Savings and Stock Plan.
<PAGE>
ARTICLE 3
Requirements for Participation
3.1 Eligibility. Any person who is an Employee on the
Effective Date is eligible to participate provided he
satisfied, and continues to satisfy, the requirements of
Section 3.2. Any other Employee is eligible to participate as
of the first of the month following the date he satisfies the
requirements of Section 3.2. In the event that a Participant
fails to continue to meet the requirements of Section 3.2, the
Participant may no longer make contributions to the Plan or
receive Company Matching Contributions to the Plan until such
time that he once again meets such requirements.
3.2 Requirements. An Employee eligible to participate
under Section 3.1 of the Plan must first satisfy the following
requirements:
(a) He is a participant in and making contributions to
the Savings and Stock Plan; and
(b) His Compensation is greater than or equal to $66,000
or such other dollar amount as set forth in Code Section
414(q)(1)(C); and
(c) The amount the Employee could otherwise contribute to
the Savings and Stock Plan is limited under (i) Section
401(a)(17) of the Code, (ii) Article 4 of the Savings and
Stock Plan, or (iii) Article 6 of the Savings and Stock Plan
as to the amount of annual additions as defined in that
Article; and
(d) The Employee is contributing (either directly or
through a Compensation Reduction Agreement) the maximum amount
permitted under the limits referenced in (ii) of subsection
(c).
3.3 Establishing an Account. Any Employee who is
eligible to become a Participant shall become a Participant by
making an election as provided in Section 4.1. A person who
becomes a Participant shall remain a Participant as long as he
shall continue to have an Account.
3.4 Collective Bargaining Units. Notwithstanding any
other provisions of this Plan to the contrary, and to the
extent determined by the Investment Committee, no Employee may
become a Participant in this Plan while in a collective
bargaining unit represented by a certified or recognized
bargaining representative, unless such unit has entered into a
collective bargaining agreement which provides that such
members of such unit shall participate in the Plan, and such
participation is approved by the Investment Committee.
<PAGE>
ARTICLE 4
Participant Contributions
4.1 Elections. Savings Contributions shall be
voluntarily authorized by a Participant by means of a
Compensation Reduction Agreement executed by the Participant
in the manner required by the Investment Committee.
Contribution amounts may be changed as of any Election Change
Date designated by the Investment Committee for this purpose.
4.2 Savings Contributions.
(a) Excess Savings Contributions. A Participant may
elect by way of a Compensation Reduction Agreement to reduce
his Compensation by an amount, expressed as a whole
percentage, which does not exceed 15% when aggregated with the
percentage of his Compensation being contributed by him to the
Savings and Stock Plan.
(b) Incremental Savings Contributions. In addition, a
Participant whose compensation under the Savings and Stock
Plan is subject to the limitations of Section 401(a)(17) of
the Code may elect to reduce his Compensation in an amount
equal to the difference between his Compensation and the
applicable section 401(a)(17) limit multiplied by the total
percentage elected for his Savings and Stock Plan
contributions.
(c) Savings Contributions shall be credited to the
Participant's Savings Contributions Account.
4.3 Savings and Stock Plan Discontinuations. If a
Participant elects to discontinue all or any portion of his
contributions to the Savings and Stock Plan, he must also
discontinue his Savings Contributions until such time that he
resumes making the maximum contribution he is permitted to
make under the Savings and Stock Plan after considering the
limitations specified in Articles 4 and 6 of such plan. After
such time he may resume making Savings Contributions as of any
Election Change Date.
4.4 Valuations. On the basis of the valuations made on
each Valuation Date, Savings Contributions authorized by a
Participant shall be credited with interest, at a rate equal
to the return on the Fixed Income Fund in the Savings and
Stock Plan.
<PAGE>
ARTICLE 5
Company Contributions
5.1 Company Matching Contributions.
(a) Excess and Additional Savings Match. Company
Matching Contributions shall be made in respect of a
Participant's Excess Savings Contributions and Incremental
Savings Contributions up to, but not exceeding, an amount
equal to the difference between 6% of the Participant's
Compensation and the Participant's Regular Contributions made
during the same period to the Savings and Stock Plan.
Effective January 1, 1994, the amount of the Company Matching
Contributions on Excess Savings Contributions and Incremental
Savings Contributions shall be equal to 35%.
(b) Additional Company Matching Contributions.
Additional Company Matching Contributions will be made in
accordance with the following table:
ADDITIONAL MATCH ANNUAL REPORTED EARNINGS PER SHARE GROWTH
25% 12% or greater, but less than 16%
45% 16% or greater, but less than 20%
65% 20% or greater
Company Matching Contributions made pursuant to the preceding
table will be made as soon as practicable after the Investment
Committee receives a determination of the Annual Reported
Earnings Per Share. Additional Company Matching Contributions
shall be made in respect of the Participant's Excess Savings
Contributions and Incremental Savings Contributions up to, but
not exceeding, an amount equal to the difference between 6% of
the Participant's Compensation and the Participant's Regular
Contributions made during the same period to the Savings and
Stock Plan. Such additional Company Matching Contributions
will be allocated in a lump sum based upon the amount of
qualifying contributions made during the prior calendar year
provided that such Participant (a) had completed three Years
of Plan Membership as of the last day of the prior calendar
year and (b) was eligible to make Savings Contributions to the
Plan as of the last day of the calendar year notwithstanding
any suspension provisions of the Plan to the contrary.
(c) 10% Match. Each Participant whose pre-tax
contributions to the Savings and Stock Plan are limited to
less than 6% and whose Regular Contributions are greater than
his pre-tax contributions shall also be credited Company
Matching Contributions in the amount of the difference between
the match actually credited in the Savings and Stock Plan and
the amount that would have been credited had the Participant's
Regular Contributions been made solely on a pre-tax basis.
5.2 Valuations. Amounts credited prior to May 1, 1991 to
a Participant's Company Matching Contributions Account will be
deemed held in shares of Company common stock and will be
adjusted on the basis of the valuations made on each Valuation
Date to reflect any increases or decreases in the market value
of Company common stock, and the value of any dividends which
may be credited thereon. Amounts credited on or after May 1,
1991 to a Participant's Company Matching Contributions Account
will be adjusted on the basis of the return provided by the
Fixed Income Fund of the Savings and Stock Plan.
<PAGE>
ARTICLE 6
Vesting
6.1 Savings Contribution Accounts. A Participant's
interest in his Savings Contributions Account shall be fully
vested.
6.2 Company Matching Contributions. A Participant's
interest in his Company Matching Contributions Account shall
be vested when the Participant is fully vested in his Company
Matching Contributions Account under Article 7 of the Savings
and Stock Plan.
<PAGE>
ARTICLE 7
Absence of Funding
The sole obligation of the Company (or any Participating
Company) hereunder to a Participant, Beneficiary or any other
person claiming through such individual is a contractual
obligation to make payments in accordance with the terms of
the Plan. No amount of cash or other property shall be set
aside as a separate trust for the payment of any benefits
under the Plan. Any benefits payable under the Plan shall be
paid directly by the Company only out of the general assets of
the Company.
<PAGE>
ARTICLE 8
Distributions After Termination of Employment
8.1 Termination of Employment. If a Participant's
employment shall terminate, the value of his Accounts in which
he is vested in accordance with Article 6 shall be distributed
to him in a lump sum, by check, as soon as practicable after
such termination.
8.2 Death. If a Participant's employment shall terminate
by reason of his death, the value of his Accounts in which he
is vested in accordance with Article 6 shall be distributed in
a lump sum, by check, as soon as practicable after such death,
to the Beneficiary who is entitled or becomes entitled to
receive benefits from the Savings and Stock Plan upon the
death of the Participant.
8.3 Disability. If a Participant becomes entitled to a
distribution under the Savings and Stock Plan due to Total
Disability, such Participant shall be eligible to receive the
value of his Accounts in a lump sum by check as soon as
reasonably practicable following his proper request for a
distribution from the Investment Committee.
8.4 Valuation of Account upon Distribution. For purposes
of determining the amount to be distributed under this
Article, the portion of a Participant's Company Matching
Contributions Account which is deemed held in shares of
Company common stock as provided under Section 5.2 will be
determined by multiplying (i) the number of Company shares
deemed held in the Participant's Company Matching
Contributions Account by (ii) the average price for Company
shares traded in the Savings and Stock Plan on the appropriate
Valuation Date. In the event that no such trades take place
in the Savings and Stock Plan on such date, the amount in
clause (ii) above shall be the closing price listed on the New
York Stock Exchange for Company shares on the appropriate
Valuation Date.
<PAGE>
ARTICLE 9
Withdrawals While Employed
9.1 Hardship Withdrawals. If the Investment Committee
determines that a Participant has incurred a Hardship, he can
withdraw all or part of his Savings Contributions Account
(including interest) and, to the extent vested and provided
that all of his Savings Contributions Account has first been
withdrawn, his Company Matching Contributions Account,
provided, however, that he has first withdrawn the maximum
amount available from the Savings and Stock Plan, including
the amount, if any, in his Pre-Tax Contributions Account. The
amount available for any withdrawal shall not exceed that
amount determined by the Investment Committee as necessary to
alleviate such Hardship.
9.2 Suspensions. A Participant who makes a withdrawal
under this Article shall immediately cease making
contributions to this Plan and shall not again be eligible to
make or authorize contributions under this Plan until the
first day of any month which is at least six months after the
pay day on which contributions were discontinued and after the
receipt by the Investment Committee of a notice of election to
resume such contributions. No Participant may elect to make
more than two withdrawals during any calendar year, except as
may be provided in Section 9.3.
9.3 Third Withdrawals. Notwithstanding the provisions of
Section 9.2, the Investment Committee may, in its absolute
discretion and in accordance with such criteria as it may
establish, permit a Participant to make a third withdrawal
from the Plan during a calendar year if the Investment
Committee is satisfied that such withdrawal is necessitated by
extreme or unusual circumstances. The Investment Committee
may impose such conditions on such third withdrawal as it
deems appropriate, including, without limitation, requiring
that the Participant withdraw the entire amount of his Account
which is available for withdrawal or suspending the
Participant from contributing to the Plan for a period not to
exceed 12 months.
9.4 Section 16(b) Transactions. Notwithstanding the
foregoing provisions of this Article 9, Participants who are
subject to Section 16 of the Securities Exchange Act of 1934
(the "Act") may not make withdrawals from their Company
Matching Contributions Accounts unless counsel to the Company
has opined that such withdrawals will not cause transactions
in respect of the Plan to be nonexempt transactions under
Section 16(b) of the Act.
<PAGE>
ARTICLE 10
Administration of the Plan
This Plan shall be administered in the same way that the
Savings and Stock Plan is administered, as set forth in
Article 13 of the Savings and Stock Plan (to the extent such
Article applies), except that administrative expenses of the
Plan shall be paid by each Participating Company.
<PAGE>
ARTICLE 11
Amendment of the Plan
11.1 Amendments. The Board of Directors shall have the
right at any time or from time to time to modify or amend the
Plan in whole or in part. No such modification or amendment
shall retroactively reduce the rights of any Participant or
Beneficiary unless required by law.
Notwithstanding any other provisions of this Plan, all
amounts credited to a Participant's Savings Contributions
Account and Company Matching Contributions Account (regardless
of whether vested pursuant to Article 6) shall be payable
promptly in a lump sum following a "Change in Control of the
Company." 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 who were also directors
at the commencement of such twenty-four (24) month period.
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 under Article 4
or Article 5 hereof, as appropriate.
11.2 Collective Bargaining Units. No modification or
amendment of the Plan shall be applicable to Participants in a
collective bargaining unit represented by a certified or
recognized bargaining representative, unless or until, if at
all, an applicable collective bargaining agreement which has
been approved by the Retirement Committee specifically
provides otherwise.
11.3 Retirement Committee Actions. The Retirement
Committee may undertake any action with respect to the Plan
(including the adoption of amendments) 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, (d) does not affect the
limitations contained in this sentence and (e) does not affect
the composition or compensation of the Retirement Committee.
11.4 Investment Committee Actions. The Investment
Committee may undertake any action with respect to the Plan
(including the adoption of amendments) which (a)(i) does not
increase Plan liabilities by an amount in excess of two
million five hundred thousand dollars ($2,500,000) and does
not increase Plan expense by an amount in excess of two
hundred fifty thousand dollars ($250,000) 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, (d) does not affect the limitations contained in this
sentence, (e) does not affect the composition or compensation
of the Retirement Committee, (f) does not have a
disproportionate or preferential impact on officers'
compensation and (g) does not significantly impact Plan
design. In exercising its rights under this section, the
Investment Committee shall be deemed to exercise a management
prerogative as a delegatee of the Board of Directors, and
shall not be deemed a fiduciary.
11.5 Adoption by Resolution. All actions, including
Plan amendments, which are undertaken by the Board of
Directors, Retirement Committee or Investment Committee shall
be authorized by a duly adopted resolution approved by the
respective body.
11.6 Deemed Amendments. Subject to the restrictions of
Section 11.3 and 11.4 hereof or action by the Board of
Directors, the Retirement Committee or the Investment
Committee to the contrary, this Plan shall be deemed amended
or modified at the time of amendment or modification of the
Savings and Stock Plan to the extent necessary to (i) provide
consistency in the provisions of this Plan and the Savings and
Stock Plan with respect to definitions and their related
operational provisions, and (ii) maintain the relationship
between the benefits provided by this Plan and the Savings and
Stock 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
Savings and Stock Plan unless the Board of Directors, the
Retirement Committee or the Investment Committee declares
otherwise.
<PAGE>
ARTICLE 12
Termination or Suspension of the Plan
12.1 Termination. The Company intends to continue the
Plan indefinitely; however, the Board of Directors may at any
time terminate the Plan by a resolution specifying the date of
termination.
12.2 Suspension. The Board of Directors may at any time
and from time to time suspend or reduce the rate of
Participating Company contributions to the Plan by a
resolution specifying the period of suspension or reduction.
<PAGE>
ARTICLE 13
General Provisions
13.1 Plan Not a Contract. The Plan shall not be deemed
to constitute a contract between any company and any
Participant, former Participant, Beneficiary, person in its
employ or other person, or a contract for the benefit of any
person, or to be a consideration for, or an inducement or
condition of, the employment of any person, or to give any
right to be retained in the employ of any company, or to
interfere with the right of any company to discharge any
person in its employ at any time without regard to the effect
which such discharge shall have, if any, upon his rights under
the Plan.
13.2 Nonalienation, etc. No distribution under this Plan
to any Participant or Beneficiary shall be subject in any
manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, whether voluntary
or involuntary, and any attempt to so anticipate, alienate,
sell, transfer, assign, pledge, encumber or charge the same
shall be void, nor shall any such distribution be in any way
liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person entitled to such
distribution, nor shall any distribution be subject to
attachment or legal process for or against any such person.
If any such Participant or Beneficiary has been adjudicated
bankrupt or has purported to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge any such
distribution, voluntarily or involuntarily, or if any attempt
is made to subject any such distribution to the debts,
contracts, liabilities, engagements or torts of the person
entitled to any such distribution, then the Investment
Committee may, in its discretion, cause such distribution, or
any part thereof, to be held or applied for the benefit of or
distributed to such Participant or Beneficiary, or held or
applied for the benefit of or distributed to the spouse,
children or other dependents, or any of them, or any other
person, in such manner and in such proportion as the
Investment Committee shall determine and such determination
shall be binding and conclusive on all persons, including the
person originally entitled to such distribution and, where
applicable, his Beneficiary.
13.3 Incapacity. If, for any reason, the Investment
Committee shall determine that it is not desirable, because of
the minority or other incapacity (whether or not recognized or
recognizable by law) of the person who shall be entitled to
receive any distribution under the Plan, to withhold such
distribution or to make such distribution directly to such
person, the Investment Committee may apply any such
distribution for the benefit of such person in any way that
the Investment Committee shall deem advisable or to make any
such distribution to any third person who, in the judgment of
the Investment Committee, will apply such distribution for the
benefit of the person entitled thereto. Such distribution for
the benefit of the person entitled thereto, or to a third
person for his benefit, having been made, each Participating
Company and the Investment Committee shall be discharged from
all further liability for such distribution.
13.4 Applicable Law. The provisions of the Plan shall be
construed, administered and governed under the laws of the
State of New Jersey (other than the provisions governing
conflict of laws) to the extent not preempted by the Employee
Retirement Income Security Act of 1974.
13.5 Quarterly Statements. As soon as practicable after
the end of each calendar quarter, the Investment Committee
shall furnish each Participant with a statement of his
participation in the Plan.
13.6 Distributions. All distributions under this Plan
shall be subject to any tax and other laws and statutes, and
regulations thereunder, and the decrees or rulings of any
court or any administrative or other regulatory representative
or agency, deemed by the Investment Committee to be
applicable.
13.7 Waivers. A Participant or Beneficiary may, by
notice in writing to the Investment Committee, at any time and
from time to time, waive his right to receive all or any part
of the benefits payable to him hereunder, subject to the
requirements of the Investment Committee.
13.8 Similar Treatment. All Participants in similar
circumstances shall be treated alike for all purposes of the
Plan.
13.9 Claims. If any person shall claim a right to
receive any benefit under the Plan, the Investment Committee
shall determine whether such benefit is permitted or required
by the terms of the Plan. If the Investment Committee shall
determine that no such benefit is permitted or required, it
shall provide written notice to such person setting forth the
reasons for such determination in a manner calculated to be
understood by the recipient. A person who receives such
notice may, by written request filed with the Investment
Committee within 60 days after the receipt of the notice,
request a review of such determination by the Investment
Committee. If so requested, the Investment Committee shall
review such determination and shall notify such person of its
decision in writing within 60 days after receipt of such
request for review (120 days if special circumstances require
an extension of time), setting forth therein the reasons for
its decision.
13.10 Indemnifications. Each member of the Investment
Committee and of the board of directors of any Participating
Company, and each other Employee who is charged with
administrative duties or responsibilities with respect to the
Plan, shall be indemnified by the Participating Companies
against liability imposed on him and against all expenses and
costs which may be reasonably incurred by him in connection
with or resulting from any action, suit or proceeding, or any
claim against him, if he shall have been made a party to such
action, suit or proceeding, or such claim shall have been
made, by reason of his having administrative or other duties
with respect to the Plan; but such indemnification shall not
apply to matters as to which he shall be finally adjudged
therein to have been liable on account of, or to have been
guilty of, gross negligence or willful misconduct in the
performance of his duties with respect to the Plan. In the
case of settlement of any such action, proceeding or claim
before a final adjudication, the right of indemnification
shall similarly exist.
WARNER-LAMBERT COMPANY
EXHIBIT 10(b)
FORM OF STOCK OPTION AGREEMENT
In addition to the terms and conditions of stock
option agreements generally applicable to Warner-Lambert
Company (the "Company") employees who receive stock options,
effective February 27, 1996, the following provisions are part
of the stock option agreement between the Company and certain
executive officers of the Company, including the named
executive officers of the Company, as defined by Item
402(a)(3) of Regulation S-K:
1. "RULE OF 80" OR ATTAINMENT OF AGE 65. If, after a
date one year from the date of grant of the stock option, the
executive officer satisfies the "Rule of 80," as hereinafter
described, when the executive officer's employment terminates
or the executive officer has attained age 65 when the
executive officer's employment terminates, the executive
officer may exercise the stock option until the expiration of
ten years from the date of grant of the stock option, except
as provided below relating to termination for cause and
relating to employment by a competitor. The "Rule of 80" is
satisfied if the individual's employment terminates (including
death while employed) on or after age 55 and if the sum of the
individual's age at termination (in full and partial years)
plus the period of service with the Company or any of its
subsidiaries (in full and partial years), equals at least 80.
In the event of the executive officer's death after
termination of employment, the individual's representative may
exercise the stock option in accordance with these provisions
to the same extent that such provisions were applicable to the
executive officer.
2. FORFEITURE OF UNEXERCISED OPTIONS. If the executive
officer's employment is terminated for cause, the stock option
shall terminate. Determinations of cause shall be made in the
sole discretion of Management and shall include, but not be
limited to, terminations for violation of the Management
Integrity Policy, sexual harassment or theft. Exceptions to
the application of this provision may be made by the
Compensation Committee of the Board of Directors. This
provision is not intended to, nor shall it, alter the
executive officer's status as an employee-at-will.
3. EMPLOYMENT BY A COMPETITOR. Notwithstanding any
other provision, if the executive officer's employment
terminates at or after age 55 and the individual becomes
employed by a competitor of the Company in any capacity (e.g,
as an employee, consultant or otherwise) within two (2) years
after the termination of employment, the stock options which
are then outstanding shall expire 90 days after the
commencement of employment with the competitor.
<TABLE>
EXHIBIT 12
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Years Ended December 31,
Three Months Ended --------------------------------------------
March 31, 1996 1995 1994 1993 1992 1991
-------------------- ---- ---- ---- ---- ----
Earnings before income taxes and
accounting changes (less
<S> <C> <C> <C> <C> <C> <C>
minority interests) $ 356.4 $1,018.6 $ 913.1 $ 318.5 $ 858.2 $ 221.5
Add:
Interest on indebtedness-
excluding amount capitalized 29.2 122.7 93.7 64.2 80.8 58.2
Amortization of debt expense .1 .4 .4 .5 .6 .4
Interest factor in rent
expense (a) 6.7 26.9 26.2 25.4 23.4 22.3
------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Adjusted earnings $ 392.4 $1,168.6 $1,033.4 $ 408.6 $ 963.0 $ 302.4
======= ======== ======= ======= ======= =======
Fixed Charges:
Interest on indebtedness $ 29.2 $ 122.7 $ 93.7 $ 64.2 $ 80.8 $ 58.2
Capitalized interest 2.1 10.1 9.4 8.6 8.1 9.4
Amortization of debt expense .1 .4 .4 .5 .6 .4
Interest factor in rent
expense (a) 6.7 26.9 26.2 25.4 23.4 22.3
------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Total fixed charges $ 38.1 $ 160.1 $ 129.7 $ 98.7 $ 112.9 $ 90.3
======= ======== ======= ======= ======= =======
Ratio of earnings to fixed charges 10.3 7.3 8.0 4.1(b) 8.5 3.3(c)
======= ======== ======= ======= ======= =======
(a) Represents one third of rental expense, which the company believes is a reasonable
approximation.
(b) The company's ratio of earnings to fixed charges for 1993 would have been 9.5 excluding the
restructuring charge of $525.2 million.
(c) The company's ratio of earnings to fixed charges for 1991 would have been 9.4 excluding the
restructuring charge of $544.0 million.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Warner-Lambert Company and Subsidiaries Financial Data Schedule.
This Schedule contains summary financial information extracted from the
consolidated balance sheet at March 31, 1996 and from the related consolidated
statement of income for the 3 month period ended March 31, 1996 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 444
<SECURITIES> 283
<RECEIVABLES> 1256
<ALLOWANCES> 0
<INVENTORY> 640
<CURRENT-ASSETS> 2974
<PP&E> 3434
<DEPRECIATION> 1435
<TOTAL-ASSETS> 6222
<CURRENT-LIABILITIES> 2458
<BONDS> 631
0
0
<COMMON> 321
<OTHER-SE> 2035
<TOTAL-LIABILITY-AND-EQUITY> 6222
<SALES> 1829
<TOTAL-REVENUES> 1829
<CGS> 590
<TOTAL-COSTS> 590
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29
<INCOME-PRETAX> 389
<INCOME-TAX> 107
<INCOME-CONTINUING> 250
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 250
<EPS-PRIMARY> 0.92<F1>
<EPS-DILUTED> 0
<FN>
<F1>Restated to reflect two-for-one stock split effective May 3, 1996. Prior
financial data schedules have not been restated for this recapitalization.
</FN>
</TABLE>
