WARNER-LAMBERT WILL TAKE $ 327 MIL. RESTRUCTURING CHARGE
This article was originally published in The Tan Sheet
WARNER-LAMBERT WILL TAKE $ 327 MIL. RESTRUCTURING CHARGE to fourth-quarter 1993 after-tax earnings, or $ 468 mil. on a pre-tax basis, the company announced Nov. 23. The organizational restructuring and plant and employee downsizing actions will include a revamping of the worldwide pharmaceutical operations; a tighter focus on "key growth products"; the shutdown of seven manufacturing plants worldwide; "streamlining" sales forces; and "simplifying work processes," Warner-Lambert said. The actions will lead to the loss of 2,800 positions, or 8.2% of the company's 34,000-person worldwide workforce, over the "coming years." Specifically, Warner-Lambert's actions will include the reorganization of the drug operations "to enhance speed of action and responsiveness in customers," the company said. The seven plants to be shut down will come from across the company's core businesses. A decision has been made so far on only one plant: the Carolina, Puerto Rico confectionary facility will be closed. The Vega Baja, P.R. and two other P.R. plants will remain open. The company will lose approximately $ 150 mil. in sales this year due to good manufacturing practices compliance difficulties at its six U.S. mainland and Puerto Rico facilities. Those difficulties resulted in the company's entry into a consent decree with FDA on Aug. 16 that requires recertification of the problem plants ("The Tan Sheet" Aug. 23, p. 16). Warner-Lambert recently reported to employees that FDA has formally accepted certification of the company's Rochester, N.Y. plant. The reduction in force of 2,800 employees will be across the board, including field sales reps, with over half the RIFs coming from the U.S. "About 1,500" employees will leave by the end of 1994, the company said. The plant closings and RIFs will take place over several years and will likely involve a combination of retirements and layoffs. Commenting on the restructuring, Chairman and CEO Melvin Goodes said: "Rapid and profound changes in the marketplace demand a like response. In pharmaceuticals, the pace of change is being accelerated by the growing impact of managed care and other cost- containment efforts in the U.S., cost control regulation in Europe and the partial loss of Section 936 tax credits" in Puerto Rico. "On the consumer side," Goodes said Warner-Lambert "must continue to strengthen [its] competitive position through productivity improvements." In its sales and earnings report for the third quarter, Warner-Lambert said worldwide sales in the consumer sector rose 9% to $ 945 mil. while global sales of pharmaceuticals and Capsugel gelatin capsules dropped 7% to $ 534 mil. Overall international sales increased by more than 9% but fell 3% in the U.S. Net earnings declined 5% to $ 155.9 mil. Other recent actions taken by Warner-Lambert include the strategic alliances announced on July 28 with Glaxo and Wellcome plc for the development and marketing of consumer health products ("The Tan Sheet" Aug. 2, p. 1). Potential products include OTC versions of Zantac and Zovirax. In addition, the company sold its chocolates/caramel business to Tootsie Roll Industries for an undisclosed price and acquired the French firm Cachou Lajaunie, which sells breath mints. Also this year, Warner-Lambert acquired the North American and European operations of the $ 190 mil.-in-sales Wilkinson Sword shaving products business, bought an equity stake in the France- based pharmaceutical firm. Jouveinal S.A. in an R&D alliance, purchased Fisons' consumer products business in Australia and New Zealand and the $ 34 mil.-in-sales Willinger aquarium-products firm. Goodes said the restructuring, "combined with our recent global alliances and acquisitions, positions us well for future growth. Over the long term, our sights must remain set on continuing to contain costs, serving our customers more efficiently and enhancing shareholder value." Warner-Lambert also indicated that it will marshal its resources behind the Alzheimer's therapy Cognex; the ACE inhibitor Accupril; and Neurontin, the anti-convulsant gabapentin that is awaiting FDA approval. The restructuring and charge to earnings are the company's second in the 1990s. In late October 1991, Warner-Lambert announced that it would take a $ 524 mil. one-time charge to after-tax earnings, or $ 690 mil. on a pre-tax basis. The company reorganized its worldwide senior management into three operating groups, putting Joseph Smith in charge of the pharmaceuticals business, creating a worldwide consumer product business (OTC products and confectionery), and a third sector to handle areas outside of the major "trading triad" of North America, Europe and Japan. The globalized management structure, along with other cost- cutting measures, including plant consolidations and a 2,700- person worldwide workforce reduction, were supposed to save the company a predicted $ 700 mil. in pre-tax savings over the first five years. To date, 60% of the 2,700 employees in the 1991 cutback have left the company and 12 plants have been closed out of the 20 earmarked by the reorganization. Warner-Lambert's last previous major restructuring occurred in late June 1986, when the company phased out 800 positions and closed certain U.S. and European manufacturing facilities.
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