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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended June 30, 1997 Commission file number 1-800
WM. WRIGLEY JR. COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-1988190
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
410 North Michigan Avenue
Chicago, Illinois 60611
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
312-644-2121
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 .
92,369,340 shares of Common Stock and 23,840,648 shares of
Class B Common Stock were outstanding as of July 15, 1997.
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FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 1
WM. WRIGLEY JR. COMPANY
CONSOLIDATED STATEMENT OF EARNINGS (CONDENSED)
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
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Revenues:
Net sales $ 521,272 483,625 968,879 910,299
Investment and other income 4,001 3,308 7,557 6,489
Total revenues 525,273 486,933 976,436 916,788
Costs and expenses:
Cost of sales 225,348 214,217 421,414 402,081
Factory closure and related costs 1,760 17,586 3,014 17,586
Selling, distribution, and
general administrative 184,824 163,380 343,992 314,346
Interest 317 152 636 403
Total costs and expenses 412,249 395,335 769,056 734,416
Earnings before income taxes 113,024 91,598 207,380 182,372
Income taxes 36,377 34,555 67,884 67,716
Net earnings $ 76,647 57,043 139,496 114,656
Net earnings per average share of
common stock $ .66 .49 1.20 .99
Dividends declared per share of
common stock $ .19 .17 .38 .34
Average number of shares
outstanding for the period 115,961 115,975 115,959 115,981
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All amounts in thousands except for per share values.
Notes to financial statements shown on page 5 are an integral
part of these statements.
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<TABLE>
FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 1 (Cont'd)
WM. WRIGLEY JR. COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (CONDENSED)
Six Months Ended
June 30
1997 1996
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CASH FLOWS - OPERATING ACTIVITIES
Net earnings $139,496 114,656
Adjustments to reconcile net earnings to net
cash flows from operating activities:
Depreciation 23,531 22,497
Gain on sales of property, plant, and
equipment (254) (1,133)
(Increase) decrease in:
Accounts receivable (44,957) (34,278)
Inventories (12,270) 4,776
Other current assets (17,879) (4,827)
Other assets and deferred charges (25,711) (15,762)
Increase (decrease) in:
Accounts payable 23,660 13,756
Accrued expenses 26,689 17,301
Income and other taxes payable 6,474 1,312
Deferred taxes 712 (3,790)
Other noncurrent liabilities 11,341 19,659
Net cash flows - operating activities 130,832 134,167
CASH FLOWS - INVESTING ACTIVITIES
Additions to property, plant, and equipment (41,004) (38,386)
Proceeds from property retirements 2,661 2,784
Purchases of short-term investments (1,071,404) (277,531)
Maturities of short-term investments 1,079,232 268,199
Net cash flows - investing activities (30,515) (44,934)
CASH FLOWS - FINANCING ACTIVITIES
Dividends paid (41,745) (39,436)
Common stock purchased (3,392) (3,705)
Net cash flows - financing activities (45,137) (43,141)
Effect of exchange rate changes on cash and
cash equivalents (4,942) (1,350)
Net increase in cash and cash equivalents 50,238 44,742
Cash and cash equivalents at beginning of period 181,233 125,725
Cash and cash equivalents at end of period $231,471 170,467
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $ 63,240 73,219
Interest paid $ 1,096 380
Interest and dividends received $ 7,209 6,284
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All amounts in thousands.
Notes to financial statements shown on page 5 are an integral
part of these statements.
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<TABLE>
FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 1 (Cont'd)
WM. WRIGLEY JR. COMPANY
CONSOLIDATED BALANCE SHEET (CONDENSED)
June 30, December 31,
1997 1996
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Current assets:
Cash and cash equivalents $ 231,471 181,233
Short-term investments 110,979 119,330
Accounts receivable 199,356 165,051
(less allowance for doubtful accounts;
6/30/97- $8,712; 12/31/96-$8,538)
Inventories -
Finished goods 57,674 52,859
Raw materials and supplies 180,858 180,338
238,532 233,197
Other current assets 35,757 19,674
Deferred income taxes - current 10,544 10,939
Total current assets 826,639 729,424
Marketable equity securities at fair value 20,174 18,525
Other assets and deferred charges 96,383 69,461
Deferred income taxes - Noncurrent 28,226 27,984
Property, plant and equipment, at cost 817,333 808,046
Less accumulated depreciation 428,578 419,897
388,755 388,149
Total assets $1,360,177 1,233,543
Current liabilities:
Accounts payable $ 94,862 75,431
Accrued expenses 90,168 66,434
Dividends payable 22,033 19,715
Income and other taxes payable 59,957 55,756
Deferred income taxes - current 514 816
Total current liabilities 267,534 218,152
Deferred income taxes - noncurrent 25,674 24,390
Other noncurrent liabilities 102,773 93,570
Stockholders' equity:
Preferred stock - no par value
Authorized - 20,000 shares
Issued - None
Common stock - no par value
Authorized - 400,000 shares
Issued - 92,291 shares at 6/30/97;
92,065 shares at 12/31/96 12,305 12,275
Class B common stock - convertible
Authorized - 80,000 shares
Issued and outstanding -
23,929 shares at 6/30/97
24,155 shares at 12/31/96 3,191 3,221
Additional paid-in capital 376 238
Retained earnings 993,945 898,512
Foreign currency translation adjustment (44,038) (14,716)
Unrealized holding gain 11,884 10,812
Common Stock in treasury, at cost - (6/30/97-
255 shares; 12/31/96-251 shares) (13,467) (12,911)
Total stockholders' equity 964,196 897,431
Total liabilities & stockholders' equity $ 1,360,177 1,233,543
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All amounts in thousands.
Notes to financial statements shown on page 5 are an integral
part of these statements.
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FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 1 (Cont'd)
WM. WRIGLEY JR. COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONDENSED)
1. The Consolidated Statement of Earnings (Condensed) for the
three and six month periods ended June 30, 1997 and 1996,
respectively, the Consolidated Statement of Cash Flows
(Condensed) for the six month periods ended June 30, 1997
and 1996, and the Consolidated Balance Sheet (Condensed)
at June 30, 1997 are unaudited. In the Company's opinion,
the accompanying financial statements reflect all
adjustments (which include only normal recurring
adjustments) necessary to present fairly the results for
the periods, and have been prepared on a basis
consistent with the 1996 audited consolidated financial
statements. These condensed financial statements should
be read in conjunction with the 1996 consolidated
financial statements and related notes which are an
integral part hereof.
2. An analysis of the cumulative foreign currency translation
adjustment follows (in thousands of dollars).
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Decrease to
Stockholders' Equity
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Second Quarter 1997 1996
Balance at April 1 $ 32,623 11,284
Translation adjustment for
the second quarter 11,415 7,207
Balance at June 30 $ 44,038 18,491
Six Months
Balance at January 1 $ 14,716 8,038
Translation adjustment for
the six-month period 29,322 10,453
Balance at June 30 $ 44,038 18,491
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3. Conformity with generally accepted accounting principles
requires management to make estimates and assumptions when
preparing financial statements that affect assets,
liabilities, revenues and expenses. Actual results may
vary from those estimates.
4. On April 23, 1996, the Company adopted and announced a
plan to close its Santa Cruz, California factory and
transfer, retire or terminate the 311 employees at that
factory by the second quarter of 1997. In 1996, the
Company provided $17 million for related closure costs
covering employee severance and costs to maintain and sell
the property and incurred an additional $2.4 million in
relocation, training and other transition costs related to
this plan. Net earnings per share were reduced by $.11
per share as a result of these charges in 1996. Operating
income for the three and six month periods ended June 30,
1997 included a $1.8 and a $3.0 million charge,
respectively, for relocation and training costs related to
this plan. The three and six month results for 1996
included a $17.6 million charge for relocation and
training. In addition to the $5.4 million of relocation
and training incurred to date, the Company expects to
incur another $.4 million for transition related costs
during 1997.
At June 30, 1997, a total of 299 employees have been
transferred, retired or terminated and $.9 million in
severance costs for the terminated employees
has been incurred and charged to the factory closure
reserve.
5. In February 1997, the Financial Accounting Standards Board
issued Statement No. 128 (FAS 128), Earnings Per Share,
which is required to be adopted for
periods ending on or after December 15, 1997. For the
quarter ending December 31, 1997, the Company will be
required to change the method currently used to
compute earning per share. The impact of FAS 128 on the
primary and diluted earnings per share for the second
quarter and first six months ended June 30,
1997, and June 30, 1996, respectively, is not expected to
be material.
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FORM 10-Q
PART I - FINANCIAL INFORMATION - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Revenues
Net Sales
Net sales for the second quarter and first six months of 1997
increased by $37.6 million or 7.8% and $58.6 million or 6.4%,
respectively, compared with the same periods last year. Higher
overseas volume and selected worldwide selling price increases
partially offset by foreign currency translation to a stronger
U.S. dollar and lower domestic volume account for the increase.
Investment and Other Income
Investment and Other Income for the second quarter and first
six months of 1997 increased by 21% and 16%, respectively, when
compared with the same periods in 1996. The increases are due
to higher invested cash balances.
Costs and Expenses
Cost of Sales
Cost of sales for the second quarter and first six months of
1997 increased by $11.1 million or 5.2% and $19.3 million or
4.8%, respectively, compared with the same periods last year.
The increase was primarily due to higher international shipment
volume and higher product costs in 1997, partially reduced by
foreign currency translation to a stronger U.S. dollar.
The Company's consolidated gross profit percentages for the
second quarter and the first half of 1997 and 1996 were:
1997 1996
Second quarter 56.8% 55.7%
First six months 56.5% 55.8%
FACTORY CLOSURE
On April 23, 1996, the Company adopted and announced a plan to
close its Santa Cruz, California factory and transfer, retire
or terminate the 311 employees at that factory by the second
quarter of 1997. In 1996, the Company provided $17 million for
related closure costs covering employee severance and costs to
maintain and sell the property and incurred an additional $2.4
million in relocation, training and other transition costs
related to this plan. Net earnings per share were reduced by
$.11 per share as a result of these charges in 1996. Operating
income for the three and six month periods ended June 30, 1997
included a $1.8 and a $3.0 million charge, respectively, for
relocation and training costs related to this plan. The three
and six month results for 1996 included a $17.6 million charge
for relocation and training. In addition to the $5.4 million
of relocation and training incurred to date, the Company
expects to incur another $.4 million for transition related
costs during 1997.
At June 30, 1997, a total of 299 employees have been
transferred, retired or terminated and $.9 million in severance
costs for the terminated employees has been incurred and
charged to the factory closure reserve.
Selling, Distribution, and General Administrative
The selling, distribution, and general administrative expenses
for the second quarter and first six months increased by $21.4
million or 13.1% and $29.6 million or 9.4%, respectively,
compared with the same periods last year. These changes were
primarily due to higher advertising, marketing and selling
expenses in International operations, partially reduced by
foreign currency translation to a stronger U.S. dollar in the
second quarter and first six months of 1997.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Cont'd)
Income Taxes
The effective tax rates for the second quarter and first six
months of 1997 and 1996 are shown below:
1997 1996
Second quarter 32.2% 37.7%
First six months 32.7% 37.1%
The 1997 effective rate benefited from increased U.S. tax
credits and a more favorable tax structure in France.
Net Earnings
Consolidated net earnings for the second quarter of 1997
totaled $76.6 million or $.66 per share, an increase of 35% on
an earnings per share basis compared to last year's results of
$57.0 million or $.49 per share. The Santa Cruz closure
decreased 1997's quarterly net earnings by $1.2 million or $.01
per share and decreased 1996's quarterly net earnings by $11.2
million or $.10 per share. Excluding the Santa Cruz factory
closure costs, consolidated net earnings for the second quarter
of 1997 totaled $77.8 million or $.67 per share, an increase of
$9.6 million, or 14%, and $.08 per share.
Consolidated net earnings for the first six months of 1997
totaled $139.5 million or $1.20 per share, an increase of 21%
on an earnings per share basis compared to last year's results
of $114.7 million or $.99 per share. The Santa Cruz closure
decreased 1997's net earnings for the six-month period by $2.1
million or $.02 per share and decreased 1996's net earnings for
the six-month period by $11.2 million or $.10 per share.
Excluding the Santa Cruz factory closure costs, consolidated
net earnings for the first six months of 1997 totaled $141.6
million or $1.22 per share, an increase of $15.7 million, or
12%, and $.13 per share.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company's cash and cash equivalents and
short-term investments totaled $342.5 million compared to
$300.6 million at December 31, 1996 - an increase of $41.9
million. The ratio of current assets to current liabilities
(current ratio) at June 30, 1997 was 3.1 to 1 compared to 3.3
to 1 at December 31, 1996.
Capital expenditures for 1997 are expected to be above 1996
expenditures of $102.0 million and are expected to be funded
from the Company's operations and internal sources.
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FORM 10-Q
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits reference is made to the Exhibit Index on
page 10.
(b) The Company has not filed a Form 8-K for the three month
period ended June 30, 1997.
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FORM 10-Q
SIGNATURES
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.
WM. WRIGLEY JR. COMPANY
(Registrant)
By /s/ JOHN F. BARD
John F. Bard
Chief Financial Officer
Date August 13, 1997
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WM. WRIGLEY JR. COMPANY
AND WHOLLY OWNED ASSOCIATED COMPANIES
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
3(i). Articles of Incorporation of the Registrant.
The Registrant's Restated Articles of Incorporation
are incorporated by reference to Exhibit 3(a) of
the Company's Annual Report on Form 10-K filed
for the fiscal year ended December 31, 1992.
3(ii). By-laws of the Registrant. The Registrant's By-
laws are incorporated by reference to Exhibit 3(a)
of the Company's Annual Report on Form 10-K filed
for the fiscal year ended December 31, 1992.
4. Instruments defining the rights of security
holders. The Registrant's Articles of
Incorporation contains all definitions of the
rights of the Registrant's Common and Class B
Common stock, representing all of the Registrant's
outstanding securities, and is incorporated by
reference to Exhibit 3(a) of the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1992.
10. Material Contracts
10(a). Non-Employee Directors' Death Benefit Plan.
Non-Employee Directors' Death Benefit Plan is
incorporated by reference from Exhibit 10(a) of
the Company's Annual Report on Form 10-K filed for
the fiscal year ended December 31, 1994.
10(b). Senior Executive Insurance Plan. Senior Executive
Insurance Plan is incorporated by reference from
Exhibit 10(b) of the Company's Annual Report on
Form 10-K filed for the fiscal year ended December
31, 1995.
10(c). Supplemental Retirement Plan. Supplemental
Retirement Plan is incorporated by reference from
Exhibit 10(c) of the Company's Annual Report on
Form 10-K filed for the fiscal year ended December
31, 1994.
10(d). Deferred Compensation Plan for Non-Employee
Directors. Deferred Compensation Plan for Non-
Employee Directors is incorporated by reference
from Exhibit 10(d) of the Company's Annual Report
on Form 10-K filed for the fiscal year ended
December 31, 1995.
10(e). Non-Employee Directors' Stock Retirement Plan.
Non-Employee Directors' Stock Retirement Plan is
incorporated by reference from Exhibit 10(e) of The
Company's Annual Report on Form 10-K filed for the
fiscal year ended December 31, 1995.
10(f). 1996 Executive Incentive Compensation Plan. 1996
Executive Incentive Compensation Plan is
incorporated by reference from Exhibit 10(f) of the
Company's Annual Report on Form 10-K filed for the
fiscal year ended December 31, 1996.
10(g). Wm. Wrigley Jr. Company Management Incentive Plan.
Wm. Wrigley Jr. Company Management Incentive Plan
and the various programs thereunder are
incorporated by reference from Exhibit 10(g) of the
Company's Form 10-K filed for the fiscal year ended
December 31, 1994, except for sub-item (i) below to
Exhibit 10(g) which is incorporated by reference
from Exhibit 10(g) of the Company's Annual Report
on Form 10-K filed for the fiscal year ended
December 31, 1995.
(i) Executive Incentive Compensation Deferral
Program
(ii) Long-Term Stock Grant Program
(iii) Stock Award Program
(iv) Alternate Investments and Savings Program
(v) 1988 Stock Option Program
99. Forward-Looking Statements. Forward-Looking
Statements are incorporated by reference from
Exhibit 99 of the Company's Annual Report on
Form 10-K filed for the fiscal year ended December
31, 1996.
- --------------------
Copies of Exhibits are not attached hereto, but the
Registrant will furnish them upon request and upon payment to
the Registrant of a fee in the amount of $20.00 representing
reproduction and handling costs.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 231,471
<SECURITIES> 131,153
<RECEIVABLES> 208,068
<ALLOWANCES> 8,712
<INVENTORY> 238,532
<CURRENT-ASSETS> 826,639
<PP&E> 817,333
<DEPRECIATION> 428,578
<TOTAL-ASSETS> 1,360,177
<CURRENT-LIABILITIES> 267,534
<BONDS> 0
0
0
<COMMON> 15,496
<OTHER-SE> 948,700
<TOTAL-LIABILITY-AND-EQUITY> 1,360,177
<SALES> 968,879
<TOTAL-REVENUES> 976,436
<CGS> 424,428
<TOTAL-COSTS> 769,056
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 636
<INCOME-PRETAX> 207,380
<INCOME-TAX> 67,884
<INCOME-CONTINUING> 139,496
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139,496
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
</TABLE>
